Archive for the ‘Business’ Category

The Secret to Optimizing Classroom Training

Monday, August 8th, 2011

 Most organizations recognize that the key to developing their leaders is to implement a continuous learning framework.  In such an approach, leaders are exposed throughout their careers to a variety of challenging job assignments, cross functional task forces, mentoring/coaching, e-learning, and instructor led classroom training.  Though e-learning options have built momentum over the last 10 years, the most popular mode of learning new leadership skills and perspective remains the classroom setting.  There is something about being in the same physical space with the instructor and the other learners that makes the learning richer and more energetic.  But does it stick?

A recent article in the T&D Journal of the American Society for Training and Development addressed this question.  In a learning study, participants were assessed on a measure of emotional intelligence, given feedback and trained for half a day in emotional intelligence competencies, and then tested for what they had retained.  They were also given a coaching session in which they discussed a plan created at the conclusion of the classroom training.  The results showed significant improvement in competencies like assertiveness, emotional self-control, self-confidence, adaptability, and optimism. 

Why are these results important?  Because they confirm the impact of individual coaching in galvanizing the learning from instructor led training. 

At Roselle Leadership Strategies (RLSI), we have offered a public workshop version of our Good Managers to Great Leaders™ classroom training for several years.  We are offering it again starting in October of this year.  Over these several years, we also concluded that it is critical to augment classroom learning if you want to make sure the participants apply the new skills and perspective.

Best practices in learning with adults.  Based on our 25 years of experience in training and coaching leaders, we have developed a set of best practices that we employ.  We suggest that you employ them when developing your own internal training, or use them as a template when you hire consulting organizations like ours to help you develop materials and a training framework.  Research in the field of adult learning suggests that the following components, when used together, will optimize the classroom training or e-learning you provide for your leaders:

  • Pretesting to establish a baseline
  • Providing in-depth feedback on the participant pretesting
  • Delivering classroom or e-learning training by a subject matter expert (include practice with new skills learned)
  • Applying the new skills to real work situations
  • Coaching to help galvanize the learning, apply it
  • Involving the participants’ managers
  • Spreading the learning over time

Let’s look at each one of these in more detail.

Pretesting.  In the study cited, the participants were given a test of emotional intelligence.  This type of norm-based instrument works well as a pretest, as does an established 360-degree feedback instrument, or one you might create specifically to assess the new skills and perspective to be included in the training.  At RLSI, we tend to use our FULLVIEW Feedback Inventory™ to establish a baseline of competence.  (This year, we are offering the FULLVIEW as an option when you sign up managers for our Great Leaders public workshop).

In-depth feedback.  This can be provided at the beginning of the training session, or individually before the training begins.  Either way, the objective is to help participants understand their style and approach, how others might perceive them, and what new skills and perspective would help them become more effective as leaders.  This can provide the basis for their individual development plan that generates from the training.

Classroom or e-learning training.   From the adult learning research, there are several characteristics that help make this type of learning effective.  These include the following:

  • Brief (15-20 minute) lecturettes to provide perspective, teach new tools
  • Practice with new tools within 10-15 minutes of learning them
  • Short training sessions of one-four hours total to maintain energy, focus

Application of the new tools.   Assuming participants have learned some new tools and practiced them in class, the next step in learning is to apply them.  This is a two-phase process.  The first phase is for participants to teach the new tool(s) they have learned to someone else within the first 24 hours.  The second phase is for them to apply the new tool(s) to an actual situation at work or home within a couple of weeks.  This maximizes their retention and the likelihood of using the tools in the future.

Individual coaching.  Though classroom settings and e-learning approaches usually allow for discussion and questions, participants often do not think of questions until later.  Or, they try to apply new tools and experience frustration or resistance from others.  They need time to talk through their experiences in order to create a breakthrough in the way they lead or manage.  Often, their managers are not equipped or available to provide such perspective.  Brief individual coaching can help. (This year in our public Great Leaders workshop, we are offering individual coaching as an option for participants).

Involvement of participants’ managers.  One of the most effective ways to insure that new learning is being applied is to involve the participants’ managers from the beginning.  Give them a chance to provide feedback, either on a 360-degree instrument, or informal conversation to determine what they think their direct report needs to work on.  Include them in follow-up information that updates them on which tools were learned during the session, so they can give on-the-job, real time feedback as they see the new tools being employed.

Spreading the learning over time.  Giving small doses of learning and spacing the training sessions over several months maximizes the likelihood that new tools will be employed.  This is why our Great Leaders series meets once per month over six months.

Bottom Line.  Use these seven learning components in your leader training, and you will optimize the retention and application of new skills and perspective.  This will help you maximize your ROI on training costs and the value it brings to the organization.

Create Sustainable Growth in Leaders by Rattling their Core

Thursday, July 8th, 2010

Growing and sustaining leadership competence is a critical need for your organization.  A recent survey by ASTD indicated that leadership/executive level skills were the most critical gap across 10 categories of potential gaps organizations anticipate in the near future.  Identifying and nurturing high potential individuals who can move into leadership roles is a core strategy for meeting this need, along with providing development opportunities for your current group of key leaders.  But, how do you create leader growth in a way that it is sustainable?

In The Leadership Pipeline (2001), the authors suggest that at least six major transitions occur in the leadership progression from individual contributor to CEO level, and that each stage requires qualitatively different approaches.  They suggest that, to build effective leaders at all levels, organizations must identify high potential leaders early on, provide them with growth assignments, give them constructive and frequent feedback, and support them with coaching and mentoring. 

We agree.  However, we believe that sustainable growth occurs through an important paradox.  The lasting changes in leader effectiveness at various stages in the leadership pipeline are those that rattle or reorganize leaders to their very core, and at the same time, remain consistent with that core. 

Allow me to explain.  At the foundation of every leader is a unique pattern of personality characteristics and abilities.  We can assess these using standard personality inventories, as well as tests for strengths, motivated abilities, cognitive intelligence, emotional intelligence, etc.  At RLSI, we do this all the time on the front end of coaching engagements to help individual leaders and ourselves understand who they are at the core.  Moreover, we ask what energizes them and assess how their thinking patterns either support or get in the way of effective leadership.  We use all this information to help us determine who they are at the core. 

To be sustainable, growth must occur within the context of this core for each leader in your organization.  At the same time, true growth seldom occurs unless events rattle the basis upon which leaders think and respond, or circumstances force them to reorganize internally with each new stage in the leadership pipeline.  Psychologist Jean Piaget called this “accommodation” and contrasted it with “assimilation,” in which we simply incorporate new thoughts, ideas, perspectives, etc. into the mental framework we already have. 

In accommodation, however, we recognize the need to reorganize our internal framework in order to take into account our new experiences.  For most people, heading off to college for the first time is a clear example of needing to accommodate to a whole new existence that we had not imagined previously.  Other major life events like marriage, death of a close loved one, or the birth of children similarly cause most people to accomodate in order to take into account dramatically different circumstances.

Joe Folkman (The Power of Feedback, 2006) makes the case that genuine change in behavior requires changing core beliefs.  Not who we are at the core, but how we think about things and make sense of circumstances.  Folkman emphasizes that lasting behavioral changes are those that feel natural and consistent with our core character and personal style.  These two principles form the basis for this seeming paradox:

  • To shift our approach and show evidence of true growth, we must accommodate to new circumstances and demands by changing some of our core beliefs, which then shifts our behaviors; however,
  • To sustain this growth, we must stay within the boundaries of our core personality, abilities, and motivations.

At RLSI, we see this most clearly in our executive coaching.  Using a framework from my book, Fearless Leadership (2006), we help leaders recognize how irrational fears and faulty beliefs can become obstacles to high performance behaviors.  We coach leaders to recognize the symptoms when they begin to react poorly to situations, and we teach them how to create a set of healthy beliefs to shift their core thinking.  In the words of the paradox, above, we provide tools for shifting some of their core beliefs.  The beliefs we typically focus on are those they have held for many years, but have not examined closely.  For example, a leader might have operated for decades on the belief that she must always be correct and show no faults, or that he must avoid conflict situations and make sure that people do not become upset.  These kinds of faulty beliefs can undermine a leader’s success, especially when paired with irrational fears about looking incompetent or being rejected by senior management. 

You can use the two components of this paradox when growing leaders in your organization.  Find challenging tasks or problems, new reporting relationships, or different team assignments that will stretch the competence and confidence of your high potential and key leaders.  Use the experiences to identify faulty beliefs and approaches that limit their effectiveness, and help them accommodate to become more effective as a result.  However, as you put them in situations and provide support to help them change their faulty beliefs, make sure you affirm who they are at the core (their strengths, unique personality/style, motivators, etc.).  To sustain the growth, it is critical that they do not conclude that they must change who they are in order to be successful at the next level.

The Power of Leader Charisma in Employee Engagement

Saturday, April 10th, 2010

The last couple years have been tough on organizations on many fronts.  One area organizations are now struggling with in particular is employee engagement.  Through this trying time much has been written about what it takes for leaders to create and develop engaged workers at all levels of the company.  This entry pulls together some of those conceptual threads to suggest ways of using your personal charisma as a leader to help energize your employees.

Let’s start with a quick look at leader charisma.  First, what does charisma mean?  Wikipedia defines charisma as a personality trait that features personal charm and magnetism, along with powerful interpersonal abilities.  But what makes leaders personally charming or magnetic?  It might be helpful to think about what charismatic leaders do and what they do not do, what they embrace as behaviors and what they avoid or totally eliminate. 

One way to think about it is in terms of the interpersonal signals leaders emit to others around them.  This includes their non-verbal behaviors, like eye contact, facial and hand gestures, energy and enthusiasm, or how close they stand to people.  Signals also include verbal behaviors like word choice, vocal tone, and clarity of articulation. 

Successful, charismatic leaders.  The most charismatic leaders are those who exhibit an energized, enthusiastic presence.  They are verbal and talkative, but also spend a good portion of their time asking questions of others and deeply listening to the responses.  They recognize and appropriately respond to people’s interpersonal cues.  They draw people out with their gentle queries and encourage others to speak up and participate in conversations or discussions.  Optimistic and upbeat, they motivate others and help create a collaborative environment and culture. 

Charismatic leaders often set high standards for their teams, and they hold themselves to the same metrics.  They make their expectations clear, cast a motivating vision, and help remove obstacles so their team members can feel good about the progress they make.  Though serious in their focus on achieving objectives at the highest levels of quality, they also exhibit an inclusive sense of humor.  And they make it a priority to help their direct reports develop in their careers.

Sounds too perfect, doesn’t it?  The good news is that leaders do not need to be perfectly charismatic in order to have a very positive effect on their direct reports and others.  Even if they simply avoid the opposites from those attributes and approaches outlined here, most people will view them positively as leaders.  For example, just by avoiding things like accepting mediocre work, being closed to new ideas suggested by others, displaying a lackluster level of energy, and projecting a muddled vision, most leaders will exhibit a level of charisma.  You do not need to be perfect to be charismatic.

Engaged, resourceful followers.  You can also positively affect your team members by emphasizing the importance of facilitating “followership” as you lead.  This graphic outlines the various types of followers you may currently have on your team:


In the lower left corner are those followers who are relatively disengaged from their jobs and the rest of the team, and, at the same time, likely to avoid decisions or actions that seem risky to them.  Your goal as a leader is to help team members move from this quadrant to the resourceful and engaged part of the graph.  Followers here display a good level of energy related to their tasks and responsibilities, and they are capable of coming up with new ideas for improving their approach.  One way to dial up your charisma and encourage development on your team is to identify which of your direct reports would best be described as:

  • Risk-averse and disengaged
  • Risk-averse, but engaged
  • Resourceful, but disengaged
  • Resourceful and engaged

Each category, above, requires a different charismatic strategy to generate enthusiasm and optimism on the part of your team members.  Of course, for the resourceful and engaged team members, the strategy is simple—keep doing what you are doing and try to stay out of their way!  But, what about the other three categories?

For the resourceful, but disengaged, the key is to figure out what is causing the disengagement.  Perhaps you have not sufficiently reinforced them for their resourceful ideas and actions, and, consequently, they have become discouraged.  Maybe something outside of work related to their personal situation is causing them to disengage from work.  They might even be depressed on some level and not cognizant of their level of disengagement.  Whatever the cause, your role is to point out examples of the disengagement and express your desire to help them re-energize and become engaged again.  Reinforce any behaviors you observe that seem energetic and positively engaged.

In the case of the risk-averse, but engaged, the primary need is to help them experience success in taking risks.  Start by giving them small stretches that might not seem risky to you, but may seem like major hurdles to them.  Give the degree of support they need as they work on the task, and encourage every resourceful step you observe.  Continue to give them assignments that stretch their comfort with risk, and make sure you positively reinforce every resourceful step you observe them take.

The most entrenched and difficult to move are the risk-averse and disengaged team members.  They need a consistent combination of reinforcement for small steps they take to optimistically solve problems or take a risk, as well as any expressions you observe that suggest energy and engagement.  You might consider pairing them on projects with someone who is both resourceful and engaged, to see if the enthusiasm of the one rubs off on the other.  As a last resort, you should consider replacing the person in the position.  Disengaged, risk-averse workers are not happy in their work, and might blossom in a very different role.  Sometimes, the most compassionate step you can take as a leader is to help someone exit their role or the organization.

The bottom line.  To function as a charismatic leader, you must exhibit energy, engage others in communication in which you both listen and convey your thoughts and feelings, and use humor to disarm stressful situations.  Make certain your expectations are clear, set high, but attainable goals, and ensure that the team makes good progress.  Prioritize the development of your team members so that they become more engaged and resourceful in their work.  The result will be one in which you, your direct reports, and the organization all win.

Get bang for your buck with selection assessments!

Saturday, April 3rd, 2010

Especially in these times of economic uncertainty, hiring top talent is of utmost importance.  To this end, organizations employ a wide range of assessment strategies, from a “one size fits all” approach to the other extreme, the “more is better” theory.  In the following post I will analyze both ends of the spectrum and use empirical evidence to suggest a best practice.

One-size fits all.  Those who trust in one standardized instrument, like the Predictive Index™, Caliper™, or Prevue™, use the same tool to help them make most hiring decisions.  They trust the instrument, are familiar with its content, and have a favorable view of its success rate in weeding out poor candidates and highlighting strong ones.  The advantages of such an approach include simplicity, minimum time and financial expense, and, oftentimes, a straightforward, common vocabulary to use in discussing candidates.  The primary disadvantage is that one simple approach for all levels of hiring decisions can miss important data and perspective, especially for senior positions that are critical to the organization’s success.  In these cases, one instrument is often not sufficient to pick up essential details.

More is better.  Contrasting with the one-size fits all proponents are those who believe in using complex assessment centers, or a wide variety of instruments and approaches to gather large amounts of data on each candidate.  These assessments typically include some combination of the following:

  • Structured interviews with multiple consultants
  • Personality tests
  • Abilities tests, including IQ tests
  • Work simulations (either tailored to the specific organization, or an “off the shelf” version designed for a marketing, engineering, or other functional area position)
  • Interpersonal role plays (individual, team)
  • Administrative in-basket exercises

The advantage of using such an approach is that the assessment views candidates from a variety of perspectives in order to draw a conclusion about them.  The instruments used typically provide a much greater level of depth than the one-size fits all, minimalist approach.  The multiple assessment components also offer a good deal of “face validity” in that it seems logical that multiple components would provide a more valid perspective than using a single test. 

While these advantages are enviable, there are many disadvantages to the more is better approach.  The cost per candidate can be prohibitive, especially if the assessment uses custom-designed work simulations, in-basket exercises, and role-plays.  The results across the various components often conflict and, consequently, are confusing.  The validity of these complex assessments is not significantly greater than the one-size fits all approach.  Let us look at each of these disadvantages separately. 

Prohibitive cost.  The up-front fees for designing and implementing an assessment center runs somewhere in the five figures range.  Even when formal assessment centers are not used, the cost per candidate for all the pre-work testing, the multiple interviews, and the in-basket, simulation, or role-play observers and raters is typically several thousand dollars.   

Conflicting, confusing results.  This happens because candidates usually do not respond equally well to each of the various assessment components.  They are not great actors, for example, so they struggle in the role-plays or simulations.  Perhaps they score well in the work simulations, but their personality testing raises red flags.  Or, they impress people in the interviews, but fail miserably in the in-basket exercise.  A related issue is that large assessment companies use multiple raters and observers across a group of candidates, often using consultants from geographically dispersed offices.  Despite the best efforts to train each of these consultants consistently on how to observe and rate candidates, their own individual biases and nuances in training introduce variability into the scoring process.  This adds to the conflict in results, and confusion in the interpretation.

When consulting companies determine the bottom line result/recommendation for such candidates, they usually sound confident in their decision.  As a client, however, you may not know what decision rules led to the conclusion and why they determined that the role-play was more important than the personality testing, for example.  The underlying decision rules, therefore, are critically important to the conclusions drawn, but these are often “hidden” from you as a client.

No real gain in validity.  How this can be, you might ask.  Why else would you include so many different assessment components, if not to substantially increase the validity?  From a strict statistical perspective, the validity of a set of assessment components is not appreciably higher than the validity of the most highly valid component. 

We know from employment research that the most valid single predictor of future job performance is general mental ability.  For this reason, any selection process should use some measure of mental ability as a primary differentiator between candidates.  From there, the question is which assessment component(s) add substantial incremental validity above mental ability, without prohibitive costs? 

A 1998 review of hundreds of assessment studies found that Assessment Centers have substantial predictive validity themselves but only add a 2% increase in validity when combined with a measure of mental ability.  In other words, applicants who score well on measures of intelligence typically also perform well in Assessment Centers, so there is little to no additional value in adding this substantial cost to the selection process.

On the other hand, both work sample tests and structured interviews add some incremental value when used in conjunction with mental ability.  A measure of mental ability plus a well-designed work sample test will predict 42% of a candidate’s performance, while mental ability combined with a structured interview will predict 40%.  However, the cost of developing a work sample test for a specific occupation in a particular organization is significantly higher than conducting a well-structured interview.  Again, the question is whether adding significant cost is worth the additional two percent in validity.

How do you get the most bang for the buck?  For most of the people they hire, our clients want an individual whose background, style, and skills match the demands of the role for which they are hiring, and give them the potential to move beyond that role.  As a leader in your organization with responsibilities for the hiring of new employees or the promotion of existing ones, you must answer the question yourself of how to get the most from your selection assessment process. 

At Roselle Leadership Strategies, we take a balanced perspective in the assessments we provide to our clients.  That is, we include tests of mental ability and structured interview as the data, above, suggest.  We typically include personality tests to help illustrate the candidate’s style and fit with the culture.  However, we avoid the excess of work simulations, in-basket exercises, and role-plays that can add major costs, with little additional validity.  Moreover, as noted above, the various components often confuse and obfuscate the bottom line results.  We try to get the clearest picture possible of the candidate, using responses from written and verbal interview questions, personality assessment, and mental abilities testing, and then we map that to the current and future needs of the organization.

Assessment results should act as a catalyst for further dialogue about a candidate, not pronounce indisputable judgment on them.  It is important to avoid situations like the one we recently encountered with a very successful director of a non-profit organization who went through an assessment.  The conclusion reached by the firm conducting the assessment was that he had “a 9 percent chance for success” in his current role.  Such a pinpoint conclusion by any vendor, in light of the limitations of the assessment components we just outlined in this paper, was either ignorant or arrogant, or both. 

The bottom line is that we suggest you use assessment tools that fit your budget and help you make better hiring decisions.  Understand that an assessment recommendation is a helpful part of an overall selection process, but should not be presented or interpreted as the final arbiter of a candidate’s chance of career success in your organization.

What are you doing to protect your organization’s future in these troubled times?

Tuesday, November 3rd, 2009

In a shaky economy, many organizations take dramatic steps to freeze expenses related to new hires and promotions, downsize, and suspend or limit expenses.  This is the conventional response and it makes good economic sense.  In fact, these moves, plus a focus on protecting the existing business revenue, are often critical in the short-term to insure that organizations remain viable. 

For the most part, senior executives have little illusion about the severity of the current economic crisis, or the chance of emerging from it soon.  Most corporate leaders are taking deliberate, intentional actions to manage through the challenges, and part of that is to lower costs and increase efficiency by reducing headcount and restructuring jobs.

The conventional response.  Laying off a percentage of the workforce is one option companies choose, but often is not the best way to reduce expenses.  A 2001 study by Bain & Company, for example, found that it took companies six to 18 months to realize savings from job cuts after the 9/11 attacks.  The actual time to realize savings is probably longer, since these numbers do not reflect the additional costs of recruiting, hiring, and training new people when the economy turned back around.  Other options to decrease cost, and often better ones, include cutting salaries, reducing benefits and perks, mandating a standard number of unpaid vacation days for everyone, or offering financial incentives for voluntary separation.

For example, in a March 2009 study by Roselle Leadership Strategies, Minneapolis, that included 30 companies ranging in size from below $50M to more than $10B, 67% are making targeted cuts in workers and managers in what they deem the least critical areas, and 70% are working with vendors to reduce cost and/or inventory.  Nearly 100 percent indicate they are taking some steps to reduce costs.  The specific steps they identify include:  institute pay cuts, increase virtual meetings, freeze or limit new hires, close marginal business lines, reduce travel and other discretionary expenses, require all employees to take unpaid vacation time, delay the filling of vacant positions, make changes to existing health plans or 401K matching contributions, and put off various consulting expenses. 

Not all cost reductions are equally helpful.  The key to effective cost reduction is to keep your organization’s core competencies intact.  Leaders need to have clear understanding of, and commitment to, the capabilities that differentiate them from the competition.  Organizations cannot succeed long-term by making short-term decisions that undermine this strategic differentiation.

The challenge for leaders in trying times like these is to be courageous and strategic, and at the same time, practical and realistic.  This is the paradox at the core of an unconventional response to an economic  downturn.

The unconventional strategy involves four facets:

  • tapping into the creative ideas of the entire organization
  • creating a distinct process for strategic expenditures
  • investing in leadership development for the stars
  • attending to the personal lives of employees.

Tap all creative ideas.  While leaders seek areas in which to make financial cuts, it is important to tap into the creativity of the entire organization for future-oriented ideas.  In difficult situations, leaders too often hunker down and try to make all the brilliant decisions themselves to save the organization.  A better strategy is to tap into others at multiple levels to harvest their thoughts and energy.

Many corporate leaders recognize the importance of developing innovative approaches to address business challenges.  One way to foster creativity is to cultivate an open and collaborative culture.  The key is to develop a corporate mindset that stimulates people to think and do things differently, and then stays out of their way enough to let ideas percolate.  Workforce diversity helps fuel this process.

Success often depends on leadership’s ability to use open-ended questions to nurture inventive problem solving, encourage information exchange and scenario analysis, and challenge the status quo with a motivated vision.  Leaders must identify the innovators in the organization, the ones that can focus on the most important kernels without getting lost in the peripheral chaff.  Successful innovators can look at business challenges from multiple perspectives and identify those approaches most likely to fly in the organization’s culture. 

In our study, we found that fully 70% were making deliberate attempts to tap into creative ideas across the organization.  How are they doing this?  By asking questions and listening (57%), encouraging information exchange at multiple levels (53%), developing various future scenarios (60%), and sharing a motivating vision of the future (60%).

Create a process for strategic expenditures.  Recognizing that this economic downturn will not last forever in its current condition, and that the marketplace may not return to its former condition, organizations must develop new strategic initiatives, and set aside money to fund them.  These might include new products, reconfigured services, expanded marketplaces, new business models, and improved talent base.

The key here is to develop some likely strategies and allocate sufficient resources to test them.  History tells us that in the lean times, future orientation rules the day.  For example, from early 1973 to late 1974, the U.S. stock market experienced a 45% drop in market value.  Spikes in oil and gas prices, easy credit, and a murky military endeavor (Vietnam) preceded this dramatic drop.  Sound familiar?  Despite these challenges, companies like FedEx, Southwest Airlines, Microsoft, Apple, Genentech, Oracle and others were born during this difficult economic time.  

This next generation’s growth companies will be the ones that exploit technology and innovation and learn to thrive during periods of deflation, inflation, and delusion.  Even in this economic downturn, such companies will invest in new products and services, nurture innovation, leverage technology, and expand into new markets.  They will expand segments of their workforce in potential growth areas, at the same time they decrease headcount in other areas.   

The new growth companies will search their high potential talent pool to find innovative people and give them future-oriented projects with few parameters to limit their thinking.  Since innovators need access to resources and networks of people against whom they can bounce ideas, leaders will also remove obstacles, and encourage mentoring and peer feedback. 

Some companies will look for opportunities to increase the level of their talent by intentionally seeking innovative and self-motivated individuals from other companies who are frustrated at the reduced career options with their current employer.  In a 2009 Deloitte study conducted by Forbes Insights, nearly half of the 300+ senior business leader respondents indicated they would focus on product development and innovation this year.  Fully 40% indicated their organizations would recruit more for critical talent. 

These recruitment efforts might include deliberate steps to build a marketplace brand that identifies them as a highly desirable employer.  From our work with Target, for example, we know that their brand image, built on a combination of business success, appealing products, and corporate philanthropy, is a major attraction to potential employees. 

In our study, 83% of responding companies indicate they are intentionally setting aside funds and creating distinct processes for developing future-oriented products or services.  Most (70%) indicate a focus on expanding or re-defining existing marketplaces, while 43% indicate they are budgeting for new or re-configured products or services.  About a third indicate they are creating pilots of new business models, and another third that they are exploring new product test markets.

Invest in leadership development.  One type of expenditure that many organizations consider a strategic priority is to retain and develop the critical talent they currently employ, while they attract similar talent for their future needs.  Downturns present the perfect opportunity to enhance and deepen workforce skills and capabilities.  It is smart business to use this time to help high performing managers and high potential stars expand and deepen their leadership skills in areas like collaboration, team play, and big picture strategy. 

Talented people are difficult to recruit and retain, and even more difficult to replace if they choose to leave.  Retention of key talent is a major concern across many organizations this year.  In the Deloitte study, nearly half of the senior business leaders who responded indicated their intention to invest in building new workforce skills despite the economic climate.  The companies in this survey came from across the globe, and ranged in size from $500M to more than $20B. 

Market leading companies recognize that leadership development is not just nice to have; it is essential to maintain and build competitive advantage, especially in tough economic times.  For example, Toyota pulls people offline in these times and provides training.  They utilize this strategy because the costs involved in providing leadership preparation and coaching are relatively small when compared to the potential future ROI.  Growing leaders from within an organization by using strategic work assignments, internal mentors, external coaches, performance feedback, and structured succession planning is a strategy increasingly employed by successful organizations. 

72% of those polled in the Deloitte study indicated the intention to direct limited human resource dollars to the development of leaders and high-potential individuals.  The same group of business leaders indicated that 48% intended to invest in building new skills in their workforce.

We determined in our study that 100% plan to invest in their key leaders during this downturn.  With more specific responses, they indicate their intention to take steps to maintain high motivation and productivity (80%), enhance skills and develop leadership capability (70%), and work to increase the likelihood of success once the economy turns around (50%). 

Pay attention to the personal lives of employees.  It seems obvious that creating personal relationships will help leaders get the most out of their employees, but most managers believe they are better at this than they actually are.  Times of dramatic change create predictable stress and fear in your workplace.  In the Deloitte study, an average of 44 percent of surveyed leaders indicated a decline in the morale of their employees, and almost 30 percent reported a decrease in trust/confidence in leadership. 

Greater attention paid to employees’ lives outside of work, and the personal toll on them caused by the changes, usually results in greater productivity, morale, and trust.  Acknowledging the pressure and affirming people for their efforts creates greater loyalty and effort.

Among the methods utilized by the organizations in our study, 93% indicate they are taking steps to acknowledge and show concern for the toll taken on those who remain after layoffs.  More specifically, 77% point out that they are affirming employees for their efforts and 67% indicate they are showing compassion for the emotional toll and the strain on their families.  Only 30%, however, say they are providing individual or workshop-based counseling for those who remain.

Peter Drucker describes the essence of leadership as the balance between managing what you have, and creating future capacity.  The dilemma in this economy is how to make the best choices in the dynamic tension between surviving now and thriving in the future.  The key to the courageous response is to be adaptive, imaginative, and practical.  Tomorrow’s industry-leaders will be those that position themselves to move quickly and effectively when the economy inevitably comes back around.  They will do this by cutting the fat, nurturing creativity, encouraging new strategic initiatives, and developing the talent that remains.

When the economic outlook seems grounded, invest in the stars!

Thursday, September 10th, 2009

When storms keep fishermen at port, they spend the time mending nets, repairing their boats, and discussing strategy so that they will be more productive
once the storm clears.

The conventional response. In a shaky economy, many organizations choose to freeze expenses related to new hires and promotions, to downsize, and to suspend or dramatically limit expenses for things like travel and capital expenditure. These moves, plus a focus on generating new revenue, are often necessary in the short term to insure that organizations remain viable for the long term. However, it is critical to offset the increases in workload and frustration on remaining employees caused by such measures. Even the most talented and motivated workers will respond with fear and sub-optimal performance in response to such changes in the work environment.

The courageous response. A great way to offset the negative impact of cost-cutting measures is to invest in high potential and high producing leaders throughout the organization during the slow economic times. Relative to the savings netted by freezing new hires or downsizing overall head count, the cost of leadership development is small. However, to engage in such initiatives during an economic downturn, even a major one, sends a strong and reassuring signal to the star performers who remain. This is the courageous response, and it leads to stronger companies long-term.

Though it may run counter to conventional thinking, it is even more important in the midst of an uncertain business environment to invest in your star performers.  Although the tendency may be to put leadership development in the “nice to have” category, smart organizations invest in their retained talent.  They maximize the productivity of their people now, even with limited resources, to prepare for a quick and competitive start when the general business climate improves.

Some companies actually increase their market strength during tough times.  Toyota, for example, pulls people offline in the slow times and provides classroom training for them (based on an article in the December 2008 Training + Development Journal, American Society for Training and Development).  They do this to better position themselves for the inevitable upswing. 

Why develop your leaders?  It is helpful to remind ourselves why successful organizations invest in leadership development initiatives in the good times.  Our research with clients over the last decade indicates these primary reasons for investment in their leaders:

  • Increase productivity:  From a quality/continuous improvement point of view, people—like products and processes—need to become more effective; greater effectiveness yields greater productivity.
  • Retain top performers:  The relationship between manager/executive and his/her subordinates is the key factor in retention; when leaders are ineffective at building and maintaining relationships, when top performers are not developed to their full potential, retention suffers.
  • Plan for Succession:  Senior managers and managers must look at how to leverage strengths and manage their development edges every year to be ready for greater responsibility.  The leadership pipeline needs to be robust for the future, and stars need to see opportunities on the horizon.
  • Foster a Motivated Environment:  The effective role model of leaders who are motivated to become better, themselves significantly impacts the drive to continuously develop and improve.  Leaders set the tone, especially in economically shaky times.
  • Form More Effective Teams:  When leaders at multiple levels identify obstacles to the effectiveness of their team and exhibit a commitment to work through these, the team becomes more effective.  Often, their own leadership style and capacity is one of the obstacles.

The compelling three reasons.  If these five outcomes are important in the good times, how much more critical must they be during business downturns?  Here are three reasons your organization should plant leadership development seeds in its stars now (based on the results of several recent leadership surveys described in the Training + Development journal of the American Society for Training and Development), in order to harvest their increased capacity when business turns around later in 2009:

  • Increase motivation, productivity.  Though 75 percent of senior leaders identified leveraging leadership talent as a top priority, 60 percent of leaders at lower levels were not satisfied with their leadership development options.  This leads to reduced satisfaction and a less motivated and productive environment.
  • Maintain competitive edge.  Star performers want on-the-job opportunities for skill development, and this is even more important when their options for promotion or increased responsibility decrease in a sluggish economic climate.  With many organizations already lowering salary increases or freezing them in 2008, providing development opportunities is a way to offset the lack of financial reinforcement.
  • Retain top talent.  Close to 50 percent of high performers leave their jobs due to ineffective leadership above them and/or a poor relationship with their immediate manager.  Though these employees might not have the opportunity to leave your organization in slow economic times, up to 30 percent will likely jump ship quickly when opportunities open up in the marketplace. 

The bottom line.  Leadership development is not just nice to have; it is an essential competitive advantage in propelling your organization into the future.  Tomorrow’s industry-leading companies will be the ones that leverage the current economic climate by cutting the fat and elevating the talent that remains.  In so doing, these leading organizations position themselves to move quickly and effectively when the economy inevitably comes back around.  The cost of providing leadership training and coaching is relatively small compared with the potential ROI in the next year.

Pay for Performance?

Wednesday, August 26th, 2009

The goal of organizational architecture is to create an organization which will be able to continuously create value for present and future customers—essentially creating systems that will optimize and organize themselves.  Organizational Architecture involves three important aspects:  the assignment of decision rights (who makes what decisions), the methods of rewarding individuals, and the structure of systems to evaluate the performance of both individuals and business units.  Corporate America has re-engineered decision rights fairly well over the last 15 years by flattening out organizations and shifting manager responsibilities.  However, most companies are falling painfully short when it comes to administering rewards and evaluating performance.

Rewards are extremely important in corporate America.  Rewards can be anything from receiving a restaurant gift card for finishing a project, to getting a 100-inch plasma TV for being the best sales person in the nation that year.  In order to make a reward system successful three things must be true (expectancy theory).  The first is that employees must feel that if they put in the requisite effort, that they will be able to achieve the desired performance level.  Second, they need to trust that if they achieve the desired performance level, they will receive the reward from the company.  Third, the valence of the reward must be such to motivate the employee to put in the effort in the first place.   

Increased emphasis in American corporations is being placed on incentive pay, or performance-based pay, in an attempt to incent workers to achieve maximum results (or at least perform above the minimum level required).   One of the problems with performance-based pay is that in order to institute a policy of rewards, the company has to put some of each employees’ pay at risk—money is taken right off the top of their salary, and now they have to earn it by performing, in many cases, at a higher level than they have in the past.  This problem is often alleviated by the company building in the ability for the employees to earn more than they used to earn by achieving the highest performance threshold.  However, this system is suboptimal for employees who will never be able to perform up to the highest level, no matter how hard they try.  Although some degree of turnover is beneficial and necessary, most organizations can’t afford to lose up to 50% of their workforce at one time.  For this reason, sometimes companies will implement an incentive program without putting any of its employees’ money at risk all—simply by adding the incentive on top of regular compensation. 

So why doesn’t every organization use a pay for performance system?  Critics of incentive pay have two arguments: the first argument is that money does not necessarily motivate employees; and the second is that it is difficult to design an effective compensation plan that truly rewards the highest performers.  To me, the second argument is a lot closer to reality than the first. With increasing reliance on teamwork in companies today, the already vague line between acceptable and poor performance is getting evermore hazy.  For this reason a system for performance appraisal is vital to organizational architecture.  In order for a performance appraisal system to work, the employee or team output must be observable at low cost and difficult to manipulate by employees or the company.  In addition, when evaluating teams of employees, a measure of team performance is required while still recognizing individual contributions to the team.  For example, giving individual bonuses for work toward the team goal, and then giving a separate team bonus if the team reaches its goal.

Where most incentive programs fall short is in the expectancy link between achieving performance and being rewarded.  That is, when a company asserts that high performance is necessary to stay in business, but does not reward high performers, what does that say to those high performers who could go to another company and perform at the same level and be rewarded for it?  The opportunity costs for high performers to work at companies that do not adequately compensate for performance are the rewards (money, recognition, job security) they could be receiving elsewhere for the same effort.  To me, the extreme disconnect between performance measures and rewards is what will drive these companies out of business.

It all comes back to operant conditioning: why would the mouse keep trying to learn how to get out of the maze if she never got cheese when she found her way out?  Business leaders need to invest the requisite time and resources needed to design a maze that truly separates the high performing mice from the poorer performing ones.  Then, give your mice the cheese they deserve!

My Vote on November 4th will be for Entrepreneurship

Wednesday, October 1st, 2008

These days, the presidential race hangs like a 45 pound weight around the neck of the collective American psyche.  Whether you’re a ‘bleeding heart’ liberal, a ‘staunch’ conservative or somewhere in between, there are likely a handful of issues that are legitimately salient to you.  There may be another 20 or so issues that you either don’t completely understand, or that you understand but do not feel strongly one way or the other.  This is the essence of our two party system—millions of citizens voting either A or B (in our case, McC(A)in or O(B)ama) on a test question that involves 25 subscales, each of which offers multiple subjective solutions. 

The reality is that few, if any, of the many and profound domestic challenges confronting our next president are fully resolvable by a single term in office.  The issues of ensuring greater access to and affordability of healthcare, addressing our looming entitlements crisis, making significant headway against poverty, and restraining man-made climate change will take much more than four or eight years under one president.

Above these important issues, improving the economy is of utmost importance and the policies our future presidents champion will have a dramatic impact on how rapidly our economy grows.  Continued growth in per capita incomes, generated through ongoing improvements in productivity, is what will drive improvements in living standards.  This faster growth is what will give us the requisite, sustainable resources to address each of our major domestic and foreign policy challenges.

Of course, government does not directly generate growth.  However, the private sector’s success, and thus the pace at which the economy advances, depends heavily on the rules, incentives, and basic infrastructure that government sets and provides.  None of our long-term challenges, or the opportunities afforded by faster growth, will be achieved in the future without continued innovation—new products, services, technologies, and ways of doing things.

American history reveals that many of the most important radical innovations—the telegraph, telephone, radio, television, automobiles, airplanes, computers and the software that operates them, and many of our current Internet-based successes (Google, Amazon, eBay)—have been introduced and commercialized first by entrepreneurs.  What we all should demand, regardless of our political affiliation, in our next president and governmental officials, therefore, is their deep understanding and promotion of policies that will best foster the entrepreneurial spirit that drives radical innovation.

For two decades from 1973-1993 the economy grew at only 2.5 percent.  However, from 1994 to 2000, annual growth jumped to about 4 percent.  Even after the 2000–2001 ‘recession’, and until the downturn this year, the economy still grew at roughly a 3 percent annual rate.  So what happened?

The conventional wisdom is that, beginning in the mid-1990s, growth surged because of the information technology (IT) revolution.  This revolution featured new technology, as well as the freedom for and support of entrepreneurs to take that technology to market.  Think for a moment about which firms made all this IT so easy to use.  The answers that immediately come to mind are companies like Microsoft, Apple, Sun Microsystems, Intel, Oracle, and Google.  The success of these entrepreneurial enterprises made it possible for the rest of us to change the way we live and for the firms we work for, or run, to churn out more products and services with ever fewer resources.  The days of large, established firms (Big Steel, Big 3 automakers, the old AT&T, etc.) driving the economy are over.

Looking ahead, rapid growth could not be more important.  30 years from now, per capita income will be roughly 35 percent higher if we can grow at the 4 percent annual rate we achieved in the last half of the 1990s, rather than the 3 percent annual rate that many now project for the future.  Further, over the next century the economy would be three times larger if it grew by 4 percent annually instead of 3 percent.

What can be done to maximize our chances of growing at the more rapid clip?  A few answers are apparent to me: improve education to build a more skilled workforce, reduce poverty through incentives, address our energy dependence, welcome high-skilled legal immigrants, and continue to open global markets.

The clear lesson from our recent past is that the central task for U.S. policymakers is to ensure that our entrepreneurial revolution continues, and that we do not slip back into anything like the Big Firm economy we once had.  Without entrepreneurs, economic growth stagnates.  Without economic growth, most of our country’s social problems will worsen.  Growth is life; stagnation is death.  In November when I walk into the voting booth and carefully choose between candidates A or B, above all else, my vote will be for entrepreneurship. 

The entrepreneur in us sees opportunities everywhere we look, but many people see only problems everywhere they look. The entrepreneur in us is more concerned with discriminating between opportunities than he or she is with failing to see the opportunities.
-Michael Gerber

Reason for Optimism

Monday, May 5th, 2008

If you have picked up a newspaper or watched any sort of news or financial coverage in the last 6 months or so you are assuredly aware of the fact that the U.S. is headed uncontrollably into the worst financial times since the ‘mild recession’ of 1990.  My question is, when did speculation start creating reality?  Only about half of Wall Street investors can even use speculation to pick a bundle of securities that will beat a basic market index like the S & P.  To avoid creating an economic self-fulfilling prophecy Americans need to focus their attention on the positive.  A few reasons for optimism are that unemployment is low, interest rates are low, and the dollar is poised for a world market correction.  As a provider of high-level services to mid and large cap companies, RLSI’s survival is dependent on the survival of the U.S. economy as a whole.  Inspired by Rich Karlgaard, the publisher of Forbes Magazine, I believe that the grim outlook for the economy is oversold at this point, and that there are four main reasons for the unjust pessimism: The president is unpopular, it is an election year, the business press is scared and ineffectual, and the subprime mortgage mess is overstated.

At the moment, George W. Bush’s approval rating is hovering around 30%.  In other words, 70% of Americans disapprove of the job the president is doing currently.  Not surprisingly, this is the exact same percentage of Americans that report that our country is on the wrong economic track.  I wonder if these percentages could be related in some way…  On the other hand, half of Americans report that they feel positive about the future, and 84% say that they are satisfied with their lives.  This is an example of how confusing statistics can be, and why we have to be very careful not to jump blindly behind the results of the latest empirical study.  So, who do you believe?  Do you believe the 70% that say that the whole country is on the wrong track, or the 50% who are rosy about their own economic futures and the 84% who are completely satisfied with their lives?  My opinion is that the 70% who say that we are on the wrong track are merely expressing their Bush fatigue, not their pessimism about our economic future.

Related, we are wholly engulfed in an extremely compelling election year.  One thing that can be guaranteed about all elections is that the out party – this year the Democrats – will always say that the economy is in bad shape.  For example, in 1992 Bill Clinton’s slogan was: it’s the economy stupid.  In 1980 Ronald Reagan asked Americans if they were better off than they had been four years earlier – These men were on different sides of the aisle, but used the same message to get elected because it works.  In our current case, the Democratic primary season has been by far the more dramatic of the two races.  Understandably, both Democratic candidates are justifying their positions on the basis of a weak economy.  Since the democratic race offers incredible daily drama, it is justifiably getting much more attention in the press, and thus, the negative economic platforms of the candidates are getting lots of air time.

Exacerbating this issue is the fact that, according to Karlgaard (not me), most business journalists are not necessarily the best people in the world to have analyzing complex economic and business topics; most of them are, after all, just failed sports writers.  Think about what it takes to be a first-rate business journalist: facile with numbers and financial statements, confidence talking with top executives, board members, etc., deep knowledge of the industry, coherent global economic views and exceptional storytelling ability.  Karlgaard argues that the people who actually have these credentials and abilities become Wall Street analysts, Booz Allen consultants, or go into business on their own; they do not become journalists.  Another issue with business journalists is that they are in a fearful mood in general due to the fact that journalism itself faces threats of disruption from the Internet.  This thin talent pool, combined with the fearful moods of the writers and the fact that the majority of journalists are hostile to business anyway, often is interjected into their stories.

Lastly, as is commonplace in the media, numbers get stated as astronomical, but are not put into proper context.  For example, one of biggest issues with the economy today is the subprime mortgage mess.  It strikes fear in the hearts and minds of Americans to hear that banks have had to write off $150 billion in bad loans; how could our economy possibly survive this?  To put it into perspective, $150 billion is less than 1% of the market capitalization of U.S. stocks, and in a typical trading day U.S. stocks gain and lose $150 billion every hour.  The nearest historical comparison we have to our current mortgage situation is the savings-and-loan crisis of 1986-1995. Back then, the S&L crisis saw $700 billion in bad loans – nearly 5 times our current level – and during this period the U.S. economy grew and stocks went up.

All of this to say, maybe we shouldn’t be so doom and gloom about the future of our country.  Are the current economic conditions ideal?  No, not by any stretch of the imagination; but the economy was due for a correction for the prosperity of the last 10 years.  As was the case in the mid-90s, it will be business innovation and consumer confidence that decides our economic fate for the next decade.  It is up to us as business owners, executives, strategists, teachers, leaders, professionals and consultants to lead the economy away from the impending downturn and create our own reality – let us not just sit back and allow political speculation and economic pessimism to shape our futures.

‘…by the best cultivation of the physical world, beneath and around us; and the intellectual and moral world within us, we shall secure an individual, social, and political prosperity and happiness, whose course shall be onward and upward, and which, while the earth endures, shall not pass away.’                  
Abraham Lincoln (1859)