Technology has made it possible for employees to be plugged in around the clock, even when they're "on vacation." In view of this reality, Kronos launched its open vacation policy in early 2016. To Ain's surprise, some employees were very unhappy about it, largely for three reasons: Because the new policy required individuals to work out time off with their supervisors, some managers thought their jobs would become more difficult. Some employees who had been banking unused vacation time resented the loss of a bundle of cash when they retired. And some felt that it was unfair for new hires to get as much vacation as they themselves had earned over time. But Kronos now considers the switch a success--and 2016 was financially the company's best year ever.
More than 15 years ago Jim Collins, the author of the management best seller "Good to Great," introduced the flywheel as a metaphor for the enduring power of strong business leadership. A company achieves excellence, he wrote, by "relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough." The power of momentum is evident in HBR's 2017 ranking of the world's best-performing CEOs--the 100 leaders who have delivered top results on both financial and ESG measures over their entire tenures, which average 17 years. Heading this year's list--his first time in that spot--is Pablo Isla of Inditex, the parent of several retail fashion chains including Zara and Pull&Bear. In an accompanying interview with HBR senior editor Daniel McGinn, Isla discusses some of the factors--a flat structure and an informal management style; "proximity sourcing," or production close to home; and a continual focus on sustainability--that have propelled the company's success.
Corporate transformations still have a miserable success rate: About three-quarters of change efforts either fail to deliver the anticipated benefits or are abandoned entirely. And because flawed implementation is most often blamed for such failures, organizations have focused on improving execution. But poor execution is only part of the problem; the authors' four-year study of 62 corporate transformations suggests that misdiagnosis is equally to blame. Before worrying about how to change, they write, executive teams need to figure out what to change--in particular, what to change first. They can do this by fully understanding three things: the catalyst for transformation, the organization's underlying quest (is it global presence, customer focus, nimbleness, innovation, or sustainability?), and the leadership capabilities needed to see it through. J.C. Penney, Norske Skog, Acer, and other classic cases illustrate the authors' points, and the article includes a "quest audit" to help companies identify their transformation priorities.
Most leadership development programs aren't working. Only 24% of senior executives at firms that have them consider them to be a success. Companies must take a more scientific approach to turning their raw talent into leaders, say three authors from Egon Zehnder, which has been measuring executive potential for 30 years. Begin by identifying which of seven key leadership competencies (results orientation, strategic orientation, collaboration and influence, team leadership, developing organizational capabilities, change leadership, and market understanding) are critical to your top roles. Next, assess employees' potential by looking at five predictors of strong competencies (motivation, curiosity, insight, engagement, and determination) and then map people's potential to role requirements to see how far they can go. Last, to help them get there, provide the right coaching and development opportunities.
Silicon Valley venture capitalists used to routinely oust start-up founders--who were viewed as green and unskilled--as part of the process leading to an IPO. The author, an adjunct professor at Stanford and a well-known entrepreneurship thinker, describes how VCs gradually came to see founders not as a problem that needed to be solved but as a valuable asset that needed to be retained. In July 2009, when Mark Andreessen cofounded the VC firm Andreessen Horowitz with Ben Horowitz, it was with a key philosophical difference from rival firms: a "founder friendly" focus. Blank argues that this trend has gone too far, and the situation at Uber is just the most obvious example of that. He offers prescriptions for how to begin correcting this power imbalance.
As firms scramble for competitive advantage, boards--once the cautious voices urging management to mitigate risk--are now calling for breakthrough innovation. Indeed, avoiding risk is now seen as the riskiest proposition of all. In speaking with CEOs and board members from a range of industries, the authors identified four common obstacles most boards face in governing innovation: an outdated risk agenda, insufficient time, lack of expertise, and a relationship with management that needs retuning. Embracing innovation and its inherent risks requires that boards and senior management develop new ways of working together. To bolster out-of-the-box thinking at their companies, boards should promote diversity among members. They should foster "creative abrasion" to keep ideas flowing and rethink traditional methods of governing. And they must learn to embrace and encourage risk.
People have a tendency to stick to an existing course of action, no matter how irrational. In the management literature, this is known as an escalation of commitment, and in nearly every academic case study on the demise of a former industry leader, it played a major role. The story of the British music company HMV--whose managing director dismissed downloadable music as "just a fad"--is a classic example. Escalation of commitment is explained by a number of mutually reinforcing biases, among them: the sunk cost fallacy, loss aversion, the illusion of control, the preference for completion, pluralistic ignorance, and personal identification. The authors describe six practices that can help counteract these biases: (1) Set decision rules. (2) Pay attention to voting rules. (3) Protect dissenters. (4) Expressly consider alternatives. (5) Separate advocacy and decision making. (6) Reinforce the anticipation of regret. Overcommitted executives, they write, are prone to ignore signs of their company's imminent collapse. These practices will encourage managers at all levels to make decisions more objectively.
To identify the value that social tools can bring to companies, the authors split employees at a large financial services firm into two groups, only one of which used an internal social platform, and observed them for six months. Those who had used the tool became 31% more likely to find coworkers with relevant expertise and 88% more likely to discover who had useful connections. Internal social tools can help employees make faster decisions, develop more innovative ideas for products and services, and become more engaged in their work and their companies. But companies that try to "go social" often fall into four traps: They (1) assume that Millennials will embrace social tools at work; (2) struggle to foster personal interaction that builds trust and promotes knowledge sharing; (3) fail to recognize how learning occurs on social tools; and (4) focus on the wrong data. The authors offer advice on how to avoid these traps.
In recent years, health care organizations have made sizable investments in information technology. They've used their IT systems to replace paper records with electronic ones and to improve billing processes, thereby boosting revenue. But so far, IT has been of little value in making medical care delivery more effective or less expensive. How can health care organizations change this? One key is to prioritize quality improvement over cost cutting. By harnessing IT to help design better clinical practices, it's possible to achieve better patient outcomes and better financial performance. It is also vital to gather good information--by using simpler, more-organic collection methods--and to make it actionable by applying analytics. Finally, many organizations will need to forge new business and operating models, expanding their IT staffs, revamping how their clinical staffs work, and creating new payment structures. The authors provide numerous examples of health care organizations that are taking these steps--and seeing impressive results.
Though executives tend to think--and want to believe--they're hiring and promoting fairly, bias still creeps into their decisions. They often use ambiguous criteria to filter out people who aren't like them or deem people from minority groups to be "not the right cultural fit," leaving those employees with the uneasy feeling that their identity might be the real issue. Companies need to acknowledge that it's fair for employees from underrepresented groups to be suspicious about bias, says Williams, Facebook's global director of diversity. They also must find ways to give those workers more support. To that end, many organizations are turning to people analytics, which aspires to replace gut decisions with data-driven ones. Unfortunately, firms often say that they don't have enough people from marginalized groups in their data sets to produce reliable insights. But there are things employers can do to supplement small n's: draw on industry or sector data; learn from what's happening in other companies; and deeply examine the experiences of individuals who work for them, talking with them to gather critical qualitative information. If firms are systematic and comprehensive in these efforts, they'll have a better chance of improving diversity and inclusion.
Relative to established organizations, start-ups can be hard to figure out. What are the jobs to be done? The best entry points? How can you tell whether a company has potential for success and is the right fit for you? The author advises that you first assess whether you're suited for a young, entrepreneurial organization. Start-up joiners need to do three things well: manage uncertainty, push the limits, and think like an owner. He then outlines four steps for choosing the right company: Pick a domain (find a field you're passionate about); pick a city (preferably in an entrepreneurial hub); pick a stage ("jungle," "dirt road," or "highway"); and pick a winner (do due diligence on the founding team, the market, and the business model). Once you've made those choices, you'll need to sell yourself, and Bussgang suggests how: Identify key players at the companies you're interested in and find ways to connect with them. When you meet, articulate how you can contribute, engage your interviewers about their work, and offer expertise, advice, or contacts with no expectation of reciprocity. Suddenly you'll be perceived as someone who is already adding value.
A TV producer struggles to balance the demands of three hit shows--and dreams of a new one. This fictional case study features expert commentary by Sarah Barnett and Melissa James Gibson.
A TV producer struggles to balance the demands of three hit shows--and dreams of a new one. This fictional case study features expert commentary by Sarah Barnett and Melissa James Gibson.
A TV producer struggles to balance the demands of three hit shows--and dreams of a new one. This fictional case study features expert commentary by Sarah Barnett and Melissa James Gibson.
By almost any measure, Charles Schwab Corp. appeared to be killing it in 2017. The wealth management, banking, custody and brokerage firm's stock was trading near its all-time high. It was posting unprecedented levels of new client accounts, net new client assets, revenues and profits and had a record $3.12 trillion in client assets under management. Schwab was taking customers and assets from old-line wire houses like Morgan Stanley, while fending off challenges from young Fintech upstarts by being a fast follower. Despite its relatively large size, Schwab saw itself as a disruptor. Schwab was attracting more net new assets than any other publicly traded full-service investment firm and its operating costs were lower than competitors like Merrill Lynch and Morgan Stanley. Still, there was no doubt that challenges loomed on the horizon. For example, how could Schwab maintain or improve trust in an era of intense cyber-threats and increasingly sophisticated technology that some consumers found invasive or even creepy? Were its products elegant and simple enough? In the era of Uber and Amazon, customers' expectations were rising. And what if a big tech company like Google or Amazon started to move onto Schwab's turf? Key to staying ahead, CEO Walt Bettinger felt, was maintaining a laser focus on the customer, and being willing to cannibalize Schwab itself to find new growth. Schwab, he thought, had repeatedly proved its willingness to do so over the previous four decades, most recently by introducing a robo-advising product. "Disruption occurs when someone listens more carefully to customers, or better anticipates what customers might want before they even realize it themselves. Most companies are disrupted because they lack the will and courage to disrupt themselves first," Bettinger said. Could Schwab stay vigilant and keep up that courage? Or was it already being disrupted and didn't realize it?
From 2010 to 2017, General Electric pivoted from an industrial behemoth to a data-driven tech company by incorporating big data analytics across all of their subsidiaries. As the world's first "digital industrial" company, it named and the Industrial Internet - the "internet of things" for manufacturing - and is poised to win big in the future, as the current CEO, Jeff Immelt, hands over the reins to his predecessor, John Flannery.
Yankuang Group Company (YGC), a Chinese provincial state-owned enterprise (SOE), had over two decades of experience operating in the international market since its overseas initial public offering (IPO) in 1997. In 2013, YGC suffered great losses from an oversupply of coal production and a sharp decline of coal prices. How has YGC adjusted its internationalization process? The case highlights the key steps in the process and the impact of internal and external environment factors on the adjustment. It also illuminate the reforms of Chinese SOEs and the solutions to tackle challenges for running multi-national businesses.
The One Fund case was written to challenge students to think more deeply about the relationships between institutions, policies, and stakeholders. The case was designed to help students understand the complexities of planning, organizing, and executing a complex mission over a short period of time with cooperating and conflicting institutional interests, varying societal expectations, and embedded relationships developed over decades. Our intent is to deliver a modest contribution to exploring how the relations between institutions and policies are positively affected when combined with determined entrepreneurial actions. The case was written for use in a class on Institutions and Policies. It may also be used in an undergraduate strategy class to introduce students to strategy in the area of non-profits. In this context, we explore the relationship between non-profit and for-profit enterprises, comparing the mutual interests of the constituents they serve. Lastly, we introduce students to antecedents that help form the PEST factors that influence firm-level strategic choice.
Once each decade, California Management Review (CMR) publishes a special issue that features research by faculty at the Haas School of Business at University of California, Berkeley. Our 40th anniversary issue, published 20 years ago, highlighted research on Knowledge Management. CMR's 50th anniversary issue featured cutting-edge research on Innovation. In our 60th anniversary issue, we present new research that focuses on Leadership.