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Organizations need to be built to change and to attract the behaviours they reward. Traditional reward systems lead to stability and often fail to motivate either performance or change. Merit-based salary increases are typically small and permanent, meaning they don’t significantly increase motivation, but can result in poorly performing but highly paid long-term employees. They create a situation in which the only way to punish underperforming or change-resistant employees is to fire them. Bonus pay is a superior reward system, as it provides more money (and hence motivation) and is impermanent. It is particularly valuable for driving organizational change. The impact of stock plans on motivation is likely less than bonuses, because the connection between performance and pay is weaker. But stock plans can create a culture of ownership and “common fate” and may better motivate change than profit sharing. Person-based pay, which pays an employee according to their skills and knowledge, is more effective in a work situation with changing task assignments than paying someone for a particular job. As this article shows, decreasing the rewards for seniority and job size are important, but they are unlikely to be as powerful as rethinking how the system should reward individuals for their skills and how it should reward performance.

Breaking down the barriers that stifle employees is easier said than done. These authors have helpful advice for well-intentioned managers.

Before you can say What crisis? you will find your organization already in the thick of it. Which is why leaders who know how to respond will be favourably judged.

Companies that create an environment that challenges employees and enables them to achieve their goals will find employees richly engaged.

An engaged employee is a person who is fully employed in, and enthusiastic about their work. The authors of this article believe that executives must be concerned about the current level of engagement in the workplace. The Employment Engagement Index published by the Gallup Management Journal indicates that only 29 percent of employees are actively engaged in their jobs, fifty-four percent of employees are not engaged while seventeen percent of employees are actively disengaged. Managers should be concerned about such results as New Century Financial Corporation statistics show that employee engagement does not merely correlate with bottom line results - it drives results. The article also describes the ten C's of employee engagement that make great leaders. The authors suggest that leaders connect with their employees and make them aware that they are valuable assets. Leaders should provide challenging and meaningful work with opportunities for career advancement. While challenging employees, good leaders also instill the confidence that the challenges can be met. Leaders should convey and clarify their expectations about employees and provide feedback on their functioning in the organization. Exceptional leaders also congratulate i.e. they give recognition, and they do so a lot; they coach and convey. Good leaders help people see how they are contributing to the organization's success and future. They also create opportunities for employees to exercise control over the flow and pace of their jobs and communicate their vision clearly. Great leaders are also team builders, they encourage collaboration. Furthermore, good leaders are credible. They strive to maintain a company's reputation and demonstrate high ethical standards. Lastly, good leaders help create confidence in a company by being exemplars of high ethical and performance standards.

An effective innovation culture can produce a steady stream of sustaining and breakthrough ideas, and a virtuous circle of growth by design.

A manager may have a great idea but the only thing that will really matter is great execution. Here's sound advice for making the execution as brilliant as the idea.

Scrutiny of governance practices has highlighted the benefits that a company can - and needs to - enjoy from a harmonious relationship between these two officers.

What started out as a search for a new model for funding research turned into a new model for developing strategy, and not just for health-care organizations.

Many managers are dumbfounded when their great, new product proves to be a dud. Too often, these managers have made one of the ten product mistakes this author describes.

This is an MIT Sloan Management Review article. Although IT portfolio management has been a best practice for some time, many companies still generate substandard returns from their IT investments. Points out that investing the right amounts in the right IT asset classes is only the first step--a suite of interlocking business practices and processes collectively labeled "IT savvy" must complement IT portfolio management techniques. The benefits of establishing such practices add up to a tangible IT savvy premium: higher net profits and other performance gains. Cites a range of organizations in which IT savvy is ingrained, informing many of the companies' business decisions and sharply focusing their IT investments. Draws on the findings of a multiyear survey to review the different IT assets in which companies invest before discussing the gap in IT investment returns that separates those with IT savvy from those without. Presents five hallmarks of IT savvy and offers a series of practical suggestions for how managers can start to match IT savvy with the IT asset mix.

This is an MIT Sloan Management Review article. Case studies suggest that companies, including Avon, Stonyfield Farm, and Starbucks, have benefited from marketing initiatives associating the company with a socially beneficial cause. But how should managers allocate dollars between social-cause marketing and other types of marketing programs? The authors use a market-research technique called "conjoint analysis" to help managers evaluate the relative benefits of various types of affinity marketing programs, including sponsorship of social causes, sports, or entertainment events. Conjoint analysis involves creating a variety of hypothetical brand profiles that contain combinations of brand attributes; by asking consumers to rank the profiles, researchers can gain insights into how different brand attributes affect consumer preferences. For some of the products studied, affiliations with social causes had more positive effects on consumer rankings than affiliations with sports or entertainment events. However, this was not always true; for example, it was not the case for the milk brands studied, suggesting that the effect of social-cause marketing initiatives may vary by industry. Also discusses how brand managers can use conjoint analysis to compare potential marketing initiatives.

This is an MIT Sloan Management Review article. Service businesses now make up about 70% of the aggregate production and employment in the OECD nations, yet true innovation is rare in the service sector. Many companies incrementally improve their offerings, but few succeed in creating service innovations that launch new markets or reshape existing ones. By thinking about a service in terms of its core benefits and the separability of its use from its production, managers can more easily see how to out-innovate their competitors. Before they can do so, though, they must understand the different types of market-creating service innovations as well as the factors that enable them. Introduces and describes a two-by-two matrix whose taxonomy helps managers think strategically about service innovations that can create new markets. The dimensions of the matrix refer to the type of benefit offered and the degree of service separability. References best-practices examples to illuminate each cell of the matrix and explain the value of understanding the dynamics of the cell that is most applicable to a service innovation effort.

This is an MIT Sloan Management Review article. New products suffer from notoriously high failure rates. Many fail, not because of technical shortcomings, but because they simply have no market. Not surprisingly, studies have found that timely and reliable knowledge about customer preferences and requirements is the single most important area of information necessary for product development. To obtain such data, many organizations have made heavy--but often unsuccessful--investments in traditional market research. The authors provide an alternative. Companies including Threadless, Yamaha, and Ryohin Keikaku have integrated customers into the innovation process by soliciting new product concepts directly from them. These firms also ask customers to commit to purchasing a new product before the companies commence final development and manufacturing. This process--called "collective customer commitment"--can help companies avoid costly product failures. In essence, collective customer commitment enables firms to serve a market segment efficiently without first having to identify that segment and helps convert expenditures in market research directly into sales.

This is an MIT Sloan Management Review article. Despite considerable research on customer retention and word-of-mouth referrals, it has always been difficult quantifying their contributions to the bottom line. Using a metric known as "net promoter score" (NPS), the author believes firms can measure the dollar value of customers based on satisfaction levels. A survey of thousands of customers in six industries reveals that customers tend to cluster into one of three categories: promoters, passives, and detractors. Promoters represent more than 80% of the positive referrals a company receives, whereas detractors represent more than 80% of the negative word-of-mouth. NPS is determined by subtracting the percentage of detractors from the percentage of promoters. Using this data, a firm can quantify the value of a customer by tracking five categories: retention rate, profit margins, spending, cost efficiencies, and word-of-mouth. The firm can then use NPS to make strategic decisions by targeting its efforts to leverage the most value for its customer service dollar.

This is an MIT Sloan Management Review article. China's institutional private equity and venture capital market is similar to that of the United States and Europe, but there are important differences. Many practices that are taken for granted in areas such as Silicon Valley have yet to become routine in China. There is a lack of readily available information about opportunities, entrepreneurs, and companies. In addition, Chinese entrepreneurs know little about finance, corporate structures, and governance, thereby requiring investors to educate them and fill the gaps. Identifies seven disciplines critical to successful investment in China: knowledge and appreciation of the importance of social capital networks, or guanxi; understanding of corporate governance and shareholder rights; the ability to manage intellectual property; the ability to adapt business models to local conditions; the ability to add managerial and technical value to young enterprises; knowledge of the legal structure; and an ability to navigate complex regulatory environments.

Combining design-process experts with business-content experts creates a capacity to envision and realize futures that are both desirable for stakeholders and viable for organizations. The authors, from leading design firm IDEO, show how organizations can look to tools from the field of design to help their leaders get in touch with their stakeholders' unarticulated needs and desires, and intentionally imagine and create futures based on the one thing that seems to remain relatively stable, even in times of great change: human behavior. When made a part of an organization's work processes and competencies, the design tools they describe can enable an organization to embrace change as a normal part of managing its business.

Most experts agree that when it comes to a global flu pandemic, it's not a matter of 'if', but 'when'. One thing is certain: the effects on the global economy will be severe and widespread. The author, the chief economist for BMO Nesbitt Burns and Harris Bank, shows how businesses can plan for their own continuity of service and the safety of their workers. She shows how the need to coordinate these efforts locally, nationally, and globally in both the private and public sectors is unprecedented, extremely demanding, and above all, necessary.

Sometime around the middle of the past century, telephone executive Chester Barnard imported the term "decision making" from public administration into the business world. There it began to replace narrower terms, like "resource allocation" and "policy making," shifting the way managers thought about their role from continuous, Hamlet-like deliberation toward a crisp series of conclusions reached and actions taken. Yet, decision making is, of course, a broad and ancient human pursuit, dating back to a time when people sought guidance from the stars. From those earliest days, we have strived to invent better tools for the purpose, from the Hindu-Arabic systems for numbering and algebra to Aristotle's systematic empiricism to Friar Occam's advances in logic to Francis Bacon's inductive reasoning to Descartes' application of the scientific method. A growing sophistication with managing risk, along with a nuanced understanding of human behavior and advances in technology that support and mimic cognitive processes, has improved decision making in many situations. Even so, the history of decision-making strategies has not marched steadily toward perfect rationalism. Twentieth-century theorists showed that the costs of acquiring information lead executives to make do with only good-enough decisions. Worse, people decide against their own economic interests even when they know better. And in the absence of emotion, it's impossible to make any decisions at all. Erroneous framing, bounded awareness, excessive optimism: The debunking of Descartes' rational man threatens to swamp our confidence in our choices. Is it really surprising, then, that even as technology dramatically increases our access to information, Malcolm Gladwell extols the virtues of gut decisions made, literally, in the blink of an eye?

When we make decisions, we're not always in charge. One moment we hotheadedly let our emotions get the better of us; the next, we're paralyzed by uncertainty. Then we'll pull a brilliant decision out of thin air--and wonder how we did it. Though we may have no idea how decision making happens, neuroscientists peering deep into our brains are beginning to get the picture. What they're finding may not be what you want to hear, but it's worth listening. We have dog brains, basically, with human cortexes stuck on top. By watching the brain in action as it deliberates and decides, neuroscientists are finding that not a second goes by that our animal brains aren't conferring with our modern cortexes to influence their choices. Scientists have discovered, for example, that the "reward" circuits in the brain that activate in response to cocaine, chocolate, sex, and music also find pleasure in the mere anticipation of making money--or getting revenge. And the "aversion" circuits that react to the threat of physical pain also respond with disgust when we feel cheated by a partner. In this article, HBR Senior Editor Gardiner Morse describes the experiments that illuminate the aggressive participation of our emotion-driven animal brains in decision making. This research also shows that our emotional brains needn't always operate beneath our radar. Although our dog brains sometimes hijack our higher cognitive functions to drive bad, or at least illogical, decisions, they play an important part in rational decision making as well. The more we understand how we make decisions, the better we can manage them.