Are you getting paid unfairly? In this episode of HBR’s advice podcast, Dear HBR:, Dan and Alison answer your questions with the help of Shirli Kopelman, a professor at the University of Michigan’s Ross School of Business and the author of Negotiating Genuinely: Being Yourself in Business. They talk through what to do when a poor performer gets paid more than you, when the company salary structure is making people quit, and how to ask for more money when your boss leaves and you do their job.
From Alison and Dan’s reading list for this episode:
HBR: When You Find Out a Coworker Makes More Money than You Do by Rebecca Knight — “Your impulse might be to storm into your boss’s office and demand that he fork over more cash. Or maybe you just feel like scowling across the cubicle at your higher-earning colleague with a sneer: ‘Seriously? You?’ These actions, of course, are not advisable.”
HBR: Most People Have No Idea Whether They’re Paid Fairly by Dave Smith — “Perceptions about pay don’t always reflect reality, even if employers are paying the same — or more — than similar companies. In fact, a whopping two-thirds of people who are being paid the market rate believe they’re actually underpaid, representing a huge discrepancy.”
HBR: Envy at Work by Tanya Menon and Leigh Thompson — “When you’re obsessed with someone else’s success, your self-respect suffers, and you may neglect or even sabotage your own performance and possibly your career. Envy is difficult to manage, in part because it’s hard to admit that we harbor such a socially unacceptable emotion. Our discomfort causes us to conceal and deny our feelings, and that makes things worse.”
HBR: Make Your Emotions Work for You in Negotiations by Shirli Kopelman — “Your emotions matter in negotiations. They fuel your behaviors, energize you, and allow you to strengthen — or distance and damage — relationships with the people you’re negotiating with. But too often, people refuse to acknowledge their full range of feelings because they’re afraid of losing the ability to think rationally and act strategically.”
An announcement on January 24 didn’t get the large amount of attention it deserved: Apple and 13 prominent health systems, including prestigious centers like Johns Hopkins and the University of Pennsylvania, disclosed an agreement that would allow Apple to download onto its various devices the electronic health data of those systems’ patients — with patients’ permission, of course.
It could herald truly disruptive change in the U.S. health care system. The reason: It could liberate health care data for game-changing new uses, including empowering patients as never before.
Since electronic health records (EHRs) became widespread over the last decade, there has been growing frustration over the inability to make electronic data liquid — to have it follow the patient throughout the health system and to be available for more sophisticated analysis in support of improved patient care and research. Most efforts to liberate and exchange health data have focused on getting doctors and hospitals to share it with one another. Those efforts continue, but progress has been slow.
Frustration has increased interest in a very different approach to data sharing: Give patients their data, and let them control its destiny. Let them share it with whomever they wish in the course of their own health care journey.
Several technology companies — including Google and Microsoft — tried this in the early 2000s, but their efforts failed. There just wasn’t that much electronic health data available at the time, since only a tiny fraction of doctors and hospitals had electronic records. Health systems were reluctant to share what data existed, seeing it as a valuable proprietary asset. The technology for giving outside entities access to electronic records kept by hospitals and doctors was underdeveloped. And EHR vendors were uninterested in promoting such access because the demand was weak and data sharing could spur competition from other vendors.Insight Center
- Health Care’s New Frontier Sponsored by Optum How technology is changing the design and delivery of care.
Those obstacles have now mostly melted away. Electronic health records and digitized health data are now ubiquitous. Various federal incentives and regulations now require providers to share data with other providers and with patients or face significant financial penalties. The Argonaut Project, a voluntary private sector collaborative, has provided guidelines for an open source, standardized application programming interface (API) that provides ready access to data stored in providers’ electronic records. Think of APIs as gateways into electronic data warehouses that now populate the health care landscape. Of note, the federal government now requires all vendors of electronic records to include these open APIs in their products to be federally certified.
A world in which patients have ready access to their own electronic data with the help of facilitators like Apple creates almost unfathomable opportunities to improve health care and health. First, participating patients would no longer be dependent on the bureaucracies of big health systems or on understaffed physician offices to make their own data available for further care. This could improve the quality of services and reduce cost through avoiding duplicative and unnecessary testing.
Second, the liberation of patients’ data makes it possible for consumer-oriented third parties to use that data (with patients’ permission) to provide new and useful services that help patients manage their own health and make better health care choices. Such consumer-facing applications — if they are designed to be intuitive, useable, and accurate — have the potential to revolutionize patient-provider interactions and empower consumers in ways never before imagined in the history of medicine. Imagine Alexa- or Siri-style digital health advisors that can respond to consumer questions based on users’ unique health care data and informed by artificial intelligence. Health care could start to function much more like traditional economic markets.
Nevertheless, this vision of the future faces obstacles and uncertainties.
First, large numbers of hospitals and doctors have to follow the lead of the 13 systems that have already jumped on board. There are encouraging signs that many more will join, but ultimately, there needs to be a clear business case for both providers and their IT allies to invest in this new partnership. Perhaps the most compelling would be widespread consumer demand for the service. For that demand to materialize, consumers have to receive something they value in return for giving third parties like Apple access to their data. This means that Apple and its future competitors will have to develop nifty consumer-facing apps that solve consumer health-related problems easily and cheaply. Those apps simply don’t exist at the moment.
Second, the opportunities for fraud and abuse in this new world of data access are daunting. Most consumers will want to delegate to third parties the job of accessing, storing, managing, and analyzing their data. Making sure those third parties are trustworthy is critical, and unscrupulous actors will inevitably take advantage of unsophisticated patients. Health data is extremely valuable on illicit markets. And even honest but unsophisticated data stewards can create huge problems if they don’t adequately protect patient information. Federal and private sector organizations are trying to develop a voluntary but enforceable code of conduct to govern the behavior of private data stewards. This would be an important first step toward assuring that consumers are not victimized on the way to a brighter health care future.
Third, once new companies start to develop consumer-facing health applications based on patients’ own health care data, the quality of those applications could become an important issue. If they offer advice, it needs to be reliable. If they promise a service, they need to deliver. Some applications may fall within the existing regulatory authorities of U.S. federal agencies like the Food and Drug Administration or the Federal Trade Commission. If not, the question of whether and how to assure that the advice furnished consumers is valid and reliable will certainly arise as a matter of public policy.
These problems notwithstanding, the announcement of this collaboration between leading American providers of health and information technology services likely signals a new era in health and medicine. The partnership and its results will not solve all our health care problems. But they could really shake things up. And that is what the U.S. health system needs.
During the horrific school shooting last month in Parkland, Florida, one of the sheriff’s deputies on the scene did not enter the building to confront the attacker. The internet, Parkland officials, and politicians reacted swiftly. The deputy was criticized by his boss for his supposed inaction and was called a “coward” by the president of the United States.
The use of this specific word was not accidental. More than just failing to act as a first responder, “coward” implies a much greater transgression: failing to act as a man. As Alex Kingsbury writes in the Boston Globe, it plays into a timeless American narrative: “the idea that real men dispatch bad men with a pull of the trigger.” Because the bonafide requirements of first responders’ jobs closely align with traditional ideals of heroic manhood (“strong,” “brave,” “risk-taking”)—ideals deeply rooted in culture and psychology—men in first responder roles face additional pressure to “act like men” at work. This makes their perceived failure to do so all the more noteworthy and susceptible to critique by the public and their colleagues.
Masculinity, we should note, has many manifestations in organizations. One of us (Olivia) has investigated a side of masculine organizational culture known for what psychologists call “companionate love.” It involves fondness, affection, caring, compassion, and tenderness—or, as first responders would say, “camaraderie” or “brotherly love.” Shaming the deputy for failing to act heroically by calling him a coward, however, perpetuates a darker side of masculine culture associated with avoiding the appearance of vulnerability and gaining and maintaining dominance over others. By making people feel diminished, worthless, and exposed, shaming like this often motivates defensive responses, as psychologist June Tangney and her collaborators have found in their study of criminal recidivism. Shame in the context of this second type of masculine organizational cultures, we are coming to learn, can lead to a variety of negative individual and organizational outcomes.
For the past two and half years, a working group of gender scholars (including us) led by Jennifer Berdahl, Joan Williams, Peter Glick, and Marianne Cooper have been working to understand what happens in organizational cultures that conflate masculinity with performance, or what the working group refers to as “masculinity contest cultures.” To maintain status, such cultures require workers (both men and women) to “prove” their masculinity by engaging in behaviors we categorize into four groups: “dog-eat-dog,” “strength and stamina,” “put work first,” and “show no weakness.” These behaviors tend to be common in organizations characterized by toughness and competitiveness, like first-responder organizations, but even consultants and executives who spend most of their time behind a computer can valorize similar ideals, as sociologists Erin Reid and Mary Blair-Loy find in forthcoming research.
Our initial analysis indicates that masculinity contest cultures are associated with numerous harmful workplace outcomes such as bullying, increased sexual harassment, burnout, and decreased employee well-being. These outcomes are exacerbated when threats to masculinity are made public.
In a series of studies, research by Jennifer Bosson, Joe Vandello, and colleagues shows that when men experience public threats to their masculinity, they have increased anxiety and are particularly likely to lash out with behaviors such as increased aggression and financial risk taking. This suggests that threats to masculinity that are widely publicized via social media or other channels—such as the reaction we observed in the Parkland case—can magnify the feeling of impending threat and scrutiny. In a vicious cycle, these negative behaviors create an environment characterized by fear and hostility, preventing people from doing their best work.
In the case of first responders who frequently need to process traumatic events, this can be particularly detrimental. Masculinity contest cultures may discourage emergency responders from confiding in others or seeking health services, a recommended best practice from employees who frequently experience trauma. A recent study by Ashleigh Rosette, Jennifer Mueller, and David Lebel found that male leaders were penalized and rated as less competent when seeking help. Psychologist James Mahalik and collaborators have also written extensively on the link between masculine norms and reduced help-seeking behaviors, suggesting that environments characterized by masculinity contests make it difficult for employees to seek the social support and health care they need.
All of this said, first responders must make quick decisions in life-or-death situations. Protecting the public is central to their jobs. When something goes terribly wrong, it’s important to investigate what happened and why. Those involved must deal with these situations in a professional manner while simultaneously negotiating the painful emotions that go along with them. None of this is easy. But it can be done.
How? In a now-classic study of offshore oil workers, for example, Robin Ely and Debra Meyerson examined one approach. The company at the center of their research implemented an organizational culture change initiative that decoupled stereotypically masculine traits prominent in the organization (like reckless bravado, emotionlessness, and never admitting failure) in favor of competencies aligned with better performance (like willingness to admit failure, relying on and learning from others, and expressing vulnerability and concern). This move not only drastically improved productivity and safety; it also helped men realize they could “behave in ways that conventional masculine norms would have precluded.”
Another antidote to the pernicious effects of masculinity contest cultures is to prioritize the aforementioned brighter side of masculinity: companionate love. Rather than publicly shaming an emergency responder, as we saw this past month, this kind of masculine culture encourages perspective-taking and caring.
A recent longitudinal, multi-method research study of 40 metropolitan fire stations conducted by one of us (O’Neill) shows just how influential—and positive—emotions can be to an organization. In the study, firefighting crews with a work culture defined by companionate love and what we found to be a prototypical masculine emotion—joviality, or being in good humor—were much less likely to engage in unnecessary risk-taking, both in their own lives and at work. The consequences of joviality for performance were striking: crews higher in joviality showed faster coordination time during emergency calls and were less likely to be in auto accidents or have property damage on the job. We also discovered the importance of a supportive family life, which had its strongest impact on firefighter physical health—particularly in combination with the warmth and supportiveness of the crew culture.
To be clear: traits associated with masculinity—heroism included—in and of themselves, are not the problem. The problem is when masculine traits like heroism and emotional stoicism are taken to the extreme, leaving no room for vulnerability or mistakes. Under these circumstances, situations unfold that can hurt men, the organizations for which they work, and potentially the people they seek to protect. Scolding emergency responders for violating masculine ideals is not helping anybody—and, in fact, may do substantially more harm in the long-run.
Kenneth andersson for hbr
Many countries and regions declare that they want to develop their own Silicon Valley and be a hub for innovation. The page for Technology Centers on Wikipedia, for example, lists no fewer than 90 places that have billed themselves as “Silicon This” or “That Valley”, hoping to emulate the Valley’s success in generating innovation. It is usually followed by a variety of policy initiatives, such as R&D tax credits, public grants for innovation, public procurement of innovation, grand innovation challenges, and support for intellectual property rights. Yet, few regions have managed to achieve the levels of innovation as seen in Silicon Valley. Why? We argue they have overlooked an important set of policies altogether. Pretty much all policy measures target the economic incentives to innovate. Instead, our research shows that social policies matter just as much — if not more.
Innovation, while an economic activity, is fundamentally a social process. In this process, people combine their ideas with those of others. This kind of interaction has fundamentally social aspects. Companies admit as much when they try to foster innovation by providing employees with ping pong tables and happy hours, and by taking away things like enclosed offices in favor of communal workspaces. Research backs up what we know intuitively — that social interactions often provide the best breeding grounds for innovation.
But do government social policies impact innovation? To answer this question, we examined the impact of two social liberalization policies (legalization of same-sex civil unions and legalization of medical marijuana) and one anti-liberalization policy (passage of abortion restrictions) on innovation in the United States. In our context, social liberalization is defined as the easing of government restrictions. The U.S. provided a good location for this study, since states have considerable leeway in setting their own laws. We also deliberately chose multiple and contrasting policies to ensure our findings were not driven by any specific one. We measured innovation output as the number of patents granted to individuals in each state, a common measure used by both researchers and policy makers. Our sample included every single patented innovation by an inventor in the United States between 1990 and 2007.
We found that states that implemented the social liberalization policies subsequently experienced a significant increase of 5% to 6% in their innovation output. In contrast, the passage of an additional abortion restriction in a state was followed by an average 1% decline in its innovation output. The chart below shows the average effects of the legalization of same-sex civil unions and the legalization of medical marijuana on state-level innovation output over time. Social policies had a very significant impact on the rates of innovation in a state.
Of course, as we all know, correlation is not causation. Therefore, we employed various sophisticated research designs and statistical techniques to ensure that it is the policies that lead to innovation (rather than, for instance, the other way around) – details of which can be found here and in the sidebar. Moreover, the staggered implementation of these policies over time enabled us to compare the change in the innovation output of states that implemented these policies to that of other states that had not yet done so. The conclusion: Social liberalization policies at the state level significantly influence local rates of innovation.Methodological Note
To disentangle correlation and causation, we relied on a number of methods. Our main empirical strategy is based on comparing the change in the patenting rate of states that have implemented a policy to those that have not yet, while controlling for a wide range of state-level factors such as past innovation rate, state total expenditure, total business R&D expenditure, population, educated population, individual and corporate tax rates, house prices, real per capita personal income, and the political mixture of state senate and house.
A major concern in our study is the direction of causality. We want to make sure that we are capturing the effect of policies on innovation and not the other way around. To address this concern, we show that the pre-legalization patenting rate of states cannot statistically predict the implementation of these policies. Moreover, we show that there is no pre-trends in innovation rate of states that have implemented these policies. The change in patenting rate of states starts approximately three years after the implementation of policies.
We also show that the effects we are capturing are not the result of some underlying trends in the patenting rates of states that implemented these policies. If the results are driven by underlying trends unrelated to these policies, the actual policy dates should not matter. To test this idea, we created a bunch of fake policy dates and show that the results do not hold when we use these fake dates. The effects only show up when we use the actual policy dates.
Finally, we checked for any other concurrent policies that could potentially drive our results, but couldn’t find any.
What explains the link between these policies and innovation? Our analysis suggests a two-step process. First, social liberalization policies can promote more diverse social interactions among individuals. Recent works in political science have shown that social liberalization policies influence individuals’ attitudes towards openness and diversity, inspiring higher levels of social diversity, increasing general trust, and promoting interactions between individuals with more diverse views, life styles, and racial-ethnic backgrounds. It is a tacit process and observing it is not straightforward.
However, we found supporting evidence in our setting. Individuals were more likely to work with more diverse collaborators after the implementation of social liberalization policies, and vice versa. We also found a faster circulation of knowledge within a state after the implementation of social liberalization policies, pointing to more frequent and diverse interactions among individuals. To conclude: Liberal policies caused people to work with a more diverse set of collaborators.
Subsequently, more diverse interactions, in turn, lead to more and higher quality ideas. New ideas do not come out of thin air. Rather, most innovations are the outcome of combining previously disconnected ideas. Henry Ford developed the idea behind Ford assembly lines from assembly lines of meatpacking plants. The Reebok “pump,” an athletic-shoe with an air bladder, was inspired by inflatable splints and intravenous bags. Almost all new music genres are the result of sampling and mixing previously known genres. Scientists constantly borrow ideas from each other, recombine them in new ways, and build new theories. For ideas to flow and collide, the people who hold those ideas need to meet, mingle, talk, and share. Individuals with more diverse social interactions are exposed to a more diverse set of ideas, and thus have more opportunities to produce innovations from combining previously unconnected ideas.
We found exactly that in our research: More diverse collaborations in states that implemented social liberalization policies were directly tied to higher levels of innovation. Our findings show increases of 22% and 17% in inventors’ number of new collaborators, i.e. other inventors with whom they had never worked before, subsequent to legalization of same-sex unions and medical marijuana, respectively. We also found an increase in the knowledge diversity of inventive teams after social liberalization policies. Further, innovations that were produced after the implementation of social liberalization policies were on average more novel and impactful. For measuring impact, we used an established measure based on the number of citations a patent receives from future patents. For novelty, we used another common measure based on whether a patent is assigned to two technological classes that were never been assigned together to any previous patent. Innovations that were produced after the implementation of social liberalization policies were on average more novel and impactful.
Overall, we found strong evidence that social liberalization policies trigger more diverse collaborations on the ground, which subsequently produce inventions with more novelty and impact.
For policy makers who want to stimulate innovation in their own region, our research implies that they should consider social policy as well as economic stimulus. And for executives thinking about where to locate their businesses, our study suggests that they should consider social regulations as well as business regulations.
The core insight is that the social context in which innovation takes place matters as much as the incentives for individuals and firms to invest in it. Social policies complement economic policies. The latter can create the right incentives and the former can create the right context. Social policies can become a source of regional competitive advantage. The same applies to managers who wish to promote higher levels of innovation in their companies. Building a workplace in which employees have the chance to routinely meet new people and freely share their ideas can truly unleash their innovation potential.
Most managers feel uncomfortable when employees cry during business conversations. Many of us may recall a time we’ve cried at work, but for some people it’s not a rare occurrence. Some individuals seem to react excessively to disappointment or challenge, with repeated bouts of apparent sadness or fear accompanied by tears, shaking, or reddening. If you manage someone who tears up easily, you may find yourself leaving important topics or issues unaddressed to avoid upsetting them.
Some employees are quick to cry because they lack strong self-management skills; they may be embarrassed by their own emotionalism, and grateful for any advice you can offer on keeping a more even keel. Some cry as a form of deflection or manipulation; I’ve worked with a handful of people whose frequent crying served as a first line of defense against criticism. Of course, they may also be handling a tough situation in their personal lives – from illness to difficult family situations. And perhaps the most positive reason for crying occurs when your employee trusts that you have the kind of boss-subordinate relationship where tears are nothing to hide or be ashamed of.
You can’t know what’s going on inside your employee’s head, or whether they cry because they trust you, are trying to manipulate you, or happen to be overwhelmed by personal issues outside of work. If the issue is personal, you may want to refer them to your HR department or your company EAP, so they can get some additional support. Regardless of the cause of their distress, though, you’ll need to find a way to work around – or through – their tears. These six steps will help you and your subordinate keep a humane and professional focus on the work that still needs to get done.
Don’t overreact to the stimulus of crying. Mentally characterize the tears as the equivalent of someone else’s furrowed brow or bit lip. The fact that a crier is crying again doesn’t mean they’re an emotional wreck who’s having a breakdown; it’s just the way their body reacts to pressure. Remind yourself that you’re in charge of the situation. Face the employee and keep your body language open and your language neutral; show that you’re paying close attention but not becoming distressed yourself. This is a time not to be empathetic and try to experience what they’re feeling, but to be compassionate and take action because you see that they’re having a hard time.
Note the trigger. It’s useful to identify the patterns for discussion, and to be aware of what gets the excessive reaction started. Is it an event, a belief about someone else’s intentions, or a build-up of frustrations that should have been vented sooner? Rather than asking why the employee is reacting, which can encourage a deep exploration of aggravations and hurt feelings, try to name the concrete, proximate cause: Say something like, “I can see that something just upset you. Was it….?” You want to start out by naming it without delving into it.
Require a brief recovery period instead of calling off the meeting or pretending nothing’s happening. With someone who cries rarely, you might want to reschedule the meeting. But with someone who cries a lot, that may not be the answer — there’s no inherent reason that your next discussion will go significantly better and no one has time to reschedule meetings anyway. So you might as well help this one along, show that you can protect the employee’s dignity, and take control of the situation simultaneously. Say, “Let’s take a quick break so you can calm yourself and then we’ll figure things out.” The employee may want to take a short walk or get a coffee, or if the meeting is in your office, you can leave for a few minutes, or even do some other work. After a short interval, say, “Okay, let’s resume our conversation.”
Probe for the employee’s immediate purpose or need. It’s important to avoid questions that invite a litany of woes or stories about problems that occurred three years ago. So skip leading questions like “What’s going on?” in favor of “What are the specifics I need to know about this situation?” or “What’s the most important thing you’re trying to accomplish right now?” Keep bringing the employee to the point: the data and considerations to move forward with the business problem.
Don’t commiserate, pity, or try to fix the situation for them. It’s okay to acknowledge, “I’m sorry that upset you,” but minimize any sense of drama. Resist getting upset yourself, even if you’re frustrated; it will only encourage even more emotion. Look away a bit, as if they happened to have a bloody nose and will take a few minutes to clean up but don’t need an ambulance.
Announce a conclusion. This is a two-fold step: The first is to declare what needs to be done to progress through the problem and ensure that you’ve each committed to your follow-up actions; the second is to bring the discussion to a close so there’s no wallowing in emotion. “So here’s what we’re going to do – you’ll handle X, and I’ll arrange a call with Y. Thank you for filling me in. We can check in again on Tuesday.”
It’s natural to want to avoid the discomfort of confronting a crying subordinate. But if you’re calm and focused, you can help the employee move past their emotions and come back to the necessary work at hand. Over time, they’ll become more proficient at curbing their own reactivity. And you’ll be happier to meet with them.
One of the things I like to do when I travel is read. Especially on flights. I figure it’s a good use of my time because I might not have access to WiFi. The same is true in the office. I try to schedule my day, so I can do work that requires a lot of concentration during times when I feel I will be interrupted less. It’s all about understanding priorities and optimizing schedules.
Today’s Time Well Spent from our friends at Kronos reminds me that this is also true when it comes to changing priorities and making time for employees. Sure, managers will schedule one-on-one meetings with their team, but sometimes conversations need to happen outside of regularly scheduled meetings. And managers need to find time to accommodate them.
Create “open office” hours. Remember how college professors would post times when they would be sitting in their office waiting for students to stop by? Well, if you’re a manager who has lots of meetings and off-site events, consider setting up office hours. That way, you can be available for employees and they know when to expect you.
Practice management by walking around (MBWA). Instead of making employees find you, add a morning or afternoon routine that allows employees to see you. Maybe in the morning you can grab a coffee and just walk around. Stop and say hello. Start casual conversation. Employees will appreciate it. And you might learn a few things too.
Stop by “happy hour”. I understand the reluctance of hanging out and having an adult beverage with colleagues. But sometimes being friendly can be a great relationship builder. I can also tell you from experience that many times, employees would say to me, “I’m glad you’re here. I have this issue and I’ve been hesitant to stop by HR.” So, grab a club soda and find out what’s going on. You can always leave early.
Use technology strategically. Today’s tech allows organizations to automate and scale many tasks. The cartoon mentions timecard approvals, but there are many more. It brings consistency and frees up manager time. So, they can spend it with employees. It’s a huge benefit to the business.
Once managers understand that making time to talk with employees is one of their top priorities, they will look for ways to build that into their schedule. That includes changing the way they manage their time and looking for technology to help them reduce boring, repetitive tasks. And that’s a win for everyone involved.
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Over the last decade, industries, academics, and the public sector have turned their focus toward culture and ethics in response to the financial crisis as well as misconduct at a broad range of corporations. But what role does culture play in corporate misconduct, and why do these problematic cultures persist?
My perspective and approach to misconduct risk are influenced by my work as a bank supervisor, and by my background and training as an economist. In my view, bank supervision must include attention to the culture at financial firms, not just to their financial safety and soundness. The justification for this attention comes from relatively simple economics. By thinking of a company’s culture as a form of investment subject to market failures, we can better understand why companies sometimes tolerate misconduct, and why they can’t always fix it on their own. Though my experience is in the financial sector, these lessons apply to other industries as well.The economics of corporate culture
Analyses of recent cases of misconduct in the financial sector suggest that misconduct is not just the product of a few individuals or bad processes, but rather the result of wider organizational breakdowns, enabled by a firm’s culture. One way to think about the underlying factors involved is as “cultural capital.” The possibility of employee misconduct—the potential for behaviors or business practices that are illegal, unethical, or contrary to a firm’s stated values, policies, and procedures—is a form of risk just like liquidity risk or operational risk. Investments in cultural capital is one way to reduce that risk.
A firm’s cultural capital is a type of asset that impacts what a firm produces and how it operates. Cultural capital is analogous to physical capital, like equipment, buildings, and property, or to human capital, like the accumulated knowledge and skills of workers, or reputational capital, like franchise value or brand recognition. In an organization with a high level of cultural capital, misconduct risk is low, and its organizational structures, processes, formal incentives, and desired business outcomes are consistent with the firm’s stated values. Unspoken patterns of behavior reinforce this alignment and drive corporate outcomes.
By contrast, in an organization with low levels of cultural capital, formal policies and procedures do not reflect “the way things are really done” — that is, the stated values of the organization are not reflected in the behavior of senior leaders or the actions of the organization’s members. Misconduct then results from norms and pressures that drive individuals to make decisions that are not aligned with the values, business strategies, and risk appetite set by the board and senior leaders. Rules may be followed to the letter, but not in spirit. All of this increases misconduct risk and potentially damages the firm and the industry over time.
As with other forms of tangible and intangible capital, a firm must invest in cultural capital or it will deteriorate over time and adversely impact the firm’s productive capacity.
When viewed through this economic lens, the question becomes: If misconduct risk is bad for firms, why don’t they invest in cultural capital and reduce the risk themselves? Why do regulators and supervisors need to get involved?Market Failures and Misconduct Risk
It’s worth noting that many large financial firms have increased their attention to misconduct risk and cultural drivers in the wake of serious frauds and enforcement actions over the past several years. But the degree of commitment and progress in these efforts has not been even across the industry, and serious and persistent misconduct continues in some businesses.
So, why wouldn’t a firm do more to invest in cultural capital? Traditional economic theory may offer a few explanations. Namely, firms may operate with sub-optimal levels of cultural capital due to different types of market failures. Three well-known phenomena—externalities, principal-agent problems, and adverse selection—may help explain why misconduct risk persists.
Externalities. Externalities are the impact that a transaction between actors has on other unrelated actors. If a company pollutes when making a product, neither the buyer nor the seller bears the cost of that pollution – the cost falls on the rest of society. Externalities can drive a wedge between private- and socially-optimal outcomes and lead firms to underinvest in their own resiliency by ignoring the broader impact of bad outcomes on the financial sector and the real economy.
Does a firm’s toxic culture create an externality? Yes, because the impact of employee misconduct extends beyond the individual and even the firm — in finance it can affect the safety, soundness, and effectiveness of the financial sector and the broader economy.
If a firm commits fraud or another type of misconduct, for instance, much of the cost of that misconduct does fall on people involved – managers, employees, and investors – in the form of fines, diverted management attention, or even bankruptcy. But this can also impose costs on people not directly connected to the company. Customers might lose confidence in the firm or the industry as a whole and financial intermediation could decline. In such a case, misconduct has created an externality.
And there is evidence that financial misconduct can have broader impact, imposing costs beyond the industry. Recent surveys, for example, have found that confidence in the financial sector has fallen by half over the last decade, which can impede the efficient intermediation of credit and the provision of financial services.
In the case of pollution, externalities motivate government intervention. In banking regulation, externalities are the conceptual driver behind the enhanced prudential standards for capital, liquidity, and risk management that are currently applied to the largest, most systemically important financial institutions. The same reasoning suggests a possible role for regulators and supervisors to consider company culture and the potential misconduct. Because the costs of that misconduct are not always paid by the firm, it may substantially underinvest in the cultural capital required to prevent it.
Principal-agent problems. Principal-agent problems occur when the incentives of employees don’t align with the broader interests of management or shareholders. This can lead to excessive risk-taking, underinvestment in risk-reduction and risk-control mechanisms, and a focus on short-term returns at the cost of long-run viability. Think about the trader who is compensated on short-term profits and losses and not long-term value creation. The misalignment of incentives can tilt the firm toward excess risk-taking unless curbed by the appropriate culture and focus on risk management.
These issues can be amplified by the opacity intrinsic to many financial activities that allows misconduct to persist and erodes the cultural capital of the firm.
Adverse selection. Adverse selection occurs when those particularly ill-suited for something are the most likely to participate. This could occur in the context of culture and misconduct if conduct-related events change the composition of a firm’s workforce. Firms with relatively low cultural capital (and a relatively high tolerance of misconduct risk) may attract and retain employees and clients more inclined to take inappropriate risks and push beyond internal limits and controls. Further, high-quality directors, executives, and employees might leave such firms or decline to join them, depleting the firm’s human capital and contributing to the deterioration of cultural capital.Role of the Public Sector
These market failures suggest a role for the public sector to encourage resiliency, including investment in cultural capital, beyond what the firm would choose to do on its own. That is, if firms don’t have sufficient incentives to overcome these forces, then the public sector should push toward a better overall outcome. Given my role as a bank supervisor, my focus is on financial firms, but these types of phenomenon can lead to inefficient outcomes in any industry.
While misconduct risk poses clear threats to both firms and the overall financial system, addressing culture reform across an entire industry is a complex challenge, and there is no one action or approach that will fully address it. The work bank supervisors do in this area is critical because there are limits to the regulatory or deterrence and enforcement approach. To understand how a firm manages misconduct risk—and to improve resiliency and reduce the potential for unwanted disruptions to financial intermediation—we must increase our focus on firms’ decision-making practices and behaviors as a core aspect of good governance.
The views expressed in this paper are those of the author only and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.
Hanna, a finance director at an international home care retailer, works long hours. She’s usually in the office from 9am to 5pm, but at home, when her three children go to sleep, she’ll work another four hours, not closing her laptop until midnight. She sometimes also works on weekends. But even though she works 60 to 65 hours per week, she told us that she can “switch off” when she needs to, and that she still feels energetic every day. She hasn’t had to worry about her health.
Michael, the director of strategy for an American insurance company, does not work as much as Hanna. His workdays usually start at 8am and finish no later than 6pm, and he often leaves work at 3pm on Fridays. But even though he works an average of 45 hours a week, and is single with no kids, he has a hard time “switching off” and unwinding from his job – he is constantly checking his email and worrying about work. A few months ago, at a routine health check, his doctor noted he had high LDL cholesterol, which raises his risk for cardiovascular disease and diabetes. He was prescribed medication to lower it.
We generally assume that working too much is bad for our health. But what exactly is unhealthy about this is unclear. Is it working long hours that increases our risk of developing health issues? Or is it something else, like Michael’s compulsive work mentality, that is harmful for health?What our research shows
We sought to unravel the difference between behavior (working long hours) and mentality (a compulsion to work, or what we call workaholism). We conducted a study in 2010 at the Dutch subsidiary of an international financial consulting firm with over 3,500 employees. We asked employees to complete a survey and then sign up for a health screening conducted by medical staff. 763 employees completed both.What Is Workaholism?
The term “workaholic” was coined in 1971 by the psychologist Wayne E. Oates, who referred to “an uncontrollable need to work incessantly” as an addiction. Workaholics are characterized by having an inner compulsive drive to work hard, thinking about work constantly, and feeling guilty and restless when they are not working. Workaholism often goes hand in hand with working long hours, but the two are distinct: it’s possible to work long hours without being obsessed with work, and it is possible to be obsessed with work but only work 35 hours a week or less.
The survey asked about participants’ workaholic tendencies (e.g., “I feel guilty when I am not working on something,” and “I put myself under pressure with self-imposed deadlines when I work”), their work skills, work motivation, and their work hours in an average week. It also asked if they experienced various psychosomatic health issues such as headaches and stomach problems. The health screenings gave us information about their various biomarkers (such as waist measurement, triglycerides, blood pressure, and cholesterol), which, when aggregated, are a reliable gauge for an employee’s risk of developing cardiovascular diseases and diabetes — what is referred to as Risk for Metabolic Syndrome (RMS). We also controlled for a host of factors such as gender, age, education, and family history of cardiovascular disease.
We found that work hours were not related to any health issues, while workaholism was. Specifically, employees who worked long hours (typically more than 40 hours a week), but who did not obsess about work, did not have increased levels of RMS and reported fewer health complaints than employees who demonstrated workaholism. We found that workaholics, whether or not they worked long hours, reported more health complaints and had increased risk for metabolic syndrome; they also reported a higher need for recovery, more sleep problems, more cynicism, more emotional exhaustion, and more depressive feelings than employees who merely worked long hours but did not have workaholic tendencies.
The experiences of Hanna and Michael, individuals whom we interviewed separately, outside of this study, align with these results. Hanna works long hours, but she is not mentally pre-occupied with work. When she finishes work for the night, she feels fulfilled and falls asleep easily. In the morning, she feels refreshed for a new workday. She told us, “I take my work very seriously while I’m working, but I forget about work the minute I decide I’ve done enough for the day.” Michael, on the other hand, has a compulsion to work hard and feels restless when he is not working. He continues to ruminate about his job and often finds it difficult to fall asleep and recharge before the next morning. When asked about his general stress levels, he mentioned that he “cannot remember the last time not feeling stressed or anxious about work.”
Unlike people who merely work long hours, workaholics struggle to psychologically detach from work. And we know that ongoing rumination often goes together with stress, anxiety, depression, and sleep problems, and it impedes recovery from work. Stress levels in workaholics are therefore often chronic, which leads to ongoing wear and tear on the body.
Here’s a quick explanation of why: To cope with stress, the body activates several systems (e.g., cardiovascular, neuroendocrine). So say you’re facing an important deadline. As you approach it, your stress hormones (e.g., cortisol), pro- and anti-inflammatory cytokines (e.g., interleukin-6), and blood pressure would likely go up. But after the deadline, these would return to their original levels, known as the “set points.” When you’re working an excessive workload and continually pushing your system beyond its range, you may re-set your set points. Elevated blood pressure may become chronic, and cortisol levels stay elevated. When your biological systems keep working around elevated set points, you have a greater risk of cardiovascular disease (CVD), diabetes, and even death.Does it matter if you love the work?
Most workaholics are aware of their obsessive work habits, and friends and family will often warn them about the possible health risks. But a common defense is that they love their jobs. Linda, a personal injury lawyer whom we also interviewed separately from our study, readily admits to her work addiction but says she simply enjoys her work too much to change. Linda works for a medium-sized law firm in Canada and although her hours are exceptionally low for a lawyer (40 hours per week), she feels guilty when she is not working and often tries to come up with solutions for her clients off the job. As a result, she finds it difficult to fully engage in play with her five-year-old after work. She often experiences headaches and difficulty sleeping, as she ruminates about work and thinks up new ways of tackling work challenges. When talking to her husband and a trusted colleague about the ongoing headaches and sleep problems, they both urged her to visit the doctor — but she initially resisted. She told us, “There is really not much wrong with me, at least not physically. I just need more hours in the day.”
We wanted to see if enjoying the work mitigates the negative health effects of workaholism. Looking at the data from our study, we differentiated between workaholics who reported being highly engaged with their work — meaning they enjoyed their work, felt vigorous at work, and got easily absorbed in their work — and workaholics who reported low work engagement. We found that both types of workaholics reported more psychosomatic health complaints (e.g., headache, stomach problems) and mental health complaints (e.g., sleep problems, depressive feelings) than non-workaholics. However, non-engaged workaholics had higher RMS — a 4.2% higher risk — than engaged workaholics. (This number might seem small, but even a small increase can pose a serious health risk.)
This suggests that being loving your work can mitigate some of the risk associated with obsessing over it. We also found that engaged workaholics reported having more resources at home and at work compared to non-engaged workaholics. Engaged workaholics reported receiving more social support (e.g., advice, information, appreciation), from their supervisor, co-workers, and their spouse, than their non-engaged counterparts. They also scored higher on communication skills, time management skills, and general work skills, and they reported much higher intrinsic motivation for work than non-engaged workaholics.
We think that this arsenal of resources may help engaged workaholics prevent initial health complaints from developing into more severe health risks. In Linda’s case, after listening to her husband’s concerns, she eventually consulted her doctor. The doctor did a general health check, and as Linda suspected, the results did not reveal any concerns in terms of physiological health. But her doctor referred her to a counselor to work on the sleep problems Linda mentioned during the check-up.
If we look at all of our examples, it’s clear that while Hanna, Michael, and Linda all work hard, the way they engage with work differs substantially, and hence, their health risk differs as well. Due to Hanna’s long work hours, her stress levels are high at times, but because they return to baseline levels, her stress is not chronic and she does not have the related mental or physical health risks. Michael has an obsessive work mentality, and he does not enjoy his work, which causes ongoing stress and frustration, frequent anxiety attacks and feelings of depression, and also elevated risk for cardiovascular disease. Linda has a similar compulsive work mentality, but she loves her job and reports having a supportive family. While she experiences some sleep issues and headaches, she does not have an elevated risk for cardiovascular diseases.Two key messages — and their caveats
These stories and our research findings reveal two key messages: First, when it comes to effects on health, working long hours is not as bad as obsessing over work. But this warrants an important disclaimer: The employees in our sample worked a maximum of 65 hours per week, and therefore we do not know the health outcomes of working longer hours. It may be quite difficult to detach from work, engage in recovery activities, or get enough sleep if one works 70 hours per week or more. Still, it seems that more than hours, our thoughts and feelings about work impact our subjective well-being and health risks.
The second key message from our study is that workaholics who love their jobs are somewhat protected from the most severe health risks, and this may be because they feel that their work is worth all the hard work they put in. But this brings up another caveat: Although we found that engaged workaholics had lower physiological health risks (lower RMS) than non-engaged workaholics, they still reported more depressive feelings, sleep problems, various psycho-somatic health complaints, and a higher need for recovery than non-workaholics. These are all signs that well-being among workaholics, regardless of how much they love their job, can be impaired.Avoiding the negative effects of workaholism
Our research suggests some potential solutions to help keep stress levels manageable and prevent health risks. The first step is to acknowledge when a relationship to work is unhealthy — when it feels out of control and is undermining outside relationships. The next step is to regain control over your work behavior. One way to do this is by setting clear rules for how many hours you will work each day. This can help you accept that there is a point at which you’ve done enough work for the day. If you have trouble “switching off,” you might want to stop working two or three hours before bed. Taking up enjoyable non-work activities, such as seeing friends, watching a movie, reading a book, or learning a new skill, can also help you psychologically detach from work.
It can also be useful to reflect on the reasons why you work excessively and compulsively. We found a striking difference in work motivation between engaged and non-engaged workaholics. Whereas engaged workaholics worked because they enjoyed their work or found their work meaningful (these are intrinsic motivators), non-engaged workaholics were more likely to work for extrinsic motivators such as money and status. Intrinsic motivation is associated with more optimism, effort, and persistence, whereas extrinsic motivation often instigates anxiety and undermines persistence, making failure more likely.
The proactive mentality that is characteristic of employees with intrinsic motivation may help them take action when they experience initial health complaints, whereas the anxiety and frustration that can accompany extrinsic motivation may make non-engaged workaholics more passive, such that they continue unhealthy work habits and eventually face substantial health risks. Thus, finding ways to promote intrinsic motivation in one’s work, whether through new projects or even a new job, may not only make you happier but also healthier.
Managers too can intervene by helping employees find intrinsic motivation; they can re-engage them in their work and provide more support. This can mean assigning employees challenging but feasible tasks, reducing red tape and other barriers, discussing their personal and professional growth, and providing them with ample resources to do their work, such as autonomy, feedback, and support. Managers can help hard workers develop stronger communication and time management skills, with tactics such as making a to-do-list each week, making a long-term goal list, differentiating between urgent and non-urgent tasks, and scheduling non-interrupted time for important tasks. Friends and family can also play a role by making sure that employees have emotional and tangible support at home.
Ultimately, the challenge for anyone is to identify a compulsive work mentality and prevent its consequences. Focusing on one’s engagement and ability to “switch off” will go a long way in helping employees feel happy at work and outside of it.
Health care teams depend on electronic health records (EHRs) to compile important medical data from innumerable lab tests and medical devices, observations, treatments, and diagnostic codes. We rely on it so much that we consider the EHR to be a team member.
But in fast-paced critical care units, where even small errors can have big consequences, this digital team member can overload physicians with information. The sheer volume of data in EHRs creates a staggering challenge in complex environments such as intensive care units (ICUs) and emergency medicine departments. Individual clinicians may have to sift through more than 50,000 data points to find key information. This proliferation of data (both meaningful and meaningless) and the workload created by EHR systems have been key drivers of clinician burnout and, paradoxically, introduced new threats to patient safety. What is more, relying only on EHR data greatly limits the insights derived from artificial intelligence algorithms or big data analytics.
Mayo Clinic, the nation’s second-largest critical-care provider in the United States, with nearly 350 beds in 15 intensive care units (ICUs) across its campuses in Minnesota, Arizona, and Florida, decided to combat the data deluge with ambient intelligence: a set of decision-making tools powered by data on and insights into clinicians’ goals, work environments, strengths, and performance constraints. When layered on top of existing information infrastructure, ambient-intelligence applications can cut through the clutter and deliver the right information in a digestible form that clinicians can use, quickly and effectively at the patient’s bedside.Insight Center
- Health Care’s New Frontier Sponsored by Optum How technology is changing the design and delivery of care.
We created a multidisciplinary team of clinicians, researchers, and experts in clinical informatics to design and test information-technology tools that can help, rather than hinder, clinical care. The ambient-intelligence approach we adopted prioritized a deep understanding of clinicians, the way they work, and the environmental factors they face. Using a NASA Task Load Index, we identified clinicians with a very high mental, or cognitive, workload who continuously have to filter important information out of the cluttered environment.
Subsequently, over a two-year period, we conducted 1,500 interviews with clinicians from Mayo Clinic ICUs nationwide. With these insights, we identified that out of tens of thousands of pieces of data pouring through EHR, roughly only 60 pieces are crucial patient information that clinicians needed to access quickly and easily for effective care. This information included both expected data points, such as blood pressure and medications, as well as less obvious but critical information such as cough strength or previous difficulty with endotracheal intubation.
Next, we needed to find a better way to deliver the crucial information to clinicians at the point of care. We built an EHR interface for clinicians in the ICU called Ambient Warning and Response Evaluation (AWARE), which we introduced in our ICUs in Rochester, Minnesota, in 2012, and in our campuses in Phoenix/Scottsdale and Jacksonville, Florida, in 2014. A rules-based, ambient-intelligence application, AWARE filters out the meaningless data and delivers context-specific, high-value information to clinicians in real time. It contains over 1,000 rules that run continuously through data and enrich it with insights from clinicians and patients. Data is organized around familiar clinical concepts needed for timely and accurate decision making.
For example, the conventional EMR displays are cluttered with irrelevant data, making it easy to miss changes in hemoglobin, platelets, and coagulation factors — all critical for recognizing and treating acute bleeding. By prioritizing these data elements on the dashboard with color coding that indicates severity and urgency of specific corrective intervention, AWARE displays allow instantaneous recognition of an ICU patient at risk of severe bleeding complications.
AWARE provides a real-time overview of every ICU in the Mayo Clinic system, using visual displays that make it simple to scan and identify patients in need of urgent interventions. Each patient is represented by a square with icons that represent the status of required tests, scans, and procedures. It provides a quick picture of overall acuity, and clinicians can drill down into each patient’s data — down to each organ system.
While conventional alarms and EHR alerts create often create meaningless noise that gets lost in the hustle and bustle, AWARE smart alerts are integrated into the clinician’s workflow. They notify the clinician of potential omissions only if the clinician’s actions do not match the patient condition, minimizing the chance of harmful interruptions.
For example, our “VILI (ventilator-induced lung injury) Sniffer” provides an automated surveillance of mechanically ventilated patients that notifies providers only if the ventilator settings do not match the patient condition based on gender, height, and the presence of acute respiratory distress syndrome. Another application, “Sepsis Dart,” continuously surveys patients in emergency departments and medical intensive care units for the timely and accurate implementation of best practices (cultures, lactate, antibiotics, fluid) for diagnosing and treating sepsis. Yet another example is context-specific smart checklists such as CERTAIN (Checklist for Early Recognition of Acute Illness) that focus on completing common processes of care that are sometimes overlooked or missed in busy environments.
Compared to standard EHR interfaces, AWARE improves the cognitive performance, efficiency, and reliability of human decision makers. It also saves three to five minutes on chart review per patient per day. With an average ICU clinician workload of 15 patients per day, the savings mean that more than one hour of additional clinician time can be devoted to patient bedsides, improving often-inadequate shared decision making. In a subsequent study, AWARE implementation was associated with improved patient outcomes and reduced costs in the ICU. Adjusted for illness severity, the odds for hospital mortality of critically ill patients treated after AWARE implementation were reduced by half (odds ratio 0.45, 95% confidence interval 0.30 to 0.70). In addition, the length of ICU stay decreased by 50%, length of hospital stay by 37%, and total charges for hospital stay by 30% ($43,745 per hospital admission).
As an example of ambient-intelligence applications used in the emergency and ICU settings, AWARE delivers results that clearly suggest the importance of human insights and creativity in developing information technology for clinicians. Advancing ambient-intelligence applications and combined human–computer partnerships has the potential to help solve some of our most meaningful and challenging health care problems.
Disclosure: Mayo Clinic Ventures licensed part of the technology referenced in this article to Ambient Clinical Analytics, which sells clinical decision-support and alerting tools to hospitals and critical care providers. Mayo Clinic and the authors have financial interests in Ambient Analytics. Mayo Clinic uses any revenue it receives to support its not-for-profit mission in patient care, education, and research.
People Don’t Want to Be Compared with Others in Performance Reviews. They Want to Be Compared with Themselves
People hate performance evaluations. They really do. According to a survey of Fortune 1,000 companies done by the Corporate Executive Board (CEB), 66% of the employees were strongly dissatisfied with the performance evaluations they received in their organizations. More strikingly, 65% of the employees believed that performance evaluations were not even relevant to their jobs.
This is unfortunate considering the amount of resources that organizations devote to conducting performance evaluations. CEB research says that when we take into account how much money organizations are investing in their performance appraisal technology and how much time managers are spending to evaluate their employees, on average U.S. organizations spend $3,000 per year, per employee. This implies that billions of dollars are spent across the country because more than 90% of American companies provide performance evaluations at least once a year.
Why are employees so frustrated about the way they are evaluated, despite all the time and money being spent on these evaluations? What are organizations missing? We believe that one clue lies in the fact that 71% of the American employees thought that their evaluations had problems in the domain of fairness.
Fairness is at the heart of enhancing employees’ work experiences. It begets numerous benefits such as employees’ satisfaction with their jobs and commitment to their companies. In the context of performance evaluations, when people believe that the outcomes of their evaluations are commensurate with how well they performed, they are likely to consider the evaluations as fair. But there is so much more that goes into people’s perceptions of fairness. Specifically, employees perceive the fairness of evaluation processes when they feel included and respected. They also consider it fair when their evaluations are accurate and are conducted based on ethical and moral principles. When employees perceive fairness in the evaluation processes, they are more likely to accept their evaluations, in which case they will digest the information contained in the evaluations and motivate themselves accordingly.
Then, the remaining question is this: what are the specific things that organizations can do to increase perceptions of fairness during the process of performance evaluations? Our research, recently accepted for publication in Organizational Behavior and Human Decision Processes, suggests that an important driver of the fairness in performance evaluations is the reference point managers use to appraise their employees’ performance. Specifically, in four studies based on the data collected from 1,024 American and Dutch employees, we compared two types of reference points.
One reference point is the focal employees’ own past performance. When employees’ current performance is compared with their past performance, managers evaluate the temporal trajectory of the employees’ achievement, thereby providing feedback on how much employees have (or have not) made progress over time. We call those temporal comparison evaluations.
Another reference point is other employees’ performance during the same period. When employees’ performance is compared with how others have done, managers evaluate how much employees have (or have not) demonstrated superiority over others. We call those social comparison evaluations.
Our findings demonstrate that employees consider temporal comparison evaluations to be fairer than social comparison evaluations. For example, in one of our studies we had participants work on a task for two rounds. The task consisted of asking participants to make HR-related predictions. After they finished their task, in one condition their manager provided evaluations that compared their performance from round two to their performance from round one; temporal comparison evaluations. In the other condition, their manager provided evaluations that compared their performance from both rounds to another person’s performance; social comparison evaluations. Then, we measured their perceptions of the fairness in the evaluation process. Participants who received temporal comparison evaluations perceived significantly higher levels of fairness than those who received social comparison evaluations. When their current performance was discussed relative to their own past performance, participants believed that the evaluations were more individualized, believing that the manager incorporated specific information about them. Thus, they considered that the evaluations were more discerning and accurate, and that they had been treated in a more respectful way.
The experience of receiving individualized evaluations was significantly weaker in the case of social comparison evaluations. Employees whose performance was compared with another person’s performance believed that while delivering such evaluations, their manager failed to account for specific details of their performance. Thus, they considered the evaluations to be less accurate. They thought that their evaluations were less respectful, perhaps because they felt like they were being treated like another face in the crowd. Importantly, these differences in the perceived fairness between temporal and social comparison evaluations were independent of the favorability of the evaluations: even when the evaluations were positive, employees perceived the process of their performance evaluations to be fairer when they received temporal comparison evaluations (“You did better than before”) rather than social comparison evaluations (“You did better than other people”).
If performance evaluations that compare employees’ performance to those of others sound unfamiliar, let us give you an example. Under the leadership of Jack Welch, General Electric ranked their employees’ performance from top to bottom, giving additional rewards to the top 20% while laying off the bottom 10%. Such evaluations might have increased the employees’ concentration and led them to exert more energy at work. However, there may have been negative repercussions, too. The employees—both at the top and the bottom—might have perceived the evaluation processes as less fair. Past research on fairness suggests that such consequences can be very costly to organizations, especially in the long run.
A counterexample comes from Huawei, the Chinese telecom giant, which is famous for evaluating their employees’ performance in terms of its temporal trajectory. The philosophy of the company is to see employees improve capabilities over time. Even though social comparisons can be used, the main focus of evaluations in Huawei is on building a culture in which each employee manages to grow and develop. Less focus on social comparisons and more on development over time is clearly articulated by their founder, Ren Zhengfei, when he noted, “I will not judge whether each team has done a good job or not, because all of you are moving forward. If you run faster than others and achieve more, you are heroes. But, if you run slowly, I won’t view you as underperformers.”
Our research provides guidance on how organizations can provide performance evaluations that seem fair. Here, managers should remember that employees have individual identities, and they want those identities to be recognized at work. By emphasizing how their performance has changed over time instead of how it fares against other people’s performance, organizations can offer what the employees want—individualized treatment—and thus achieve the goal of offering fair evaluations, which are much more likely to be embraced rather than met with scorn.
Guest post from CrisMarie Campbell and Susan Clarke:
If you want your organization to successfully embrace your strategic change, focus on the human aspect. That’s right. People will be the ones implementing the change. So, get them involved, listen to them, and work together. If you do, you’ll build tremendous loyalty, trust, and engagement, which is priceless.
As coaches, our work with leaders includes focusing on the human side, which helps leaders reap the ROI of their business or smart investment. In short, we teach leaders to be proactive with change.
When I, CrisMarie, was consulting with Blue Cross Blue Shield in the early 2000s, I was lucky enough to get certified in the Leading and Managing Organizational Transitions through William Bridges & Associates. Much of how I approach change initiatives is influenced by William Bridges, the grandfather of change management and author of Managing Transitions.
A critical proactive measure is to be sure you communicate about the change early, often, and in varied ways. Give your people what they need to get on board with the change. I’ve adapted Bridges’ work for this simple communication framework called Why, What, How, and Who:
Why: Start with why. People need to understand why this change is so important. You have a good reason. Let them know what it is.
What: Paint a clear picture of how the world will look and feel on the other side of the change so people understand what you are aiming for. Your team wants to know how the destination will look and feel. Understanding the target will help them gauge their progress along the way.
How: Lay out a step-by-step plan how the organization will get to the final destination.Plans may change as you travel and close the gap between where the organization is now and where you want it to go. Offer frequent updates.
Who: Who needs to do what? Help your people understand exactly what they will be doing to make this change a reality. You can’t do it alone. Giving people a role helps them buy in to the change as they participate in the implementation.
For people to buy in to change, they need to understand the change from your point of view. You know why you want to change, what you are aiming for, how you are going to get there, and who needs to do what. Explain that to them so it becomes crystal clear, easy to understand, and nearly impossible to be misunderstood.
In addition to the why, what, how, and who, people want to know that you care about more than just the business results. They want to know you care about them as human beings. When you communicate, let people feel like they are part of this process, because, in fact, they are. You literally could not do it without them.
Show them they matter as people. They are not just cogs in the wheel. You hear and understand their points of view. Be considerate. Let them talk about where they are in the change process, especially if they are upset with it. Shutting down their frustrations only sends those feelings underground, causing bigger problems, like gossip and undermining – what we call corporate cancer. This will only sabotage your change efforts.
Let them know you haven’t discarded them. Show the team how they are still connected to the company, to you, and to each other in the midst of this change. Give them a specific role to play, hear their feedback, and encourage their participation in the solution.
Combine the why, what, how, and who when you address the organization. This detailed communication gives people clarity about where they are going, and helps them get and stay engaged.
So, what happens when things get bleak? Let’s look at the Valley of Despair.
Valley of Despair
Change requires people to work differently, be it on a system or in a specific business process.Going from what was to what will be involves a period of transition. During this transition, productivity almost always drops. In change management circles, this is called the Valley ofDespair. It’s based on and adapted by various Change Management experts from Elisabeth Kubler-Ross’s “Five Stages of Grief” described in her book, On Death & Dying. Productivity falloffs during times of transition is due in part to concrete changes such as new systems and processes. It’s also due to the internal process human beings navigate to embrace the change.
William Bridges says that when change occurs, people have to experience psychological reorientation to the new way of being. For people who have been doing the same things at the same place for a long time, this does not happen overnight. People process at different speeds.As a leader, you can support individuals to move through this process.
What seems like resistance is often fear of the unknown.
Most people really do want to do a good job. They resist the new way because they’re afraid of losing competency, status, control, relationships, turf, meaning, and/or identity. This fear mires them in resistance. Getting specific about what they fear they are losing and acknowledging that fear will help them move through the resistance.
For example, let’s say you’re implementing a new software system. You have an older employee, Bob, who is a wiz on the old system. Everyone comes to him when they have issues. When the new system arrives, with much more modern technology, Bob may feel a bit threatened. His feelings are justified. All of a sudden, he doesn’t know what he’s doing. He’s a beginner. If there’s not space for him to acknowledge his loss of competency, he may feel so overwhelmed that he quits. When he does, all his organizational knowledge, which is priceless, walks out the door with him.
If instead, there’s permission for him to first acknowledge the loss, he can then feel it and accept that he’s a beginner. This makes it easier for him to engage in the training offered. Acknowledgement of what is being lost right-sizes the impact of change. The system is new, but Bob still knows all about the organization.
Once Bob, or any employee identifies their loss, they can move through it and figure out how to replace or redefine what they have lost. Sometimes they have to come to terms with the need to let go, or relinquish, something. For Bob, he may have to let go of “man to go-to” status when the new system arrives as the younger employees learn it more quickly.
Communication — early and often — is a key responsibility for leaders implementing big change. Communicate why the organization is changing, what the end goal looks and feels like, how the organization will get there, and who will do what to make it so.
And remember, success depends on bringing your people along. Treat them as humans so they know they matter to you, to each other, and to the company. Be prepared for the Valley of Despair, and provide a path for individuals to honestly talk about their struggles in the change process. Give them ways to identify what specifically they’re losing in this change and how they can replace, redefine, or relinquish what they have lost.
Finally, keep in mind that big change can take months or years to successfully implement. Stay connected to your people for the entire journey. Then you’ll reap the ROI you’ve been looking for.
CrisMarie Campbell and Susan Clarke are coaches, business consultants, speakers, and co-authors of The Beauty of Conflict: Harnessing Your Team’s Competitive Advantage. They and their organization, Thrive! Coaching and Consulting specialize in helping professional women, leaders, teams and entire companies learn how to transform conflict into creativity and innovation.
Guest post from Scot Hunsaker:
Back in 2000, my company, Counsilman‐Hunsaker was in need of a receptionist. After our interview process, we found Macy to be the best fit for the position. It would be an understatement to say that when she interviewed with us and was hired, she was inexperienced in the industry. From day one, however, she displayed a natural curiosity for how the business worked and, most importantly, how it could be improved and what role she could play in that improvement.
Very quickly, Macy’s role within the company began to change. Within a couple of years of joining us, she was helping us manage events and customer experiences. She had a real talent for spotting ways that the customer experiences could be improved and then working to implement ways to make those improvements happen. She did this with little need for instruction or oversight despite her lack of experience.
As we began to have authentic conversations at Counsilman‐Hunsaker, we saw the need to formalize the process of finding emerging leaders in the organization. There were people who excelled at thinking about the future of the company, so we needed a place for them to have influence – not because of their title or tenure, but because they demonstrated the will and ability to lead. My partners and I decided that the strategic planning process was the best experiential way that emerging leaders could shape the future of the organization.
In one of the first conversations about our new strategic planning process I had with my partners, we identified Macy as one of those emerging leaders. She had a sense for finding the ways to continuously improve processes and she cared enough to follow through on that as best as her current role would allow. And we felt she was ready for a seat at the table. Just five years after she was hired to be our receptionist, Macy became part of our strategic planning team. Through her research and dedication to helping us grow, she helped to formalize our strategic improvement and management processes. Perhaps less obvious on paper, but unavoidable in experience, Macy had a tendency to be optimistic – to expect the best of herself and others. In short, she was inspiring. This kind of artful leadership ability was not a theory. We could see it on full display. She leaned into leadership situations that likely caused her some discomfort. But she did them with a kind of passion that made every interaction with her meaningful and engaging.
Little did we know at the time that was just the beginning of the leadership role at Counsilman‐Hunsaker for Macy.
Allow for Leaders to Emerge
It is not lost on me that we were lucky to have a person like Macy in our company. A‐players like that are hard to find. And that is just the point. How often do we overlook people who have the leadership ingredients but nowhere to go with them? This does not happen because we don’t care, but because there is no set structure or path to a leadership role outside of pure instinct.
This matters in the context of building a legacy for your organization. No matter what you may decide you would like to do with your business, there is a need for knowledgeable leaders who know how to make decisions. Pay close attention to your people. You most likely have more potential leader than you think.
To find and encourage the potential leaders like Macy within Counsilman‐Hunsaker, we built upon the structures we already had in place when we had authentic conversations. We used a combination of the corporate dashboard, SWOT analysis, employee surveys and customer surveys and created a strategic planning group. By using the activities associated with strategic planning, we found a way to engage people in ways that were challenging, but did not set them up for failure.
We found, through trial and error, that strategic planning is best done with no more than ten people present total to promote some intimacy and not a public speaking forum. I also made sure, as the CEO, that I listened more than I talked. This was not easy for me. We wanted to create ourcollective plan and not mine. And I wanted to observe how they dealt with adversity, being challenged and how they thought through their portion of the plan.
As a concept, strategic planning has been around since before the Great Depression. Using the concepts involved in plotting the growth of a business is at least a 100‐year‐old idea. At this point, there are as many ways to strategically plan as there are privately held companies. It is nothing new. The nuance I want you to grab hold of is using strategic planning as a tool for creating a legacy. It is the why behind the strategic planning. This is the best tool that we found for allowing the cream to rise to the top – for leaders to emerge. At Counsilman‐Hunsaker, we decided that strategic planning was the most fitting leadership training ground for legacy creation. We did not want to make people feel like leaders. We wanted them to have a chance to really be leaders. We wanted them to put their ideas to the test. Being able to strategically plan for the future is a prerequisite for ownership. So why not use that critical skill as a way to identify your next crop of leaders?
Scot Hunsaker is the author of the book Heroic Ownership, and leads The Ardent Group, an organization that provides owners with the necessary roadmap to build a team of co-owners and create a legacy.
Let’s face it. Sometimes as much as HR and the organization want to create and implement a program, the resources simply aren’t available. As a result, we have to resort to the “no-cost, low-cost program options”.
I thought about this as I was planning my agenda for this year’s WorkHuman Conference, pioneered by Globoforce. I’ve been to every year since its inception and it continues to get better. This year’s conference is being held April 2-5, 2018 in Austin, Texas. And it’s not too late to join us! (Check out the promo code at the end of this post for a discount.)
Anyway, back to the conference. I saw that one of the sessions this year was titled “Show Me the Money: 5 Unexpected Places to Find Recognition Budget” and reached out to the speaker Rob Schmitter, solutions architect at Globoforce, to see if he would give us a sneak peek. Thankfully, he said “yes”.
Rob, I’d like to think that everyone understands recognition is important. But I could see some organizations questioning whether or not they need a “formal” program (versus an informal one). What’s the one statistic that can help companies start to consider formal recognition?
[Schmitter] For me, it’s less about a statistic and more about a realization. If you want better business outcomes (less attrition, more engagement, higher sales, more profit), then create a better employee experience. Products and services will come and go, but it’s your employees that are the constant and the driving force behind those products and services. They don’t invent themselves.
It stands to reason that more engaged employees deliver better products and are more likely to ‘Wow’ your customers. That’s what drives better business outcomes. Companies that focus on human workplace practices like trust, relationships, feedback, empowerment, growth and appreciation consistently out perform their competition because their employees are more engaged.
To me, the first step in implementing any program is conducting an internal assessment. How can organizations conduct an assessment of their recognition programs?
[Schmitter] Conducting an internal assessment of existing recognition programs can be a difficult task. Here are three things to keep in mind:
- Know where to look.
- Get the full cooperation of those owners to come clean in terms of activity and spend.
- Realize you’ll never identify everything, especially when a formal, centralized program does not exist.
I’ve seen some pretty clever (and sneaky) rouge programs over my 30 years of total rewards experience. That said, I do have 3 favorite places to look first.
- Finance. Specifically, manager and employee expense items that can’t clearly be categorized or understood.
- Compensation. Any ‘one-time’ employee payment should be clearly understood and pay close attention to the ‘Other’ category. Most organizations have one and this can be a gold mine.
- Payroll. What payments do they see that look suspicious in nature?
There are plenty of other places to look too, but these are your best bets. Oh, one last thing, whatever dollar figure you come up with in terms of spend, triple it! That’s what our research suggests the real spend is…
I don’t want to give away your session during the WorkHuman Conference, but one of the things you’re going to discuss is how to get the budget for recognition programs. Are there any assumptions that HR pros need to keep in mind when asking for budget dollars to implement a recognition program?
[Schmitter] During the conference, I will be sharing 5 places that can help fund your recognition program and it’s very unlikely that just one will provide all the dollars you need. In fact, sourcing budget is generally an exercise in identifying or shaving off a little budget from a multitude of sources.
All that said, getting approval to invest in a recognition program almost always comes down to return-on-investment (ROI), as it should – organizations can’t afford to invest in just a ‘feel good program’. It has to deliver some value back to the business. The good news is that the investment in recognition, on a per employee basis, does just that.
I believe the return on the investment ratio just can’t be beat with any other HR management tool. We have some great case studies (and will be sharing a couple more during WorkHuman) that demonstrate some impressive results and it’s that kind of data that will ultimately get your investment approved.
Unfortunately, the reality of business is that we don’t always get everything we ask for. But in the case of recognition, having a program turned down can be perceived as the company saying, “it’s not important”. How can senior leaders balance recognition with budget demands?
[Schmitter] I think the conversation is finally moving away from recognition not being important. More and more senior leaders realize now the opportunity that a strategic, social recognition program presents. The research and results just can’t be ignored anymore.
That said, having your program funding request denied is still a reality and more likely due to poor program strategy and design versus the idea that recognition is not important. To overcome the budget approval obstacle, make sure that your program can demonstrate real ROI. Take on some big HR or business objectives and design a thoughtful program around those objectives. Be sure to have your success measures in place and documented when you go for approval. Just like you have a compensation strategy, you should have a recognition one too.
Last question. Even though we’re talking about how to get budget dollars, what’s one “no-cost” recognition strategy that organizations can implement, while they’re trying to get the budget?
[Schmitter] I’ve always thought that one of the best forms of recognition is to be a great listener. It acknowledges to others that you hear them and that what they have to say is important. You may not agree with it, but the simply act of not being dismissive or uninterested tells others that you appreciate them, that they have a voice and that they belong in the conversation. It feels good and is cost free!
My thanks to Rob for sharing his ideas. If you’re not already subscribed to the Globoforce blog, take a moment to check it out. And as promised, you can use promotion code WH18INF-DBU to get a little discount on your WorkHuman Conference registration.
We spend a lot of time on this blog talking about the increased focus on employee engagement and retention. Part of the way organizations can create an engaging culture and keep employees is by recognizing them.
The post How to Find Budget Dollars for Employee Recognition appeared first on hr bartender.
LEADERSHIP BEGINS in the mind. To lead effectively we must understand what is going on inside of us, so that we can lead ourselves. Only when we have developed a consistent habit of doing that can we then better understand and lead others and then collectively our teams and organizations.
In The Mind of the Leader, authors Rasmus Hougaard and Jaqueline Carter of the Potential Project, report that there are three mental qualities that stand out as being foundational for leaders today: Mindfulness, Selflessness, and Compassion. They call it MSC Leadership. All three work together and enrich the others.
Mindfulness is about managing your attention and in turn managing your thoughts. Mindfulness enables us to respond to our circumstances instead of reacting. The two key qualities of mindfulness are focus and awareness. These two qualities “help us to be mentally agile and effective.” “As your mindfulness increases, your perception of ‘self’ starts to change. More specifically, a stronger sense of selfless confidence arises, helping you develop the second quality of MSC Leadership: selflessness.
They describe selflessness as “the wisdom of getting out of your own way, the way of your people, and the way of your organization to unleash the natural flow of energy that people bring to work. Selflessness combines strong self-confidence with a humble intention to be of service.” It is interesting the way they put that.
Selflessness is often thought of as weak by the uninitiated. It is important that selflessness is combined with self-confidence. You become an enabler. “You are not worried about being taken advantage of, because you have the confidence to speak up for yourself if needed. At the same time, you’re not driven by your own interests. You have a strong focus on the well-being of your people and your organization.”
This is a tough one for many leaders. According to a study completed at the University of California, Berkley, “when many leaders start to feel powerful, their more benevolent qualities start to decline. Leaders are three times more likely than lower-level employees to interrupt coworkers, multitask during meetings, raise their voices, and say insulting things.” Also, they are more likely to be rude, selfish, and unethical. We have seen many leaders that think they are above the mores of everyone else. It’s not easy to keep yourself in perspective. Mindfulness plays a big part in that.
As we become more selfless, “we naturally begin attending more to other people: we show more interest in them and offer more care. In this way, compassion arises as a natural outgrowth of selflessness.”
Compassion is benevolent leadership. “It’s the ability to understand others’ perspectives and use that as a catalyst for supportive action.” Compasion combines with wisdom. Wisdom gives compassion a compass so that choices can be made that are thoughtful and holistic.
A compassionate organizational culture “supports positive intentions toward others, and at the same time instills the wisdom and professionalism in everyone to make tough choices. This includes sometimes doing things that are difficult bit will benefit the culture and the organization in the long term.”
MSC Leadership begins with you—inwardly—and then flows outward to your people and then your organizational culture as a whole. “It requires that we take an unflinching look at ourselves, at how we interact with our people, and at how our organizations operate.” The Mind of the Leader looks at this whole process and provides practical methods to apply each of these three qualities of mind to your leadership. This book provides a well-articulated and comprehensive look at these essential qualities of leadership.
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If your customer retention strategy relies on “buying” loyalty with rewards, rebates, or discounts, it is coming at a high cost. And these days, it could also mean that you’re giving up something priceless: your relevance.
That’s because the “loyalty era” of marketing, as we’ve known it, is waning. It was built in part on the notion that consumers will keep buying the same things from you if you have the right incentives. Yet, according to recent consumer research from Kantar Retail, 71% of consumers now claim that loyalty incentive-programs don’t make them loyal at all. Instead, in this new era of digital-based competition and customer control, people are increasingly buying because of a brand’s relevance to their needs in the moment.
In fact, consumer research we’ve worked on at Accenture shows that in the U.S. market alone, companies are losing $1 trillion in annual revenues to their competitors because they are not consistently relevant enough. Loyalty remains important, but this finding indicates that the future of marketing — and, in the big picture, many businesses — depends on serving a customer’s most relevant needs in the moment. In this way, companies need to become like more like living businesses, building and sustaining symbiotic ties with their customers as if those relationships are with a concierge, butler, or friend.A New Definition of Relevance
To become this kind of living business, with a new understanding of customer needs, we need a new definition of relevance. Abraham Maslow’s oft-quoted “hierarchy of needs” — first published in 1943 — provides a good start. Maslow sought to map the psychological needs of humans and their motivations. But his framework also offers a model for rethinking the traditional four P’s of marketing: product, price, place, and promotion. Most companies today are guided by these four facets of engagement.
The problem, however, is that brands using the four P’s exclusively often target a static customer archetype (e.g., a high-minded customer for an organic supermarket or a value-conscious customer for a discount chain). The reality is that there is no such archetypical customer. Everyone’s needs vary depending on time and context. And with today’s technologies, companies now have the ability to see and act on these fluctuations in the moment. Customers are increasingly expecting all companies to do just that, both in their marketing efforts and in the experiences they offer.
To become a living business, companies should expand their thinking to include the following five P’s as well: purpose, pride, partnership, protection, and personalization. These form a simple and comprehensive test of relevance. The first four extend from the top to the bottom of the psychological hierarchy—from what Maslow called “self-actualization” or fulfilling your full potential, to safety, a more basic need. The fifth, personalization, enables companies to connect with customers around any of these needs.
- Purpose: Customers feel the company shares and advances their values.
- Pride: Customers feel proud and inspired to use the company’s products and services.
- Partnership: Customers feel the company relates to and works well with them.
- Protection: Customers feel secure when doing business with the company.
- Personalization: Customers feel their experiences with the company are continuously tailored to their needs and priorities.
Soul Cycle provides a good example of what the five P’s look like in practice. By creating a community for indoor cyclers and fitness buffs, SoulCycle’s purpose aligns with customers’ values of health and a positive environment. This experience creates a sense of pride for customers who want to participate in a high-end cycling experience (given the pricing and the tendency for instructors to be young and fit). Customers also feel that SoulCycle is a partnership in the lifestyle they wish to achieve: They feel like they are treating themselves with new, clean facilities, upscale bathroom products, and custom SoulCycle playlists on Spotify.
SoulCycle customers also feel protection in their purchase — which is expensive for a 45-minute fitness class compared to the cost of a traditional gym — because they are confident that the staff will help them with their needs and also will help them to make the most of each class. Finally, the SoulCycle experience becomes totally relevant when a customer has an instructor that personally inspires them, thus creating personalization.
Many companies will be challenged to satisfy all five P’s at once. The following three principles, however, should help them in their efforts to connect with customers on these fronts:Go outside your comfort zone
Many companies have been using the traditional four P’s for decades, and many of those with great success. Often, this means companies will need to extend outside of their comfort zones to position their brands these new, expanded ways.
Consider Yoplait, the global yogurt brand owned by food giant General Mills. Consumers typically associate big food companies with mass-production methods and plastic packaging. Companies like these are more typically accustomed to using traditional 4 P’s approaches such as pricing and promotions to attract and retain customers. But Yoplait recently found itself contending with an influx of newer brands, including the Greek yogurt brand, Chobani, that emphasize and compete on meaningful connections to authentic food traditions.
In response, Yoplait pivoted toward a focus on customer relevance. Yoplait found that consumers often take pride in using products with a connection to an authentic national tradition – whether Italian olive oil, or Greek and Icelandic yogurt. Recognizing that its long history of making French yogurt could be turned into a market advantage, it embraced a traditional French method in which yogurt is cultured and sold in small individual glass pots. As a yogurt executive at General Mills noted, “The simplicity of this idea, that this is a French method, coming from a French brand, with a French name — that’s authenticity.” It is also something both Yoplait and its customers can take pride in.
The company is, at the same time, enhancing its relevance to customers in other ways. For example, it also recognized customers’ desire to feel protected. Their new “Oui” French yogurt product is all-natural, non-GMO, and promotes its very simple ingredient list.
It’s still too early to tell whether this targeted initiative will translate into increased sales. Nonetheless, it is a noteworthy example of a company purposefully pivoting to an approach that extends beyond its norms to be relevant to customers.
CVS Pharmacy, the retail pharmacy of CVS Health, offers another example. CVS Pharmacy is moving beyond a purely transactional retail model where customers fill prescriptions; instead, the company is focusing on helping their customers on their path to overall better health. In this way, customers share the company’s purpose. It also helps satisfy their desires to feel cared for, and helps build upon the trusted relationship most customers have with their pharmacist – an example of what we’ve termed protection.
Extending far outside the traditional retail paradigm, CVS is embracing technologies including predictive analytics, artificial intelligence, and machine learning to send their customers personalized reminders to refill or take their medications, in the spirit of partnership. And, the company has teamed with AI giant IBM Watson to anticipate patient needs, including when they might require more urgent care. These new avenues and practices will enhance the value for customers in maintaining an active engagement with a pharmacy retailer—and make the CVS brand more relevant in the moment through protecting their health and well-being.Timing is everything
If the first four P’s are additive, the final one — personalization — is multiplicative. A key component of becoming a living business is conveying exactly the right message, experience, or offer to customers in exactly the right context. It’s a level of personalization that few companies ever attain.
Car-rental giant Hertz has worked to develop a “Just in Time” approach to delivering highly relevant offers at the exact moment when the customer is evaluating deals across the channels they prefer, whether it is through call-center agents, counter terminals, handheld devices, or the Hertz web site.
Using predictive analytics, Hertz suggests deals based a customer’s propensity to accept certain offers over others. For example, a customer who would be qualified for a buy-one-get-one-free deal might still receive a different (perhaps even less profitable) offer if she passed up similar offers in the past. The company understands that a promotion can only be as profitable as a customer’s willingness to take it — and an unwilling customer is a lost opportunity. That’s why offers are calibrated to a customer’s behavior in a way that all marketing channels can simultaneously use.Don’t be loyal to the status quo
To succeed in this era of relevance, marketers and companies must be continuously willing to abandon the old. As new technologies shift customer journeys and expectations, they can (and should) also enhance companies’ abilities to engage with customers in the most relevant ways. Often, the greatest roadblock is a company’s lack of willingness to transform their processes, organizations, and mindsets as needed.
To overcome that barrier, some companies have shifted from a product-focused mindset to a platform approach.
Under Armour, Inc. offers a good example. Instead of thinking of itself merely as a sports apparel manufacturer, the company has purposefully developed a “connected fitness” ecosystem. In 2015, in fact, it spent more than $500 million to acquire two popular fitness-metrics services in a bid to become the world’s largest tracker of fitness information. The two services — one based in the United States and the other in Europe — had a combined 100 million subscribers when they were acquired.
Under Armour intends to enable these platforms to grow independently, while reaping aggregated data that can inform and expand its apparel designs. Ultimately, the goal is to link customers to new services such as innovative start-ups that are developing embedded sensors and biometric readers for apparel. In the words of CEO Kevin Plank, “Brands that do not evolve and offer the consumer something more than a product will be hard-pressed to compete.”
Similarly, automaker BMW has embraced partnerships across a broader ecosystem to help its customers navigate their urban environment, with or without their car. Customers can now see their engagement with the brand as an ongoing relationship, rather than a one-and-done purchase. To provide its customers a seamless transportation experience, the automaker links them into a broader of ecosystem of car-share and rental companies, parking aids, electronic-vehicle charging stations, and location-based mobile lifestyle apps.
Today’s mobile-enabled consumers are constantly evaluating and re-evaluating their purchasing decisions. They will choose the brands most relevant to them at an increasingly rapid pace. And they’ll pay a premium. Living businesses — those that achieve this profound degree of relevance — will have pricing power and will drive repeat purchases. Those are the ultimate goals of loyalty, now newly attainable, when relevance matters more than ever.
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When I ask corporate leaders why they are committed to preventing serious injuries and deaths among their workers, most say they care about their employees and don’t want to see anyone hurt. They’ll also note that “safety pays” in reducing costs, or admit they fear reputational damage following a significant incident at their company.
In my experience, these rationales rarely lead to significant changes in workplace safety and the prevention of serious injuries and deaths. Underneath it all, many business leaders have an implicit but unfounded belief that, while it is necessary to reduce workplace injury risk, there is a trade-off between profits and the expenditures necessary to keep workplaces safe. One example of this sticks in my mind.
During my years at OSHA, where I served as the Assistant Secretary of Labor from 2009 through the beginning of 2017, I received several reports of safety system failures at DuPont facilities. I watched with concern as the company, under pressure from activist shareholders to increase profits, cut costs and let its safety program deteriorate. Needed repairs and upgrades were delayed, worker training postponed, and risk assessments overlooked. The culmination was an incident at an insecticide plant in LaPorte, Texas, where, as a result of a basic process safety management failure, an extremely toxic chemical—methyl mercaptan—was released and two workers were overcome. With inadequate equipment, others rushed in to save their colleagues. In all, four workers were killed.
We fined DuPont a few hundred thousand dollars—a high penalty for OSHA but petty cash for DuPont. To get management’s attention, I issued a statement declaring that “these four preventable workplace deaths and the very serious hazards we uncovered at this facility are evidence of a failed safety program.”
It worked. CEO Ellen Kullman came to see me and promised a top to bottom review of the DuPont safety program. I was pleased with our meeting, feeling like she had made a real commitment. And then, less than two weeks later, she stepped down.
Her successor, Ed Breen, was quoted as saying, “as we confront a challenging environment, [Kullman] and the management team already have taken actions to accelerate cost reductions. Looking ahead, we will continue to drive productivity, and we plan to conduct a deep dive into the details of our cost structure and allocation of capital to ensure we deliver appropriate returns for shareholders.”
When I read DuPont CEO Breen’s words “accelerating cost reductions,” my heart sank. I thought immediately of BP and the other industrial giants whose “accelerating cost reductions” had disastrous consequences. These kinds of statements speak to a leader’s choice of values, and a failure to understand the relationships between a safe work environment and operational performance. They convey to workers what’s really important, and they create ample context for inadequate safety focus lower down the organization.
It doesn’t have to be this way. Companies can be successful and safe at the same time. The reality is that virtually all workplace injuries are preventable, and safety management and operational excellence are intimately linked. Injuries and catastrophic events, in addition to being tragic, are evidence that production is not being managed correctly. Improved operational performance will result in fewer injuries.
Here are some steps CEOs, executives, and boards can take to accomplish just that.Start at the top.
From the CEO down, the message should be, “We care about safety because we care about you — doing it right means no one gets hurt.” Take safety as seriously, if not more seriously, than anything else you do.
One former CEO who exemplifies this message is Jim Gallogly, who was hired to be CEO of LyondellBasell, one of the world’s largest plastics, chemicals and refining companies, in 2009. When Gallogly arrived, the firm was in bankruptcy; his job was to return it to profitability (which he did). At his first meeting with employees, however, he announced that he wasn’t going to begin by talking about the firm’s financial challenges. Instead, the new CEO wanted to focus on something far more important: his absolute commitment to safety. He subsequently included a report of the firm’s safety performance in every earnings call, too.
Aside from prioritizing safety with employees and investors, corporate leaders need to be familiar with the nature, extent, and potential of the major risks — and the risk mitigation plans — associated with their facilities. Many executives require every serious injury to be reported to them immediately. At Cummins, Inc., for example, serious incidents are reported directly to the COO and communicated to business unit vice presidents as well. They are then reviewed by the company’s Manufacturing Leadership Council.
When operational staff knows that the C-suite will be on the receiving end of such reports, and that they will be analyzed in detail, it reminds mid-level management of the importance of risk reduction and injury prevention.Use the right incentives.
The term “safety culture” is misleading because it suggests organizations have multiple cultures: one for safety, another for production, and perhaps others for quality and for sales. In reality, each company has its own organizational culture, and all too often, when production needs suddenly to increase, production takes precedence over safety.
At the safest, most successful companies, safety is what the firm does — and what the firm is at its core — not something that is separate from operations. In fact, a study of 19 manufacturing firms on quality, productivity, and economic performance, along with subjective data on how workers and managers felt about their safety program, found that:
“As safety deteriorates, product quality and plant performance, based on internal and external measures, suffers. There is more scrap, more rework, and employees are less involved. Such outcomes are in line with the core concepts of total quality management which would suggest that employees who do not feel safe in their jobs are not likely to do their jobs well…. Safety and operating performance measures should be viewed as in concert with each rather than as competing entities.”
Operations managers must get the message, though direct comments, performance reviews, and bonuses, that safety is a central part of their jobs. I have seen far too many employers who fail to penalize managers when their safety management systems are failing but their production numbers are good. LyondellBasell, for example, has a policy that makes it clear that safety is no less important than profits. According to Jim Gallogly, no matter how low the OSHA recordable injury rate, if there is a serious incident — a fire, a chemical release, a worker is seriously hurt — no manager gets a bonus.Don’t blame workers for injuries.
Workers are humans and humans make mistakes. No matter the job, at some point a person will get tired, bored, or distracted. Because of this, errors are inevitable. Well-functioning safety programs understand this and have multiple backup systems to ensure that mistakes do not result in injuries or deaths.
It’s also worth remembering that serious events are almost always caused by multiple factors — not the actions of one person — and that the prevention of these events is most effective when many indicators are considered together.
The most effective path to preventing injuries is to consider human errors as the consequences, rather than as causes, of operational failure. As James Reason, the organizational psychologist who authored the seminal book Managing the Risks of Organizational Accidents, wrote, “(w)hen an adverse event occurs, the important issue is not who blundered, but how and why the defenses failed.”Rethink how you think about injury rates.
Injury rates, often called “OSHA recordables” are important metrics, in that they reflect the very real experience of your workforce. At the same time, injury rates and reports of specific incidents are what are known as lagging indicators. While they identify problems that often need immediate attention, they do not adequately evaluate a firm’s safety and health management system.
This may be the opposite of what many CEOs hear from their safety professionals. For many years, it was a common belief that preventing minor injuries will also prevent the most serious ones. In fact, the causal chains that lead to most serious and fatal injuries are quite different than those leading to the majority of “OSHA recordable” injuries (#4 talks more about these). This is especially true in the high-risk sectors where a single event can be catastrophic. Famously, BP executives were on the Deepwater Horizon drilling rig the night before that horrific explosion, giving its workers an award for their low injury rate.
That said, you should set concrete goals for injury rates at your company. But instead of focusing on a lower rate, I would recommend setting an aspirational goal of zero injuries (while making it clear that reporting injuries is an absolute requirement). The undesirable premise underlying the goal of a lower injury rate — versus aspiring to no injuries — is that it is OK for some workers to get hurt, as long as fewer get hurt than before.Focus on leading indicators.
To make substantial progress in injury prevention, companies must select a set of indicators that measure progress toward that firm’s chosen goals. These are called “leading indicators” because, unlike lagging indicators like recordable injuries, they are predictive of fatalities, serious injuries, or events that may have catastrophic consequences.
The measures could involve hazard identification or abatement, incident investigations, or the time it takes to close out of recommendations, among others. Each firm needs to select or develop its own, appropriate to its functions and products. Start with a small number and then add more as your program matures.
The pharmaceutical manufacturer Allergan, for example, tracks “good observations,” reports that include near misses, unsafe conditions, or suggestions for reducing risk. Beyond providing a mechanism for workers to alert management to problems, this metric encourages a continual focus on risk reduction. Good observations are a take-off point for another measure the company tracks: speed in which serious or high gravity hazards are addressed. Simply receiving the observations is not enough, of course; eliminating the serious hazards are what is important.
Whatever the metrics, top managers should use them to measure the evolution of their safety management system (see #5 below), and they should be an integral component of managerial performance payments. The performance of senior executives at Dow Chemical, for example, is evaluated using leading safety indicators, not injury rates.Embrace a safety and health management system.
Managing for safety requires managers to implement a systemic process to find and fix workplace hazards before workers are hurt. Generically these programs are called Safety and Health Management Systems (SHMSs) or Injury and Illness Prevention Programs. They all involve an iterative, continual improvement process that have as their operating principle the Plan Do Check Act cycle (or the Plan Do Study Act cycle, sometimes called the “Deming Wheel”) widely in use today.
In order to be successful, an SHMS must involve support from leadership; worker participation (including the acting involvement of a union if one present in an organization); hazard identification, assessment, prevention and control; opportunities for education and training; and regular program evaluation and improvement.
SHMSs should also include protocols for investigating incidents that are sometimes called near misses or close calls. These incident investigations, conducted with the participation of managers, workers, and safety experts, examine the chain or root causes that led to the incident and then develop recommendations for preventing them in the future.Welcome a regulator as a “cheap consultant.”
A visit from an OSHA inspector often triggers fear, if not panic, especially among inexperienced managers. But many OSHA inspections lead to substantial improvements in a firm’s operations. I was amused to hear an executive at one of the nation’s largest chemical manufacturers tell me that he looked at OSHA inspections as an inexpensive consultant, since our fines were always less than he would have to pay an industrial hygienist to do that same inspection for him.
In fact, most firms actually benefit from OSHA inspections, and I’m not just saying this because I worked there. According to researchers David I. Levine and Michael W. Toffel, OSHA’s random inspections of high hazard establishments result in a 9% reduction in injuries that triggered workers’ compensation claims in the four years following the inspection. On average, each inspection reduced employer expenditures for wage replacement and medical costs by $350,000. Further, not only do the OSHA inspections prevent injuries, “they cause no discernible damage to employers’ ability to stay in business and no reductions in sales or credit ratings… Nor did we identify any effects of workplace inspections on wages, total payroll, or employment.”
Today and every day in the future, corporate leaders need to reassess what safety means and how their company can achieve it. They need to recognize that safety is a value proposition, that safety management and operational excellence are inextricably linked. If you ask the CEOs of companies who take this seriously, my bet is you won’t hear the same old tired line that “safety is a priority.” They understand that safety is not a priority — it is an essential precondition of their work. It is a fundamental component of their operating culture. Safety, ultimately, is at the core of what they do.
Smart machines tend to elicit both awe and deep anxiety. This is especially true in health care, where people’s hopes and fears tend to get magnified quickly. Consider three issues that get a lot of attention: the use of medical records, the “human touch” in medical care, and the future of jobs in the industry. On balance, are people more glass half-full or half-empty? Our research points to an optimism that may surprise expert observers.Consumers Want What Works
When it comes to privacy of medical data, of course people don’t want their records hacked by criminals. But consumers are ready to share their information when it’s in their clear interests to do so, and when it’s shared with the right people. More and more people are turning to wearable health devices, for example. According to a recent Accenture survey, 88% of consumers are willing to share the data from their “wearables” with either their doctor, a nurse, or other health care professionals. And 72% are fine with their health insurers having that information. (On the other hand, only 38% are willing to share that data with their employers.)Insight Center
- Health Care’s New Frontier Sponsored by Optum How technology is changing the design and delivery of care.
We see similar results when it comes to the human touch. Of course, in many situations, nothing can substitute for the human touch. But in many cases, convenience and efficiency trump personalized care. In our survey, two-thirds of respondents said they would use AI-based after-hours services, and 63% said they would use AI agents to help them navigate the health care system. In addition, more than half of those surveyed said they would be likely to use AI-based systems to diagnose their symptoms and to receive emergency advice. Overall, 75% of U.S. consumers surveyed said that AI technological advances (including mobile apps, wearable monitoring devices, and smart scales) were important to them to help them manage their health.What About Jobs?
When it comes to the impact of smart machines on jobs, we see ample evidence to put hopes over fears. Take the question of potential worker displacement through automation. Accenture Research recently concluded a study of future workforce trends, including in health care, and the data point to significant growth for the industry, both in terms of jobs and revenues, as AI moves beyond rudimentary automation and enables greater collaboration between humans and machines. The data predict that, from 2018 to 2022, employment in health care will increase by 15% while revenues will surge by 49%.
Much of that growth will come from three new ways in which smart machines will enable humans to improve performance.
The first is by amplifying people’s natural abilities, enhancing their insight and intuition through the use of powerful analytics and copious historical data. A Harvard-based team of pathologists, for example, recently developed an AI-based technique to identify breast cancer cells with greater precision. Using the new method, they were able to increase their accuracy from 96% to 99.5%. That might not sound like much of change, but with nearly 1.7 million new cases of breast cancer diagnosed globally each year, the improvement translates to 68,000 to 130,000 more women receiving accurate diagnoses.
The second way is by interacting with people through novel types of interfaces such as voice, emotion, or gesture recognition. In elder care, robots can help overburdened caregivers by reminding patients to take medication, lead them through physical and cognitive exercises, and provide them with companionship. Chatbots can help mental health professionals serve many more patients a day. Machine learning tools can help with the screening and treatment for autism. Philips has developed an AI-based tool, Illumeo, for radiologists. One of the tool’s features is that it displays contextual information about a patient alongside the images, so a radiologist doesn’t have to hunt for that information. It can also anticipate the radiologist’s needs. It might, for example, recognize the anatomy of the radiological images and automatically suggest the correct tool set such as one that can measure and analyze blood vessels. The software is also able to learn how a particular user prefers to look at the images — what’s known as a radiologist’s “hanging protocol.”
The third way that smart machines are helping humans is by embodying physical attributes that work to extend people’s capabilities beyond their natural limits. A good example of embodiment in the health care field is robot-assisted surgery: Instead of using a scalpel, the surgeon sits at a console and nudges a joystick that controls robotic arms. This AI-assisted technology has been a huge asset for certain types of surgeries that require incredible precision — for instance, when a doctor has to remove an overgrown retina membrane that’s only a hundredth of a millimeter thick. By eliminating human jitters and involuntary tremors, robot-assisted surgery can help significantly improve the success rate of such operations.
The above examples are just a few of the many that illustrate the power of human-machine collaborations in which each party does what it does best: people’s intuition, creativity, teamwork, and social skills combined with a machine’s precision, speed, scalability, and quantitative capabilities. Such collaborations are the future, enabling companies to reimagine their work processes, and this transformation is happening in one industry after another. That’s cause for considerable optimism.
Rasmus Hougaard and Jacqueline Carter, of the global consulting firm Potential Project, make their case for mindfulness, selflessness, and compassion in leadership. Their survey of 30,000 leaders showed those characteristics are foundational — and often missing from leadership development programs. Practicing self-awareness, they say, leads to more focused and more people-focused organizations. They’re the authors of the new book, The Mind of the Leader: How to Lead Yourself, Your People, and Your Organization for Extraordinary Results.