HSM Inspiring Ideas BLOG

Susan Copperman at John Davis Special Management Program "Family-Managed Business"

Bonus Dis-incentive?

   As year end approaches, it is safe to say that across America and around the globe, executive expectations with regard to 2008 bonuses are low. According to his recent NY Times Op-Ed piece ("What's the Value of a Big Bonus?") published on November 20th, Dan Ariely, professor of behavioral economics at Duke University and author of "Predictably Irrational: The Hidden Forces That Shape Our Decisions", might argue that bonus incentives should have been eliminated long ago or, at the very least, should have, in some industries, not risen to the astronomical heights that they did. In fact, he might say, bonus expectations got so high, they actually became dis-incentives.

    Ariely and some colleagues conducted a series of experiments in which they offered monetary incentives tied to certain performance objectives. They offered rewards of low, medium and high value, taking into account the value of the bonus relative to local standards. For instance, in India, the "low" bonus was $.50, which is equivalent to a day's wage in rural India. The "medium" bonus, $5.00, correlated to two weeks pay, and the "high" bonus, $50.00, was the equivalent of five months pay. 

    Assigned tasks included both repetitive, mechanical tasks as well as tasks which required some level of proficiency, i.e. creativity or mental acuity. While performance outcomes associated with the mechanical, "rote", tasks increased as the bonus incentive increased, performance outcomes for tasks that required mental exertion and concentration  were inversely related to the bonus! Over a series of experiments that were conducted, Ariely and his colleagues consistently witnessed that the higher the bonus incentive, the more it appeared to become a dis-incentive.

    Taking into account different economies, Ariely and his colleagues repeated the experiment with students at MIT offering low and high bonuses of $60.00 and $600.00. Not surprisingly, the outcome was the same. A greater percentage of participants received low and medium bonuses than high bonuses.  Ariely concludes that at some point the stress induced by the "promise" of a high bonus becomes demotivating.

    That is interesting and having read "Predictably Irrational", I would not contest Ariely's methods nor would I challenge his conclusions. I would, however, like to suggest another explanation, and that is around goal setting and the numbers/results that need to be attained in order to collect the high bonus.

    Who is setting targets and how realistic are they? Is it possible that managers, not accurately assessing the reality of the competitive landscape, are setting unrealistic goals? Is it possible that managers, in their attempts to manage up, are setting targets to appease their superiors without considering how their teams are going to achieve these numbers? Is it possible that market expectations for short term, quarterly results are coercing managers to "say" anything without regard for HOW their teams can or will get there? I would argue that some managers tie huge bonus incentives to such outlandish targets that their teams never even buy in. Skeptical as it may sound, I believe that there is some point at which people may tune out the bonus number because they don't believe they will ever get there.

    In attempts to conduct a different sort of experiment than Ariely's, I would like to hear about the bonuses you have been offered, whether or not you believed they were attainable, and how often you actually received them.

    Dan Ariely, recently named by Fortune as one of the "ten new gurus you should know", will be speaking at HSM's World Innovation Forum taking place in New York City May 5 & 6, 2009.

Some universal truths about business...

No matter how many times I hear world class management thought leaders speak, I always - at the very least - appreciate the opportunity to have business maxims reiterated - repetition is key to retention, after all. Additionally, and invariably, I am always grateful for the opportunity to hear new ideas and to be provoked to think about things differently.

Just this week, after attending HSM's Special Management Program, Family-Managed Business, with Harvard University professor and foremost authority on families in business, John Davis, I had many great takeaways. While there are some sensitive family business issues not for public consumption - issues that are best shared and discussed among family business peers - there are some key learnings that apply to everyone regardless of industry or position. 

1. Talent and leadership

In listening to John and his colleagues talk with event attendees, it struck me that all businesses today, including family managed businesses, are engaged in the "war on talent". Just because owners and founders have sons and daughters, nieces and nephews waiting in the wings, it does not mean that their heirs are entitled to jobs - jobs are earned, based on merit. Jobs are not birthrights. Owners are acutely aware that today their businesses are competing on talent, and they need to be concerned with building talent pools. Families may have networks that extend into 2nd and 3rd generations, even 4th and beyond, comprised of 40 to 70 to 100+ cousins, but there still exists a leadership crisis. How do family businesses ensure that they are fulfilling their obligation to prepare tomorrow's leaders today?

Another interesting point that John made is that structure within your business "is your friend". Who can't benefit from that??? Whoever you are, whatever you are doing, in the crazy nonstop whirlwind in which you are competing, take some time to impose some structure around how you plan to make your plans. It will be time that reaps dividends.

2. Executives managing and leading Family-Managed Businesses can benefit tremendously from thought leadership of iconic and respected CEOs

As I listened to John talk about talent being the most important factor on which all businesses compete today, as well as the subsequent discussion regarding succession planning (by the way, 35% - 40% of next generation family business leaders are women), I realized that executives - whether family members or not - who are involved in family managed businesses will find HSM's Management Week (April 27 - May 1, 2009) to be time well spent. Management Week will be comprised of 3 modules.

The first module, April 27 & 28, will be facilitated by Bill George, former CEO of Medtronic who grew the company from a market cap of $1 billion to $60 billion. Bill, who has devoted much time to studying Authentic Leadership, has a very important message for families who wish to preserve and continue to grow business dynasties: the "command and control" style of leadership which resulted in a business' early success will definitely not result in a business' long term future growth! To sustain itself for future generations, how does the leadership of family managed businesses need to change and adapt to thrive in today's world? 

Herb Kelleher, iconic co-founder, former Chairman and CEO of Southwest Airlines, will lead a discussion on Building a People Focused Culture on April 29th. As family managed businesses continue to grow and expand, the number of people within the organization will grow exponentially. As a result leaders need to focus on a culture which recognizes and rewards the increasing numbers of non-family members who will be instrumental in enabling family businesses to sustain their legacies. More than any other business leader, Herb was key at building and maintaining a culture which recognized the contribution of its people as fundamental to Southwest's best in class performance - as evidenced by 35 consecutive years of profitability.

Finally, once attendees have honed their authentic leadership skills and have understood how to create a people focused culture, Larry Bossidy, former Vice Chairman of GE and CEO of Allied Signal and Honeywell, will spend April 30 & May 1 discussing "Execution in Action". Implementation of effective execution in conjunction with authentic leadership within a people focused organization puts an organization in a great position to maximize its resources for optimal bottom line results.

In today's environment of uncertainty, the future of any business is dependent on implementing management and leadership best practices. Whether you are part of a publicly traded or privately held company, spending  five days at Management Week next spring will arguably yield the best return on any investment that you could make in the challenging year ahead. 

For more on HSM's Management Week and to register to attend, please visit www.hsmglobal.com/us/mw.

 

T5 at JFK --- A winning innovation featured at World Innovation Forum!

For the second installment of our 4 part series on innovation cases that will be presented at World Innovation Forum New York on May 5 & 6, 2009, I would like to tell you about a recent visit to JFK Airport during which I had the pleasure of flying out of the newly opened and reinvented Terminal 5 (T5). I was only sorry that my plane was precisely on time which meant that I had no time to enjoy the new T5 experience. Yes, you heard me correctly, I was SORRY that I was NOT delayed! If you have not yet been to T5, you have to make it your business to fly into or out of New York on JetBlue at your next opportunity. Spearheaded by Rick Blatstein, CEO of OTG Management, the travel experience on Jet Blue and through Terminal 5 at JFK has been reborn.

T5 opened last month and is unlike anything we have seen or experienced to date. I believe that it will be a model for the rest of the world as airports around the globe rush to upgrade the experience for travelers who begrudgingly trudge through terminals. Not only is everything at T5 brand new, sleek, and state of the art - something travelers in and out of NY are unaccustomed to - but also, the terminal is full of great shopping and dining at restaurants featuring cuisine of world renowned chefs. I predict that T5 and Jet Blue will become a destination and carrier of choice, finally relieving passengers of the feeling of being held hostage by the airlines. Instead, passengers will decide that they need to fly Jet Blue and they need to fly out of T5.

Included in a recent press release about T5 and issued by JetBlue was the following:

"From day one Terminal 5 will welcome more than 30 percent of JFK's annual customer traffic," said Dave Barger, CEO of JetBlue Airways. "The terminal is designed specifically with our customers in mind, and we have created a new standard in both comfort and service that everyone can enjoy. Its unique amenities will create a stress free on-the-ground experience for JetBlue customers that will match the innovative and award-winning experience JetBlue is known for in the air."

Although there are many innovations incorporated into T5 such as a large central security checkpoint capable of accommodating 20 screening lanes, free Wi-Fi throughout the terminal, and grandstand seating under a 40-foot-diameter digital ring of LCD monitors perhaps the best is the gate area program called re:vive that allows customers to use touch-screen monitors to order meals for delivery to the gate areas. Here is a picture that I took of re:vive when I was there.

Centered at the top of the terminal, notice the OTG logo. OTG Management is the company which is overseeing all food and beverage concessions at T5. The way in which OTG conceived, proposed, and executed this concept is an innovation in and of itself. Rick Blatstein, OTG's CEO will be joining the roster at World Innovation Forum next May to describe the ways in which his project at T5 is illustrative of major innovation theories such as Clayton Christensen's Disruptive Innovation and Renee Mauborgne's and Chan Kim's Blue Ocean Strategy.

Having been to T5, I can honestly say that if I have to suffer a flight delay, there is nowhere I would rather spend 5 hours waiting for a flight than at T5. With that in mind, please tell us your worst airport experience...

Oh, and to learn more about Rick's session and the entire World Innovation Forum program, please visit www.wifny.com.

The Inside Scoop on Building Winning Teams

Have you ever imagined what it is like to be at an HSM Special Management Program?  After all, it is an extremely exclusive, limited capacity opportunity. Well, since we are approaching the end of the year, and the season of giving has put me in the spirit, my gift to you is a glimpse inside this week's Building Winning Teams with Patrick Lencioni.

Along with the CEOs and CFOs in attendance were an array of executives representing a cross section of industries, both from the US and outside the US. It was an impressive who's who of the business world including the Chief Administrative Officer of the largest children's hospital in the US, a risk manager from a major financial services firm, a consultant who works with family businesses, top Human Resource executives from agricultural, healthcare, pharmaceutical, software, defense, telecom, and television were also in attendance. People attended both with 4 or 5 team members joining them, while others came on their own as the sole representatives of their firms.

You see, in the challenging times in which we are competing today, these executives realize how crucial it is to build and maintain winning teams. Without a winning team, it is impossible to execute effectively, efficiently and profitably. Without a winning team, forget about being in the game. 

So, what did Pat talk about? To begin with, he talked about the two requirements for success - smart teams and healthy teams....Incidentally, how would you assess your team? He spent alot of time discussing this based on a bit of prework attendees had completed prior to coming to the event. So, how smart is your team? How healthy is it? Do you know --- is it more important to be smart or healthy?

Pat also talked about the 5 Dysfunctions of a Team:
* Absence of Trust
* Fear of Conflict
* Lack of Commitment
* Avoidance of Accountability
* Inattention to Results

How dysfunctional is your team? Do you know that if there is not trust within your team, your team will fear conflict? Without conflict, the "right" issues will not surface, will not be addressed, and will not be resolved. Dysfunction will prevail. Pat says that "great teams argue". Great teams argue???? Yes, he explains that trust enables us to have "good arguments around the right things". Trust is the foundation upon which great teams are built.

If I may speak for Pat, he had a great time. In fact, he must have said 5 times that he felt like "a kid in a candy store" because he loved the active engagement and participation of the attendees. With regard to all of the questions attendees were asking, he commented that there were "lots of great questions. I love this!" How often do you attend events during which you get to ask whatever is on your mind whenever it enters your mind???

People wanted to know about:
* Managing up when there is no trust
* Gaining buy in from the top
* "Healthy" conflict
* Constructive vs destructive confrontation
* Being friends with co-workers
* Peer pressure and accountability

Other discussions were around running effective meetings and the 3 signs of a miserable job! After this discussion, nearly 100% of attendees raised their hands when asked how many now thought they had insight into things they could do right away to ensure that people in their organizations were not miserable in their jobs. Although maintaining high morale and employee satisfaction is always extremely important, it is a key to success particularly in challenging times. You want and need an "A team" on its "A game". Learning how to recognize, remedy and reverse misery among team members is a huge, valuable, and priceless takeaway!

What were some of the things attendees told us they liked about the program?
* Speaker "awesome"
* The practical applications
* The contextual discussion that drove points home - both by Pat and the audience
* Pat's interaction with the attendees
* The open forum
* Ability to ask questions directly to speaker
* Good practical takeaways
* Audience participation

While the intent of this post is, in fact, to let you know what you missed, it is decidely NOT intended to make anyone feel excluded  from this exclusive gathering because you have 2 more opportunities in the months ahead to participate. Patrick Lencioni's Building Winning Teams will be taking place on March 10 - 11, 2009 in New York City, and on March 18 - 19, 2009 in San Francisco. While there is still space available, and as you put together your "to do" list for next year, make sure that "Register for Building Winning Teams with Patrick Lencioni's" is # 1 on that list. For more information and to register, please visit www.hsmglobal.com/us/lencioni.

# 1 Invention 23andMe at # 1 Innovation Event!

Call me biased - but - I would be remiss if I did not share that the # 1 Invention of the Year, as named by TIME Magazine, “23andMe”, will demo at HSM’s World Innovation Forum in New York City on May 5-6, 2009. With this exciting announcement, I am pleased to launch the first installment in our four part series highlighting the illustrative "case studies" that will further bring to life the outstanding thought leadership which will be presented by world class thinkers such as Vijay Govindarajan, CK Prahalad, Clayton Christensen, and more at next May's program. 

With the mission of democratizing genomics, 23andMe provides what some consider a “controversial” new service that estimates one’s predisposition for more than 90 traits and conditions from baldness to blindness, as well as one’s propensity to contract or pass on disease. All this from simply submitting a saliva sample!  
 
Per TIME’s November 10th issue, “We are at the beginning of a personal-genomics revolution that will transform not only how we take care of ourselves but also what we mean by personal information. In the past, only elite researchers had access to their genetic fingerprints, but now personal genotyping is available to anyone who orders the service online and mails in a spit sample.”  
 
At World Innovation Forum, 23andMe will provide an outstanding illustration of innovation in a wiki world. 23andMe co-founders Linda Avey and Anne Wojcicki will demonstrate the way in which data compiled from individuals around the globe is building a universal data base of genetic information with broad based value to individuals, executives, researchers and society at large. 
 
By tapping into global data pools, how can your business expand and target your offerings, ultimately reaching more people and positively impacting your bottom line? How have you done this in your organization? P&G does it all the time. Obama did it and became President-elect. What have you done? What will you do?  
 
The World Innovation Forum is taking place on May 5-6, 2009 at the Nokia Theater in New York City. Stay tuned to next week's blog post in which I will tell you about another of our must see cases at next May's event! 
 
For more information on the “World Innovation Forum” including how to register and attend the event, visit www.wifny.com

Great posts about World Business Forum I found while surfing the web...

Surfing through the Internet today, I came across a video testimonial on YouTube from one of the World Business Forum 2008 attendees, Jack Siulinski.

Jack is a student at the University of Southern Maine School of Business and runs his own website and online Blog.

After seeing the video and visiting his website, I saw several Blog postings he has written about his experience at the World Business Forum 2008.

I found the Blog postings to be very well written and valuable and I have included below direct links to the posts on Jack's blog,

• Play to Your Strengths

 

• Bill George on Leadership

 

I'm also embedding the YouTube video testimonial I found:

Special thanks to Jack Siulinski for letting me post his YouTube testimonial as well as links to his personal Blog. Great work!