Lou Miller has owned and operated Big Apple Bagels in Apple Valley, Minnesota for the past eleven years. At the end of each day, she donates whatever bagels she has left over to a variety of non-profits, such as food shelves, veterans groups, and schools. While Lou can't say for sure whether the donations have significantly improved her bottom line, she does know that this small gesture of giving away excess food on a daily basis has generated good will for her business. Most importantly, to Lou, it just feels like the right thing to do.
Some business leaders believe that their only obligation is to their shareholders. The sole objective in business, these managers assert, is to improve profitability for the benefit of the owners of the firm. Increasingly, however, American consumers are rewarding businesses that see their mission more broadly. Many companies, big and small, are becoming aware of and acting upon an important economic reality: corporate social responsibility is good business strategy.
Corporate social responsibility (CSR) involves the array of steps that a company can take to contribute back to the community: philanthropy, product donations, volunteerism, cause-marketing (for example, providing business expertise to non-profit groups), and citizenship, especially around environmental sustainability. While it is no doubt more difficult to precisely measure return on investment for these types of activities, abundant data demonstrates the economic benefits of CSR. DePaul University conducted a study in 2002 that compared the performance of the 100 Best Corporate Citizens from Business Ethics magazine against the remainder of the S & P 500. In measurements such as sales growth, profit, and return on equity, the socially responsible companies exceeded the competition by ten percent.
A Time magazine article from September 2009, entitled "The Responsibility Revolution," cites a 2007 Goldman Sachs report that concluded that companies with a focus on sustainability outperformed the overall market, frequently by a significant margin. PricewaterhouseCoopers recently completed a study that showed a better return on assets for companies that reported sustainability information over those firms that did not share such data.
Time conducted a poll which showed that more than 60 percent of Americans have purchased organic products since January 2009. Almost 40 percent say that they bought products this year because of the social or political values of the company that sold the merchandise. Time says, "What we are discovering now, in the most uncertain economy since [the Great Depression], is that enlightened self-interest- call it a shared sense of responsibility- is good economics… We are starting to put our money where our ideals are."
Many organizations have long understood the importance of CSR. More than 30 years ago, 23 Minnesota companies formed the Keystone Program. Participating firms each contribute at least 2 percent of annual pre-tax earnings back into their communities. Today, there are more than 200 members of Keystone.
Target Corporation- a charter Keystone member as Dayton Hudson- contributes 5 percent of pre-tax earnings, in good times and in bad. I recently spoke with my friend and former colleague Gail Dorn, who was for many years the Vice President of Communications and Community Relations at Target.
Gail talked about the enduring culture and tradition of giving back at Target, and indicated there were many times when it would have been easy to cut the program. She recalled, "Analysts would challenge us, asking Why are you giving away 5 percent? [Target leadership] ignored their pleas. Even though a return on investment was difficult to measure, Target's community programs generated incredible good will. Our customers loved that we always took the extra step to become integrated in the community. This was particularly helpful in 1987 when Dayton Hudson sought public support to fend off a hostile takeover attempt."
Another mighty Minnesota corporation that appreciates the importance of CSR is the Best Buy Company. An article in the December 7, 2009 issue of Fortune magazine describes Best Buy's free recycling program. Since March, when Best Buy began offering free recycling of TVs, computers, and any other electronic gadgets, more than 25 million pounds of old devices have been turned in at Best Buy's 1004 U.S. store locations. Fortune says, "The company's massive recycling program seems expensive to run, until you look at all the benefits: a green reputation, a focus on service, and a fresh way to get customers into the stores. No wonder Best Buy has learned to love old TVs and eight-track tape players."
Best Buy's leadership understands that the take-back program will probably be, at best, a break-even proposition. Nevertheless, P & L consequences aside, Best Buy CEO Brian Dunn described how he feels when a customer drops off an old TV set: "I'm happy because it helps make the connection between Best Buy and the customer and the community."
Sometimes, financial outcomes are not the most important consideration in business.
Small and medium-sized companies should take heed of the responsibility revolution as well. Time points out that shoppers consider not only the nature of the product they buy, but where it came from. More than 80 percent of consumers say they have deliberately supported local and neighborhood businesses (like Big Apple Bagels) that demonstrate a corporate conscience and concern for the environment. Also, there are more than 250 socially responsible investment mutual funds (consisting generally of companies that do not profit from tobacco, oil, or child labor), that today manage approximately $2.7 trillion in wealth.
Time concludes, "… Americans are recalibrating our sense of what it means to be a citizen, not just through voting or volunteering, but also through commerce: by what we buy… That's evidence of a changing mind-set, a new kind of social contract among consumers, business, and government. We are seeing the rise of the citizen consumer- and the beginning of a responsibility revolution." Indeed, smart companies today have seen the future and are taking action. These companies know that corporate social responsibility is good business strategy.
Saturday, December 19, 2009
Sunday, December 6, 2009
Be Aware of Cognitive Roadblocks to Good Decision Making
Perhaps the most important skill of an effective business leader is the ability to make good decisions. Yet as leaders we are susceptible to cognitive biases that can hinder the decision making process. Cognitive biases are simply distortions in our perception of reality that can occur when we use traditional shortcuts to help us make choices. Most of the time, shortcuts allow us to arrive efficiently at a good decision. Sometimes, however, making choices in the most economical manner based on familiar rules of thumb is not the right thing to do. Even competent, knowledgeable, and experienced business leaders can get caught up in this trap. Because we are human, we will never completely overcome our natural biases, but we can learn to make better choices by simply being aware of cognitive roadblocks to good decision making.
Cognitive biases can take many forms, but in the case of the Mount Everest tragedy of 1996, three types of bias contributed significantly to a disaster in which two expeditions were trapped in a storm near the top of the mountain and five people died. Those cognitive biases are:
• The overconfidence bias
• The sunk-cost or escalation of commitment bias
• The recency effect
In May 1996, two commercial expeditions consisting of customers who paid up to $65,000 each to be professionally guided to the summit of Everest (the world's tallest peak) became trapped in a blizzard high on the mountain. This tragic event was immortalized in Jon Krakauer's famous best-seller, Into Thin Air (Krakauer, a journalist, accompanied one of the expeditions). Two of the world's best-known and most experienced mountaineers, Scott Fischer and Rob Hall, served as expedition leaders. In addition to the financial outlay, the effort to reach the summit of Everest requires a huge time commitment; climbers must spend six weeks acclimatizing their bodies to the high altitude. The two teams established a series of base camps at ever-increasing heights, and then embarked on an arduous 18-hour round-trip to reach the summit. An unexpected and violent storm moved in, killing both Fischer and Hall, and three other climbers.
In a pamphlet entitled, The Art of Critical Decision Making, Professor Michael Roberto of Bryant University identifies the three primary cognitive biases that reared their ugly heads to contribute to the Everest disaster.
First, both Fischer and Hall demonstrated the overconfidence bias. Research shows that human beings have a consistent tendency to be overly optimistic. For example, even experienced physicians tend to be unrealistically positive in their diagnoses. In talking about Everest, Scott Fischer said, "We've got the Big E completely figured out, we've got it totally wired. These days, I'm telling you, we've built a yellow brick road to the summit." Other members of the team became cocky as well. Jon Krakauer described several of the highly inexperienced amateur climbers as so overconfident in their own abilities as to be "clinically delusional."
The second cognitive bias is the sunk-cost effect. A rational actor makes choices based on the marginal cost of pursuing one choice over another. In contrast, the sunk-cost effect causes people to continue in a sometimes disastrous course of action in which they have invested significant time, money, and/or effort. On Everest, expedition members refused to allow their huge financial expenditure and many weeks of herculean effort to be for nothing. With the blessing of their leaders, they pushed ahead to the summit, even in violation of well-established turnaround times. A number of climbers reached the top too late in the afternoon, and were forced to descend the mountain while negotiating a furious storm in the dark.
Another common term for this same basic phenomenon is the escalation of commitment bias. Consider America's experience in Vietnam, or the current debate about Afghanistan. We have spent eight hard years fighting in that troubled country at great cost in blood and treasure. To be sure, all of our choices there are tough ones. Yet the argument still centers not on whether we should withdraw, pursue a different strategy, or otherwise cut our losses, but rather at what level we will continue the effort.
The final cognitive bias is the recency effect, which simply refers to the tendency to place a disproportionate value on information obtained recently. This data is most salient to us, but can cause us to overlook other relevant information. On Everest, team leaders were fooled by a string of years in which good weather had prevailed on the mountain. One commentator said, "Season after season, Rob [Hall] had brilliant weather on summit day. He'd never been caught in a storm high on the mountain." No one prepared for the worst case scenario. Disaster resulted because of this failure on the part of leadership to consider ample data that demonstrated that in past years, deadly storms had been a common occurrence on Everest.
Think about your own decision making as a business leader. Have you ever allowed overconfidence, sunk-costs, or recency to sway your mind one way or the other? Don't be too hard on yourself if the answer is yes. Despite what economists would have us believe, none of us are perfectly rational actors. We all occasionally yield to a lifetime of biases. Nevertheless, we can improve our decision making if we develop the self-knowledge to be aware of these tendencies and, wherever possible, to overcome them.
Cognitive biases can take many forms, but in the case of the Mount Everest tragedy of 1996, three types of bias contributed significantly to a disaster in which two expeditions were trapped in a storm near the top of the mountain and five people died. Those cognitive biases are:
• The overconfidence bias
• The sunk-cost or escalation of commitment bias
• The recency effect
In May 1996, two commercial expeditions consisting of customers who paid up to $65,000 each to be professionally guided to the summit of Everest (the world's tallest peak) became trapped in a blizzard high on the mountain. This tragic event was immortalized in Jon Krakauer's famous best-seller, Into Thin Air (Krakauer, a journalist, accompanied one of the expeditions). Two of the world's best-known and most experienced mountaineers, Scott Fischer and Rob Hall, served as expedition leaders. In addition to the financial outlay, the effort to reach the summit of Everest requires a huge time commitment; climbers must spend six weeks acclimatizing their bodies to the high altitude. The two teams established a series of base camps at ever-increasing heights, and then embarked on an arduous 18-hour round-trip to reach the summit. An unexpected and violent storm moved in, killing both Fischer and Hall, and three other climbers.
In a pamphlet entitled, The Art of Critical Decision Making, Professor Michael Roberto of Bryant University identifies the three primary cognitive biases that reared their ugly heads to contribute to the Everest disaster.
First, both Fischer and Hall demonstrated the overconfidence bias. Research shows that human beings have a consistent tendency to be overly optimistic. For example, even experienced physicians tend to be unrealistically positive in their diagnoses. In talking about Everest, Scott Fischer said, "We've got the Big E completely figured out, we've got it totally wired. These days, I'm telling you, we've built a yellow brick road to the summit." Other members of the team became cocky as well. Jon Krakauer described several of the highly inexperienced amateur climbers as so overconfident in their own abilities as to be "clinically delusional."
The second cognitive bias is the sunk-cost effect. A rational actor makes choices based on the marginal cost of pursuing one choice over another. In contrast, the sunk-cost effect causes people to continue in a sometimes disastrous course of action in which they have invested significant time, money, and/or effort. On Everest, expedition members refused to allow their huge financial expenditure and many weeks of herculean effort to be for nothing. With the blessing of their leaders, they pushed ahead to the summit, even in violation of well-established turnaround times. A number of climbers reached the top too late in the afternoon, and were forced to descend the mountain while negotiating a furious storm in the dark.
Another common term for this same basic phenomenon is the escalation of commitment bias. Consider America's experience in Vietnam, or the current debate about Afghanistan. We have spent eight hard years fighting in that troubled country at great cost in blood and treasure. To be sure, all of our choices there are tough ones. Yet the argument still centers not on whether we should withdraw, pursue a different strategy, or otherwise cut our losses, but rather at what level we will continue the effort.
The final cognitive bias is the recency effect, which simply refers to the tendency to place a disproportionate value on information obtained recently. This data is most salient to us, but can cause us to overlook other relevant information. On Everest, team leaders were fooled by a string of years in which good weather had prevailed on the mountain. One commentator said, "Season after season, Rob [Hall] had brilliant weather on summit day. He'd never been caught in a storm high on the mountain." No one prepared for the worst case scenario. Disaster resulted because of this failure on the part of leadership to consider ample data that demonstrated that in past years, deadly storms had been a common occurrence on Everest.
Think about your own decision making as a business leader. Have you ever allowed overconfidence, sunk-costs, or recency to sway your mind one way or the other? Don't be too hard on yourself if the answer is yes. Despite what economists would have us believe, none of us are perfectly rational actors. We all occasionally yield to a lifetime of biases. Nevertheless, we can improve our decision making if we develop the self-knowledge to be aware of these tendencies and, wherever possible, to overcome them.
Saturday, November 21, 2009
Diversity Is Strength
From 1804 to 1806, Army officers Meriwether Lewis and William Clark led an amazing team known as the "Corps of Discovery" on an 8000-mile journey over 863 days into the unknown reaches of the western United States and safely home again. They were commissioned by President Thomas Jefferson to find an all-water thoroughfare- the fabled "Northwest Passage"- to the Pacific Ocean. Though they failed in that mission (no such waterway existed), they succeeded in exploring and documenting virtually everything they saw along the way, establishing the boundaries of the young nation, and opening the great American West to future expansion.
What is perhaps most remarkable about Lewis and Clark and their incredible journey of discovery is that they achieved this feat- in a day and age when people gave no thought to the importance of celebrating and incorporating differences- with a team of talented individuals who were truly diverse in the broadest sense of the term. Lewis and Clark dramatically demonstrated a fundamental principle that all modern-day business leaders should know and understand: diversity is strength.
We all remember the story from our school days of Sacagawea, the sixteen-year-old Shoshone Indian woman who accompanied the expedition. She was the wife of Toussaint Charbonneau, who had been added to the team en route as an interpreter. Sacagawea was a nursing mother who traversed 5000 miles with her infant son Jean Baptiste (known as "Pomp") on her back. There is a common misconception that she guided the expedition throughout the journey, which she did not, but her value to the Corps of Discovery was nevertheless profound. She was skilled and knowledgeable in field craft: building shelters, making and repairing clothing, and finding food. Through her quick thinking, she once saved valuable equipment and supplies when a canoe nearly capsized.
Most important, Sacagawea served as the physical embodiment of the Corps of Discovery's peaceful intentions. She was instrumental in securing necessary cooperation from Native American tribes along the way. Meriwether Lewis described Sacagawea as "our only dependence for a friendly negotiation with the Snake [Shoshone] Indians on whom we depend for horses to assist us in our portage from the Missouri to the Columbia River."
Another important member of the team was York, who was William Clark's black slave. In a time when it was a criminal offense for a slave to be taught how to operate a gun, York carried a musket throughout the expedition and used it with great skill to hunt. York was valuable during the many months spent rafting on a river because, unlike other members of the expedition, he could swim. York physically accompanied Clark on all of the most dangerous phases of the mission, suggesting that Clark fully trusted York's ability to handle any perilous situation. Finally, by virtue of his skin color, York fascinated the Indian tribes encountered on the journey. They referred to him as "Big Medicine." He was perceived as having greater value because of his uniqueness, and made negotiations with the Indians easier than they would otherwise have been. In the end, because of the special gifts they each brought, Sacagawea and York became regarded, in effect, as fully equal members of the team.
The Corps of Discovery was also diverse in less obvious ways. In an era when social status mattered a great deal, Lewis and Clark did not select a single member of the expedition based on any criteria other than merit. They cast their net far and wide in search of people who were not just physically strong, but who also possessed intelligence, discipline, and distinctive skills. One of the men they hired was a master carpenter; another was a veteran blacksmith. They recruited a tailor, a fisherman, a boatman, and several excellent hunters. They hired interpreters who would help them in their discussions with Native American tribes. The team members came from a variety of cultures: Irish, German, French and English. There were several men who were mixed-race, half-white and half-Native American.
In his wonderful book, Into the Unknown: Leadership Lessons From Lewis and Clark's Daring Westward Expedition, author Jack Uldrich says, "It would be unrealistic to say that Lewis and Clark started their selection process with diversity as an end goal or even a deciding factor. As products of the late-eighteenth century, this was not how they thought. The lesson, however, is that by focusing on their end goal- reaching the Pacific- they were led, by necessity, to assemble a diverse team. As the famous architect Ludwig Mies van der Rohe said, 'Form follows function.' And to conquer the unknown, that 'form' manifested itself as a diverse team."
Even Lewis and Clark themselves possessed complementary skills as co-commanders of the expedition. They were both seasoned soldiers, strong, and experienced in the ways of the wilderness. They were also both curious, ambitious, and excellent leaders. But Lewis was better educated, and a superb hunter and botanist. Clark was a talented boatman and cartographer. Lewis tended to be reserved, humorless, and even prone to bouts of depression, while Clark was warm and engaging, with an easy manner that made him popular with the men. Together they formed a formidable duo, arguably the most successful leadership team in American history.
Do you belong to a diverse business team? A team that is diverse not just in the obvious, visible sense, but that possesses diversity of skills, backgrounds, and experiences? Or does everyone on your team more or less think and act alike? With the increasing complexity of business missions in today's global economy, leaders who ignore the imperative to seek diversity in their approach will lose. As Lewis and Clark taught us so ably more than 200 years ago, diversity is an absolute necessity, because diversity is strength.
What is perhaps most remarkable about Lewis and Clark and their incredible journey of discovery is that they achieved this feat- in a day and age when people gave no thought to the importance of celebrating and incorporating differences- with a team of talented individuals who were truly diverse in the broadest sense of the term. Lewis and Clark dramatically demonstrated a fundamental principle that all modern-day business leaders should know and understand: diversity is strength.
We all remember the story from our school days of Sacagawea, the sixteen-year-old Shoshone Indian woman who accompanied the expedition. She was the wife of Toussaint Charbonneau, who had been added to the team en route as an interpreter. Sacagawea was a nursing mother who traversed 5000 miles with her infant son Jean Baptiste (known as "Pomp") on her back. There is a common misconception that she guided the expedition throughout the journey, which she did not, but her value to the Corps of Discovery was nevertheless profound. She was skilled and knowledgeable in field craft: building shelters, making and repairing clothing, and finding food. Through her quick thinking, she once saved valuable equipment and supplies when a canoe nearly capsized.
Most important, Sacagawea served as the physical embodiment of the Corps of Discovery's peaceful intentions. She was instrumental in securing necessary cooperation from Native American tribes along the way. Meriwether Lewis described Sacagawea as "our only dependence for a friendly negotiation with the Snake [Shoshone] Indians on whom we depend for horses to assist us in our portage from the Missouri to the Columbia River."
Another important member of the team was York, who was William Clark's black slave. In a time when it was a criminal offense for a slave to be taught how to operate a gun, York carried a musket throughout the expedition and used it with great skill to hunt. York was valuable during the many months spent rafting on a river because, unlike other members of the expedition, he could swim. York physically accompanied Clark on all of the most dangerous phases of the mission, suggesting that Clark fully trusted York's ability to handle any perilous situation. Finally, by virtue of his skin color, York fascinated the Indian tribes encountered on the journey. They referred to him as "Big Medicine." He was perceived as having greater value because of his uniqueness, and made negotiations with the Indians easier than they would otherwise have been. In the end, because of the special gifts they each brought, Sacagawea and York became regarded, in effect, as fully equal members of the team.
The Corps of Discovery was also diverse in less obvious ways. In an era when social status mattered a great deal, Lewis and Clark did not select a single member of the expedition based on any criteria other than merit. They cast their net far and wide in search of people who were not just physically strong, but who also possessed intelligence, discipline, and distinctive skills. One of the men they hired was a master carpenter; another was a veteran blacksmith. They recruited a tailor, a fisherman, a boatman, and several excellent hunters. They hired interpreters who would help them in their discussions with Native American tribes. The team members came from a variety of cultures: Irish, German, French and English. There were several men who were mixed-race, half-white and half-Native American.
In his wonderful book, Into the Unknown: Leadership Lessons From Lewis and Clark's Daring Westward Expedition, author Jack Uldrich says, "It would be unrealistic to say that Lewis and Clark started their selection process with diversity as an end goal or even a deciding factor. As products of the late-eighteenth century, this was not how they thought. The lesson, however, is that by focusing on their end goal- reaching the Pacific- they were led, by necessity, to assemble a diverse team. As the famous architect Ludwig Mies van der Rohe said, 'Form follows function.' And to conquer the unknown, that 'form' manifested itself as a diverse team."
Even Lewis and Clark themselves possessed complementary skills as co-commanders of the expedition. They were both seasoned soldiers, strong, and experienced in the ways of the wilderness. They were also both curious, ambitious, and excellent leaders. But Lewis was better educated, and a superb hunter and botanist. Clark was a talented boatman and cartographer. Lewis tended to be reserved, humorless, and even prone to bouts of depression, while Clark was warm and engaging, with an easy manner that made him popular with the men. Together they formed a formidable duo, arguably the most successful leadership team in American history.
Do you belong to a diverse business team? A team that is diverse not just in the obvious, visible sense, but that possesses diversity of skills, backgrounds, and experiences? Or does everyone on your team more or less think and act alike? With the increasing complexity of business missions in today's global economy, leaders who ignore the imperative to seek diversity in their approach will lose. As Lewis and Clark taught us so ably more than 200 years ago, diversity is an absolute necessity, because diversity is strength.
Saturday, November 7, 2009
Lead Courageously in a Challenging New World
There are some positive indicators that we are currently rebounding from the worst economic crisis since the Great Depression. The stock market is thriving. Manufacturing activity is increasing. Retail sales are up. With that said, unemployment now exceeds ten percent. Many experts predict the recovery will be slow and arduous at best. We all hope for a better future. But I think we also know- regardless of how the future takes shape- things will never be the same again. To quote the great philosopher Dorothy Gale from The Wizard of Oz, "We are not in Kansas anymore." For business leaders, the critical new skill set will be the ability to lead courageously in a challenging new world.
Survival in a deeply recessionary economy and building for a healthy future requires leaders to take on two important tasks. The first involves stabilizing the current situation. The second involves adapting to a new and uncertain future and seizing opportunity wherever it presents itself.
The old adage "when you are up to your [posterior] in alligators, it's difficult to remember the original objective was to drain the pond," has come to my mind often during these trying times. The down economy has very understandably caused businesses to focus attention on the immediate task of survival. Research shows that both people and organizations are far more highly motivated to take action by the possibility of loss than by the prospect of gain.
Indeed, it makes sense during tough times to take every reasonable step to protect the existing business. Is your financial house in order? Are there opportunities to trim costs or otherwise gain efficiencies? Are you staffed and organized correctly? Does your product mix make sense? Is your product or service priced right? Are there opportunities to divest? These are all important questions that should already have been part of a rigorous review of your current business model.
The risk in undergoing this kind of crisis-mode analysis involves the inclination to hunker down and wait out the storm once near-term steps are in place. All of us as leaders have a tendency to rely on skills and abilities that have worked for us in the past. We look for recognizable patterns so we can respond to them just as we have successfully done before. We want to be able to reassure our teams that things will return to normal soon. But there is great danger in this mindset because the future that we face will be unlike anything any of us have ever previously experienced.
The businesses that will go beyond mere survival and thrive into the future are those that aggressively seize opportunity. They see lean times not as a disaster to endure, but as a challenge to overcome. During the last recession, approximately one in three industry leaders lost their perch at the top of their fields as savvy competitors maneuvered skillfully during the downturn. Those who follow bicycle racing know that in an event such as the Tour de France, the ultimate winner frequently overtakes the leaders during the mountain phase- the toughest part of the contest.
Do you have an opportunity to rethink your business model? In the recession of the early 1990's, IBM experienced its first revenue decline in over fifty years. Losses mounted year over year. CEO Louis Gerstner took time during the downturn to seriously reconsider a business model based on sales of mainframe computers. IBM shifted its focus from hardware into computer services and solutions, and it flourished.
Are you continuing to think about the future by investing in research and development? In 2001, the beginning of a two-year recessionary period, Apple Computer experienced a revenue decline of 33 percent. Yet Apple bravely chose to increase R&D expenditures by 13 percent, and continued to maintain that level of investment throughout the downward cycle. Such innovative technologies as the iTunes music store and software, the iPod Mini, and the iPod Photo were developed during this period. Rapid and healthy growth resulted for Apple.
Are you continuing to invest in your people? Remember, even during bad times, your top performers have other options. Do you have the right players in place? Are you encouraging them in their development? Do they see a future with your organization? I believe that one of the most short-sighted moves that many companies make when the going gets tough is to immediately cut training and development dollars.
Finally, these pragmatic steps of rethinking your business model, investing in R&D, and taking care of your people should not just be one-time responses to a crisis, but rather an ongoing part of how you do business. In a Harvard Business Review article from 2003, business authors Gary Hamel and Liisa Valikangas state that the strongest businesses are those that continuously "reinvent business models and strategies as circumstances change," rather than just making singular adjustments in reaction to an emergency. The authors argue that those companies that work incrementally to try numerous different ideas on a micro scale- while involving many people in the discovery process- succeed over time. Businesses "should steer clear of grand, imperial strategies and devote themselves instead to launching a swarm of low-risk experiments."
No matter how we cut it, the future is daunting and unknowable. But it is also richly abundant with opportunity. Those leaders who work hard to strengthen their organizations in the short run and then courageously look to the future will end up on top of the mountain when the economy improves. A continuous cycle of scrutinizing the business model, investing in lots of new ideas, and developing people will bring success in a challenging new world.
Survival in a deeply recessionary economy and building for a healthy future requires leaders to take on two important tasks. The first involves stabilizing the current situation. The second involves adapting to a new and uncertain future and seizing opportunity wherever it presents itself.
The old adage "when you are up to your [posterior] in alligators, it's difficult to remember the original objective was to drain the pond," has come to my mind often during these trying times. The down economy has very understandably caused businesses to focus attention on the immediate task of survival. Research shows that both people and organizations are far more highly motivated to take action by the possibility of loss than by the prospect of gain.
Indeed, it makes sense during tough times to take every reasonable step to protect the existing business. Is your financial house in order? Are there opportunities to trim costs or otherwise gain efficiencies? Are you staffed and organized correctly? Does your product mix make sense? Is your product or service priced right? Are there opportunities to divest? These are all important questions that should already have been part of a rigorous review of your current business model.
The risk in undergoing this kind of crisis-mode analysis involves the inclination to hunker down and wait out the storm once near-term steps are in place. All of us as leaders have a tendency to rely on skills and abilities that have worked for us in the past. We look for recognizable patterns so we can respond to them just as we have successfully done before. We want to be able to reassure our teams that things will return to normal soon. But there is great danger in this mindset because the future that we face will be unlike anything any of us have ever previously experienced.
The businesses that will go beyond mere survival and thrive into the future are those that aggressively seize opportunity. They see lean times not as a disaster to endure, but as a challenge to overcome. During the last recession, approximately one in three industry leaders lost their perch at the top of their fields as savvy competitors maneuvered skillfully during the downturn. Those who follow bicycle racing know that in an event such as the Tour de France, the ultimate winner frequently overtakes the leaders during the mountain phase- the toughest part of the contest.
Do you have an opportunity to rethink your business model? In the recession of the early 1990's, IBM experienced its first revenue decline in over fifty years. Losses mounted year over year. CEO Louis Gerstner took time during the downturn to seriously reconsider a business model based on sales of mainframe computers. IBM shifted its focus from hardware into computer services and solutions, and it flourished.
Are you continuing to think about the future by investing in research and development? In 2001, the beginning of a two-year recessionary period, Apple Computer experienced a revenue decline of 33 percent. Yet Apple bravely chose to increase R&D expenditures by 13 percent, and continued to maintain that level of investment throughout the downward cycle. Such innovative technologies as the iTunes music store and software, the iPod Mini, and the iPod Photo were developed during this period. Rapid and healthy growth resulted for Apple.
Are you continuing to invest in your people? Remember, even during bad times, your top performers have other options. Do you have the right players in place? Are you encouraging them in their development? Do they see a future with your organization? I believe that one of the most short-sighted moves that many companies make when the going gets tough is to immediately cut training and development dollars.
Finally, these pragmatic steps of rethinking your business model, investing in R&D, and taking care of your people should not just be one-time responses to a crisis, but rather an ongoing part of how you do business. In a Harvard Business Review article from 2003, business authors Gary Hamel and Liisa Valikangas state that the strongest businesses are those that continuously "reinvent business models and strategies as circumstances change," rather than just making singular adjustments in reaction to an emergency. The authors argue that those companies that work incrementally to try numerous different ideas on a micro scale- while involving many people in the discovery process- succeed over time. Businesses "should steer clear of grand, imperial strategies and devote themselves instead to launching a swarm of low-risk experiments."
No matter how we cut it, the future is daunting and unknowable. But it is also richly abundant with opportunity. Those leaders who work hard to strengthen their organizations in the short run and then courageously look to the future will end up on top of the mountain when the economy improves. A continuous cycle of scrutinizing the business model, investing in lots of new ideas, and developing people will bring success in a challenging new world.
Friday, October 23, 2009
Actively Manage Your Career
In a recent interview in the New York Times, Ford Motor Company President and CEO Alan Mulally was asked to provide his best career advice. He responded, "Don't manage your career. Think about just exceeding expectations in every job you do, continually ask for feedback on how you can do a better job, and the world will beat down your door to ask you to do more…"
I respectfully disagree. Exceeding expectations and seeking feedback are important but, in my experience, success and advancement come most often to those individuals who actively manage their careers.
I spent more than a decade in human resources at Target and Best Buy. I can't count the number of times that people came to me frustrated over their perceived lack of career progress. The common theme sounded like this: "I work really hard. Feedback is positive. Performance reviews are good. Yet no one seems to notice. The best opportunities go to others."
What I frequently found was that many of these individuals simply assumed that if they "exceeded expectations," someone would notice and ensure that their career moved forward. Also, some of these folks could not answer the most fundamental question, What do I want to do with my career?
There may be lots of people- your supervisor, colleagues, human resource professionals, mentors- who think highly of you and will work to help you advance in your career. But, trust me, no one is going to do it for you. You must take personal responsibility for actively managing your own career.
And if you are going to manage your career, you need to know to what end. Ask yourself some tough questions, and be honest about the answers: Am I happy in my current job? Is it challenging and rewarding? Do I have room to grow, or have I hit a plateau? Where would I like to be one year, two years, or five years from now? Backing up from those goals, what affirmative steps must I take now to get there? In short, you need to be able to clearly answer the question, What do I want to do with my career?
Don't measure your progress or self-worth solely by money, title, power or prestige. It is great to be ambitious. We need people in corporate America like Alan Mulally, who want to rise to the top of their organizations. But remember, just one person gets to be CEO. For the rest of us, at some point, we top out. If you are only seeking more money or the next title, you will be forever unhappy, because someone else will always be richer or outrank you.
Consider other measures of success. Is your work interesting? Are your skills put to the test? Are you learning new things? Do you receive recognition for your efforts? Do you believe in the mission of your company? Are you adding not just to the bottom line for your organization, but creating value for society as a whole? Does your work match with your personal values? Consider the definition of career success as broadly as you can, with a focus on those internal measures of satisfaction that are personally important to you.
I do agree with Alan Mulally on the criticality of feedback. In order to successfully manage your career, you need to be in a continuous cycle of seeking, receiving, absorbing, and adjusting to constant feedback. Seek feedback from as many different sources as possible, not just from your boss. Find those one or two really valuable people who will unfailingly give you honest feedback on how you are doing. Listen carefully to what they say. Insist on specifics.
If you are told you lack good communication skills, ask for details. Do you need to work on written skills? Spoken skills? Ask for examples of when you have fallen short and suggestions on how to improve.
Make changes based on the feedback you receive. Demonstrate flexibility and a willingness to learn and grow. Put together a personal development plan with clear milestones and share it with your boss and other trusted advisors. Work that plan with seriousness of purpose. Adjust the plan when appropriate as your career moves forward.
Finally, don't think of leadership or advancement in your career as simply a matter of managing a checklist, like a boy or girl scout completing activities to earn a merit badge. Sometimes people would say to me, "I've done the three things you told me to do… now I'm ready to be promoted, right?" The very fact that they asked that question told me they weren't ready. Think of leadership and your career not in terms of finishing a to-do list, but as an ongoing journey. A sometimes complex and difficult journey.
Managing one's career is challenging, even in the best of times. These days, when so many of us are in crisis-mode, reacting to rather than shaping the reality around us, career management frequently goes to the back burner. Don't let it.
Remember these suggestions:
• Take responsibility for actively managing your own career.
• Develop a clear picture of what you want to do with your career.
• Measure success broadly, with a focus on intrinsic factors that are important to you.
• Seek specific, actionable feedback and respond appropriately.
• Put together a personal development plan and work it with energy.
• Consider leadership and career progress as a journey.
With these tips in mind, go forth and have a great career. Enjoy the adventure.
I respectfully disagree. Exceeding expectations and seeking feedback are important but, in my experience, success and advancement come most often to those individuals who actively manage their careers.
I spent more than a decade in human resources at Target and Best Buy. I can't count the number of times that people came to me frustrated over their perceived lack of career progress. The common theme sounded like this: "I work really hard. Feedback is positive. Performance reviews are good. Yet no one seems to notice. The best opportunities go to others."
What I frequently found was that many of these individuals simply assumed that if they "exceeded expectations," someone would notice and ensure that their career moved forward. Also, some of these folks could not answer the most fundamental question, What do I want to do with my career?
There may be lots of people- your supervisor, colleagues, human resource professionals, mentors- who think highly of you and will work to help you advance in your career. But, trust me, no one is going to do it for you. You must take personal responsibility for actively managing your own career.
And if you are going to manage your career, you need to know to what end. Ask yourself some tough questions, and be honest about the answers: Am I happy in my current job? Is it challenging and rewarding? Do I have room to grow, or have I hit a plateau? Where would I like to be one year, two years, or five years from now? Backing up from those goals, what affirmative steps must I take now to get there? In short, you need to be able to clearly answer the question, What do I want to do with my career?
Don't measure your progress or self-worth solely by money, title, power or prestige. It is great to be ambitious. We need people in corporate America like Alan Mulally, who want to rise to the top of their organizations. But remember, just one person gets to be CEO. For the rest of us, at some point, we top out. If you are only seeking more money or the next title, you will be forever unhappy, because someone else will always be richer or outrank you.
Consider other measures of success. Is your work interesting? Are your skills put to the test? Are you learning new things? Do you receive recognition for your efforts? Do you believe in the mission of your company? Are you adding not just to the bottom line for your organization, but creating value for society as a whole? Does your work match with your personal values? Consider the definition of career success as broadly as you can, with a focus on those internal measures of satisfaction that are personally important to you.
I do agree with Alan Mulally on the criticality of feedback. In order to successfully manage your career, you need to be in a continuous cycle of seeking, receiving, absorbing, and adjusting to constant feedback. Seek feedback from as many different sources as possible, not just from your boss. Find those one or two really valuable people who will unfailingly give you honest feedback on how you are doing. Listen carefully to what they say. Insist on specifics.
If you are told you lack good communication skills, ask for details. Do you need to work on written skills? Spoken skills? Ask for examples of when you have fallen short and suggestions on how to improve.
Make changes based on the feedback you receive. Demonstrate flexibility and a willingness to learn and grow. Put together a personal development plan with clear milestones and share it with your boss and other trusted advisors. Work that plan with seriousness of purpose. Adjust the plan when appropriate as your career moves forward.
Finally, don't think of leadership or advancement in your career as simply a matter of managing a checklist, like a boy or girl scout completing activities to earn a merit badge. Sometimes people would say to me, "I've done the three things you told me to do… now I'm ready to be promoted, right?" The very fact that they asked that question told me they weren't ready. Think of leadership and your career not in terms of finishing a to-do list, but as an ongoing journey. A sometimes complex and difficult journey.
Managing one's career is challenging, even in the best of times. These days, when so many of us are in crisis-mode, reacting to rather than shaping the reality around us, career management frequently goes to the back burner. Don't let it.
Remember these suggestions:
• Take responsibility for actively managing your own career.
• Develop a clear picture of what you want to do with your career.
• Measure success broadly, with a focus on intrinsic factors that are important to you.
• Seek specific, actionable feedback and respond appropriately.
• Put together a personal development plan and work it with energy.
• Consider leadership and career progress as a journey.
With these tips in mind, go forth and have a great career. Enjoy the adventure.
Sunday, October 11, 2009
Avoid the Tyranny of Meetings
In a classic Dilbert cartoon, a group of co-workers sits down around a conference table and the team leader says, "There is no specific agenda for this meeting. As usual, we'll just make unrelated emotional statements about things that bother us." In that spirit, I'm about to make an emotional statement about something that bothered me throughout my corporate career, which was an excessive number of interminable, meandering, useless meetings. I counsel any of my friends in business who are willing to listen: Avoid the tyranny of meetings.
I once worked in a retail store where, at the beginning of each day, the general manager would pull his leadership team together for a meeting which lasted, literally, all morning. It was not a discussion with give and take, but rather a chance for him to go on about any subject that popped into his head. Then, meeting complete, he would walk the floor with those same leaders and get genuinely angry when he saw problems in their respective areas. Evidently, he thought we each had a clone that was getting the work done while he blathered on. It was surreal, and the very definition of the tyranny of meetings.
Later in my career, I also spent many hours in meetings where the primary objective was to discuss the fact that we spent too many hours in meetings. It was sort of like being in the U.S. Congress and serving as a member of the Committee on Committees.
In the June 2009 issue of Inc. Magazine, entrepreneur Joel Spolsky discussed how the culture of Microsoft-- where he worked in the early 1990's-- has changed in the years since he left. Then, Microsoft employed about 10,000 people worldwide, and was headquartered in Redmond, Washington, on a campus of a dozen buildings within easy walking distance of one another. Now, there are 90,000 employees globally, and 94 buildings comprise the corporate headquarters. A fleet of company-owned vehicles transports people from place to place on campus.
Most notably, at the new Microsoft, meetings have proliferated. Spolsky says, "Back in my day, meetings were avoided like the plague, and it was considered a burden if you had to go to three or four a week. But today, the average Microsoft manager is scheduled to within an inch of his or her life. The new virtue is keeping a schedule of brisk half-hour meetings, and most of the mid-level managers… [have] consecutive half-hour meetings scheduled for stretches of days at a time."
Though Microsoft's business has understandably suffered like most others in today's recessionary economy, one wonders whether bloated bureaucracy (Spolsky describes the comical series of registration steps he was required to go through just to access the free Wi-Fi network as a guest on Microsoft's campus) and the new "meeting culture" have contributed to relatively poor recent performance by Microsoft, in comparison to the leaner, more carefree days gone by.
With that said, there are clearly times when meetings are appropriate and very necessary. Often, the results that can be achieved in a face-to-face sit-down vastly exceed what can be accomplished through a phone conversation, conference call, or e-mail. Every culture is different, and no set of guidelines applies in every circumstance, but here are some basic tips for meeting organizers that might help improve the quality of your meetings and thereby increase productivity:
• Invite the right people. If the invitees to your meeting do not have the requisite experience, technical knowledge, or decision-making authority, you have wasted everyone's time.
• Start and stop the meeting on time. This will force discipline and eliminate meandering. Assign a timekeeper who has the courage to speak up when things get off track.
• Develop a detailed agenda beforehand and share it at the beginning of the meeting. It should contain specific, actionable outcomes. It should answer the questions: Why are we here and what do we intend to accomplish?
• Assign a note taker. The note taker should review key points before the end of the meeting to ensure consensus on what was discussed, and then distribute notes to all stakeholders after the meeting, including those who may have missed the meeting.
• Stick to the agenda. Don't be inflexible, but try to limit unnecessary digressions and stay on task.
• Use real data, not anecdote or emotion. Remain factual in your approach.
• Allow and encourage everyone to contribute. Listen carefully to what each team member says, even if you disagree.
• Create an environment in which people are comfortable speaking up if they do disagree. Encourage open and honest debate. Thoroughly discuss key points of difference.
• At the end, summarize meeting outcomes and assign next steps. Be specific and make sure each person knows what is expected of him/her going forward.
What is the culture of your company, organization, or team concerning meetings? Do you have too many, not enough, or just the right number of meetings? Are your meetings well-organized and efficient? Do you lose productivity with too much time wasted talking about getting work done, instead of actually doing the work? Do you have time to think and reflect in your job? If you are less than perfect in your meeting disciplines, please consider trying some of the above-described techniques. If you do, you will go a long way towards avoiding that dread corporate disease that saps energy and hinders results: the tyranny of meetings.
I once worked in a retail store where, at the beginning of each day, the general manager would pull his leadership team together for a meeting which lasted, literally, all morning. It was not a discussion with give and take, but rather a chance for him to go on about any subject that popped into his head. Then, meeting complete, he would walk the floor with those same leaders and get genuinely angry when he saw problems in their respective areas. Evidently, he thought we each had a clone that was getting the work done while he blathered on. It was surreal, and the very definition of the tyranny of meetings.
Later in my career, I also spent many hours in meetings where the primary objective was to discuss the fact that we spent too many hours in meetings. It was sort of like being in the U.S. Congress and serving as a member of the Committee on Committees.
In the June 2009 issue of Inc. Magazine, entrepreneur Joel Spolsky discussed how the culture of Microsoft-- where he worked in the early 1990's-- has changed in the years since he left. Then, Microsoft employed about 10,000 people worldwide, and was headquartered in Redmond, Washington, on a campus of a dozen buildings within easy walking distance of one another. Now, there are 90,000 employees globally, and 94 buildings comprise the corporate headquarters. A fleet of company-owned vehicles transports people from place to place on campus.
Most notably, at the new Microsoft, meetings have proliferated. Spolsky says, "Back in my day, meetings were avoided like the plague, and it was considered a burden if you had to go to three or four a week. But today, the average Microsoft manager is scheduled to within an inch of his or her life. The new virtue is keeping a schedule of brisk half-hour meetings, and most of the mid-level managers… [have] consecutive half-hour meetings scheduled for stretches of days at a time."
Though Microsoft's business has understandably suffered like most others in today's recessionary economy, one wonders whether bloated bureaucracy (Spolsky describes the comical series of registration steps he was required to go through just to access the free Wi-Fi network as a guest on Microsoft's campus) and the new "meeting culture" have contributed to relatively poor recent performance by Microsoft, in comparison to the leaner, more carefree days gone by.
With that said, there are clearly times when meetings are appropriate and very necessary. Often, the results that can be achieved in a face-to-face sit-down vastly exceed what can be accomplished through a phone conversation, conference call, or e-mail. Every culture is different, and no set of guidelines applies in every circumstance, but here are some basic tips for meeting organizers that might help improve the quality of your meetings and thereby increase productivity:
• Invite the right people. If the invitees to your meeting do not have the requisite experience, technical knowledge, or decision-making authority, you have wasted everyone's time.
• Start and stop the meeting on time. This will force discipline and eliminate meandering. Assign a timekeeper who has the courage to speak up when things get off track.
• Develop a detailed agenda beforehand and share it at the beginning of the meeting. It should contain specific, actionable outcomes. It should answer the questions: Why are we here and what do we intend to accomplish?
• Assign a note taker. The note taker should review key points before the end of the meeting to ensure consensus on what was discussed, and then distribute notes to all stakeholders after the meeting, including those who may have missed the meeting.
• Stick to the agenda. Don't be inflexible, but try to limit unnecessary digressions and stay on task.
• Use real data, not anecdote or emotion. Remain factual in your approach.
• Allow and encourage everyone to contribute. Listen carefully to what each team member says, even if you disagree.
• Create an environment in which people are comfortable speaking up if they do disagree. Encourage open and honest debate. Thoroughly discuss key points of difference.
• At the end, summarize meeting outcomes and assign next steps. Be specific and make sure each person knows what is expected of him/her going forward.
What is the culture of your company, organization, or team concerning meetings? Do you have too many, not enough, or just the right number of meetings? Are your meetings well-organized and efficient? Do you lose productivity with too much time wasted talking about getting work done, instead of actually doing the work? Do you have time to think and reflect in your job? If you are less than perfect in your meeting disciplines, please consider trying some of the above-described techniques. If you do, you will go a long way towards avoiding that dread corporate disease that saps energy and hinders results: the tyranny of meetings.
Sunday, September 27, 2009
Think Like a Chess Player
The game of chess is a metaphor for business, and for life. Seemingly simple at the most basic level, chess is in reality mind-boggling in its complexity. The focus, discipline, and skill required to play chess well are reminiscent of the same attributes that are required to succeed in business. While not every business leader plays chess, every business leader can benefit from thinking like a chess player.
I first became fascinated by chess as a youngster in the early 1970's when the quirky American prodigy Bobby Fisher defeated the reigning world champion, the Russian Boris Spassky, in their famous title match in Reykjavik, Iceland. My sister and I played for hours on end. While there have been periods when I studied and played intensively, I have never been better than an average player. But I still love the game.
In his wonderful book on the history of chess, The Immortal Game, author David Shenk says, "The exquisite interplay of the simple and the complex is hypnotic: the pieces and moves are elementary enough for any five-year-old to quickly soak up, but the board combinations are so vast that all the possible chess games could never be played-- or even known-- by a single person."
Indeed, in a chess game, after just four moves by each player, the number of possible board positions is 315 billion. Shenk says, "The total number of unique chess games is not literally an infinite number, but in practical terms, the difference is indistinguishable. It is truly beyond comprehension-- 'barely thinkable,' as one expert puts it-- and beyond human or machine capacity to play through them all."
Business, like chess, can be seemingly elementary on its surface. The Oxford English Dictionary defines business simply as "commercial activity." Those of us who are in business know that our most fundamental objective is to sell our product or service to customers at a profit. Easy, right? No, because when we delve deeper into the world of business, things quickly become more complicated.
Therefore, preparation and experience are keys to success in both business and chess. Shenk points out that Bobby Fisher supplemented his obvious aptitude for the game with thousands of hours of study. Well-known author Malcolm Gladwell talks about this essential combination of talent and preparation in his book Outliers. Ten thousand hours of practice, according to Gladwell, is what separates the Bobby Fishers of the world from other talented people.
Similarly, in business, it is those leaders who know their discipline inside and out, and who spend years gaining knowledge and hard-won experience, who will best navigate the intricacies of their competitive environment. Those leaders will win over the long haul.
One of history's famous chess players was Benjamin Franklin. He was an American founding father, as well as a diplomat, scientist, publisher, and inventor. He was also a savvy businessman. Franklin said, "The Game of Chess is not merely an idle amusement. Several very valuable qualities of the mind, useful in the course of human life, are to be acquired or strengthened by it… For life is a kind of Chess, in which we often have points to gain, and competitors or adversaries to deal with."
Franklin believed that chess sharpened his thinking, and that it taught several useful lessons. As quoted by Shenk, Franklin "asserted that the game improved a person's:
1) Foresight-- looking ahead to the long-term consequences of any action.
2) Circumspection-- surveying the entire scene, observing hidden dynamics and unseen possibilities.
3) Caution-- avoiding haste and unnecessary blunders.
4) Perseverance-- refusing to give up in dim circumstances, continually pushing to improve one's position."
There is one final way that business leaders can benefit from thinking like a chess player. Professor Dianne Horgan of Memphis State University has investigated how chess might improve various cognitive abilities. She found that, among other things, chess improves a person's self-perception.
Self-perception involves "calibration," which is the correlation between a person's perception of their own ability, and the actual level of their ability. In the population at large people generally have an overinflated view of their own abilities. Improving calibration skills-- by playing chess, for example-- significantly enhances the value of feedback. If people have an accurate idea of their own level of competence, they are more open to input from others.
I would never advocate that every business leader needs to learn how to play chess in order to succeed in the world of "commercial activity." I would argue, however, that the thinking skills utilized by chess players are the same kinds of skills that business leaders need to develop.
Business leaders need to work hard at learning their craft. They need knowledge, experience, and an in-depth technical understanding of their profession.
Business leaders need to be strategic, which involves skills like considering long-term consequences, surveying the entire scene for all possible outcomes, proceeding with caution, and sticking to goals even when the going gets tough.
Finally, business leaders need to be receptive to feedback, and to make adjustments as necessary to improve performance.
The leaders who display these qualities, whether they are actually chess players or not, stand the best chance of putting their competition into checkmate and winning the game.
I first became fascinated by chess as a youngster in the early 1970's when the quirky American prodigy Bobby Fisher defeated the reigning world champion, the Russian Boris Spassky, in their famous title match in Reykjavik, Iceland. My sister and I played for hours on end. While there have been periods when I studied and played intensively, I have never been better than an average player. But I still love the game.
In his wonderful book on the history of chess, The Immortal Game, author David Shenk says, "The exquisite interplay of the simple and the complex is hypnotic: the pieces and moves are elementary enough for any five-year-old to quickly soak up, but the board combinations are so vast that all the possible chess games could never be played-- or even known-- by a single person."
Indeed, in a chess game, after just four moves by each player, the number of possible board positions is 315 billion. Shenk says, "The total number of unique chess games is not literally an infinite number, but in practical terms, the difference is indistinguishable. It is truly beyond comprehension-- 'barely thinkable,' as one expert puts it-- and beyond human or machine capacity to play through them all."
Business, like chess, can be seemingly elementary on its surface. The Oxford English Dictionary defines business simply as "commercial activity." Those of us who are in business know that our most fundamental objective is to sell our product or service to customers at a profit. Easy, right? No, because when we delve deeper into the world of business, things quickly become more complicated.
Therefore, preparation and experience are keys to success in both business and chess. Shenk points out that Bobby Fisher supplemented his obvious aptitude for the game with thousands of hours of study. Well-known author Malcolm Gladwell talks about this essential combination of talent and preparation in his book Outliers. Ten thousand hours of practice, according to Gladwell, is what separates the Bobby Fishers of the world from other talented people.
Similarly, in business, it is those leaders who know their discipline inside and out, and who spend years gaining knowledge and hard-won experience, who will best navigate the intricacies of their competitive environment. Those leaders will win over the long haul.
One of history's famous chess players was Benjamin Franklin. He was an American founding father, as well as a diplomat, scientist, publisher, and inventor. He was also a savvy businessman. Franklin said, "The Game of Chess is not merely an idle amusement. Several very valuable qualities of the mind, useful in the course of human life, are to be acquired or strengthened by it… For life is a kind of Chess, in which we often have points to gain, and competitors or adversaries to deal with."
Franklin believed that chess sharpened his thinking, and that it taught several useful lessons. As quoted by Shenk, Franklin "asserted that the game improved a person's:
1) Foresight-- looking ahead to the long-term consequences of any action.
2) Circumspection-- surveying the entire scene, observing hidden dynamics and unseen possibilities.
3) Caution-- avoiding haste and unnecessary blunders.
4) Perseverance-- refusing to give up in dim circumstances, continually pushing to improve one's position."
There is one final way that business leaders can benefit from thinking like a chess player. Professor Dianne Horgan of Memphis State University has investigated how chess might improve various cognitive abilities. She found that, among other things, chess improves a person's self-perception.
Self-perception involves "calibration," which is the correlation between a person's perception of their own ability, and the actual level of their ability. In the population at large people generally have an overinflated view of their own abilities. Improving calibration skills-- by playing chess, for example-- significantly enhances the value of feedback. If people have an accurate idea of their own level of competence, they are more open to input from others.
I would never advocate that every business leader needs to learn how to play chess in order to succeed in the world of "commercial activity." I would argue, however, that the thinking skills utilized by chess players are the same kinds of skills that business leaders need to develop.
Business leaders need to work hard at learning their craft. They need knowledge, experience, and an in-depth technical understanding of their profession.
Business leaders need to be strategic, which involves skills like considering long-term consequences, surveying the entire scene for all possible outcomes, proceeding with caution, and sticking to goals even when the going gets tough.
Finally, business leaders need to be receptive to feedback, and to make adjustments as necessary to improve performance.
The leaders who display these qualities, whether they are actually chess players or not, stand the best chance of putting their competition into checkmate and winning the game.
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