We have heard a great deal of commentary about the low wages paid to front-line employees in some industries, particularly the retail and restaurant sectors. While politicians debate the merits of raising the minimum wage, some people point to the companies paying higher wages as a model. They argue that these companies attract and retain more productive workers because they pay higher-than-usual wages. For instance, people point to firms such as Costco, Trader Joe's, and Whole Foods as examples. I think that we have to be very careful about these arguments though. These firms attract and retain highly productive, engaged employees for reasons well beyond the wages that they pay. Yes, they pay their employees more than some of their rivals. However, these firms also have built an entire organizational system that supports an engaged, productive, and collaborative workforce. They have developed a culture that attracts talented people. They have embraced certain values and principles. They have articulated a sense of purpose that people find compelling. They have developed managers and supervisors who know how to engage employees. I could go on. The point is simple: they have built an entire system that attracts and retains these workers, and helps them produce great value for the firm. Paying someone a few bucks more without doing these other things won't have any significant effect on engagement, customer satisfaction, employee retention, or profits.
Monday, October 20, 2014
Saturday, October 18, 2014
Bob Moritz, the U.S. Chairman of PWC, has written an article for Harvard Business Review regarding his firm's efforts to attract, engage, and retain millennials. Moritz and his firm collaborated with researchers from USC and LBS to understand key generational differences. From that work, PWC began to develop initiatives to foster higher levels of engagement and retention among millennials. They have tracked the effectiveness of various efforts. Moritz cites four major areas of emphasis:
- Give them voice. Millennials want to have input regarding the future direction of the organization. Therefore, PWC gave them voice in several powerful ways. They asked millennials to offer ideas regarding the most effective methods for talent development in the firm. In addition, they asked people for suggestions regarding the next $100 million opportunity for PWC. More than 70% of the employees offered suggestions.
- Provide flexible career paths. Millennials do not want to stay in the same role for a lengthy period of time. They want to shift positions and roles, try new things, and embrace different opportunities. Moreover, they want greater flexibility in their careers. PWC has created several programs that enable talented employees to take time off or to work part-time for the firm while pursuing other opportunities (such as graduate school).
- Recognize them often and in multiple ways. Millennials want to be recognized, and that does not mean only monetary awards. PWC implemented more frequent recognition, and they began to offer a host of non-monetary rewards. For instance, PWC created a sabbatical program as a reward for millennials who perform well and stay at the firm for a certain period of time.
- Give them a chance to give back. Millennials want to make a broader impact, and they want to work for a firm that has that same aspiration. PWC found that employees who participate in a corporate responsibility initiative tend to stay at the firm for a longer period of time. For example, participants in one program to enhance students' financial literacy tended to exhibit much less turnover than those who did not participate (only 8% of participants had left PWC a year later, while 16% of non-participants had left the firm).
Thursday, October 16, 2014
HBO made a major announcement yesterday. They informed investors that they would be offering a stand-alone digital subscription to customers outside of the usual cable distribution model. Time Warner (parent company of HBO) indicated that the firm would be targeting customers (typically millennials) who have chosen to "cut the cord" - i.e., to go without a cable television subscription.
Today's Wall Street Journal article about the move has quotes from several experts. Some indicate that the move is revolutionary, while others downplay its potential to disrupt the cable business. One expert (USC's Jeff Cole) regards the announcement as a "seismic event." On the other hand, Tom Larsen, an executive at Mediacom Communications, states, "I don't view it as overly disruptive." Some cable companies regard the move as not disruptive so long as HBO does not undercut the price which the cable firms charge customers for HBO.
Where do I come down on this move? In and of itself, I don't think it's hugely disruptive. However, the strategic decision by HBO may have a large ripple effect. We have already heard that CBS will follow suit and offer a streaming subscription service. The next big shoe to drop could be Disney. If that firm offered its networks (children's programming, ESPN networks) directly to consumers, that would be a major jolt to the cable business. If consumers can package together subscriptions to Netflix, Disney/ESPN, and HBO, would they still purchase an expensive cable package? Many consumers would not. Yes, the cable companies also make money selling broadband service. However, that cannot make up for the loss of significant numbers of cable subscriptions. The price that HBO charges for its standalone service may not be the key factor. Why? People are not thinking about HBO in isolation. The key is whether other firms follow, and consumers can begin to patch together a whole set of desirable entertainment options for less than the total price of their cable package.
The entertainment industry has been known for herd behavior in the past. Consider the moves by many large players to vertically integrate in the 1990s (CBS/Viacom, AOL/Time Warner, Disney/ABC). They watch each other closely. Herd behavior can sometimes occur in an industry because managers are risk averse. In this case, perhaps managers at other entertainment companies will view a move to sell directly to consumers as less risky if a few leaders, such as HBO and Disney, make the move first. Bob Iger, the industry... and the consumer is watching...
Monday, October 13, 2014
You have worked for months on the planning of a new initiative or project. You have been meticulous. You have identified the key phases in the implementation process, built a budget and schedule, and marked milestones that need to be achieved at each stage. You have assembled a terrific team with talented individuals who possess complementary skill sets. Unfortunately, as you begin to execute the plan, unexpected obstacles arise. You begin to fall behind schedule, and the results do not match expectations. As you approach the first major milestone meeting, you realize that you also have exceeded your budget to date.
What do many managers do? They try to get back on plan. They work harder. They implore their team members to work harder. They throw more resources at the project. They try to catch up. That strategy can be very problematic though. Doing more of what got you into trouble in the first place does not constitute an effective strategy. Yet, that is the initial tactic often chosen when execution does not match our plan. Even worse, playing catch up can burn our people out and expend precious organizational resources. To be effective, we have to be willing to modify that original plan, or perhaps move to Plan B. However, managers often become overly committed to their original plans. They don't want to be accused of having put together a "bad plan" for the project. Instead, though, they may find themselves conducting a very "bad implementation" in part because they are trying to save face.
Saturday, October 11, 2014
I'm very proud to serve as the CEO club adviser here on campus. In this video, the club makes its case for National CEO chapter of the year in advance of the national conference in Orlando, Florida later this month.
Friday, October 10, 2014
The Wall Street Journal reports today that Amazon will open its first brick-and-mortar store in Manhattan. Here's the description of the first site:
Amazon’s space at 7 West 34th St., across from the Empire State Building in Midtown, would function as a mini warehouse, with limited inventory for same-day delivery within New York, product returns and exchanges, and pickups of online orders. The Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers and likely one day will feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes, according to people familiar with the company’s thinking.
What do we make of this move? As an experiment, it may serve a very useful purpose. Innovative companies test ideas and conduct well-designed experiments frequently. They recognize that such experiments may fail, in the sense that they do not achieve desired business results. However, they view them as successful if tons of learning emerges from these tests. Could this site in Manhattan drive a great deal of learning and innovation at Amazon? Definitely. However, the logic of a major brick-and-mortar expansion at Amazon escapes me. Leasing incredibly expensive space in the middle of Manhattan to serve as a place for customers to pick up online orders does not seem to make economic sense. If the store is meant to be a flagship, focused on providing a fun and engaging retail experience for showcasing the firm's digital products, then one might be able to make a case for it. Of course, a "flagship" strategy would entail a very limited number of brick-and-mortar locations. Does Amazon need such flagship locations to build the brand and sell more digital devices? It does not seem so; they already have a strong brand and have achieved great success with the Kindle. Is the brick-and-mortar location all about same-day delivery? Well, one could achieve that without leasing high-priced retail space on 34th Street in Manhattan. It will be interesting to see how this experiment evolves, and to understand precisely what Amazon's aims are with this brick-and-mortar strategy.
Thursday, October 09, 2014
Travis Bradberry, author of the bestselling book Emotional Intelligence 2.0, has a great post over at the Forbes website about multitasking. Bradberry reviews the research on multitasking and concludes that it can very detrimental. He notes that Stanford's Clifford Nass, Eyal Ophir, and Anthony Wagner conducted research showing that, "Multitasking is less productive than doing a single thing at a time." Moreover, the notion that some people are simply great at multitasking appears to be false. Bradberry explains, "They found that heavy multitaskers—those who multitask a lot and feel that it boosts their performance—were actually worse at multitasking than those who like to do a single thing at a time." The article also cites recent research showing differences in the brain for those people who engage in a great deal of multitasking. Bradberry suggests that those changes in the brain may even reduce an individual's emotional intelligence. That last point is purely speculation, but the overall point is clear: multitasking may be having an adverse effect on employee performance in many organizations.