Our results, using data on 1,088 founders, identify two key results: selection effects matter in the decision to plan; and it pays to plan. This study assesses if founders that write a formal plan are more likely to achieve new venture viability. This is important because, despite its popularity, there is considerable debate about the value of plans. One root reason for this is that what prompts a founder to plan also impacts on their chances of creating a viable new venture. The study's novelty is to separate out influences on the decision to plan from the plan-venture viability relationship. Our results show that better educated founders, those wanting to grow and innovate, and those needing external finance are more likely to plan. Subsequently, having isolated what prompts planning, we assess if writing a plan actually promotes venture viability. We find that it pays to plan.
Friday, April 28, 2017
You are an aspiring entrepreneur. You would like to launch a startup. You've been hearing that writing a business plan is over-rated. You just need to do it. Mistakenly, some have counseled you that adopting a learning by doing approach somehow means not planning at all. New research by Francis Greene and Christian Hopp explores the question of whether it "pays to plan" as an entrepreneur. Their paper, published in the Strategic Entrepreneurship Journal, is titled, "Are formal planners more likely to achieve new venture viability?: A counterfactual model and analysis." Greene and Hopp summarize their findings in the abstract of their paper:
Tuesday, April 25, 2017
We hear quite often these days that leaders need to instill a sense of purpose in their organizations. People have to believe that they are doing meaningful work. They have to understand why the organization exists and what beyond profit is the goal of the firm. In an interview for Knowledge at Wharton, Professor Andrew Carton talks about an important part of this process. He talks about how important it is to connect the broad vision of the firm to the actions of individuals on the front lines. That connecting process is crucial. People have to see how their work connects to the bigger picture. How are they specifically contributing to the mission even if they are not interacting with the customer every day or doing what they perceive to be the glamorous work in the firm?
What I found is that it’s absolutely critical that leaders do depict a compelling picture of where ultimately we want to go. But just as important — and also more time consuming and requiring even more investment — is that they communicate about how each employee in the organization can get a sense of how their work connects to the organization’s mission or vision. That process of connection-building took more steps and was more time intensive and more complex than the process of just selling somebody about the importance and beauty of this ultimate goal that we’re trying to achieve together. In some sense, that was the easy part. The hard part is helping people see a connection between their work and the organization’s mission.
Monday, April 24, 2017
Ayelet Fishbach, Tal Eyal, and Stacey R. Finkelstein have written an interesting research paper titled, "How Positive and Negative Feedback Motivate Goal Pursuit." They examined the usefulness of positive and negative feedback. They conclude that timing matters. Moreover, it matters whether you are evaluating your commitment to a particular pursuit (positive feedback more helpful), or whether you are evaluating your progress toward a goal (negative feedback more helpful). The authors explain:
We propose that whether people wish to evaluate their commitment or pace of pursuing a goal influences whether positive or negative feedback is more effective. Our theory further predicts that the question people ask themselves (‘am I committed?’ versus ‘am I making sufficient progress?’) shifts over the course of pursuing a goal. People often start by evaluating commitment and then shift to monitoring progress as they gain experience or expertise in a goal domain. They make this shift because novices feel uncertain about their level of commitment, whereas experts are already committed and wish to monitor their rate of progress. One consequence of this shift is that novices should increase their efforts in response to positive feedback on their successes, and experts should increase their efforts in response to negative feedback on their lack of successes.
The authors describe a series of studies on this topic. As an example, they examined student choice of instructors for French classes. They found that beginner students preferred instructors who offered positive feedback. Advanced students preferred instructors who offered more negative feedback.
What's the lesson here? If someone is just starting out on a challenging new task, they may want and need encouragement. They could use more positive reinforcement than negative feedback. However, as they begin to move toward mastery of that task, they need more negative feedback so that they can continue to improve.
Friday, April 21, 2017
Jason Dana, Assistant Professor of Management at Yale, wrote a thought-provoking piece for the New York Times this past week. The title of his article: "The Utter Uselessness of Job Interviews." Dana argues that people draw conclusions from interviews based on a variety of factors, yet in many cases, these conclusions are unwarranted or flat-out wrong. In his article, Dana explains the findings from his experimental research. He began by conducting an experiment in which people were asked to predict a student's future GPA. They had an opportunity to review each student's past GPA as well as the student's course schedule. The research subjects also had an opportunity to interview these students. The research subjects also tried to predict future GPA for some students who they did not interview. Amazingly, they predicted GPAs more accurately in the case of the students who did not participate in interviews. In a second experiment, they instructed half of the interviewees to answer each question posed by the interviewer honesty. The other half of interviewees were told to answer the questions randomly. Dana reports a startling finding: "The students who conducted random interviews rated the degree to which they 'got to know' the interviewee slightly higher on average than those who conducted honest interviews." What's the lesson here? Dana argues, "The key psychological insight here is that people have no trouble turning any information into a coherent narrative....People can't help seeing signals, even in noise."
Wednesday, April 19, 2017
Many organizations seek to identify their high potential employees. They provide them good opportunities for growth and development and interesting work assignments. Firms typically invest a great deal in their high potential employees. A recent article in Harvard Business Review suggests that many firms may be going about this process all wrong. They might not be selecting the right people as their high potential employees.
Jack Zenger and Joseph Folkman, leaders of the Zenger/Folkman leadership development consulting firm, wrote recently about a study they conducted at three companies. They studied nearly 2,000 high potential employees at these firms. Zenger and Folkman used a 360 degree feedback instrument to evaluate the leadership effectiveness of these individuals. Amazingly, they found that 42% of these high potentials scored below average on leadership effectiveness. 12% of the high potentials ranked in the bottom quartile.
What's going on? Zenger and Folkman argue that companies are selecting high potentials using the wrong criteria in many cases. They maintain that many firms select based on technical and professional expertise. Moreover, they examine whether people can deliver results, meet commitments, and fit the organizational culture. Unfortunately, many of these traits might make someone a strong individual performer, but not an effective team leader.
Tuesday, April 18, 2017
Jessica Stillman writes this week in Inc. about a new research study conducted at Duke University. Mark Leary and his colleagues conducted a series of studies examining the impact of "intellectual humility." Stillman writes, " In everyday language, it means the willingness to accept that you might be wrong and to not get defensive when arguments or information that's unfavorable to your position comes to light. And according to this new study, those who lack this quality make markedly worse choices that those who have it in abundance."
Stillman notes that others have written about this concept previously, though this research at Duke provides strong statistical evidence of the impact of intellectual humility. An article published on Duke's website cites some of the key findings: "People who displayed intellectual humility also did a better job evaluating the quality of evidence -- even in mundane matters. For instance, when presented with arguments about the benefits of flossing, intellectually humble people correctly distinguished strong, fact-based arguments from weak ones."
Stillman notes that Stanford's Bob Sutton wrote about intellectual humility a decade ago, and he explained using a phrase made famous by people at the Institute for the Future in Palo Alto, California. I love the phrase as it conveys the essence of intellectual humility. Sutton explains that people should have "strong opinions, weakly held." Here is Sutton's full explanation of this phrase:
Perhaps the best description I've ever seen of how wise people act comes from the amazing folks at Palo Alto's Institute for the Future... they advise people to have "strong opinions, which are weakly held." They've been giving this advice for years, and I understand that it was first developed by Institute Director Paul Saffo.
Bob explained that weak opinions are problematic because people aren't inspired to develop the best arguments possible for them, or to put forth the energy required to test them. Bob explained that it was just as important, however, to not be too attached to what you believe because, otherwise, it undermines your ability to "see" and "hear" evidence that clashes with your opinions.
Friday, April 14, 2017
I listened recently to a Stanford Innovation Lab podcast with Professor Tina Seelig. During this episode, she interviews Emily Ma from Alphabet. They discuss the keys to an effective brainstorming session. During their discussion, they focused on important it is to frame the question properly at the outset of a brainstorming meeting. For instance, Seelig and Ma describe the question: "How might we create an awesome birthday party for our friend?" Then they talk about how you might reframe the question with a slight change in word choice. What if you used the word "celebration" instead of "party" in your "How Might We" question? The word "party" might have framed the question too narrowly. Changing the word to "celebration" could invite a much wider range of ideas. This example reminds us that we should be careful about our word choices. However, we also have to consider multiple frames as we pose the question(s) that initiate our brainstorming sessions.