Tuesday, August 19, 2014

Does Certain Music Make Us Feel Powerful and Act Differently as a Result?

Dennis Hsu, Li Huang, Loran Nordgren, Derek D. Rucker and Adam D. Galinskyhave conducted some interesting new research regarding the impact that music has on our behavior.  According to Kellogg Insights, the key research question that these scholars asked was: "Could listening to the right kind of music—even in the background—make us feel more powerful and in control?"  The scholars conducted several experimental studies to try to answer this question.  The researchers first had a set of subjects rate different songs with regard to how powerful, dominant, and determined they felt when listening to that particular music.  For instance, the famous Queen song, We Will Rock You, was rated very highly... it made most subjects feel powerful.   Then they conducted studies using the music that subjects had rated as either high-power or low-power songs. 

For instance, Professor Derek Rucker noted, “One thing we know from prior research is that people who feel powerful tend to make the first offer in negotiations. Essentially, power is a propensity to act, to take charge of the situation."   One of these experimental studies indeed showed that people listening to a "high-power playlist" indicated that they would prefer to go first in a debate more often than those who listened to a "low-power playlist."  

In sum, music - even in the background - does affect how we feel, and it may affect how we behave in crucial situations.   It can have a significant effect on our feelings of psychological empowerment.  So, what song do you want to play next time you have to enter a crucial meeting or negotiation at work?  

Monday, August 18, 2014

Do You Understand the Non-Economic Motives of Your Competitors?

Sun Tzu once wrote, "It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle."  Understanding your competitors is crucial to success in business.  Firms rightfully spend a great deal of time analyzing the competition.  In many cases, though, they assume that the competition is completely "rational" i.e. that the firm is purely pursuing profit maximization as its objective.  That's a mistake.   Organizations are not black boxes.  They are made up of people, and those people have a range of motives.  They are not simply motivated by profits.   You have to ask yourself:  Who is the chief executive?  Who are the owners of the firm?  Is a family involved?  How do these people find satisfaction?  What are their goals and aspirations?  In short, you have to probe so as to understand the full range of motivations that may be shaping their behavior.  In so doing, you can better understand how your competition is acting in the marketplace. 

I am reminded of the importance of understanding non-economic motives because my students and I spent the day studying the wine industry.  We discussed my case on Robert Mondavi and the Wine Industry this morning, and then we visited Chateau La Coste here in Provence this afternoon.  In the wine industry, many vineyard owners are clearly motivated by factors beyond profit maximization.  Think about the wealthy people with success in other fields who have entered the wine business (Francis Ford Coppola, Greg Norman, etc.) 

Chateau La Coste offered us a terrific tour; they were wonderful hosts.  The winery is an interesting example of varied motivations.  The winery is hundreds of years old, but a decade ago, it was acquired by an Irish property developer named Patrick McMillen, a friend of U2 lead singer Bono.  He's invested to build an amazing new wine production facility.  He's brought in designers and architects such as Frank Gehry, Tadao Ando, and Jean Nouvel to create an incredible new venue at the vineyard.  He's brought in an amazing art collection.  Is McMillen simply interested in profits?  Perhaps, but it sure seems that he has aspirations of creating something quite special in Provence, with an interest in something other than purely maximizing return on investment.  Other industries exhibit these types of dynamics as well, but wine certainly is a good example.  Wineries can be tough economic propositions, as it takes years to yield a return on your investment in land, vines, equipment, etc.  Yet, people do invest in vineyards and wineries for a variety of reasons.  Know thy enemy - that's the key lesson.  However, knowing your enemy means not just treating that organization as a black box interested in optimizing its bottom line.  Think about the humans leading the enterprise and seek to understand their goals and aspirations. 

Sunday, August 17, 2014

The Value of Internships

Students in college often fret over landing that attractive internship over the summer.  Should they worry so much about internships?  Or, should college students be content with a decent job as a waiter or waitress over the summer?   Business Week's data from its undergraduate business school rankings survey indicates that they should be working hard to land that internship.  The magazine reports that, "Overall, 75 percent of students said they had an internship. Of those, 61 percent had a job offer in hand by the winter of their senior year, compared with 28 percent of students without an internship."  It appears that internships matter a great deal in certain industries, such as banking and consulting.   Overall, though, they are valuable regardless of what field you choose.  I know that many firms recruiting here at Bryant University do much of their hiring through their internship program.  Their goal, in fact, is to fill most of their openings through hiring of summer interns who performed very well.   They prefer that mode of hiring to the usual process of interviewing seniors who are approaching commencement. 

Thursday, August 14, 2014

The Outcome Bias

Andrew O’Connell's brief blog post on HBR this week highlights research by three BYU professors - Lars Lefgren, Brennan Platt, and Joseph Price.   These three economists have written about the outcome bias, an important cognitive bias that impairs our ability to make good decisions.   According to Jonathan Baron and John Hershey, the outcome bias refers to the tendency of people to "take outcomes into account in a way that is irrelevant to the true quality of the decision."   In other words, you should not judge the quality of a decision simply based on an evaluation of the result, yet people do.  You should examine whether a choice was the best possible course of action given the information available at the time, and given the uncertainty in the situation.  Yet, we don't look back at how the decision was made in many cases.  We simply judge the result.  

Professors Lefgren, Platt, and Price explore the outcome bias by looking at the decision-making processes of professional basketball coaches.  These scholars report, "We find they [basketball coaches] are more likely to revise their strategy after a loss than a win—even for narrow losses, which are uninformative about team effectiveness. This increased strategy revision following a loss occurs even when a loss was expected and even when failure is due to factors beyond the team's control."   

Of course, the outcome bias works the other way as well.  How many times do we conclude that we made a good decision simply because a positive result was achieved?   Perhaps the positive outcome occurred despite the fact that made a poor choice.  Perhaps luck played a role.  We tend to downplay those possibilities, and we attribute the good result to our wise choice.  As a Navy Seal once told me, "The minute we forget that luck may have played a role in our most recent success is the minute when we enhance our risk of dying on the next mission." 

Tuesday, August 12, 2014

Do You Have Any Questions For Me? Tackling This Key Job Interview Question

You are attending a job interview, and you are asked: "Do you have any questions for me?"  What should you say?   You really should have four objectives in mind when formulating your questions.  First, you should pose inquiries that demonstrate you have done your homework about the company.  Show that you have investigated the company's history, strategy, products, culture, and performance.  Doing your homework means going beyond Google searches and the 10K report.   It means visiting the company's stores, talking to a current employee, and/or testing out a firm's products or services.   Second, you should avoid questions that clearly could be answered through such homework.   Asking a question whose answer can readily be found on the web is a signal that you have not done your homework properly.   Third, ask a question or two that enables the interviewer to talk about their own experiences.   Let's face it... people like to talk about themselves.  Ask them why they chose to join the firm, or how the firm has helped them develop and enhance key skills.  Finally, and perhaps most importantly, you have an opportunity to learn whether this company is truly a fit for you.   Here you want to learn more about the organization's culture, beyond the statement of values that you may have found on the website. 

How can you learn more about a company's culture?  Jason Hanold has posted an article on LinkedIn that articulates two good follow-up questions, beyond simply asking an interviewer to describe the culture in general terms. 
  1. “When thinking about your best of the best talent - the most distinctive people at all levels of the organization - are there three or four traits that they share?” (Three to four traits in common well above all other traits)
  2. “Has anyone who possessed those most admired traits ever failed, and if so, why?”
With this brief primer, hopefully you are more prepared to tackle the question: "Do you have any questions for me?"   If readers have other ideas as to how to address this interview question, I would love to hear them.  

Thursday, July 31, 2014

How Entrepreneurs Can Recover From Failure

Vivian Giang has written an interesting story for Fast Company about how entrepreneurs can recover from failed startup experiences.   She interviews Steve Blank, among others.  Blank is a serial entrepreneur who now teaches at Stanford.   Blank talks about the importance of giving yourself "time to grieve" when you have been part of a failed startup.  You don't want to rush into the next startup.  You need time to go through the natural emotional reactions and to experience the grief, denial, anger, and depression that might come with a failure.   Then, you need to truly reflect on what you have learned and identify how you want to change your behavior moving forward.   Only when you have moved past the emotionally difficult stage, and moved through the reflection and learning stage, are you ready for another venture.  It seems like terrific advice.  I would argue that it's good advice not simply for entrepreneurs.  Anyone experiencing a failure would benefit from Blank's advice.

Wednesday, July 30, 2014

Market Basket and the Benefits of Low Employee Turnover

As the crisis at Massachusetts-based supermarket Market Basket rages on, it's worth noting that Consumer Reports just ranked the retailer as one of the top 10 supermarkets in the United States.  I also found an article this week on Boston.com quite interesting, because it explored the question of how Market Basket could keep prices so low while offering employees compensation and benefits that exceeded those provided by rivals in the industry.  The article, by Adam Vaccaro, cites low employee turnover as one key to the firm's success.  I thought that I would do a bit of research on the economic cost of high turnover.  I went to the Hay Group's website, since that firm has done a great deal of research on issues related to employee compensation.   The Hay Group examined the economic benefit of having a highly engaged workforce coupled with low employee turnover (the two obviously are related... if you have high engagement, you are likely to have low turnover).  Here is what they found:

Similarly companies with high levels of engagement show turnover rates at 40 percent lower than companies with low levels of engagement. However, companies that both engage and enable employees demonstrate a total reduction in voluntary turnover of 54 percent... For an organization with 20,000 employees and an annual voluntary turnover rate of eight percent, the cost of turnover is approximately $56 million (assuming an average salary of $35,000). Reducing the voluntary turnover rate by 40 percent would yield annual savings of $22.4 million. But reductions in turnover through high levels of engagement and enablement would yield savings of over $30 million annually, a difference of more than $7.5 million.  

The Hay Group research also shows that highly engaged employees are likely to far more productive.  As a result, the firm achieves substantial additional economic benefits.  What can firms do with these economic gains from the combination of high engagement, low turnover, and high productivity?   Certainly, they can pile up healthy profits.  However, in the case of a firm such as Market Basket, it appears that they were able to share that economic value with customers and employees as well.  Employees received solid compensation and benefits, while customers enjoyed low prices.  Of course, all of these gains are at risk if the Board cannot move to resolve the leadership crisis at the firm.  As of now, the workers are standing strong in support of their former CEO.  The Board continues to examine a potential sale, either to that former CEO or to another party.