Human Potential & Leadership

The unfairness (and wisdom) of paint

Seth Godin's Blog -

Repainting your house the same color it already was feels like a waste. It's a lot of effort merely to keep things as they are.

But if you don't do it, time and entropy kick in and the house starts to fade.

The same can be said for 1,000 elements of your organization, including your relationships with customers, staff, suppliers and technology. The way you approach your market, the skill you bring to your craft, the culture in your organization—it constantly needs another coat of paint.

Rust never sleeps.

[PS... delighted that I'll be speaking at the upcoming Convertkit event in June in Boise... Hope to see you there.]


Empathy is the hard part

Seth Godin's Blog -

The rest is mechanics. We're not wired to walk in someone else's shoes, it's not our first instinct.

Showing up with empathy is difficult, hard to outsource and will wear you out.

But it's precisely what we need from you.


How Companies Say They’re Using Big Data

Harvard Business Review -

Laura Schneider for HBR

Are companies seeing any value to their investments in “big data”? I’ve been surveying executives of Fortune 1000 companies about their data investments since 2012, and for the first time a near majority – 48.4% — report that their firms are achieving measurable results from their big data investments, with 80.7% of executives characterizing their big data investments as “successful.”

Survey respondents included Presidents, Chief Information Officers, Chief Analytics Officers, Chief Marketing Officers, and Chief Data Officers representing 50 industry giants, including American Express, Capital One, Disney, Ford Motors, General Electric, JP Morgan, MetLife, Nielsen, Turner Broadcasting, United Parcel Service, and USAA.

The chart below illustrates the range of big data initiatives that are underway at leading corporations, with expense reduction being the most mature, as measured by the number of initiatives that are underway, with nearly one-half of all executives indicating that they have decreased expenses as a direct result of their investments in big data.


However, big data isn’t just being used for cost-cutting. The survey strongly indicates that firms are also undertaking “offensive” efforts that are explicitly intended to change how they do business.  After the initial “quick wins” are wrung from cost-reductions, executives are turning their attention to new ways to innovate using data.

In spite of the investment enthusiasm, and ambition to leverage the power of data to transform the enterprise, results vary in terms of success. Organizations still struggle to forge what would be consider a “data-driven” culture. Of the executives who report starting such a project, only 40.2% report having success. Big transformations take time, and while the vast majority of firms aspire to being “data-driven”, a much smaller percentage have realized this ambition. Cultural transformations seldom occur overnight.

Related Video The Explainer: Big Data and Analytics <span>What the two terms really mean -- and how to effectively use each.</span> See More Videos > See More Videos >

At this point in the evolution of big data, the challenges for most companies are not related to technology. The biggest impediments to adoption relate to cultural challenges: organizational alignment, resistance or lack of understanding, and change management.

Big data is already being used to improve operational efficiency, and the ability to make informed decisions based on the very latest up-to-the-moment information is rapidly becoming the mainstream norm. The next phase will be to use data for new products and other innovations. About half of the executives I surveyed predict major disruption on the horizon, as big data continues to change how businesses operate and compete. Companies that fail to adapt do so at their own competitive and market risk.

Don’t Give Up on Unconscious Bias Training — Make It Better

Harvard Business Review -

There’s a growing skepticism about whether unconscious bias training is an effective tool to meet corporate diversity goals. Critics of such training contend that it doesn’t visibly move the needle on diversity numbers, and can even backfire. Some academic studies support this perspective: one longitudinal study found that traditional diversity trainings are the least effective efforts in increasing numbers of underrepresented minorities, while experimental research has shown that presenting evidence that people commonly rely on stereotypes — information often found in diversity trainings — isn’t helpful and can even condone the use of stereotypes. On the other hand, a meta-analysis found that diversity trainings can be effective, depending on many factors including content, length, audience, and accompanying diversity efforts.

Clearly, not all trainings are equally good — and none are a silver bullet. Training is effective only when designed intentionally to achieve discrete, and often narrow, outcomes. Anyone who believes trainings will quickly result in greater demographic diversity will be disappointed. On the other hand, companies that want to motivate employees to engage in new behaviors that complement and accelerate more structural efforts may find thoughtfully designed training to be an effective tool.

As part of our work at Paradigm, we conduct unconscious bias trainings, so perhaps we are a little biased towards them. While initially we were skeptical and declined to offer training, we learned that failing to engage employees as participants in debiasing organizational processes can limit the impact of those efforts. For example, implementing a new interview process, without educating employees on its benefits, inhibits its adoption. It turns out that trainings can be an effective mechanism for educating employees and inspiring behavior change: our post-training surveys indicate that 96% of participants leave intending to engage in behaviors to reduce bias. (This aligns with Google’s findings that participants in its internal training leave with a higher understanding of unconscious bias, and more motivation to mitigate bias, than their untrained peers.) But do employees actually act on these good intentions?

When a global technology company engaged us to train its entire workforce over the course of 2016, we took the opportunity to more thoroughly evaluate the impact of our trainings by surveying employees about their actual behaviors before, immediately after, and as much as eight months following our training. We found that, months after attending the workshop, employees reported engaging in more of the research-backed strategies for mitigating bias highlighted in the workshop than they had prior to the workshop.

So, what made these long-term outcomes possible? By articulating specific and realistic expectations of what our trainings could achieve, and bearing in mind the factors that limit training effectiveness, we developed three evidence-based tenets to guide the design of any unconscious bias training.

1. Strike a careful balance between limiting defensiveness about unconscious bias, while communicating the importance of managing bias. One concern with teaching people about unconscious bias, or talking about diversity efforts more broadly, is that majority group members can become defensive. Training can be designed to reduce defensiveness by explaining that we don’t have unconscious biases because we’re bad people – we have them because we are people. (Note: in this conversation we do not include explicit forms of bias–like racial slurs, antipathy toward others or sexual harassment.) Training can communicate this by highlighting that unconscious bias creeps into all aspects of our lives and decision-making, not simply in ways that negatively impact diversity and inclusion efforts. Although it’s important to reduce defensiveness, some trainings go too far and give the impression that, “we all do this, so it’s okay.” When unconscious bias is simply normalized, people’s actions can be more likely to be influenced by stereotypes. It’s important that training make clear the importance of managing bias and offer strategies to do so.

2. Structure the content around workplace situations. Many unconscious bias trainings draw on social science research, organizing it around psychological phenomena (such as “confirmation bias”) or demographics (“maternal bias”). To make training feel more relevant and memorable, we’ve found it’s better to organize content around specific workplace situations. Research shows that when information is presented in a way that is linked to our current schemas, we are better able to remember it. Our trainings are organized around three specific situations that our participants encounter in their day-to-day work: recruiting and hiring, team dynamics, and career development. In the post-workshop survey given at the global technology company, we asked participants to commit to one action they would take to manage bias. Months later, we found that 41% of respondents remembered their specific commitment, and of those, 91% had made progress in implementing that new behavior.

3. Make it action oriented. Because raising awareness about bias can backfire when not paired with strategies for managing bias, it’s essential that unconscious bias training equip participants with action-oriented strategies. For example, we talk about strategies to increase feelings of belonging, and the importance of defining what qualifications matter before making people-related decisions. Sharing such strategies seems to have long-ranging impacts on participants. One question we asked employees in our training evaluation was whether, when interviewing multiple candidates for the same role, they ask all candidates the same questions. This method of structured interviewing has been shown to promote more objective, less biased decision-making. As much as eight months after our training, employees reported a 25% increase in use of this method. Other employees reported they “stopped giving resumes in advance of tech interviews to reduce bias in expectations of a candidate’s potential ability.” Another shared: “Anytime I witness someone being interrupted, I speak up to ensure that person can voice their input after the person who interrupted them is done speaking.”

We are continuing to improve our efforts to rigorously evaluate trainings. For example, in the research we describe here, we relied on self-reported behavior, rather than more objective measures. Because we were not able to compare training participants to nonparticipants, we can’t conclusively exclude the possibility that our longitudinal results were not influenced by other factors.

But for now, our takeaway is this: unconscious bias training can be a useful component of diversity and inclusion efforts, but only if it’s thoughtfully designed with research in mind and its limitations are well understood. By using the strategies outlined above, organizations can design trainings that engage employees, motivate them to adopt behaviors that mitigate bias, and empower individual diversity advocates within companies. But these outcomes can only take an organization so far. Ultimately it is a commitment to consistently evaluate and innovate organizational processes — including the systems that allow for bias in the first place — that will have the most sustained impact on achieving diversity goals.

Smart Cities Are Going to Be a Security Nightmare

Harvard Business Review -

In the fictional world of the video game Watch Dogs, you can play a hacktivist who takes over the central operating system of a futuristic, hyper-connected Chicago. With control over the city’s security system, you can spy on residents using surveillance cameras, intercept phone calls, and cripple the city’s critical infrastructure, unleashing a vicious cyberattack that brings the Windy City to its knees.

Watch Dogs is just a game, but it illustrates a possible “what if” scenario that could happen in today’s increasingly smart cities. Advancements in artificial intelligence and Internet of Things (IoT) connected devices have made it possible for cities to increase efficiencies across multiple services like public safety, transportation, water management and even healthcare.

An estimated 2.3 billion connected things will be used in smart cities this year, according to Gartner, Inc., the technology research and advisory company. That would represent a 42% increase in the number of connected devices since 2016. But the rise of digital connectivity also exposes a host of vulnerabilities cybercriminals are lining up to exploit.

On April 8, hackers set off 156 emergency sirens in Dallas, Texas, disrupting residents and overwhelming 911 operators throughout the day. The number of attacks on critical infrastructure jumped from under 200 in 2012 to almost 300 attacks in 2015. As smart cities move from concept to reality, securing their foundation will become a top priority to ensure the safety of our digitally connected communities.

Insight Center

Simply put, smart cities rely on interconnected devices to streamline and improve city services based on rich, real-time data. These systems combine hardware, software, and geospatial analytics to enhance municipal services and improve an area’s livability. Inexpensive sensors, for example, can reduce the energy wasted in street lights or regulate the flow of water to better preserve resources. Smart cities rely on accurate data in order to properly function. Information that has been tampered with can disrupt operations — and constituents’ lives — for days.

Several cities have adopted smart technologies, applying artificial intelligence to accelerate their transition into the future. In Barcelona, smart water meter technology helped the city save $58 million annually. In South Korea, one city cut building operating costs by 30% after implementing smart sensors to regulate water and electricity usage. With the global IoT footprint expected to surpass 50 billion connected devices by 2020, urban communities will need to strengthen existing cybersecurity protocols and disaster recovery methods to counter hackers searching for opportunities to wreak havoc.

As smart city infrastructure proliferates, the stakes for protecting these digital foundations will only get higher. While investment in smart technology has gone up, many of these innovations are deployed without robust testing and cybersecurity is often neglected.

For example, cities currently using a supervisory control and data acquisition (SCADA) system, are particularly susceptible to frequent hacks due to poor security protocols. Though SCADA systems control large-scale processes and unify decentralized facilities, they lack cryptographic security and authentication factors. If a hacker targets a city’s SCADA system, they could threaten public health and safety, and shut down multiple city services from a single entry point.

Simple computer bugs can also cause significant glitches in control systems, leading to major technical problems for cities. Once hackers invade smart city control systems, they can send manipulated data to servers to exploit and crash entire data centers. This is how hackers gained access to an Illinois water utility control system in 2011, destroying a water pump that serviced 2,200 customers. Not only do these breaches disrupt daily operations for residents, they can be costly to remedy. A hypothetical hack that triggers a blackout in North America is estimated to leave 93 million people without power and could cost insurers anywhere from $21 billion to $71 billion in damages.

The inevitability of cyberattacks is a lesson the private sector has learned the hard way. As cities adopt smart initiatives, they’d be wise to make data security a priority from the outset. In addition to physically securing facilities controlling power, gas and water, city planners should also implement fail safes and manual overrides in all systems and networks. This includes forcibly shutting down potentially hacked systems until security experts have the opportunity to resolve vulnerability issues. Encrypting sensitive data and deploying network intrusion mechanisms that regularly scan for suspicious activity can also protect against hackers trying to breach control systems remotely.

Smart cities can increase productivity and efficiencies for citizens, but they have a serious problem when security is underestimated. As local governments pursue smart initiatives, realizing the full potential of these digitally connected communities starts with implementing cybersecurity best practices from the ground up.

Returning to Work When You’re Grieving

Harvard Business Review -

The death of a loved one can be devastating. And while many companies provide bereavement leave, the leave is often only three to five days. Some of us are fortunate to be able to reduce work hours or quit work altogether for a while. Others have a manager who gives us unofficial time off. Even so, many of us must go back to work well before we’re ready.

Grief can be isolating because people don’t know how to connect with you when you come back to work, or when you experience setbacks from time to time. Because of this, you’re likely to face some challenges, particularly in how to deal with your personal grief while remaining productive and and how to deal with your colleagues, especially when they respond in a way that’s jarring.

Over the last year, my brother, my mother, a close friend, and six relatives died. My experience, as well as hearing from others who have lost people close to them, has helped me to think about ways to tackle common situations at work when you return after the death of a loved one. You may not be able to control what your coworkers say, but you can make your reactions work to your benefit. From answering difficult questions in a way that you’re comfortable to stopping awkward conversations in their tracks, here are a few tips to consider when facing colleagues after a loss.

Expect to be surprised. Support, and lack of it, can come from unexpected sources. Death and grieving are difficult topics at best, and the experience is unique for each person. You’ll see a range of reactions from your colleagues, from acting as though nothing had happened, to offering condolences in private, to publicly offering help and asking morbidly curious questions. Knowing that you’ll experience a variety of reactions can help you prepare a range of ways that you might respond to your colleagues.

You and Your Team Series Stress

Control what you do, and don’t, want to share. Don’t force yourself to share when you’re not ready. Just because someone asks you a question doesn’t mean you have to answer it. You might want to talk through the details of what happened, but if not, think through short answers to probing questions. These answers might provide brief facts or simply say, “Thank you for your questions, but I’m unable to answer them right now.” Or you can direct the conversation to something you can talk about — for example, “I’d rather talk about what my mom meant to me than the specifics of her last few weeks.”

You might not always realize this during a conversation, but you can use what you learn to proactively discuss a topic the next time it comes up. Six months after my brother died, an acquaintance wanted to talk to me about her brother’s illness. I was fine during our conversation, but I woke up the next morning feeling traumatized. The next time someone wants to talk to me about their brother’s health, I might instead try saying, “I’m still feeling raw from having lost my brother. Is there a way I can support you without going into the specific challenges of your brother’s condition?”

Appoint an ambassador. You may not want to talk about things at all — or at least not in public or in the middle of a workday. Make your wishes known to a trusted colleague and enlist their help in communicating with the rest of the office. As things change, keep your ambassador updated so they can make your latest preferences known to others.

When I knew I had to teach a leadership class while my mother was in her last days, I emailed one of my cofacilitators ahead of time to let them know I might need to leave early. I also said, “While teaching the class, it will be too difficult for me to talk about my mom. I appreciate and know that you care about me. One way to support me when we’re teaching the class is to not talk to me about my mom. Please also let Shannon and Lisa know, as it’s difficult for me to communicate with too many people right now. I’d love to connect after our session is over.” This statement let them know when would be best for them to talk to me and ensured I didn’t have to worry about how to respond in a public setting when I needed to focus on getting a job done.

These three steps can help you control some of the external factors that you may face upon your return to work, but your personal and emotional needs are just as important to take into account. Consider these tips to help you take care of yourself in the workplace.

Create pauses. Grief saps your energy. There are days when you might feel capable of performing any task but your energy may not last long. A colleague of mine says that she’s had to tell herself, “This is the new normal,” moving her mind into a world where her loved one is no longer alive and where she relates to her surroundings differently. If possible, give yourself space between meetings and interactions with others. Use those times to catch up if you’re feeling productive or to care for yourself by going for a walk, doing breathing exercises, or meditating. Such pauses help you pace yourself so you can last the day and even the week.

Find a sanctuary. There are times when you might want to burst into tears or just escape for a while. Before you return to work, think of a private space where you can recoup. My car is my sanctuary. I have a pillow in case I need to take a nap, plenty of water, and a box of my favorite salted caramel truffles.

Carry tissues. You are likely to tear up when you least expect it, so keep tissues handy. People will understand because they know you’re grieving. At least with tissues you’ll be spared the embarrassment of sniffles and a runny nose during a business meeting.

Create a comfort box. Keep tiny items of comfort close by. A couple of months after my brother died, my friend Caron repurposed a chocolate box, decorating it and calling it Sabina’s Sunshine. She invited my friends to write notes about what they appreciated about our friendship and put them in the box. I have my box of sunshine next to me at my office desk. When I’m feeling particularly sad, or before a challenging meeting, I open the box and read a note. After my mother died, I asked my friends for objects they could contribute to a comfort box that kept one of my five senses occupied: essential oils, chocolate, beautiful pictures, fabrics with different textures, chimes, and so on.

Create a checklist and ask for help. A common side effect of grief is being spacey. You may forget things and make more mistakes than you usually do. Write down things that you usually don’t bother to. For important deliverables, create a detailed checklist; check it twice or ask a coworker to check your work for you.

Going to work while grieving is difficult — on you and on your coworkers. Anticipating others’ reactions and creating a planthat includes flexible solutions before you go back to work will help reduce the stress of returning to a professional environment, while still giving yourself the space to grieve.

Taking it for granite

Seth Godin's Blog -

Look around for a second.

Those bedrock institutions, the foundational supports you take for granted--they rarely last forever.

Nurturing and investing in the things we need and count on needs to be higher on the agenda.

Things that appear to be made of granite rarely are.


Ethos, Logos, Pathos

Steven Pressfield Online -

This is the fourth post in my Story Gridding Nonfiction series.  To read the first, click here.  To read the second, click here. To read the third, click here.

We’ve been exploring Story Grid as it relates to nonfiction. And we’ve come up with four big categories/genres of nonfiction: Academic, How-To, Narrative Nonfiction and the Big Idea Book. As the Big Idea Book, at its best, is an elaborate combination plate of the other three, let’s pick it apart a bit more and see if we can suss out its secrets.

Where did the nonfiction Big Idea Book come from? That is, from what form did it emerge? What’s the tadpole version that has the potential to morph into a complex frog?

Fiction has shorter forms than the novel right? There are novellas and short stories. So nonfiction must have equivalent shorter forms.  Thinking about a smaller version of a Big Idea Book will narrow my focus and give me some clues about why one works and another doesn’t (Story Grid’s raison d’etre) as well as how to create one of my own.

I’d say that Ph.D. dissertations (Academic) and Operating Manuals (How-To) and Extended Essays (Narrative Nonfiction and Big Idea) would be the medium forms of Nonfiction. And fiction’s short story equivalents for nonfiction would be research papers (Academic), driving directions or Ikea furniture assembly diagrams (How-To) and short form reporting pieces like W.C Heinz’s classic “Death of a Racehorse” (Narrative Nonfiction) and Tom Wolfe’s “The Me Decade” (Big Idea).

But where did all of those things come from? Is there some Nonfiction form from which these all sprang forth?

I think there is. It’s one of those inevitable, but surprising reveals too.

It’s the form of the High School Thesis paper.

You remember those, right?

The 2,000 to 5,000 word, dry as dust compositions our English Lit teachers put us through in High School and our Professors put us through in College?

As you’ll recall, the structure of a thesis paper looks like this:

Thesis Paper Form

  1. Start with an inverse pyramid, moving the statements from global to specific, and then transition into
  1. Three or more boxes of supporting evidence/data/examples and then round it out with
  1. A pyramid moving from specific to general.

That’s basically it.

I don’t think it’s a coincidence that the three parts mirror the Beginning Hook, Middle Build, and Ending Payoff in fiction.

But how do you construct these three Nonfiction Beginnings, Middles and Ends? How do you make an argument? How do you persuade someone to believe you? How do you persuade them to act?

Let’s go all the way back to Aristotle for the answer. Because his was a very good one. Aristotle suggested that there are three forms of persuasion: ethos, logos and pathos. And I think these are the three building blocks for Nonfiction Scenes.

Ethos is all about the bona fides of the arguer. Does the writer have the character and background to be someone worthy of trust? Is he principled? Does he have experience in the arena in which he writes? Is he an expert?

Logos is all about the evidence/the data/the backup material that the arguer/writer uses to support his conclusions. Because of the following data/examples/case studies, logically we can conclude…

Pathos is the writer appealing to the emotions of his audience to get them on his side, arousing readers’ anger or appealing to their self-interest or sense of identity. As you’ll surmise, employing a fiction writer’s Story technique is crucial for this form of persuasion.  New Journalism’s pantheon (Wolfe, Talese, Didion, etc.) knows how to create Pathos as do the Tony Robbins’ and Erik Larsons of the world.

Getting readers to “like” the writer or “root” for him to succeed in his argument is another way of making a Pathos based argument.

Or, on the other end of the spectrum, perhaps the writer wishes his readers to “fear” his “Oz-like” all-knowingness. In this case, the reader’s inability to understand is not the failure of the genius writer’s erudition, but of the novice reading the material. This approach is intellectual sado-masochism. Gore Vidal was a master of this kind of “I’m smarter than you” school.

Both “hey, we’re all in this together” and “hey, I know more than you so try and keep up” can work.

Whether they know it or not, arguers/writers confront that old Machiavellian rhetorical question Is it better to be loved or feared? with every mission statement/project they take on. Their preference (their desire to be loved or feared) reveals itself by their choices among these three fundamental forms of persuasion.

Do they include all three persuasion techniques in their global argument? Or do they rely more on their reputation (ethos) than data (logos) or story (pathos)?

How well do they transition from one form of persuasion to another?

And of course, how do they execute each technique?

With this in mind, here’s my take on the building blocks of Big Idea Nonfiction…

  • Ethos Scenes (the writer/narrator takes center stage and dispenses his wisdom)
  • Logos Scenes (the evidence takes center stage) and
  • Pathos Scenes (an emotional appeal to the reader through Story takes center stage)

Steven Pressfield masterfully uses all three kinds of persuasion in The War of Art. And he weaves his narrative in and out of one to the other in practically invisible ways.

But that’s not what makes The War of Art a book that people hold dear to their hearts. Nor is it what makes the book an evergreen bestseller.

What makes it both of those things is The War of Art’s Internal Genre, not its External BIG IDEA BOOK Genre.

More on that next.


Sheryl Sandberg and Adam Grant on Resilience

Harvard Business Review -

Facebook COO Sheryl Sandberg talks about returning to work after her husband’s death, and Wharton management and psychology professor Adam Grant discusses what the research says about resilience. In this joint interview, they talk about how to build resilience in yourself, your team, and your organization. They’re the authors of the new book, Option B: Facing Adversity, Building Resilience, and Finding Joy.

Download this podcast

A Scorecard to Help You Compare Two Jobs

Harvard Business Review -

You have a big career decision to make. Maybe you’ve been offered an exciting new opportunity — on the other side of the country. Or maybe you’ve been unhappy in your job and need a change — but haven’t been able to find inspiring alternatives.

Several of the professionals I’ve coached share a common struggle: how to make major decisions that balance career growth with satisfaction in other domains of their lives. While it’s often easy to see the impact a certain choice will have on objective criteria such as duties, position, prestige, salary, and opportunities for advancement, evaluating the “softer” considerations is tougher. But things like cultural fit, the quality of interactions with colleagues, ability to exert influence, and impact on family and social life, all deeply affect how personally satisfied someone feels with their work.

To help my clients take an objective look at decidedly subjective considerations, I’ve developed a tool that allows them to quantify and visualize the pros and cons of various choices  taking into consideration the impact each would have on matters of both heart and head.

Here’s how I used it with a physician I’ll call Dinesh. He was feeling stuck trying to decide whether he should continue working in his current position at a prestigious academic medical center, which he truly enjoyed, or accept an exciting leadership position at a nearby community hospital. Dinesh was weighing some pretty standard “head” issues of salary, resources, leadership potential, commute, and call schedules. But he knew this was a huge change and needed to evaluate the more feelings-based issues such as how much would he would enjoy his new colleagues, have the flexibility to manage his workload, and be able to prioritize family time, etc. Some of his “heart” issues also included his self-image as it related to “just” being a busy, highly regarded clinician vs. being seen as a leader with broader influence beyond his own patient care responsibilities.

We started by listing all the factors he was considering and the relative importance of each, on a scale of 1-5, so Dinesh could see how they related to one another, shown on the graphic below. Under the Current Hospital and the New Hospital headings is the score he assigned each choice regarding how good it would be for each factor, again rated on a scale of 1-5. We then multiplied the rating by the importance and added the total for each factor to derive a weighted total score for each job option.


And a very interesting happened. While the Current Hospital job scored higher overall, viewing the scores in this way made it possible to see that the relative downsides of the new job were likely temporary. Even though it confirmed his gut feeling that his day-to-day life in the short term was better at his current job, his potential for career growth over the long haul was greatly enhanced by taking the job at the community hospital. The issues that decreased quality of life at the community hospital were mainly related to workload, protected time, and flexibility of schedule – considerations that would likely have a negative impact on his family life. He also realized that a promotion of this magnitude would be very unlikely to materialize in his home institution. By having a tool that allowed him to visualize the relative impact of each factor, he was able to see that he’d likely be better off at the community hospital after the first year once he’d finished recruiting new physicians who could share the workload, a concept that was hard to grasp by just thinking things through without a structured framework.

You and Your Team Series Career Transitions

Another client, whom I’ll call Martha, had always been in management and needed a change from her current position. She was looking at executive roles in other organizations as well as fundraising opportunities, but wasn’t getting jazzed about any of these options. I suggested she complete a similar decision grid comparing the options she was currently considering. The result surprised us both: looking at the completed grid, she could plainly see that each option scored very low. Martha felt dispirited, worried that no job that would truly satisfy her. When I asked her what kind of job would satisfy her most highly weighted factors such as taking advantage of her natural talents, providing opportunities to help people in the moment, and being active and on her feet, she finally uncorked the true desire that she’d kept buried for years beneath a pile of “shoulds.” In her heart of hearts, she’d always wanted to be a nurse. However, the few times she’d confided this desire with someone, they told her she’d have more success as an executive. But after completing this exercise, her true career passion was undeniable. Her heart was pulling her hard into nursing even though her head told her it would be costly to go back to school and difficult to let go of the prestige factor of her management career.

But once she put nursing on the table for consideration, we were able to address her concerns one by one. There was a way to marry her heart’s desire with her head’s abilities to have it all — eventually. There are numerous leadership roles available within the nursing field that will provide rich career opportunities down the road. While she pursues that long-term goal, she is enjoying her volunteer work in a nearby emergency department where she confirms each day that working in a hospital is the place for her. No prestigious management job or huge paycheck could give her more satisfaction than she receives from her patients’ grateful smiles when she provides comfort just when they need it most.

The intangible parts of a job  autonomy, collegiality, prestige, purpose  can make an even bigger impact on our overall well-being than the easy-to-count factors like salary, benefits, and vacation time. To avoid undercounting the “soft” factors, try translating them into hard numbers. The way they add up might surprise you.

What If Investors Who Held Their Shares Longer Got More Voting Power?

Harvard Business Review -

Joe Bower and Lynn Paine “had me at hello” (to quote Jerry Maguire) with their new HBR article, “The Error at the Heart of Corporate Leadership.” Laying out their data, they find that long-term oriented companies create more financial value and more jobs. In fact, if more American companies were focused on the long term, they estimate, investors would have an additional $1 trillion, workers would have an additional 5 million jobs, and the country would have more than an additional $1 trillion in GDP.

I agree with their vision of a future in which more companies focus on the long term and become more productive for the world (their findings accord with my own work on the dangers of short-termism). But I long for actions that go beyond admonitions to managers and boards to do better, that give both parties a better chance to stand up to capital markets players, like activist hedge funds, pressuring them to become too short-term focused. While no one thing can or will drive the transformation, there is one change that I think is doable and would make a real difference: holding-period-based voting rights.

My basic premise is that corporations need to make capital investments that take years — not months, weeks, days, minutes or seconds — to pay out. Hence they need capital that is with them for longer rather than shorter periods. One capital form is debt: a bond. Bonds give the debtor certainty over its ability to use the capital for a fixed period of time (unless there is a call provision written into them). Common equity is supposed to be even longer term – once it is given to the company, it notionally has the capital forever.

However, unlike a bond, common equity is not long-term/forever on predetermined, immutable terms. Because anybody can buy that equity on a stock market without permission of the company, buyers can fundamentally change the terms of that equity investment. An activist hedge fund, for example, can exert massive pressure to change the strategy and/or investment approach of the company based on its ownership of a sufficient share of the company’s equity.

Related Video The Refresher: Net Present Value Next time you're deciding about a big investment, NPV can help you make a more informed decision.

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For the creation and deployment of strategy, long-term capital is more valuable than short-term capital, plain and simple. If you give me $100 but say that you have the right to take it back or change the pattern of its usage with 24 hours notice, it isn’t nearly as valuable to me as if you say I can use it for 10 years for the purpose for which we agree it is intended before I am allowed to assist on any change in purpose or to ask for it back.

While not fully analogous, if Singapore sovereign wealth fund Temasek holds its equities for, say, 8 years on average while quantitative arbitrage hedge fund Renaissance Technologies holds them for milliseconds at a time, the Temasek capital is more valuable than Renaissance’s. And arguably, the capital of Renaissance is more valuable than “activist hedge funds” Triac or Pershing Square who will jerk around your strategy with one thing in mind – short-term trading gains.

The fundamental difference in value to the company notwithstanding, those equity dollars invested are given exactly the same rights.

Instead, we should adopt holding-period based voting rights. Each common share should give its holder one vote per day that holder has owned the share – up to 3,650 days or 10 years. So if you hold 100 shares for 10 years, you get to vote 365,000 shares. If you sell your shares to an activist hedge fund (or anybody else), they get 100 votes the day they buy the shares. If its intention is to become a long-term holder, eventually it will get 365,000 votes. If it is Pershing Square, the interests of the investors who have provided the company with more valuable capital will swamp its influence — appropriately.

The adoption of holding-period based voting rights would provide long-term shareholders with the reward they deserve for providing the most valuable kind of capital. And it would make it extremely hard for the Pershing Square’s of the world to take over effective control of companies because the minute they acquire a share, its voting rights get reduced to a single vote. This would frustrate the “arbs” (arbitrageurs) who make their returns by buying up shares and hoping to sell to the acquirer at the time of their successful takeover bid.

Critics of this idea argue that it would simply ensconce bad management. No, it wouldn’t change investors’ incentives one iota. Currently investors sell their economic ownership of a share along with one voting right to the arbs or the activists if they are unhappy with management. Under holding-period based voting rights, they sell their economic ownership of a share along with one voting right to the arb/activist if they are unhappy with management. There is no difference whatsoever.

However, if a lot of shareholders are happy with management and the activist wants to make a quick buck by gaining enough voting control to force the company to sell assets, cut R&D investment, or anything else bad for its future, this will reduce the ability of the activist to collect enough voting rights to force management to make short-term decisions.

There is no cost to anybody other than the investors in hedge funds. For everybody else in the system, it is an improvement.

Why Do IoT Companies Keep Building Devices with Huge Security Flaws?

Harvard Business Review -

Earlier this year an alarming story hit the news: Hackers had taken over the electronic key system at a luxury hotel in Austria, locking guests out of their rooms until the hotel paid a ransom. It was alarming, of course, for the guests and for anyone who ever stays at a hotel. But it came as no surprise to cybersecurity experts, who have been increasingly focused on the many ways in which physical devices connected to the internet, collectively known as the internet of things (IoT), can be hacked and manipulated. (The hotel has since announced that it is returning to using physical keys.)

It doesn’t take a great leap to imagine an IoT hostage scenario, or all of the other ways hackers could wreak havoc with the networked objects we use every day. Smart devices permeate our homes and offices. Smoke detectors, thermostats, sprinklers, and physical access controls can be operated remotely. Virtual assistants, televisions, baby monitors, and children’s toys collect and send data to the cloud. (One of the latest toy breaches, involving CloudPets teddy bears, is now the subject of a congressional inquiry.) Some smart technologies can save lives, such as medical devices that control intravenous drug doses or remotely monitor vital signs.

Insight Center

The problem is that many IoT devices are not designed or maintained with security as a priority. According to a recent study by IBM Security and the Ponemon Institute, 80% of organizations do not routinely test their IoT apps for security vulnerabilities. That makes it a lot easier for criminals to use IoT devices to spy, steal, and even cause physical harm.

Some observers attribute the failure to the IoT gold rush, and are calling for government to step in to regulate smart devices. When it comes to cybersecurity, however, regulation can be well-intentioned but misguided. Security checklists that are drafted by slow-moving government bodies can’t keep up with evolving technology and hacking techniques, and compliance regimes can divert resources and give a false sense of security. Add up all the different federal, state, and international agencies that claim a piece of the regulatory pie, and you get a mishmash of overlapping requirements that can confuse and constrain companies — but leave hackers plenty of room to maneuver.

The Obama administration pushed regulatory proposals for cybersecurity infrastructure in its early years, but eventually pivoted to a more effective risk-management approach. This was embodied by the widely acclaimed National Institute of Standards and Technology (NIST) Cybersecurity Framework, which was developed in collaboration with the industry and provides risk-based guidance and best practices that can be adapted to an organization of any size or profile. Early signs are that the Trump administration plans to continue the NIST approach.

A wise next step would be to build on that success and develop a similar framework for IoT. Rather than trying to dictate specific controls for a diverse, growing set of technologies, the framework could harmonize international best practices for IoT and help companies prioritize the most important security strategies for their organization. This is essentially what the bipartisan Commission on Enhancing National Cybersecurity recommended to the new administration in December. A framework could also serve as a much-needed coordination point for a number of fragmented IoT efforts currently under way in federal agencies.

It would be a mistake, however, for the IoT industry to wait for governments to step in. The problem is urgent, and it will become even more so as new IoT attacks come to light, as they certainly will. IoT providers can demonstrate that they are serious about security by taking some basic steps.

First, security and privacy should be incorporated into design and development. Most security testing of IoT devices occurs in the production phase, when it is too late to make significant changes. Planning and investment up front can go a long way. For example, many IoT devices share default user names and passwords that are well known and can be found with a quick Google search. Because most consumers do not change those settings, products should be designed to ship with unique credentials, or require users to set new credentials upon first use. This would thwart the easiest and most widespread method of compromising IoT devices. Just last fall, hackers used known factory credentials to infect thousands of DVRs and webcams with the Mirai botnet, which was used to cause massive internet outages.

Second, IoT devices should be able to receive software updates for their entire life span. New software vulnerabilities are often discovered after a product is released, making security patching critical to defend against threats. If there are limits to the length of time that updates can reasonably be provided, then the product should be clearly labeled with an “expiration date,” past which security will no longer be maintained.

Third, transparency to consumers should be improved. Unlike mobile phones and computers, IoT devices often operate without human supervision or visibility. Many of these objects lack screens to display messages. As with other types of product recalls, owners need to be notified when the device has a security issue and told how to apply security updates. When IoT devices are resold, there should be a simple way to conduct a factory reset to erase data and credentials. For example, IBM Security recently demonstrated how sellers of used cars can retain access to vehicles’ remote functions (like geolocation) without buyers being aware.

It is still early days in the world of IoT, but it’s a fast-moving world, with billions of new devices being connected every year. And the window on building a trustworthy ecosystem is closing. Will others follow the Austrian hotel’s example, disconnecting when their devices, and their trust, are breached? The IoT industry should not wait to find out. We can either invest now in securing that trust, and safely enjoy the benefits of this remarkable technology, or we can expect hackers to wreak more havoc and governments to intervene in a heavy-handed manner.

How to Act Quickly Without Sacrificing Critical Thinking

Harvard Business Review -

An unbridled urgency can be counterproductive and costly. If you’re too quick to react, you can end up with short-sighted decisions or superficial solutions, neglecting underlying causes and create collateral damage in the process.

But if you’re too deliberative and slow to respond, you can get caught flat-footed, potentially missing an opportunity or allowing an emergent challenge to consume you.

To balance these two extremes, you need reflective urgency — the ability to bring conscious, rapid reflection to the priorities of the moment — to align your best thinking with the swiftest course of action. In my work, coaching leaders at every level through a variety of management dilemmas, I’ve developed three strategies to practice reflective urgency:

Diagnose your urgency trap. To get started, you need to identify what’s limiting your quality thinking time — the habitual, unconscious, and often counterproductive ways that you push harder to get ahead when you feel the pressure of too many demands.

Common urgency traps include: ending one meeting prematurely, only to rush to the next one with more unfinished business; multitasking during work that requires your complete presence and full attention, which only diminishes the quality and accuracy of your output; saying yes to projects that dilute your contribution and burn your energy, when selectively saying no is the wiser choice. Traps like these keep you stuck in triage mode. In this mindset, taking time out to reflect on your intentions and actions feels like a luxury you can’t afford.

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But if you’re able to spot your trap, then you can stop the self-defeating habits that keep you in a constant state of elevated urgency.

For example, Jenna was a new manager struggling to adjust to the dueling pressures of delivering her own work, while keeping the team accountable for theirs. Trying to get it all done without any drop in performance, her urgency trap was an involuntary shift to extreme command-and-control. In her words, “Everything felt like an urgent crisis, so I acted like it was.”

This mindset triggered knee-jerk reactions to overinvolve herself in delegated work and to communicate harshly by bottom-lining every email, one-on-one conversation, and team discussion. The result was that her team felt increasingly micromanaged and less engaged in their contributions. And because Jenna’s conversations were all rushed and impersonal, she failed to deepen relationships and establish trust within the team.

To stop leading with such an acute sense of urgency, Jenna made two changes. First, she got better at learning from her own experience. When demand spiked and she felt the instinct to control things as a means of staying ahead of the curve, she got out of her own way and followed through on previous delegation. Before sending an email to demand a progress update, she paused to review the timeline and task completion agreement already in place. This helped her avoid micromanaging the team, and it freed up time for her to focus on the big picture.

Second, Jenna implemented a new communication habit to shift her leadership presence from cold and excessively direct to engaging and supportive. Before each conversation or meeting, she quietly considered two questions: What impact do I want to have on my team right now? When I walk out of the room, what words do I want them to use to describe my influence? For Jenna, these two questions were straightforward enough to start applying immediately. The reflective act of pausing, to review delegation agreements and to consider her communication impact, was enough to jolt her out of the autopilot mode fueled by her urgency trap.

Once you diagnose your own urgency trap, you can bring the same thoughtful reflection to your critical moments to disrupt the pattern.

If you’re unaware of what your trap is, answer the following prompt to explore it: “When the demands I face increase and my capacity is stretched thin, a counterproductive habit I have is….” Once you pinpoint the initial behavior, the unproductive thinking that holds it in place will be evident.

Bring focus to the right priorities. Another problem is the unconscious tendency to focus on less important work, because we enjoy it or we’re good at it, at the expense of our highest priorities. Chris Argyris, the influential MIT professor and organizational thinker, showed how routine behaviors like this can become accepted norms when we fail to recognize and challenge ourselves to address them.

This was true for Marcus, a senior leader who developed a habit of obsessing over administrative tasks. The busier he got, the more he slipped into tactical mode, in order to get things checked off his to-do list as quickly as possible. It helped him feel productive, but failing to delegate these tasks meant he never had time to focus on longer-term, strategic issues.

To shift this pattern, Marcus applied a quick reality test during pivotal moments of transition throughout his day. The task was to fill in the blanks to complete this sentence: “I’m tempted to work on…, but I know I should focus on…”

On the surface, this question seems obvious. But for Marcus, it was precisely the simplicity and ease of application that helped him combine reflection with quick action. The thoughtfulness embedded in the statement triggered a deliberative choice, one dictated not by the urgencies of the moment or easy tasks that felt gratifying to accomplish, but by his honest assessment of his highest priorities.

Avoid extreme tilts. In a perfect world, you would fluidly pivot from reflection to action, but that’s not the world you inhabit. You cannot reduce the demands you face, nor can you afford to attack them with the reckless abandon of unchecked urgency. But you can recognize that not every issue requires the same approach. Depending on the situation, you can consciously, and subtly, turn down or dial up the required elements of reflection and urgency.

Haruto was the VP of sales for a technology company. In the midst of a major new product launch, he knew that he had to think very carefully about his team’s strategy, but the pressure of impossible deadlines was constant. As a result, Haruto vacillated between the extremes of thoughtful reflection and urgent action. On some issues he flexed toward too much deliberation, got lost in the details, and became bogged down with analysis paralysis. As a result, he appeared aloof and indifferent to others, and his response to emerging issues was slow and ineffective. But with other issues, he swung toward urgency. With a mindset of “react first, think later,” Haruto spent more time cleaning up his hasty decisions than he did making them.

Haruto recognized that he needed to stop the pendulum swing and focus more on the subtle tilts toward greater urgency in some cases and a reflective stance in others. To do this, he used a 60/40 breakdown as a logic model to increase his situational agility. For each initiative, he assessed whether success relied more on urgent action or thoughtful reflection. If he determined that a 60% focus on action was required (e.g., for tactical, routine work), Haruto would shrink the time and attention devoted to the work in order to favor efficiency. But if deliberation mattered more and action was only valued at 40% (e.g., for relationship-defining moments, innovation-specific work, etc.), he expanded the time and deepened his focus to allow for dynamic thinking.

In some cases this was as simple as adding 20 minutes to an agenda to avoid the temptation to rush and leave half-considered issues on the table. In other instances it was a matter of scheduling shorter meetings, or setting self-imposed timelines to not get lost in the weeds.

As you evaluate your daily responsibilities, avoid the temptation to treat every initiative the same. Knowing that you need the best of both — and that a perfect 50/50 split is unrealistic — make the subtle tilts toward reflection and action as needed to get the balance right.

Like Jenna, Marcus, and Haruto, you can take these steps, at any time and in any sequence, to increase your capacity for reflective urgency. When you combine these microreflections with a heightened sense of urgency, your decisiveness and speed to impact will not be at the mercy of the counterproductive habits and unconscious oversights that occur when you act without your best thinking.

You go first

Seth Godin's Blog -

That's the key insight of the peer-to-peer connection economy.

Anyone can reach out, anyone can lead, anyone can pick someone else.

But if you wait for anyone, it's unlikely to happen.

It begins with you.


What Separates Goals We Achieve from Goals We Don’t

Harvard Business Review -

The importance of delaying gratification is universally recognized. Being able to forgo immediate benefits in order to achieve larger goals in the future is viewed as a key skill. For example, consider the classic “marshmallow test” experiment: children’s ability to delay eating one marshmallow so that they can get two marshmallows later is linked to a number of positive life outcomes, including academic success and healthy relationships.

But wouldn’t immediate benefits also help us follow through on our long-term goals? To explore this question, we conducted five studies, surveying 449 people, including students, gym-goers, and museum visitors. They reported their ability to persist in their long-term goals. They also told us whether they experienced immediate and delayed benefits when working towards these goals. Our paper was published in the Personality and Social Psychology Bulletin.

In one study, we asked people online about the goals they set at the beginning of the year. Most people set goals to achieve delayed, long-term benefits, such as career advancement, debt repayment, or improved health. We asked these individuals how enjoyable it was to pursue their goal, as well as how important their goal was. We also asked whether they were still working on their goals two months after setting them. We found that enjoyment predicted people’s goal persistence two months after setting the goal far more than how important they rated their goal to be.

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Yet people overestimated how much delayed benefits influenced their goal persistence. When we asked people what would help them stick with their goal in the upcoming months, they believed both immediate and delayed benefits—enjoyment and importance—mattered for their success. In actuality, delayed benefits had less influence on persistence; they mainly played a role in setting the goal in the first place.

We found this pattern—immediate benefits are a stronger predictor of persistence than delayed benefits—across a range of goals, in areas including fitness, nutrition, and education. In one study, we measured the number of minutes gym-goers spent exercising on a cardio machine. We also asked them how much they cared that their exercise improved their health (delayed benefit) and was fun (immediate benefit). Gym-goers who cared more about having a fun workout exercised longer than those who cared less about having fun. Caring more about the delayed health benefits of their exercise, such as staying fit, did not affect how many minutes they spent on a cardio machine.

A similar pattern appeared in another study we conducted measuring adherence to healthy habits over time. We approached Chicagoans who were visiting a museum and asked them to rate how much they enjoyed exercising, as well as how many hours per week they exercised over the last three months. Those who rated exercising as more fun exercised more each week over that period. The extent to which these people thought exercising was important for their health goals did not predict the amount of time they spent exercising over that period. Although people reported that exercising was both important and fun, importance did not predict their exercise behavior; having fun did.

We also asked these same museum visitors about their healthy food consumption. They rated the tastiness and importance of eating green vegetables and reported their weekly vegetable consumption. People who really liked the taste of vegetables also reported eating more servings over a one-week period. However, rating green vegetables as more important for their health did not lead to greater consumption.

This effect also appeared when we looked at University of Chicago students’ persistence in studying. Most students study to receive delayed benefits, such as good grades. But studying can also provide enjoyment if the topic is interesting. We asked students working at the University of Chicago library how much they enjoyed their study materials and how important their study materials were for success in their classes. Whereas those who enjoyed their materials more spent more time studying, there was no relationship between the importance of the materials and time spent studying. Even though students study because it is important, this is not what predicted their study behavior.

Harness Immediate Benefits to Increase Your Persistence

How can we use these findings to help people follow through with important goals? Other research we conducted, through four experiments and a sample of 800 students and adults, offers three strategies:

First, factor in enjoyment when choosing which activity to pursue to achieve your goals. For example, choosing a weight-lifting exercise based on enjoyment led gym goers to complete more repetitions of their exercise. On average, they completed 52% more repetitions of the exercise they selected based on enjoyment versus one they selected based on effectiveness. So, if you want to work out more, select a fitness class that you enjoy. If you want to succeed at work, find a work task or a work environment that you enjoy. And if you want to eat healthier, build a diet plan around healthy foods you actually like to eat.

Second, give yourself more immediate benefits as you pursue long-term goals. We found that high school students worked longer on a math assignment when they listened to music, ate snacks, and used colored pens while working. Immediate benefits make difficult tasks seem less like work and more like fun. Making activities more enjoyable, by listening to music while exercising or working in your favorite coffee shop, may help you persist in your goals.

Third, reflect on the immediate benefits you get while working toward your goal. For example, we found that people ate almost 50% more of a healthy food when they focused on the positive taste, compared with another group that focused on the health benefits. When you are pursuing a goal, seeking out the positive experience—to the extent that it offers one—may aid your persistence.

Setting a goal is the first step toward achieving the delayed outcomes you want. Yet, forgoing immediate outcomes or daily pleasures can undermine these goals. By making the experience more rewarding in the moment, you’ll have a better chance at success.

How Banks Can Compete Against an Army of Fintech Startups

Harvard Business Review -

It’s been more than 25 years since Bill Gates dismissed retail banks as “dinosaurs,” but the statement may be as true today as it was then. Banking for small and medium-sized enterprises (SMEs) has been astonishingly unaffected by the rise of the Internet. To the extent that banks have digitized, they have focused on the most routine customer transactions, like online access to bank accounts and remote deposits. The marketing, underwriting, and servicing of SME loans have largely taken a backseat. Other sectors of retail lending have not fared much better. Recent analysis by Bain and SAP found that only 7% of bank credit products could be handled digitally from end to end.

The glacial pace at which banks have moved SME lending online has left them vulnerable. Gates’ original quote contended that the dinosaurs can be ”bypassed.” That hasn’t happened yet, but our research suggests the threat to retail banks from online lending is very real. If U.S. banks are going to survive the coming wave in financial technology (fintech), they’ll need to finally take digital transformation seriously. And our analysis suggests there are strategies that they can use to compete successfully online.

Lending to small and medium-sized businesses is ready to move online

Small businesses are starting to demand banking services that have engaging web and mobile user experiences, on par with the technologies they use in their personal lives. In a recent survey from Javelin Research, 56% of SMEs indicated a desire for better digital banking tools. In a separate, forthcoming survey conducted by Oliver Wyman and Fundera (where one of us works), over 60% of small business owners indicated that they would prefer to apply for loans entirely online.

In addition to improving the experience for business owners, digitization has the potential to substantially reduce the cost of lending at every stage of the process, making SME customers more profitable for lenders, and creating opportunities to serve a broader swath of SMEs. This is important because transaction costs in SME lending can be formidable and, as our research in a recent HBS Working Paper indicates, some small businesses are not being served. Transaction costs associated with making a $100,000 loan are roughly the same as making a $1,000,000 loan, but with less profit to the bank, which has led to banks prioritizing SMEs seeking higher loan amounts. The problem is that about 60% of small businesses want loans below $100,000. If digitization can decrease costs, it could help more of these small businesses get funded.

New digital entrants have spotted the market opportunity created by these dynamics, and the result is an explosion in online lending to SMEs from fintech startups. Last year, less than $10 billion in small-business loans was funded by online lenders, a fraction compared to the $300 billion in SME loans outstanding at U.S. banks. However, the current meager market share held by online lenders masks immense potential: Morgan Stanley estimates the total addressable market for online SME lenders is $280 billion and predicts the industry will grow at a 47% annualized rate through 2020. They estimate that online lenders will constitute nearly a fifth of the total SME lending market by then. This finding confirms what bankers fear: digitization upends business models, enabling greater competition that puts pressure on incumbents. Sometimes David can triumph over Goliath. As JPMorgan Chase’s CEO, Jamie Dimon, warned in a June 2015 letter to the bank’s shareholders, “Silicon Valley is coming.”

Can banks out-compete the disruptors?

Established banks have real advantages in serving the SME lending market, which should not be underestimated. Banks’ cost of capital is typically 50 basis points or less. These low-cost and reliable sources of funds are from taxpayer-insured deposits and the Federal Reserve’s discount window. By comparison, online lenders face capital costs that can be higher than 10%, sourced from potentially fickle institutional investors like hedge funds. Banks also have a built-in customer base, and access to proprietary data on depositors that can be used to find eligible borrowers who already have a relationship with the bank. Comparatively, online lenders have limited brand recognition, and acquiring small business customers online is expensive and competitive.

But banks’ ability to use these strengths to build real competitive advantage is not a forgone conclusion. The new online lenders have made the loan application process much more customer-friendly. Instead of walking into a branch on Main Street and spending hours filling out paperwork, borrowers can complete online applications with lenders like Lending Club and Kabbage in minutes and from their laptop or phone at any hour of the day. Approval times are cut to days or, in some cases, a few minutes, fueled by data-driven algorithms that quickly pre-qualify borrowers based on a handful of data points such as personal credit scores, Demand Deposit Account (DDA) data, tax returns, and three months of bank statements. Moreover, in instances where borrowers want to shop and compare myriad options in one place, they turn to online credit brokers like Fundera or Intuit’s QuickBooks Financing for a one-stop shopping experience. By contrast, banks — particularly regional and smaller banks — have traditionally relied on manual, paper-intensive underwriting processes, which draw out approval times to as much as 20 days.

The questions banks should ask themselves

We see four broad strategies that traditional banks could pursue to compete or collaborate with emerging online players—and in some cases do both simultaneously. The choice of strategy depends on how much investment of time and money the bank is willing to make to enter the new marketplace, and the level of integration the bank wants between the new digital activities and their traditional operations.

Two of the four options are low-integration strategies in which banks contract for new digital activities in arms-length agreements, or pursue long-term corporate investments in separate emerging companies. This amounts to putting a toe in the water, while keeping current operations relatively separate and pristine.

On the other end of the spectrum, banks choose higher-integration strategies, like investing in partnership arrangements, where the new technologies are integrated into the bank’s loan application and decision making apparatus, sometimes in the form of a “white label” arrangement. The recent partnership between OnDeck and JPMorgan Chase is such an example. Some large and even regional banks have made even more significant investment to build their own digital front ends (e.g. Eastern Bank). And as more of the new fintech companies become possible acquisition targets, banks may look to a “build or buy” strategy to gain these new digital capabilities.


For banks that choose to develop their own systems to compete head-on with new players, significant investment is required to automate routine aspects of underwriting, to better integrate their own proprietary account data, and to create a better customer experience through truly customer-friendly design. The design and user experience aspect is especially out of sync with bank culture, and many banks struggle with internal resistance.

Alternatively, banks can partner with online lenders in a range ways – from having an online lender power the bank’s online loan application, to using an online lender’s credit model to better underwrite and service bank loan applications. In these options, the critical question is whether the bank wants to keep its own underwriting criteria or use new algorithms developed by its digital partner. Though the new underwriting is fast and uses intriguing new data, such as current bank transaction and cash flows, it’s still early days for these new credit scoring methods, and they have largely not been tested through an economic downturn.

Another large downside of partnering with online lenders is the significant level of resources required for compliance with federal “third party” oversight, which makes banks responsible for the activities of their vendors and partners. In the U.S., at least three federal regulators have overlapping requirements in this area, creating a dampening effect that regulatory reform in Washington could serve to mitigate.

Banks that prefer a more “arm’s-length” arrangement have the option to buy loans originated on an alternative lender’s platform. This allows a bank to increase their exposure to SME loans and pick the credits they wish to hold, while freeing up capital for online lenders. This type of partnership is among the most prolific in the online small business lending world, with banks such as JPMorgan Chase, Bank of America, and SunTrust buying assets from leading online lenders.

The familiar David vs. Goliath script of the scrappy, internet-fueled startup vanquishing the clunky, brick-and-mortar-laden incumbent is repeated so often in startup circles that it is sometimes treated as inevitable. But in the real world, sometimes David wins, other times Goliath wins, and sometimes the right solution involves a combination of both. SME lending can remain a big business for banks, but only with deliberate choices about where to play and how to win. Banks must focus on areas where they can build a distinct competitive advantage, and find ways to partner with or learn from the new innovators.

The C-Suite and IT Need to Get on the Same Page on Cybersecurity

Harvard Business Review -

A recently published global survey of C-Suite level executives and IT Decision Makers (ITDMs) revealed a large gap in assessments of cyber threats, costs and areas of responsibilities. Among the most significant disconnects:

  • 80% of the executives surveyed in the U.S. believe cybersecurity to be a significant challenge facing their business, while only 50% of ITDMs agree.
  • ITDMs estimated the average cost of a cyber breach at $27.2 million, much higher than the average $5.9 million cited by executives.
  • 50% of the executives surveyed believe the reason why an attack on their organization would succeed would be due to human error of employees, compared to 31% of ITDMs.

The research shows there is a lack of understanding when it comes to the cost of a successful breach, which many underestimate. It isn’t just about what the thieves get away with. A successful cyber attack can have far reaching implications such as impacting share price, lost business, fines — even a failed strategic investment or merger.

Insight Center

Gaps between the strategic visions of the C-suite and the real-world experiences of IT specialists should not be a surprise. They may think differently about the nature of cyber risk and of the way threats translate into business and technological risks. This is largely due to their priorities — C-suite executives have responsibility for mitigating business risk, while IT delivers the technological support that drives the business.

The most common area of agreement between these key groups is that danger lurks in cyberspace. Sixty percent of C-Suite executives and 66% of ITDMs think their businesses will be targeted for a cyber attack in the next 12 months, and both groups report that they expect the frequency and severity of attacks to increase. This is confirmation that the threat from cyber attack is now just part of the day-to-day reality of doing business in a hyper-connected world.

Organizations that take cyber security seriously should implement best practices that will help reduce the disconnects and ensure effective cyber risk management. Among them:

  • Include the C-suite in incident response table-top exercises so they fully understand their roles, and all the possible costs of an attack. Having firsthand experience of an attack, even a simulated one, means the C-suite will gain awareness that’s vital to driving a top-down security-focused culture.
  • Educate both groups — and all employees — on the need to understand their organization’s cyber exposure and how attackers can exploit information they gather from reconnaissance efforts to craft targeted attacks. It should be more than a theoretical exercise, using real examples of what can be found about the organization. For example, customer details including login credentials and account information is often for sale on the dark web. This information can be leveraged by attackers to create synthetic IDs that are often used to enable cyber crime.
  • Introduce a forward looking, strategic approach to cyber defense to deal with the reality of the likelihood of cyber attacks. This strategy must capture an appropriate balance between tools, people and processes. There is no silver bullet when it comes to protecting critical assets and technology cannot be counted on alone. You can have the latest and greatest technology in place, but it can still be vulnerable if you don’t have the right people with the correct skills as well. Furthermore, operating procedures need to be well defined and expressed to get the most from the technology. For example, security teams need to have enough bandwidth to investigate alerts that are being generated – and simply turning up the alerting threshold and thereby reducing the number of alerts is not a good way to deal with a lack of bandwidth.
  • Exploring the use of automation, where possible, in operational processes is becoming a focus as security professionals look to maximize what they can do with existing resources. To triage efficiently, security teams need as much context as possible to ascertain if an alert is important or not. This context includes internal as well as external data, such as threat-intelligence, which can provide broader context on attack groups’ tools, tactics and procedures.
  • With the continued risk of ransomware attacks, IT teams must implement an appropriate back up strategy to help mitigate the impact of these attacks. If valuable data is lost because it was encrypted by ransomware, backups can be used to restore the data without the need to pay the ransom. Data needs to be stored in protected locations to ensure that it isn’t encrypted during an attack. This back up strategy needs to be part of an organization’s broader Incident Response plan, which should capture in detail what would be done to contain and then recover from a ransomware attack.
  • Assume that at some point your organization will be breached. Review your ability to detect and respond to threats inside your network and on your endpoints. New security initiatives should focus on reducing the time it takes to discover and then contain and remediate unwanted activity on your systems. It is now broadly accepted by security thought leaders that only looking for patterns of nefarious activity derived from previously seen attacks is not sufficient to detect well-crafted targeted attacks that are likely not to have been seen before. To reduce the time it takes to detect unwanted activities in IT systems, organizations now need to evaluate the use of additional detection techniques. For example, hackers often establish command and control channels to direct their attacks. Finding these channels is crucial to uncovering unwanted activities.

As the threats evolve, it isn’t just about tracking known threats, but taking a proactive approach and working to understand new, unknown cyber threats.

An Early Warning System for Your Team’s Stress Level

Harvard Business Review -

Cat Yu for HBR

“If you can’t stand the heat, get out of the kitchen!” This had always been Michel’s response when his senior executives started “wilting under pressure” and letting him down. As the CEO of a global oil company who had risen through the ranks, Michel had faced many stressful events on off-shore rigs early in his career, and considered himself to be a tough guy with no tolerance for wimps.

But with intense media and regulatory focus on oil prices adding complexity to a current restructuring in the organization, Michel was now facing an internal crisis that he had not foreseen. His blunt approach to fixing low performers in his executive committee wasn’t working.

In the past year, two members of his team had disappeared into a “black hole” of long-term sick leave (as he thought of it). On Monday, a third person — a colleague who often picked up slack for others as well as being a source of great ideas — advised him that she had been put on leave due to stress-related burnout. Michel was annoyed with her, but also with himself. Now his team was seriously compromised. Why hadn’t he seen this coming? What was going on? He was angry about losing three team members. He himself would be ashamed of being diagnosed with burnout — or whatever it was called — and sent off for weeks of “paid vacation.”

When the head of HR met with him to discuss the situation, Michel started with his usual bluster, but it soon became apparent that he had missed many warning signals. When he heard that the developments in his team had caused a disturbing ripple effect in the company, Michel had to admit that his take-no-prisoners leadership style might be a problem.

The tipping point of distress

A recent study suggested that work-related stress in the UK in 2015-2016 accounted for 37% of all ill-health cases and 45% of all working days lost due to ill health across all industries and professions. This study identified workload pressure (including tight deadlines and too much responsibility) and lack of managerial support as the main work factors mentioned by employees causing work-related stress. This raises a long-recognized conundrum: pressure to perform is only effective to a certain, unpredictable degree. Positive stress, also known as “eustress,” helps keep people energized and alert. However, the boundary between eustress and “distress” — harmful stress — can be quickly crossed, catching managers and employees unprepared. Everyone has a tipping point — influenced by physiological as well as psychological factors — when stress or pressure leads to decreasing performance and, if not addressed, eventually to burnout.

You and Your Team Series Stress

Although workplace stress and burnout is a hot topic, it is rarely discussed in senior executive teams. Many executives like Michel think of it as a problem that affects other, weaker, people. It is often self-diagnosed as a lack of sleep — an insignificant side effect of a high-profile executive lifestyle. But there is more to it. And given our experience the cost can be enormous. Organizations lose substantial amounts of money because of bungled deals, misguided decisions, or cover-up of mistakes that can be linked to work-related stress.

Evaluating signs of stress

Inspired by aviation and medical best practices for handling crises, we set out to develop a simple yet robust protocol that could help executives like Michel and his HR director anticipate cases of potential burnout. A robust protocol is one that is easy to remember and clearly pinpoints the critical issues that must be addressed. A classic, and widely used example of such a protocol is the APGAR scoring system, introduced in 1952 by Dr. Virginia Apgar, which is used to quickly summarize the health of a newborn baby. The medical APGAR score is effective because the easy-to-recall acronym — including assessments such as Appearance, Pulse, and so on — serves as a protocol for rapidly taking stock of the newborn’s overall medical condition within minutes.

Building on the effectiveness of this type of quick assessment, we developed the Stress-APGAR barometer. Rather than being a test, survey, or assessment tool, the Stress-APGAR provides a set of guidelines that help executives think about and articulate factors that may lead to burnout.

Our Stress-APGAR acronym recalls five key areas of potential pressure overload. These are:

A for appearance: How does the person look? Does he/she seem overly tired? Has he/she been gaining or losing weight? Is there any indication of substance abuse?

P for performance: A decrease in performance, particularly over time, may be linked to increasing distress. On the other hand, a forced effort to over-perform — becoming a workaholic — is also a warning sign.

G for growth tension: Growth is a result of learning and stretch goals. Everyone is different; some people take to new challenges easily, whereas others may find them more difficult. Is the person becoming bored? Or conversely, does the person seem overwhelmed?

A for affect control: “Affect” is another word for “emotion.” Everyone has good and bad days, but most people can regulate their emotions in a way that is appropriate for the workplace. However, noticeable and lasting changes in emotional state —including emotional outbursts or high and low mood swings — can be related to an overload of physical and psychological pressure.

R for relationships: Personal relationships are an essential part of mental health. In situations of increased stress, it is possible to observe deterioration in the quality of relationships at work, including social isolation.

Stress-APGAR in practice

Stress-APGAR dimensions, when taken together, can be used as a barometer that indicates changes in a pressure system. Any sailor knows that high or low barometric pressure readings are essential data, providing information about potential danger and uncertain consequences. Similarly, if a work colleague has shown worrying changes in one or more Stress-APGAR dimension, the next step is to consider if the changes could become dangerous if ignored.

Each organization and individual is different, so we deliberately have not devised good or bad scores. But we have found that the Stress-APGAR can be used by anyone — at any level of the organization, but also family members and friends — to gather information and begin a conversation with the individual concerned.

Returning to Michel’s situation as our example, we can see that the problem festered — as it most often does — due to a reluctance to discuss stress among senior executives. Michel’s colleagues were obviously reluctant to talk to him about how his relentless pressure was affecting performance.

We asked senior executives what they would tell Michel to get him to consider a different approach. One executive who had worked in the oil industry told us: “Clearly, Michel’s approach to people is not working. He is not really listening to them. He seems to be quite tone-deaf concerning the danger signs of stress. It’s important for him to realize that people are different; that not everyone thinks like him. But given his mind-set, he may need help in becoming more familiar with the softer side of leading people.” Another executive told us: “Michel is writing off a lot of talent, and that’s really counter-productive. It’s pretty obvious: if people hate going to work, they will eventually leave. Ironically they will probably thrive once again in a better work environment — maybe with one of Michel’s competitors.”

If Michel decides to address the debilitating effect of work-place stress with his team, he could tackle what initially may be “undiscussable” by first sharing these Stress-APGAR dimensions with them. As a group, they might reach an agreement on how to act if concerns arise. By taking these fairly straightforward actions, Michel and his team could mitigate the risk of burnout in the future, and avoid the financial consequences that often follow.

The Stress-APGAR can be used over time to see whether there is an increase or decrease in the danger signs. A simple self-rating of 1-10 can be used, with the individual stating where they are today, and where they feel they could use some help to improve their score. If the individual is reluctant to discuss possible burnout, his or her colleagues could consider other, indirect actions. For example, senior team members could tell a CEO that his mood swings are affecting the way they work together. Indeed, increased empathetic attention to a person at risk can have a positive effect, reducing social isolation and eventually helping the individual to open up. Once trust is established in this way, it is often easier for the person at risk to make stress discussable instead of leaving the matter to external stress experts.

Our hope is that the Stress-APGAR could become a starting point for courageous conversations on how to create better places to work. From a sustainability perspective, it’s essential to create work environments where cases of stress imbalance are made discussable. And as Hans Selye, the father of modern stress research once said, “It is not stress that kills us, it is our reaction to it.”

If You Think Downsizing Might Save Your Company, Think Again

Harvard Business Review -

During the Great Recession of 2008, companies around the world downsized their workforces. American firms alone laid off more than 8 million workers from the end of 2008 to the middle of 2010. Even in healthier financial times, such as now, firms often downsize because it is seen as a way to reduce costs, adjust structures, and create leaner, more efficient workplaces. Despite the prevalence of downsizing, researchers and businesspeople alike continue to disagree on the viability of this common organizational practice. We add to this debate with our new research, which indicates that downsizing may actually increase the likelihood of bankruptcy.

Proponents of downsizing argue that it is an effective strategy, with benefits such as increased performance and sales. Detractors, on the other hand, point to negative consequences including performance and productivity declines, decreases in customer satisfaction, and adverse effects on remaining employees, such as increased stress. As the debate continues, high-profile firms continue to downsize, as demonstrated by recent announcements or actions by Victoria’s Secret, Lowe’s, and PepsiCo.

Our team of researchers from Auburn University, Baylor University, and the University of Tennessee, Chattanooga set out to better understand the consequences of downsizing in large, U.S.-based corporations. In our recently published work in the Journal of Business Research, we tested the theory that downsizing could lead to a host of problems that eventually increases the likelihood of bankruptcy. Among these: Downsizing firms lose valuable knowledge when employees exit; remaining employees struggle to manage increased workloads, leaving little time to learn new skills; and remaining employees lose trust in management, resulting in less engagement and loyalty. Many of these effects may have long-term consequences, like reduced innovation, that are not captured in short-term financial metrics. We sought to investigate whether these effects could increase the likelihood that firms would declare bankruptcy.

To investigate these potential consequences, we examined 2010 data from 4,710 publicly traded firms and determined whether they declared bankruptcy in the subsequent five-year period. These firms spanned 83 different industries, including the service, high technology, and manufacturing industries. We did not examine financial firms, as changes introduced by the Dodd-Frank Act changed the bankruptcy landscape for these firms. We found that 24% of our sample firms reduced their workforce by 3% or more in 2010, including Ford, Petmed Express, and Regal Cinemas.

To ensure the accuracy of our results, we controlled for known potential drivers of both downsizing and bankruptcy. These included the size of the firm, changes in market capitalization, prior performance, profitability, trajectory toward bankruptcy (using the Altman Z score), a large number of employees per sales relative to their industry peers, and other indicators of financial health. As firms might differ in number of employees they downsized, we controlled for the percentage of employees reduced in each downsizing event. We also accounted for the number of acquisitions in the previous five years (since downsizing often occurs after acquisitions) and industry differences. We further confirmed our findings across a different time period (1995–2000).

We found that downsizing firms were twice as likely to declare bankruptcy as firms that did not downsize. While downsizing may be capable of producing positive outcomes, such as saving money in the short term, it puts firms on a negative path that makes bankruptcy more likely. While not always fatal, downsizing does increase the chances that a firm will declare bankruptcy in the future.

Given this finding, we sought to understand why some firms were able to survive the negative effects of downsizing while some were not. We speculated that examining firms’ remaining resources could shed light on this question. Accordingly, we examined intangible resources (captured through Tobin’s q, a measure of the value of the firm not captured by its balance sheets), financial resources, and physical resources.

We found that having plentiful financial and physical resources did not replace the downsized employees, who fulfilled multiple roles as workers, knowledge bearers, and cultural contributors within the firm. Having ample capital is often viewed as a corporate panacea, so it was unexpected and interesting to find that financial resources did not contribute to the prevention of bankruptcy for downsizing firms.

We did find, however, that intangible resources helped to reduce the likelihood that downsizing firms would declare bankruptcy. Intangible resources can be redeployed in unique and perhaps innovative ways following downsizing. For example, existing employee knowledge can be utilized to revamp processes that have been interrupted or to replace these processes with more effective ones. Similarly, because these resources can be used in a multitude of ways, firms may be able to use them to attract partners that can fill the gaps left by downsized employees and thereby soften the blow for downsizing firms.

Our findings suggest that, prior to deciding to downsize, company leaders should consider whether any positive short-term returns from downsizing will outweigh the potentially severe long-term consequences, and examine the specifics of their resource portfolio to determine whether their firms are adequately protected from downsizing’s negative consequences. Any moves that eliminate important intangible resources may limit the ability of managers to counteract the negative effects from employee layoffs.

Given that downsizings are often part of a larger restructuring plan, managers must ensure that they retain the resources that can decrease the odds of negative outcomes. Most important, firms planning to downsize must focus carefully on their intangible resources, rather than financial or physical ones, because they will be essential if the company loses valuable employees.

Make Your Hero Suffer

Steven Pressfield Online -

[Today’s post is a revised and updated version of a favorite of mine that ran earlier in the blog’s cycle. It’s #1 in a new series starting today.]


There’s a story about Elvis:

He was about to make his first movie (“Love Me Tender”) and he was getting a little nervous. He phoned the director and asked to speak with him privately.

Elvis was worried that he’d have to smile.

“What is it, Elvis?” the director asked when they got together. “You look upset. Is there anything you want to ask me?”

“Yes,” said Elvis. “Am I gonna be asked to smile in this movie?”

The director was momentarily taken aback. No actor, he said, had ever asked him that question. “Why do ask that, Elvis?”

“I’ve been watching the movies of James Dean and Marlon Brando, and I notice that they never smile. I don’t wanna smile either.”

Have you ever noticed how the most emotionally involving books and movies all have heroes that go through hell? Cool Hand Luke, The Grapes of Wrath, the books of Matthew, Mark, Luke and John. Mildred in Mildred Pierce, Sethe in Beloved, even Scarlett O’Hara in Gone With the Wind.

One of the most powerful books I’ve ever read is The Forgotten Soldier by Guy Sajer. It’s the true story of the German retreat before the Russians on the Eastern front in WWII. Talk about suffering. You read it and you’re actually feeling sorry for the Nazis.

As writers, you and I may sometimes be tempted to go easy on our protagonists. After all, we like them. We’re rooting for them. They’re our heroes. Sometimes they’re even thinly-veiled versions of ourselves.

But giving our heroes a break is the worst thing we can do.

Instead, pour on the misery. Afflict them like Job.

Beat them up like Karl Malden did to Brando in One-Eye Jacks or Gene Hackman did to Clint Eastwood (not to mention Morgan Freeman) in Unforgiven. Torture them emotionally like Julianne Moore in Far From Heaven or Still Alice. Break their hearts like Meryl Streep in Out of Africa (or any, or all, of her other movies.)

Readers will love it.

Audiences will love it.

Think of your lead character as if he or she were an actor. Actors love to suffer. They win Oscars for it. Daniel Day-Lewis in My Left Foot. Tom Hanks for Philadelphia. Eddie Redmayne in The Theory of Everything.

Luke Skywalker suffers.

Rocket Raccoon suffers.

Even James Bond suffers.

The trick for us writers is knowing how to make our heroes suffer.

In the upcoming posts we’ll examine the storytelling principles that apply to this precept.

Principle #1:

The hero’s suffering must be on-theme.


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