Leadership

How to Make Wise People Decisions

January 15, 2016 By Nagesh Belludi Leave a Comment

Here are eight basic management principles for making wise people decisions:

Pay attention to your people decisions. These are the decisions that determine your team/organization’s performance. Hiring and coaching employees is a manager’s most important task.
For any assignment, pick people who’ve shown at least some evidence of the ability to do it well. Don’t expect them to be productive in their new role within days or weeks.
Do not give new people major assignments. First, put them into positions where expectations are known and help is available. Help them make the transition.
Set the right expectations. A manager can forestall a great deal of employee problems by proactively setting expectations.
Don’t ignore concerns until they morph into problems. Conflict can be emotionally distressing, but being decisive and doing what’s best eventually works out well for everyone.
If an employee is doing poorly, first attempt remediation and coaching. If those don’t solve his/her underperformance, it’s usually prudent to cut your losses. Giving the employee more time to improve not only wastes time and energy, but increases the mutual hostility and chances of a claim of wrongful termination.
Take responsibility for mistakes. Don’t blame the person you hire or promote for not performing. Your decision put them there.
Take your managerial duties seriously. It’s your obligation to make sure that responsible people in your organization perform. In turn, they have a right to expect you to be a competent manager.

Effective Goals Can Challenge, Motivate, and Energize

January 12, 2016 By Nagesh Belludi Leave a Comment

One of my blog readers asked me to write more about goal-setting and performance against goals. In response, I studied the work of University of Maryland’s Edwin Locke and University of Toronto’s Gary Latham, two renowned researchers on goal-setting. Here is a summary.

Goals Impact Performance in Several Ways

Goals can help direct: A person’s goals should direct his/her attention, effort, and action toward goal-relevant actions at the expense of less-relevant actions.
Goals can help motivate: A person’s goals can motivate him/her to pursue specific outcomes. The person can be motivated only when his/her goals are sufficiently challenging and can nudge him/her to put in special efforts.
Goals can help persist: A person is likely to persist at his/her efforts when his/her goal is worthy enough to attain.
Goals can trigger learning: Goals can either activate a person’s knowledge and skills that are relevant to performance or induce the person to acquire such knowledge or skills.

Best Practices for Goal-Setting and Performance

Specific, difficult, but attainable goals lead to better performance than easy, vague, or abstract goals such as the general-purpose exhortation to “do your best.” Hard goals motivate because they require a person to achieve more in order to be content with his/her own performance.
Goal specificity and performance share a positive, linear relationship. When a person’s goals are specific, they direct and energize his/her behavior far more effectively than when they are vague and unspecific.
Performance is directly proportional to the difficulty of a goal as long as a person is committed to the goal, has the requisite ability and resources to achieve the goal, and does not have conflicting goals.
Taking on excess work without access to the necessary resources to realize the goals (“overload”) can moderate the effects of goals.
A team performs best when the goals of the individuals on the team are compatible with the team’s goal. Therefore, when an individual’s goals are incompatible with his team’s, his/her contribution to the team will be subpar.
The goal need not be in focal awareness all the time. Once a goal is accepted and understood, it resides in the periphery of the person’s consciousness and serves to guide and give meaning to his/her actions.
While long-term goals are relevant and helpful, most people find short-term goals more effective because they channel a person’s immediate and direct efforts and provide quick feedback. This suggests that it’s best to divide long-term goals into concrete short-term objectives.
Self-efficacy plays a key role in the achievement of goals. A person is much more likely to buy into and pursue goals if he/she believes himself/herself to be competent enough to reach those goals. The most effective goals must therefore embrace a person’s strengths—such goals help him/her strive towards success by leveraging the best of who he/she is and what he/she can do.
One reason a person may lack self-efficacy is his/her past failures with undertaking similar goals. Such a person may believe that he/she may never reach his/her goals and should first undertake a series of small, near-term goals instead of difficult, distant goals. The person’s success with a series of smaller goals can boost his/her confidence and can inspire him/her to undertake larger goals. For example, a chain-smoker will find the goal of smoking cessation daunting. He should therefore focus on smaller goals like gradually cutting down the number of cigarettes he smokes every day. Experiences of goal achievement can build up momentum to tackle the larger goal.
Goals are not effective by themselves. Feedback is the most important moderator of goal-setting because it tracks the progress of performance towards goals and creates new sub-goals. If a person finds his/her progress towards a goal unsatisfactory, the feedback he/she receives can drive corrective efforts to develop new skills or pursue the goal in a new way.

Three Leadership Lessons from Ron Johnson’s Debacle at J.C. Penney

April 11, 2013 By Nagesh Belludi Leave a Comment

Monday’s dismissal of J.C. Penney CEO Ron Johnson comes as no surprise.

In late 2011, J.C. Penney had hired Ron Johnson from Apple to revive the sagging fortunes of the storied retailer. He was deemed as a retailing genius who had proved himself by creating Target’s hip-yet-inexpensive cachet and then by leading Apple’s highly lucrative retail stores.

During his 17-month tenure, Ron Johnson had poured hundreds of millions into rapidly remaking the retailer. Mostly, his attempt at the high-stakes makeover of J.C. Penney hadn’t worked. Revenue deteriorated sharply, feedback from customers and employees was persistently negative, and the J.C. Penney share price declined by over 50%.

Lesson 1: Don’t disenfranchise your traditional customer base

Over the years, J.C. Penney’s economic moat had declined considerably. J.C. Penney lost customers to higher-end retailers and specialty stores who had started to offer better value at lower prices. At the other end, Wal-Mart and Target wooed price-sensitive customers with better-than-basic goods.

When retailing relatively undifferentiated merchandise, one of the key levers to revenue is discounts and promotions. Like other retailers, J.C. Penney had trained its customers to buy largely when its stores had a sale. Shoppers recognized that J.C. Penney’s tag prices were made-up to be marked down during sales events and were fixated on coupons, discounts, and promotions. Shoppers had come to regard of shopping at J.C. Penney as a treasure hunt for significantly marked-down merchandise.

Within weeks of joining J.C. Penney, Ron Johnson observed that three-quarters of everything sold had been discounted by at least 50% from list price. Instead of marking up the tag prices and then using deep discount sales to attract customers, he initiated a new “fair and square every day” pricing strategy. By offering good prices every day he attempted to change customer bahavior and dissuade them from waiting for markdowns. Further, by minimizing sales, promotions, and coupons, Ron Johnson eliminated the thrill of pursuing markdowns, a key characteristic of J.C. Penney’s conventional customer. When the pricing strategy flopped, Ron Johnson reinstated sales and coupons, and even brought back “fake prices.” The successive changes confused employees and customers. Additionally, J.C. Penney stopped carrying some traditional brands that many of its long-time customers had favored and injected trendy brands to appeal to younger customers. Ron Johnson’s team created exciting marketing and advertising that was seen as too edgy and further confused traditional customers.

Lesson 2: Don’t be so hubristic as to wager big on hunches without prototyping

At Apple, Steve Jobs frequently shunned extensive consumer research because he had the exceptional genius to introduce the right products, with the right features, at the right time. Drawing from his success at the helm of Apple stores, Ron Johnson was perhaps overconfident that he had all the right answers and could therefore forego the crucial feedback from employees and customers before embarking to “revolutionize retailing” by “teaching people how to shop on their terms” and “fundamentally disrupting the traditional retailing paradigm.”

The gravest error Ron Johnson made at J.C. Penney was not testing his new pricing strategy in a handful of stores. According to this WSJ article, when a colleague proposed a limited store-test of the new pricing strategy, Johnson allegedly responded, “We didn’t test at Apple.”

Clearly, what Ron Johnson thought of value was not what its customers saw as value. As a result, J.C. Penney overlooked the reality that, for its customers, pursuing discounted goods on sale was part of the fun of shopping at J.C. Penney. Ron Johnson set about to tear down an old business model before he had switched over to a new business model without prototyping.

Ron Johnson possibly had a compelling out-of-the-box vision for J.C. Penney. However, he did not stay closely connected to J.C. Penney’s customers and employees before the launch of a radical strategic change. It is challenging to be an effective leader when customers and employees don’t understand and buy major changes.

Incremental improvements to J.C. Penney’s merchandising strategy through extensive prototyping and measured makeover could have provided the opportunity to learn through trialing and encouraged ownership of the strategy by employees, especially those in customer-facing roles.

Lesson 3: Beware of the “Halo Bias” in rating leaders

We tend to attribute a manager/leader’s success to his apparent genius and we overlook the role of the context (team, product, industry, timing, and luck) in his success. Thus, we come to expect him to have the same success in a different context. We anticipate that the very tactics and devices that proved successful in the past would work for him in the new context. (See my earlier article on the halo and horns biases in rating people.)

Ron Johnson certainly proved his retailing genius by first creating Target’s hip-yet-inexpensive brand image and then, for ten years, by leading Apple’s highly lucrative retail stores where he most famously introduced the Genius Bar concept. Nevertheless, his experience with selling premium-priced products at full price all the time with no promotions at the Apple stores did not translate well to J.C. Penney’s undifferentiated merchandise and its customer base of bargain hunters.

In June 2011, J.C. Penney stock spiked by 17.5% when the company announced Ron Johnson’s appointment as CEO. Wall Street saw in him a proven leader with the silver bullet. Investors got overly optimistic that he would remake the embattled retailer and overlooked the fact that J.C. Penney lacked the brand image of Apple and its most-sought-after products. Alas, J.C. Penney stock slid by over 50% during Ron Johnson’s 17-month tenure. The golden boy of retail never hit his stride.

Leadership: Stay out of the kitchen if you can’t handle the heat

April 8, 2013 By Nagesh Belludi Leave a Comment

Not everybody is prepared to endure the demanding responsibilities of a leadership role:

It’s tough to challenge status quo and to pilot your organization forward into unfamiliar territory
It’s tough to be long-term oriented and to propose transformative ideas that may fall eventually short of expectations
It’s tough to see around the corner and to rely on gut intuitions to develop an “end state” vision
It’s tough to prioritize decisiveness over inclusivity and to take tough—and sometimes unpopular—decisions
It’s tough to resist the urge to settle and to avoid letting circumstances define your strategy
It’s tough to gain strong credibility and communicate the direction and priorities of your organization
It’s tough to face censure and be verbally graceful under fire
It’s tough to be decisive, to acknowledge setbacks, and to change course midstream, if required
It’s tough to rationalize seemingly irrational actions and to ask for resources
It’s tough to be tough-minded without being inflexible or insensitive
It’s tough to do the right thing while resisting the temptation to please your constituents
It’s tough to say no when you must; it’s tough to say yes when you can’t

If you cannot come to terms with the pressures of a leadership role, perhaps leadership may be the wrong kind of work for you.

It is acceptable to be an individual contributor; although you must still develop your leadership skills to succeed in any role in the modern organization.

The Duplicity of Corporate Diversity Initiatives

February 5, 2013 By Nagesh Belludi Leave a Comment

Corporate Diversity Initiatives Even after years of diversity initiatives in corporate America, “inclusion” is more about meeting the numbers on gender, race, and other obvious differences, and less about pursuing intellectual, ideological, pedagogical, and stylistic diversity within teams and organizations.

Overall, the workforce diversity initiatives have succeeded in deterring explicit discriminatory behavior and preventing employee lawsuits. However, to make the representation numbers look good, corporate diversity initiatives have largely resulted in exclusionary practices for the preferential hiring and promoting of underrepresented demographic groups, much to the chagrin of those who are more competent, yet arbitrarily overlooked because the latter belong to groups that are numerically “overrepresented”—reverse discrimination, indeed. For fear of reprisal, the shortchanged majority is reluctant to speak out against this veiled unfairness or to call attention to the dichotomy between the ideals and the practice of affirmative action in the workplace.

Even if nearly all corporate mission statements extol the virtues of “valuing differences,” managers stifle individuality down in the trenches. They are less willing to be receptive of distinctive viewpoints and seek to mold their employees to conform to the existing culture of the workplace and to comply with the existing ways of doing things. Compliant, acquiescent employees who look the part are promoted in preference to exceptional, questioning employees who bring truly different perspectives to the table. The nail that sticks its head up indeed gets hammered down.

Performance Appraisal Systems “Don’t Meet Expectations”

November 26, 2012 By Nagesh Belludi Leave a Comment

Across the corporate world, the annual performance appraisal system has been reduced to a perfunctory exercise to “do what HR needs and check-the-box,” and produce paperwork to weed out the laggards and reduce liability against discrimination lawsuits. So much so that one company I know recently distributed copies of the book “Perfect Phrases for Performance Reviews” to hundreds of its managers to help “use relevant phrases and standardize the vocabulary” and “ease the whole process.”

Empirical evidence suggests that, taken as a whole, the annual performance appraisal system has failed to “meet expectations.” It produces no durable improvements in employee behavior and seldom assists the employees meaningfully with career development. Nor does it have a discernible impact on organizational development. Thanks to a system that is highly subjective and easy to game, this annual ritual has become a stressful exercise for managers and employees alike.

At many companies, performance appraisals center too much on filling out forms. The actual performance appraisal meetings tend to be uncomfortable encounters for both managers and employees. Much time during these meetings is devoted to disputing the self-evaluations of employees, summoning up their failings, and defending the employee rankings previously determined by a “consensus” process administered by HR. Besides, during the ranking process, managers tend to overstate the accomplishments of their own employees and put down other employees—after all, managers do not want to incriminate themselves and admit failure in managing employees as successfully as their managerial peers might assert.

Core to this problem is that most managers fail to understand that employee performance management is about establishing relationships and ensuring effective communication about how employees, managers, teams, and organizations can succeed and create enduring value.

Performance management should not be limited to just once a year during the annual performance appraisal. Helping employees to reflect on their performance and learn from their mistakes, and coaching them should be part of the everyday interactions between employees and their managers. This way, the employees can solicit feedback promptly, know where they stand, and make small ongoing improvements. The managers do not have to wait until the appraisal time and then make an extraordinary attempt to convince their employees to correct themselves. The constant communication can eliminate any surprises for both the manager and the employee during the formal performance appraisal exercise.

As part of this informal practice, the managers can keep a diary on employee performance. Recording significant and relevant examples of an employee’s performance (achievements and shortcomings) can help the managers write objective performance summaries. In addition to diminishing the recency bias, the awareness that a manager might write up opinions may persuade an employee to pay attention.

For now, HR can develop a “Performance Improvement Plan” to overhaul the performance appraisal system and truly help improve individual and organizational performance.

More Ideas for Career Success

Why Mergers Tend to Fail

August 31, 2010 By Nagesh Belludi 1 Comment

Corporate mergers tend to fail because of conflicting corporate cultures

Many corporate mergers and acquisitions (M&As) fail to realize their wished-for synergies, and eventually fall short of producing value to the stakeholders. Some years ago, a KPMG survey estimated that 83 percent of all mergers fail to create value and half may actually destroy value.

M&As invariably produce disappointing results because of a variety of reasons. One of the principal reasons has to do with the failure of management to integrate successfully the operating cultures of the individual companies. During M&A deals, the due diligence processes tend to focus more on the corporate matters (market synergies, product or service offerings, financial projections, legal and regulatory matters, etc.) and overlook the organizational and cultural challenges.

Integrating Conflicting Corporate Cultures

Undoubtedly, the biggest barrier of post-merger integration is the conflicting corporate cultures of the individual companies. Management consultant Rick Maurer likens corporate mergers to the marriage of two single parents each with their own children—“just because mom and dad are so in love, they fail to see that the kids don’t get along.”

During a merger, two organizations with unique cultures cease to exist and a new organization is supposed to establish. The erstwhile individual organizations simply will not let go of the past and move on. In time, when the “stronger” partner tries to thrust its culture on the new combined organization, employees of the “weaker” partner resist change. This impairs cooperation among employees, as was case with AT&T’s unsuccessful acquisition of NCR in the early ’90s.

Forcing Employees to Mesh

If cultural differences are far apart, the merged companies often fail to compromise and stick to a middle ground. The ill-fated Daimler-Chrysler merger suffered immensely from differences in the engineering and corporate cultures of the supposedly equal partners, Daimler-Benz and Chrysler Corporation, as well from differences in the national cultures of Germany and the United States. Within years of the merger, the dominance of the Daimler culture did not go well with employees in the United States. In December 2001, DaimlerChrysler CEO Jürgen Schrempp exclaimed, “What happened to the dynamic, can-do cowboy culture I bought”

Conflicting corporate cultures between US Airways and America West Combining two individual cultures and intricate administrative processes is very difficult to execute and manage successfully. Forcing employees to mesh behind the scenes is often ineffective because differences in organizational cultures are indiscernible to the top management. Take, for example, the merger of the Phoenix-based America West and Washington, D.C area-based US Airways in 2005. Many years into the merger, US Airways’s managers spoke of the “east side” (referring to the former US Airways) and the “west side” (referring to America West.) The unions continued to squabble over pilot seniority. Even though the company obtained a single operating certificate, two distinct cultures functioned internally resulting in poor employee morale, unhappy customers, and unpredictable financial performance.

Retaining Key Talent

Sagging morale and employee disorientation about job insecurity, company structure, seniority, decision-making processes, and promotion and growth opportunities often constitute another barrier to successful post-merger integration. Employees of the “weaker” partner or the acquired company tend to distrust the management of the “stronger” partner or the acquiring company. Fears of layoffs and new power equations in the merged entities often result in the exodus of key talent from the acquired company.

Forcing employees to mesh » why mergers fail

Engaging the Rank-and-file

“Human due diligence is every bit as important as financial due diligence. Ultimately, every deal will succeed or fail based on the collective efforts of the individuals who make it up.”
* David Harding

The success or failure of a merger results not from what happens at the top management level, but from what happens at the rank-and-file level. The importance of engaging the rank-and-file employees in the merger process and retaining key talent during the initial transition period cannot be overstated.

Recommended Resources

Bain consultant David Harding offers insights into M&A best practices in his book, “Mastering the Merger: Four Critical Decisions That Make or Break the Deal”
Wally Bock illustrates the importance of integrating corporate cultures with case studies from Chevron + Gulf Oil and HP + EDS
Carol Hymowitz’s WSJ article “In Deal-Making, Keep People in Mind” lists cultural problems that plagued other mergers

Any Crisis Calls for Constant, Candid Communication

July 3, 2010 By Nagesh Belludi Leave a Comment

As the current crises at Toyota and BP highlight, how you respond to a problem or crisis is the ultimate test of your leadership character. Knowing how to step up your communications efforts to the right levels during disorder can be a powerful tool in managing a crisis. Here are seven key lessons for communicating during crises.

Be visible. Communicate and lead from the front. In a crisis, your key constituencies (your board, management, team, government, or the public) insist on hearing from the leader. Stay engaged and maintain consistency of purpose and action. Keep all the lines of communication open.
Communicate in real-time and explain your position. If you do not communicate frequently with your key constituents, somebody else will. In the absence of information, people will develop their own perceptions of the problem and its implications. Keeping your constituencies well informed diffuses many suspicions and uncertainties.
Be transparent and forthright right from the beginning. Face the realities of the problem and its potential consequences. Acknowledge what you know about the problem or crisis and go into detail about what steps you are taking in response. Proactive communication is reassuring and prevents perceptions of negligence and evasion from becoming realities.
Research thoroughly the challenges you face and your options for remedial actions. Be prepared to describe everything that matters at each moment. Carefully administer your communication plan with due consideration to possible litigations and penalties.
Be objective and calm. Avoid engaging in finger pointing and playing pass-the-parcel. Avoid criticizing and discrediting the victims or critics. Continuously verbalize empathy and responsibility, and announce plans for early resolutions and restitution.
Remember that your attitude sets the tone for the rest of your organization. If you take a defensive position, play victim or engage in finger pointing, the rest of your organization will react the same way. Through your communications, set a positive tone to build confidence within your organization and promote constructive responses.
As soon as the crisis dissolves, research and communicate opportunities to make fundamental changes to improve your organization. Reiterate your core values and missions. Revamp internal practices as necessary and follow through on all initiatives to rebuild your credibility. Consider organizational changes and new processes for managing future crises.

Measuring Leadership Performance in Context

September 9, 2009 By Nagesh Belludi Leave a Comment

In this article from Wharton School of the University of Pennsylvania, US presidential historian Richard Norton Smith offers ten guidelines to evaluate presidents. These guidelines apply to assessing leadership performance as well.

History’s take on presidential performance is subject to change. Presidents can only be understood within the context, conventions and limitations of their time. Each generation needs to revisit its assumptions in light of new evidence, the performance of succeeding presidents and the perspective that comes with time.

Frequently, leadership assessments disregard the fact that leadership is contextual. The common belief that Mahatma Gandhi was opposed to modernity and technology ignores Gandhi’s proposal for rural development through means such as homespun cloth, cottage industry and self-sufficiency in the just-independent India. Six decades hence, this idea now seems obviously bizarre.

Furthermore, ideas, competencies, and actions that are relevant in one context can be inhibiting in others. Comparisons of General Electric’s CEO Jeffrey Immelt to his predecessor, the legendary Jack Welch, in terms of shareholder return ignore the fact that Jack Welch’s tenure intersected with the prosperous Regan- and Clinton-presidencies and Jeffrey Immelt has faced two of the worst slowdowns in modern history.

Some of the key intellectual traits demanded of a leader—risk-taking, vision and execution, organizational development, etc.—may not see fruition until long after the leader’s tenure. Hence, a broad, sincere assessment of a leader’s performance can happen only years after his tenure.

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Leadership

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Goals Impact Performance in Several Ways

Best Practices for Goal-Setting and Performance

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Lesson 1: Don’t disenfranchise your traditional customer base

Lesson 2: Don’t be so hubristic as to wager big on hunches without prototyping

Lesson 3: Beware of the “Halo Bias” in rating leaders

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More Ideas for Career Success

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Integrating Conflicting Corporate Cultures

Forcing Employees to Mesh

Retaining Key Talent

Engaging the Rank-and-file

Recommended Resources

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