All the news that's hip to print - Something to think about

All the news that's hip to print - Something to think about

Why we are shallow
HINDSIGHT By F Sionil Jose (The Philippine Star)
September 12, 2011

I was visited by an old Asian friend who lived here 10 years ago. I was floored by his observation that though we have lots of talented people, as a whole, we continue to be shallow.

Recently, I was seated beside former Senator Letty Shahani, PhD in Comparative Literature from the Sorbonne, watching a medley of Asian dances. The stately and classical Japanese number with stylized movements which perhaps took years to master elicited what seemed to me grudging applause. Then, the Filipino tinikling which any one can learn in 10 minutes; after all that energetic jumping, an almost standing ovation. Letty turned to me and asked, “Why are we so shallow?”

Yes, indeed, and for how long?

This is a question which I have asked myself, which I hope all of us should ask ourselves every so often. Once we have answered it, then we will move on to a more elevated sensibility. And with this sensibility, we will then be able to deny the highest positions in government to those nincompoops who have nothing going for them except popularity, what an irresponsible and equally shallow media had created. As my foreign friend said, there is nothing to read in our major papers.

Again, why are we shallow?

There are so many reasons. One lies in our educational system which has diminished not just scholarship but excellence. There is less emphasis now on the humanities, in the study of the classics which enables us to have a broader grasp of our past and the philosophies of this past. I envy those Hindus and Buddhists who have in their religion philosophy and ancestor worship which build in the believer a continuity with the past, and that most important ingredient in the building of a nation — memory.

Sure, our Christian faith, too, has a philosophical tradition, particularly if we connect it to the ancient Greeks and Romans. Remember, the first Bible was in Greek. But Greek, Latin and the classics in these languages are no longer taught in our schools the way these are still studied in many universities in Europe.

We are shallow because we are mayabang, ego driven, and do not have the humility to understand that we are only human, much too human to mistake knowledge for wisdom. We can see this yabang in some of our public commentators, particularly on TV — the know-it-alls who think that because they have so much knowledge — available now on the Web at the click of a button — they can answer every question posed to them. What they do not realize is that knowledge is not wisdom. Until they recognize that important if sometimes awful difference, they will continue to bluster their way to the top at our expense because we, the people, will then have to suffer their arrogance and ignorance.

We are shallow because with this arrogance, we accept positions far beyond our competence. Because there is no critical tradition in this country — a tradition which will easily separate the chaff from the grain, we cannot recognize fakery from the real goods. That outstanding scholar, Wilfredo Villacorta, is a rare bird indeed; when offered a high position in government, he refused it because he knew he was not qualified for the job. Any other mayabang academic would have grabbed it although he knows he can’t handle it. And so it happens always — the nitwits who hold such high positions stubbornly hold on to their posts, bamboozling their subordinates who may be brighter than them for that is the only way those who are inferior feel they can have respect.

On the other hand, the intelligent person will be aware of his shortcomings. He does not hesitate to ask the opinion of those who know more than him on particular subjects. If he is a government hierarch, he will surround himself with advisers who he knows can supply him with guidance and background possessing as they do more knowledge, experience and wisdom than him. Such an official is bound to commit fewer mistakes because he knows himself.

We are shallow because we lack this most important knowledge — who we are and the limits to what we can do.

We also lack the perception, and the courage, for instance, to deny these religious quacks and the thousands who listen and believe in them. Sure, religion is the opium of the masses as Marx said. So then, how can we prevent the masa from taking this poison without recognizing their right to make fools of themselves? Again, shallowness because the good people are silent. Ubi boni tacent, malum prosperat. Where good men are silent, evil prospers.

This shallowness is the impediment to prosperity, to justice, and men of goodwill should emphasize this, take risks even in doing so. As the late Salvador P. Lopez said, “It is better to be silenced than to be silent.”

We are shallow because our media are so horribly shallow. Every morning, I peruse the papers and there is so little to read in them. It is the same with radio — all that noise, that artifice.

I turn on the TV on prime time and what do I get? Five juvenile commentators gushing over the amors of movie stars, who is shacking up with whom. One of the blabbering panelists I distinctly remember was caught cheating some years back at some movie award. How could she still be on TV after that moral destruct? And the telenovelas, how utterly asinine, bizarre, foolish, insipid moronic and mephitic they are! And there are so many talented writers in our vernaculars and in English as the Palanca Awards show every year — why aren’t they harnessed for TV? Those TV moguls have a stock answer — the ratings of these shows are very high. Popularity not quality is their final arbiter. They give our people garbage and they are now giving it back to all of us in kind! So I must not be blamed if, most of the time, I turn on BBC. Aljazeera, rather than the local TV channels. It is such a pleasure to read The New York Times, the San Jose Mercury News, the Washington Post, to listen to “Fresh Air” on US public radio and public TV where my ever-continuing thirst for knowledge (and good entertainment) is quenched.

We are shallow because we don’t read. I go to the hospital on occasion — the long corridor is filled with people staring into the cosmos. It is only I who have brought a book or a magazine. In Japanese cities, in Korea — in the buses and trains, young and old are reading, or if they are not holding books and magazines, they are glued to their iPhones where so much information is now available.

In these countries and in Western cities, the bookshops are still full, but not so much anymore because the new communications technologies are now available to their masa. How I wish my tiny bookshop or any Filipino bookshop for that matter would be filled with people. I’ll make an exception here: BookSale branches are always full because their books are very cheap. But I would still ask: what kind of books do Filipinos buy?

We are shallow because we have become enslaved by gross materialism, the glitter of gold and its equivalents, for which reason we think that only the material goods of this earth can satisfy us and we must therefore grab as much as can while we are able. Enjoy all these baubles that we have accumulated; sure, it is pleasurable to possess such artifacts that make living trouble free. And that old anodyne: “Man does not live by bread alone,” who are the thinking and stubborn few who believe in it?

I hope that those who read this piece still do.

An Awesome Book of Thanks!

An Awesome Book of Thanks!

Branding in the Digital Age:�You’re Spending Your Money in All the Wrong Places - Harvard Business Review

Branding in the Digital Age:�You’re Spending Your Money in All the Wrong Places - Harvard Business Review

Branding in the Digital Age: You’re Spending Your Money in All the Wrong Places

by David C. Edelman

The Idea in Brief

Consumers today connect with brands in fundamentally new ways, often through media channels that are beyond manufacturers’ and retailers’ control. That means traditional marketing strategies must be redesigned to accord with how brand relationships have changed.

Once, a shopper would systematically winnow his brand choices to arrive at a final selection and complete his engagement by making a purchase. Now, relying heavily on digital interactions, he evaluates a shifting array of options and remains engaged with the brand through social media after a purchase.

Smart marketers will study this “consumer decision journey” for their products and use the insights they gain to revise strategy, media spend, and organizational roles.

Artwork: Alex MacLean, Untitled, 2010, photograph, Atlantic City, New Jersey

To see how one company developed and implemented its CDJ, please read "Aligning with the Consumer Decision Journey."

The internet has upended how consumers engage with brands. It is transforming the economics of marketing and making obsolete many of the function’s traditional strategies and structures. For marketers, the old way of doing business is unsustainable.

Consider this: Not long ago, a car buyer would methodically pare down the available choices until he arrived at the one that best met his criteria. A dealer would reel him in and make the sale. The buyer’s relationship with both the dealer and the manufacturer would typically dissipate after the purchase. But today, consumers are promiscuous in their brand relationships: They connect with myriad brands—through new media channels beyond the manufacturer’s and the retailer’s control or even knowledge—and evaluate a shifting array of them, often expanding the pool before narrowing it. After a purchase these consumers may remain aggressively engaged, publicly promoting or assailing the products they’ve bought, collaborating in the brands’ development, and challenging and shaping their meaning.

Consumers still want a clear brand promise and offerings they value. What has changed is when—at what touch points—they are most open to influence, and how you can interact with them at those points. In the past, marketing strategies that put the lion’s share of resources into building brand awareness and then opening wallets at the point of purchase worked pretty well. But touch points have changed in both number and nature, requiring a major adjustment to realign marketers’ strategy and budgets with where consumers are actually spending their time.

Block That Metaphor

Marketers have long used the famous funnel metaphor to think about touch points: Consumers would start at the wide end of the funnel with many brands in mind and narrow them down to a final choice. Companies have traditionally used paid-media push marketing at a few well-defined points along the funnel to build awareness, drive consideration, and ultimately inspire purchase. But the metaphor fails to capture the shifting nature of consumer engagement.

In the June 2009 issue of McKinsey Quarterly, my colleague David Court and three coauthors introduced a more nuanced view of how consumers engage with brands: the “consumer decision journey” (CDJ). They developed their model from a study of the purchase decisions of nearly 20,000 consumers across five industries—automobiles, skin care, insurance, consumer electronics, and mobile telecom—and three continents. Their research revealed that far from systematically narrowing their choices, today’s consumers take a much more iterative and less reductive journey of four stages: consider, evaluate, buy, and enjoy, advocate, bond.

Block That Metaphor

Then: The Funnel Metaphor

For years, marketers assumed that consumers started with a large number of potential brands in mind and methodically winnowed their choices until they’d decided which one to buy. After purchase, their relationship with the brand typically focused on the use of the product or service itself.

Now: The Consumer Decision Journey

New research shows that rather than systematically narrowing their choices, consumers add and subtract brands from a group under consideration during an extended evaluation phase. After purchase, they often enter into an open-ended relationship with the brand, sharing their experience with it online.

Consider & Buy

Marketers often overemphasize the “consider” and “buy” stages of the journey, allocating more resources than they should to building awareness through advertising and encouraging purchase with retail promotions.

Evaluate & Advocate

New media make the “evaluate” and “advocate” stages increasingly relevant. Marketing investments that help consumers navigate the evaluation process and then spread positive word of mouth about the brands they choose can be as important as building awareness and driving purchase.

Bond

If consumers’ bond with a brand is strong enough, they repurchase it without cycling through the earlier decision-journey stages.

Consider.

The journey begins with the consumer’s top-of-mind consideration set: products or brands assembled from exposure to ads or store displays, an encounter at a friend’s house, or other stimuli. In the funnel model, the consider stage contains the largest number of brands; but today’s consumers, assaulted by media and awash in choices, often reduce the number of products they consider at the outset.

Evaluate.

The initial consideration set frequently expands as consumers seek input from peers, reviewers, retailers, and the brand and its competitors. Typically, they’ll add new brands to the set and discard some of the originals as they learn more and their selection criteria shift. Their outreach to marketers and other sources of information is much more likely to shape their ensuing choices than marketers’ push to persuade them.

Buy.

Increasingly, consumers put off a purchase decision until they’re actually in a store—and, as we’ll see, they may be easily dissuaded at that point. Thus point of purchase—which exploits placement, packaging, availability, pricing, and sales interactions—is an ever more powerful touch point.

Enjoy, advocate, bond.

After purchase, a deeper connection begins as the consumer interacts with the product and with new online touch points. More than 60% of consumers of facial skin care products, my McKinsey colleagues found, conduct online research about the products after purchase—a touch point entirely missing from the funnel. When consumers are pleased with a purchase, they’ll advocate for it by word of mouth, creating fodder for the evaluations of others and invigorating a brand’s potential. Of course, if a consumer is disappointed by the brand, she may sever ties with it—or worse. But if the bond becomes strong enough, she’ll enter an enjoy-advocate-buy loop that skips the consider and evaluate stages entirely.

The Journey in Practice

Although the basic premise of the consumer decision journey may not seem radical, its implications for marketing are profound. Two in particular stand out.

First, instead of focusing on how to allocate spending across media—television, radio, online, and so forth—marketers should target stages in the decision journey. The research my colleagues and I have done shows a mismatch between most marketing allocations and the touch points at which consumers are best influenced. Our analysis of dozens of marketing budgets reveals that 70% to 90% of spend goes to advertising and retail promotions that hit consumers at the consider and buy stages. Yet consumers are often influenced more during the evaluate and enjoy-advocate-bond stages. In many categories the single most powerful impetus to buy is someone else’s advocacy. Yet many marketers focus on media spend (principally advertising) rather than on driving advocacy. The coolest banner ads, best search buys, and hottest viral videos may win consideration for a brand, but if the product gets weak reviews—or, worse, isn’t even discussed online—it’s unlikely to survive the winnowing process.

The second implication is that marketers’ budgets are constructed to meet the needs of a strategy that is outdated. When the funnel metaphor reigned, communication was one-way, and every interaction with consumers had a variable media cost that typically outweighed creative’s fixed costs. Management focused on “working media spend”—the portion of a marketing budget devoted to what are today known as paid media.

This no longer makes sense. Now marketers must also consider owned media (that is, the channels a brand controls, such as websites) and earned media (customer-created channels, such as communities of brand enthusiasts). And an increasing portion of the budget must go to “nonworking” spend—the people and technology required to create and manage content for a profusion of channels and to monitor or participate in them.

Launching a Pilot

The shift to a CDJ-driven strategy has three parts: understanding your consumers’ decision journey; determining which touch points are priorities and how to leverage them; and allocating resources accordingly—an undertaking that may require redefining organizational relationships and roles.

One of McKinsey’s clients, a global consumer electronics company, embarked on a CDJ analysis after research revealed that although consumers were highly familiar with the brand, they tended to drop it from their consideration set as they got closer to purchase. It wasn’t clear exactly where the company was losing consumers or what should be done. What was clear was that the media-mix models the company had been using to allocate marketing spend at a gross level (like the vast majority of all such models) could not take the distinct goals of different touch points into account and strategically direct marketing investments to them.

The company decided to pilot a CDJ-based approach in one business unit in a single market, to launch a major new TV model. The chief marketing officer drove the effort, engaging senior managers at the start to facilitate coordination and ensure buy-in. The corporate VP for digital marketing shifted most of his time to the pilot, assembling a team with representatives from functions across the organization, including marketing, market research, IT, and, crucially, finance. The team began with an intensive three-month market research project to develop a detailed picture of how TV consumers navigate the decision journey: what they do, what they see, and what they say.

What they do.

Partnering with a supplier of online-consumer-panel data, the company identified a set of TV shoppers and drilled down into their behavior: How did they search? Did they show a preference for manufacturers’ or retailers’ sites? How did they participate in online communities? Next the team selected a sample of the shoppers for in-depth, one-on-one discussions: How would they describe the stages of their journey, online and off? Which resources were most valuable to them, and which were disappointing? How did brands enter and leave their decision sets, and what drove their purchases in the end?

The research confirmed some conventional wisdom about how consumers shop, but it also overturned some of the company’s long-standing assumptions. It revealed that off-line channels such as television advertising, in-store browsing, and direct word of mouth were influential only during the consider stage. Consumers might have a handful of products and brands in mind at this stage, with opinions about them shaped by previous experience, but their attitudes and consideration sets were extremely malleable. At the evaluate stage, consumers didn’t start with search engines; rather, they went directly to Amazon.com and other retail sites that, with their rich and expanding array of product-comparison information, consumer and expert ratings, and visuals, were becoming the most important influencers. Meanwhile, fewer than one in 10 shoppers visited manufacturers’ sites, where most companies were still putting the bulk of their digital spend. Display ads, which the team had assumed were important at the consider stage, were clicked on only if they contained a discount offer, and then only when the consumer was close to the buy stage. And although most consumers were still making their purchases in stores, a growing number were buying through retail sites and choosing either direct shipping or in-store pickup.

The research also illuminated consumers’ lively relationships with many brands after purchase—the enjoy-and-advocate stage so conspicuously absent from the funnel. These consumers often talked about their purchases in social networks and posted reviews online, particularly when they were stimulated by retailers’ postpurchase e-mails. And they tended to turn to review sites for troubleshooting advice.

What they see.

To better understand consumers’ experience, the team unleashed a battery of hired shoppers who were given individual assignments, such as to look for a TV for a new home; replace a small TV in a bedroom; or, after seeing a TV at a friend’s house, go online to learn more about it. The shoppers reported what their experience was like and how the company’s brand stacked up against competitors’. How did its TVs appear on search engines? How visible were they on retail sites? What did consumer reviews reveal about them? How thorough and accurate was the available information about them?

The results were alarming but not unexpected. Shoppers trying to engage with any of the brands—whether the company’s or its competitors’—had a highly fractured experience. Links constantly failed, because page designs and model numbers had changed but the references to them had not. Product reviews, though they were often positive, were scarce on retail sites. And the company’s TVs rarely turned up on the first page of a search within the category, in part because of the profusion of broken links. The same story had emerged during the one-on-one surveys. Consumers reported that every brand’s model numbers, product descriptions, promotion availability, and even pictures seemed to change as they moved across sites and into stores. About a third of the shoppers who had considered a specific TV brand online during the evaluate stage walked out of a store during the buy stage, confused and frustrated by inconsistencies.

This costly disruption of the journey across the category made clear that the company’s new marketing strategy had to deliver an integrated experience from consider to buy and beyond. In fact, because the problem was common to the entire category, addressing it might create competitive advantage. At any rate, there was little point in winning on the other touch-point battlegrounds if this problem was left unaddressed.

What they say.

Finally, the team focused on what people were saying online about the brand. With social media monitoring tools, it uncovered the key words consumers used to discuss the company’s products—and found deep confusion. Discussion-group participants frequently gave wrong answers because they misunderstood TV terminology. Product ratings and consumer recommendations sometimes triggered useful and extensive discussions, but when the ratings were negative, the conversation would often enter a self-reinforcing spiral. The company’s promotions got some positive response, but people mostly said little about the brand. This was a serious problem, because online advocacy is potent in the evaluate stage.

Taking Action

The company’s analysis made clear where its marketing emphasis needed to be. For the pilot launch, spending was significantly shifted away from paid media. Marketing inserted links from its own site to retail sites that carried the brand, working with the retailers to make sure the links connected seamlessly. Most important, click-stream analysis revealed that of all the online retailers, Amazon was probably the most influential touch point for the company’s products during the evaluate stage. In collaboration with sales, which managed the relationship with Amazon, marketing created content and links to engage traffic there. To encourage buzz, it aggressively distributed positive third-party reviews online and had its traditional media direct consumers to online environments that included promotions and social experiences. To build ongoing postpurchase relationships and encourage advocacy, it developed programs that included online community initiatives, contests, and e-mail promotions. Finally, to address the inconsistent descriptions and other messaging that was dissuading potential customers at the point of purchase, the team built a new content-development and -management system to ensure rigorous consistency across all platforms.

How did the CDJ strategy work? The new TV became the top seller on Amazon.com and the company’s best performer in retail stores, far exceeding the marketers’ expectations.

A Customer Experience Plan

As our case company found, a deep investigation of the decision journey often reveals the need for a plan that will make the customer’s experience coherent—and may extend the boundaries of the brand itself. The details of a customer experience plan will vary according to the company’s products, target segments, campaign strategy, and media mix. But when the plan is well executed, consumers’ perception of the brand will include everything from discussions in social media to the in-store shopping experience to continued interactions with the company and the retailer.

For instance, Apple has eliminated jargon, aligned product descriptions, created a rich library of explanatory videos, and instituted off-line Genius Bars, all of which ensure absolute consistency, accuracy, and integration across touch points. Similarly, Nike has moved from exhorting consumers to “Just Do It” to actually helping them act on its motto—with Nike+ gear that records and transmits their workout data; global fund-raising races; and customized online training programs. Thus its customers’ engagement with the brand doesn’t necessarily begin or end with a purchase. And millions of consumers in Japan have signed up to receive mobile alerts from McDonald’s, which provide tailored messages that include discount coupons, contest opportunities, special-event invitations, and other unique, brand-specific content.

These companies are not indiscriminate in their use of the tactics available for connecting with customers. Instead they customize their approaches according to their category, brand position, and channel relationships. Apple has not yet done much mining of its customer data to offer more-personalized messaging. Nike’s presence on search engines shows little distinctiveness. McDonald’s hasn’t focused on leveraging a core company website. But their decisions are deliberate, grounded in a clear sense of priorities.

New Roles for Marketing

Developing and executing a CDJ-centric strategy that drives an integrated customer experience requires marketing to take on new or expanded roles. Though we know of no company that has fully developed them, many, including the consumer electronics firm we advised, have begun to do so. Here are three roles that we believe will become increasingly important:

Orchestrator.

Many consumer touch points are owned-media channels, such as the company’s website, product packaging, and customer service and sales functions. Usually they are run by parts of the organization other than marketing. Recognizing the need to coordinate these channels, one of our clients, a consumer durables company, has moved its owned-media functions into the sphere of the chief marketing officer, giving him responsibility for orchestrating them. Along with traditional and digital marketing communications, he now manages customer service and market research, product literature design, and the product registration and warranty program.

Publisher and “content supply chain” manager.

Marketers are generating ever-escalating amounts of content, often becoming publishers—sometimes real-time multimedia publishers—on a global scale. They create videos for marketing, selling, and servicing every product; coupons and other promotions delivered through social media; applications and decision support such as tools to help customers “build” and price a car online. One of our clients, a consumer marketer, realized that every new product release required it to create more than 160 pieces of content involving more than 20 different parties and reaching 30 different touch points. Without careful coordination, producing this volume of material was guaranteed to be inefficient and invited inconsistent messaging that would undermine the brand. As we sought best practices, we discovered that few companies have created the roles and systems needed to manage their content supply chain and create a coherent consumer experience.

Uncoordinated publishing can stall the decision journey, as the consumer electronics firm found. Our research shows that in companies where the marketing function takes on the role of publisher in chief—rationalizing the creation and flow of product related content—consumers develop a clearer sense of the brand and are better able to articulate the attributes of specific products. These marketers also become more agile with their content, readily adapting it to sales training videos and other new uses that ultimately enhance consumers’ decision journey.

Marketplace intelligence leader.

As more touch points become digital, opportunities to collect and use customer information to understand the consumer decision journey and knit together the customer experience are increasing. But in many companies IT controls the collection and management of data and the relevant budgets; and with its traditional focus on driving operational efficiency, it often lacks the strategic or financial perspective that would incline it to steer resources toward marketing goals.

More than ever, marketing data should be under marketing’s control. One global bank offers a model: It created a Digital Governance Council with representatives from all customer-facing functions. The council is led by the CMO, who articulates the strategy, and attended by the CIO, who lays out options for executing it and receives direction and funding from the council.

We believe that marketing will increasingly take a lead role in distributing customer insights across the organization. For example, discoveries about “what the customer says” as she navigates the CDJ may be highly relevant to product development or service programs. Marketing should convene the right people in the organization to act on its consumer insights and should manage the follow-up to ensure that the enterprise takes action.

Starting the Journey

The firms we advise that are taking this path tend to begin with a narrow line of business or geography (or both) where they can develop a clear understanding of one consumer decision journey and then adjust strategy and resources accordingly. As their pilots get under way, companies inevitably encounter challenges they can’t fully address at the local level—such as a need for new enterprisewide infrastructure to support a content management system. Or they may have to adapt the design of a social media program to better suit the narrow initiative. In the more successful initiatives we’ve seen, the CMO has championed the pilot before the executive leadership team. The best results come when a bottom-up pilot is paralleled by a top-down CMO initiative to address cross-functional, infrastructure, and organizational challenges.

Finally, a company must capture processes, successes, and failures when it launches a pilot so that the pilot can be effectively adapted and scaled. A key consideration is that although the basic architecture of a CDJ strategy may remain intact as it is expanded, specific tactics will probably vary from one market and product to another. When the consumer electronics firm discussed here took its CDJ strategy to East Asia, for example, its touch-point analysis revealed that consumers in that part of the world put more stock in blogs and third-party review sites than Western consumers do, and less in manufacturers’ or retailers’ sites, which they didn’t fully trust. They were also less likely to buy online. However, they relied more on mobile apps such as bar-code readers to pull up detailed product information at the point of purchase.

The changes buffeting marketers in the digital era are not incremental—they are fundamental. Consumers’ perception of a brand during the decision journey has always been important, but the phenomenal reach, speed, and interactivity of digital touch points makes close attention to the brand experience essential—and requires an executive-level steward. At many start-ups the founder brings to this role the needed vision and the power to enforce it. Established enterprises should have a steward as well. Now is the time for CMOs to seize this opportunity to take on a leadership role, establishing a stronger position in the executive suite and making consumers’ brand experience central to enterprise strategy.

To see how one company developed and implemented its CDJ, please read "Aligning with the Consumer Decision Journey."

Smart Rules: Six Ways to Get People to Solve Problems Without You - Harvard Business Review

Smart Rules: Six Ways to Get People to Solve Problems Without You - Harvard Business Review:

Smart Rules: Six Ways to Get People to Solve Problems Without You

by Yves Morieux

The Idea in Brief

To deal with an ever more complex environment, many companies increase their complicatedness, adding new coordination procedures and structures.

This exacts a heavy price. Managers in the most complicated companies may spend 40% of their time writing reports and up to 60% of it in coordination meetings—leaving their employees struggling to figure out their priorities.

A better response is to create an environment in which individuals cooperate to develop solutions on the ground.

Managers Can Do This by Applying Six Rules

Improve understanding of what coworkers do.

Reinforce the people who are integrators.

Expand the amount of power available.

Increase the need for reciprocity.

Make employees feel the shadow of the future.

Put the blame on the uncooperative.

Artwork: Jen Stark, Tri Angular, 2010, Acrylic paint on wood, 35" x 35" x 25"

Companies face an increasingly complex world. Globalization and technology have opened up new markets and enabled new competitors. With an abundance of options to choose from, customers are harder to please—and more fickle—than ever. Each day competitive advantage seems more elusive and fleeting. Even if you can figure out the right approach to take, what works today won’t work tomorrow.

The growth of complexity is reflected in businesses’ goals. Today companies, on average, set themselves six times as many performance requirements as they did in 1955, the year the Fortune 500 list was created. Back then, CEOs committed to four to seven performance imperatives; today they commit to 25 to 40. And many of those requirements appear to be in conflict: Companies want to satisfy their customers, who demand low prices and high quality. They seek to customize their offerings for specific markets and standardize them for the greatest operating return. They want to innovate and be efficient.

In and of itself, this complexity is not a bad thing—it brings opportunities as well as challenges. The problem is the way companies attempt to respond to it. To reconcile their many conflicting goals, managers redesign the organization’s structure, performance measures, and incentives, trying to align employees’ behavior with shifting external challenges. More layers get added, more procedures imposed. Then, to smooth the implementation of those “hard” changes, companies introduce a variety of “soft” initiatives designed to infuse work with positive emotions and create a workplace where interpersonal relationships and collaboration will flourish.

At the Boston Consulting Group, we’ve created an “index of complicatedness,” based on surveys of more than 100 U.S. and European listed companies, which measures just how big the problem is. The survey results show that over the past 15 years, the amount of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed in each of those firms has increased by anywhere from 50% to 350%. According to our analysis over a longer time horizon, complicatedness increased by 6.7% a year, on average, over the past five decades.

This complicatedness exacts a heavy price. In the 20% of organizations that are the most complicated, managers spend 40% of their time writing reports and 30% to 60% of it in coordination meetings. That doesn’t leave much time for them to work with their teams. As a result, employees are often misdirected and expend a lot of effort in vain. It’s hardly surprising that employees of these organizations are three times as likely to be disengaged as employees of the rest of the group—or that dissatisfaction at work is so high and productivity so often disappointing.

Companies clearly need a better way to manage complexity. In our work with clients and in our research, we believe, we’ve found a different and far more effective approach. It does not involve attempting to impose formal guidelines and processes on frontline employees; rather, it entails creating an environment in which employees can work with one another to develop creative solutions to complex challenges. This approach leads to organizations that ably address numerous fluid and contradictory requirements without structural and procedural complicatedness.

The approach incorporates a set of simple yet powerful principles. We call them “smart rules.” These rules help managers mobilize their subordinates’ skills and intelligence.

There are six smart rules. The first three involve enabling—providing the information needed to understand where the problems are and empowering the right people to make good choices. The second three involve impelling—motivating people to apply all their abilities and to cooperate, thanks to feedback loops that expose them as directly as possible to the consequences of their actions. The idea is to make finding solutions to complex performance requirements far more attractive than disengagement, ducking cooperation, or finger-pointing. When the right feedback loops are in place, cumbersome alignment mechanisms—ranging from compliance metrics to the proliferation of committees—can be eliminated, along with their costs, and employees find solutions that create more value.

As you will see in the following pages, using the smart rules—all of them, or sometimes just one or two—enables a complicated company to transform itself, in part or sometimes completely, into a smarter, more streamlined organization.

Rule 1: Improve Understanding of What Coworkers Do

To respond to complexity intelligently, people have to really understand each other’s work: the goals and challenges others have to meet, the resources they can draw on, and the constraints under which they operate. People can’t find this kind of information in formal job descriptions; they can learn it only by observing and interacting.

The manager’s job is to make sure that such learning takes place. Without this shared understanding, people will blame problems on other people’s lack of intelligence or skills, not on the resources and constraints of the organization.

This was the case at the hotel unit of a global travel and tourism group that was struggling with falling occupancy rates, declining prices, and poor customer satisfaction. Many of the hotel managers blamed the “detached mentality” and weak customer-facing skills of the reception employees, who were young and inexperienced—and never stayed long enough to learn better. The sales managers at the group center agreed, even accusing receptionists of contributing to low occupancy rates by pretending that no rooms were available when in fact the hotels had vacancies. The chain therefore decided to set up an incentive based on occupancy rates and sales for the receptionists and to train them in customer service.

Despite all the energy devoted to these initiatives, the results did not improve. Eventually, a team of salespeople decided to spend one month with the receptionists to see what was really going on. The team discovered that the receptionists’ most pressing challenge was handling unhappy customers. Their constraint was a lack of cooperation from the support functions, including housekeeping, room service, and maintenance, whose actions had the most effect on customer satisfaction. Housekeeping, for instance, regularly failed to inform maintenance about broken appliances in rooms, leaving the people at reception to manage the customers’ complaints at night.

To compensate for this lack of cooperation, receptionists were drawing on other resources. One was the refunds they could grant to defuse angry complaints at checkout. The new training actually made receptionists much more at ease with entering rebate discussions, which inevitably pushed price points down further.

A second resource was their own youthful energy: When a guest complained, the receptionists would try to fix the problem themselves, abandoning the front desk to make a faulty shower work or to dash around looking for a spare remote control to replace a broken one. By the time they got back to the front desk, a line of fuming guests would have formed.

Their third resource was offering unhappy guests an upgrade, which meant they needed to keep some rooms in reserve—a practice that depressed occupancy rates. The new incentives were useless, because they had no impact on the lack of cooperation from the support functions and how the receptionists coped with it. The bonus scheme, which showed receptionists how much they could have earned each day, only increased their frustration.

Exhausted and discouraged, the young clerks would often quit after a few weeks. Their high turnover rate didn’t stem from a lack of commitment, as the sales team had believed. On the contrary, the receptionists who cared the least were the ones who stayed the longest.

Exploring the real context of employees’ work helps managers discover when people need to cooperate and how well they’re doing it. Although you can measure the combined output of a group, it is difficult to measure the input of each member, and the more cooperation there is, the harder it gets. Indeed, when managers rely on traditional metrics and peer feedback, they may end up rewarding people who actually avoid cooperation.

Of course, it isn’t always feasible for a manager to spend a month observing in minute detail what’s happening on the front line. But managers do need to supplement the formal metrics and reports they receive with observation and with judgment when measurement is impossible. In many cases, just a day on the ground watching the interplay among people from different functions will provide insights into where and how cooperation is breaking down. Once you identify that moment of truth and some simple root causes, you can move on to applying the other rules.

What Not to Do

You may find it helpful to keep in mind the following caveats—what I think of as “the don’ts.” If you catch yourself ignoring any of them, you’re probably not applying the smart rules.

Never add a process or a layer unless you absolutely have to.

Adding or keeping what is unnecessary is at least as damaging as lacking what is needed.

Never blame a problem on someone’s mentality or mind-set.

This reflects only the limitations of your analysis. Instead look at the goals, resources, and constraints people face.

Don’t let decisions be escalated to you.

Push them back to those who failed to cooperate on a solution. But if you must take on a decision, hold the local people accountable and make it a learning experience: “What will you guys do differently the next time so I don’t have to arbitrate?”

Don’t rely on financial incentives.

The counterproductive side effects are too severe. Instead try to embed feedback loops into people’s tasks.

Don’t try to measure specific behaviors.

The most valuable behavior—cooperation—cannot be measured. And in the few performance areas that do not require cooperation, the effects of people’s behaviors show up directly in the business results. Focus instead on results, and use judgment rather than measurements when cooperation is required.

Rule 2: Reinforce the People Who Are Integrators

Conflicts between front and back offices are often inherent. Back offices typically need to standardize processes and work, and front offices have to accommodate the needs of individual customers.

A common organizational response is to create some sort of coordinating unit—a middle office. But that just turns one problem into two: between the back and middle offices, and between the middle and front offices. The same thing happens vertically in organizations: Coordination problems between the corporate center and country operations trigger the creation of regional layers in between. Another common solution is to impose a coordinating procedure like computerized job requests.

A better response is to empower line individuals—or groups—to play that integrative role. In almost any unit you will find one or two managers—often from a particular function—who already interact with multiple stakeholders (customers as well as other functions). If you’ve followed the first rule and observed people at work, it will probably be fairly obvious to you who these individuals or groups are. These people can act as integrators, helping teams obtain from others the cooperation needed to deliver more value.

Once you’ve identified them, you should reinforce their power by increasing their responsibilities and giving them a greater say on issues that matter to others. Removing some formal rules and procedures also helps increase the discretionary power of integrators. The larger a company gets, the greater the need for integrators, and therefore the fewer formal rules there should be. Unfortunately, most managers think the exact opposite is true.

At the struggling hotel group, the managers realized that the receptionists could play a key integrative role among the hotel staff and the customers. But rather than coordinating those interactions through a formal process, the company decided to give the reception staff a stronger voice in the promotions of people in support functions—particularly the housekeepers and the maintenance crew.

The housekeepers soon started to cooperate by checking all equipment and appliances as they were cleaning rooms; maintenance would then readily intervene during the day, so that customers would not discover problems at night. The change had a snowballing effect on customer satisfaction—eliminating the need to grant rebates at checkout—and on the receptionists’ willingness to sell available rooms. Within 18 months, the company’s gross margin had increased by 20%.

Rule 3: Expand the Amount of Power Available

Usually, the people with the least power in an organization shoulder most of the burden of cooperation and get the least credit. When they realize this, they often withdraw from cooperation and hide in their silos. Companies that want to prevent this and increase cooperation need to give these people more power so that they can take the risk of moving out of isolation, trusting others, showing initiative, and being transparent about performance.

However, firms have to do this without taking power away from others in the system. The answer is to create new power bases, by giving individuals new responsibilities for issues that matter to others and to the firm’s performance.

The experiences of a large retailer illustrate how this works. The retailer had decided to lower costs and enhance professionalization by centralizing the procurement and human resources functions that used to reside in individual stores. Store managers lost a lot of power in the process; it was clear that the issues that mattered to store employees were now in the hands of centralized shared services. The store managers had become a kind of “nice but useless nanny,” as someone actually put it.

Yet the store managers were supposed to play a strong role in making sure employees were responsive to customer needs and were a primary source of innovations for store layouts and shop floor operations. Without organizational clout, how were they to do this?

The chain’s senior managers addressed the problem by announcing to customers that the lines in front of cashiers would not exceed a certain length in their stores. This mattered for performance because lines had a large impact on customers’ loyalty and frequency of visits. The store managers were given responsibility for assembling the teams—from any section in the stores—that would come and help the cashiers if the lines were about to exceed the limit. That mattered to the floor staff: Having to feel the heat of unhappy customers—who were all the more vocal once the company had publicly committed to short lines—was not a trivial issue. The ability to decide who would be picked for these teams gave the store managers the power to foster cooperation and diligence in store operations and innovations.

New sources of power can also be created around expertise building and knowledge transmission. This works especially well if both project managers and line managers need more power. Project managers can assess and reward project-related performance, and line managers can decide who gets to be trained in the higher-order management skills that will improve chances for promotion.

Rule 4: Increase the Need for Reciprocity

A good way to spur productive cooperation is to expand the responsibilities of integrators beyond activities over which they have direct control. Making their goals richer and more complex will drive them to resolve trade-offs rather than avoid them. But if you measure people only on what they can control, they will shy away from helping with many other problems you need their input on.

Consider the case of an airline that competes on asset utilization (having planes full and in the air rather than waiting on the ground) but doesn’t want to compromise customer satisfaction. To achieve high utilization and satisfaction, the company makes aircraft crew members accountable for overseeing both cabin cleaning and ground service. They cannot blame someone else—like the cleaning subcontractor—when customers grumble about a messy plane or a slow boarding crew. The superior trade-off they are impelled to achieve—reconciling cabin cleanliness, customer experience, and speed of turnaround between flights (which is about twice that of other airlines)—would be out of reach if people were not allowed to decide what works best in each situation and instead followed predefined procedures and were measured by their compliance with them.

As you spread responsibility for achieving outcomes, don’t feel you have to give people more resources to go with it. It’s actually often better to take resources away. A family with five television sets doesn’t have to negotiate which program to watch because everyone can watch the show he or she wants. The result is the kind of self-sufficiency that kills family life. Removing resources is a good way to make people more dependent on, and more cooperative with, one another, because without such buffers, their actions have a greater impact on one another’s effectiveness. Eliminating internal monopolies—by creating overlaps, bundling activities, or even setting up external alliances—also increases the possibility for reciprocal action and impels cooperation.

Click here for a larger image of the graphic.

It might seem that you will multiply the number of goals and targets by applying this rule. Actually, this is not the case. What you will do is drive goals back to the employees who actually have to achieve them, so that the people who are best positioned to resolve trade-offs are the ones handling them. Indeed, the multiplication of corporate requirements that we described earlier is arguably a transfer up the hierarchy of certain goals and accountabilities that should remain nearer the bottom of the organization.

Rule 5: Make Employees Feel the Shadow of the Future

The longer it takes for the consequences of a decision to take effect, the more difficult it is to hold a decision maker accountable. Many who are involved at the launch of a three-year project will no longer be around when it’s completed—they will have been moved to another job or location, or promoted. They won’t be affected by the consequences of the actions they take, the trade-offs they make, or how well they cooperate. To paraphrase game-theorist Robert Axelrod, the “shadow” of the future does not reach them.

People are more likely to feel the shadow of the future if you bring the future closer. For example, the lead times on many projects or work processes can often be significantly reduced at companies.

Another remedy is just to assign managers to downstream work. Consider the case of an industrial goods company that needed to lengthen the warranty period on certain products in order to fend off new competition. To do this cost-effectively, its engineering division had to make the product easier to repair.

The engineers were already laboring to meet many requirements—including product compactness, energy consumption, and anticorrosion performance—each of which came with a set of goals, incentives, and people who oversaw it. Now management added a repairability requirement to the list. It established a new function that would coordinate all the decisions that affected repairability with all the engineering specialties—notably the mechanical and electrical groups. It also defined a repairability process and a set of performance indicators and incentives to go with it.

None of the changes helped. Given the number of other incentives, the repairability incentive was insignificant (it could make at most a 0.8% difference in the engineers’ compensation), whereas the overall requirements had become more complex. For example, if the engineers met the requirement for compactness, the product became much more difficult and costly to repair, owing to the intricacy of mechanical and electrical parts. The conflict between compactness and repairability was not new. What was new was the competitive pressure that removed the possibility of fulfilling one requirement and sacrificing the other. Moreover, the coordinators could not get the electrical and mechanical engineers to cooperate on repairability. Numerous “soft” initiatives to improve interpersonal feelings within these groups had made them even more reluctant to strain their relationships by negotiating tough trade-offs between electrical and mechanical constraints. Real cooperation, after all, is not a matter of getting along well; it’s taking into account the constraints and goals of others in your actions and decisions. Indeed, people get along all the better if they can avoid such real cooperation.

The after-sales team continued to struggle with costly repair operations, and the warranty period could not be extended. Then the company tried a new approach: moving some of the engineers to the after-sales network once the new products were launched and making them responsible for the warranty budget. This meant that they would experience firsthand the effects of their design on that budget. The touchy-feely approach to collaboration, with its convivial avoidance of real cooperation, stopped, and engineers quickly started to address the tough trade-offs. The innovative solutions they developed enabled the company to meet both its repairability goals and the other requirements. Soon it extended the warranty period and did away with the coordination function and its processes, scorecards, and incentives.

Increasing the frequency of output performance reviews also makes employees feel the shadow of the future more. A telecom systems manufacturer that was struggling to integrate its hardware and software engineering units discovered this when it upped the frequency with which it tested the compatibility of hardware and software from every six months to every two weeks. Previously, engineers from either unit could avoid cooperating and not face any consequences for at least five months and 29 days. Now the consequences can be avoided for only 13 days.

Rule 6: Put the Blame on the Uncooperative

Some activities involve such a long time lag between cause and effect (for example, in some research and development efforts) that it’s impossible to set up direct feedback loops that expose people to the consequences of their actions. There are also situations where jobs are so remote that it’s difficult to have a direct feedback loop that makes the people who perform them feel interdependent with others. In those cases, managers have to close the feedback loop themselves by explicitly introducing a penalty for any people or units that fail to cooperate on solving a problem, even if the problem does not occur in their area, and increase the payoff for all when units cooperate in a beneficial way.

This was the approach taken by one railway company that was struggling to boost its on-time record, which for years had not risen above 80%. It had tried to improve punctuality by upgrading traffic control mechanisms, hiring more agents, dedicating more resources to the function in charge of monitoring delays, and skimping on some operations (such as cleaning and equipment checks). But each measure that slightly increased punctuality also had an unacceptably negative impact on other performance requirements, such as cost, quality, and safety.

So the company took a new tack. Applying Rule 1, it focused on cooperation between the units whose performance affected timeliness (which included maintenance, train drivers, station crews, and conductors). It became clear that each unit could, by cooperating, anticipate, absorb, and compensate for the delays or problems occurring in other units. But the company also realized that the people working in the various units were more concerned with not getting blamed for delays than with reducing them.

That situation was the result of perverse rules that prevented people from improving timeliness. Under them, blame for a delay was placed only on the unit responsible for its root cause. So, when Unit A had a problem, Units B and C did not feel impelled to help solve it. Why would they? If they didn’t cooperate, only Unit A got the blame. Instead, each unit tried to make up the lost time by itself. In 20% of cases, however, that wasn’t enough.

The company needed to modify the reward criteria so that it would be in the interest of those who needed help to be transparent about it, and of others to provide that help. It was decided that once a unit told others it had a problem, the units that failed to cooperate in solving the problem would be held responsible for the delay. The station managers, who would be present in the necessary moments of cooperation, would judge which units had contributed to solving problems. In just four months on-time performance jumped up to 95% on the major lines where the change was implemented.

Smart rules allow companies to manage complexity not by prescribing specific behaviors but by creating a context within which optimal behaviors occur—even though what is optimal cannot be defined in advance. This approach leads to greater organizational diversity, because voluntary frontline cooperation breeds creative, customized solutions to problems. Yet despite this diversity, companies following smart rules are highly efficient in terms of the resources they use, because problems are solved entirely by leveraging, through cooperation, the skills and ingenuity of employees. Any costs generated by the diversity are more than offset by being able to ditch all the coordination and collaboration programs favored by many organizational experts. Employee satisfaction rises along with performance, as companies remove the complicatedness that causes both frustration and ineffectiveness. So rather than overload your org chart with a lot of arrows and layers, why not aim for the kind of smart simplicity you’ll get from applying the six rules described in this article?

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Gadget Grocery - Your Friendly Neighborhood Online Gadget Store