The Power of the Post-Recession Consumer

An analysis of attitudes and spending reveals a return to traditional values, driven by consumers searching for quality, affordability, and connection.

strategy+business magazine
February 22, 2011 / Spring 2011 / Issue 62
by John Gerzema and Michael D'Antonio

Illustration by Lars Leetaru

Image via WikipediaThe wave of hyper-consumerism that propelled the U.S. economy through the last decades of the 20th century and into the first years of the 21st century has passed. …Consumer spending patterns are changing as part of a trend that has been quietly gathering strength over the past 10 years. …People are returning to old-fashioned values to build new lives of purpose and connection. They also realize that how they spend their money is a form of power, and are moving from mindless consumption to mindful consumption, increasingly taking care to purchase goods and services from sellers that meet their standards and reflect their values.

This change in consumer attitudes … is …, in part, a reaction to economic hard times. But it is also closely related to the civic dissatisfaction that is rocking the political establishment, and additionally has some roots in environmental awareness and changing aspirations. That is why this Spend Shift movement, as we call it, is here to stay. It will create opportunities for businesses that heed its message, and penalize those that do not. (For another perspective, see “Values vs. Value,” by Timothy Devinney, Pat Auger, and Giana M. Eckhardt, s+b, Spring 2011.)

Our view of the Spend Shift is based on two years of gathering and analyzing data, and traveling around the U.S. to discover how the recession has affected people’s lives. We started with Young & Rubicam’s BrandAsset Valuator (BAV), which is a poll of consumer values, attitudes, and shopping behaviors that goes back nearly 20 years. …

The BAV data revealed that even before the recession took hold in mid-2008, there were dramatic shifts in what people expected in the consumer marketplace and how they defined and pursued what they considered the good life. … More recently, the BAV surveys show sharp increases in the number of consumers who want positive relationships with marketplace vendors and who focus more on corporate behavior. Between 2005 and 2009, a growing number of people rejected status-driven values such as snobbishness and exclusivity, and embraced attributes related to bringing people closer together or making the world a better place. Among the once-prized brand attributes that declined in this period were: “exclusive” (down 60 percent), “arrogant” (down 41 percent), “sensuous” (down 30 percent), and “daring” (down 20 percent). On the opposite side of the scale, the brand attributes Americans found more important as they began to sense the impending recession and then suffered through the crisis were: “kindness and empathy” (up 391 percent), “friendly” (up 148 percent), “high quality” (up 124 percent), and “socially responsible” (up 63 percent).

… Between 2005 and 2009, U.S. consumers expressed a nearly fourfold increase in their preference for companies, brands, and products that show kindness in both their operations and their encounters with customers. This desire for companies to be more empathetic toward consumers is the biggest shift in any attitude that we have ever seen during the BAV survey’s two-decade history. …

1. United by Change

The Spend Shift is a far-reaching and inclusive phenomenon that can’t be defined by any particular demographic. According to our data, 55 percent of all Americans are part of this movement; in addition, about one-quarter of the U.S. adult population embraces many of the Spend Shift attitudes and characteristics (we call them Fast Followers). Although the word values tends to polarize U.S. citizens, the Spend Shift is blind to geography, education, age, and income. …

What unites all these Spend Shifters is a common sense of optimism and newfound purpose. As the shock of economic loss wears off for many people, they are redefining what it means to be successful and happy. They are living with less and yet feeling greater satisfaction. …

2. The New Thrift

…Consumer spending will no longer be able to grow faster than personal income, as it did during the 30 years leading up to the crisis. … If you look at historical savings rates in the U.S., people have on average saved 10 percent of their income going back as far as six decades. It was only in the mid-1980s that … ordinary people [ere encouraged] to get out over their skis. In only 20 years, average American households swung from being net savers to being net borrowers. Now, however, consumers are returning to traditional values that have long defined the U.S. ideal.

Image via Wikipedia… In the post-recession economy, resourcefulness and self-sufficiency are viewed as virtues, and excessive consumption as a sign of weakness. … We examined the 2009 performance of a basket of “retooling” companies — those that are in the top 10 percent of our data on being “helpful,” “reliable,” “educational,” and “durable,” such as LeapFrog, Weight Watchers, Craftsman, and DeWalt, because they help people help themselves. The performance of these companies against all others is notable: They performed 249 percent better than other companies when respondents were asked whether they would recommend these brands to a friend, 234 percent better when respondents were asked if they used the products regularly, and 210 percent better on whether the products were worth a premium price.

…[Many] people, … are seeking ways to experience a sense of competence, self-sufficiency, and accomplishment. … If you have an idea for helping people learn new skills and connect with others, your business has a good chance of success.

3. Transparency Breeds Trust

… Companies serving these customers, who know more and expect more, will need to continuously listen, respond, and innovate. They are in for a challenge: Our data shows that confidence in all types of big organizations, including big government and big business, has declined by nearly 50 percent in the past two years. …

Wary consumers are going beyond just reading labels to get the best products and the best deals. The most tech-savvy are using online services as they stand in the supermarket aisle to get instant access to information on prices and on a company’s social or environmental record. …

… Today, however, customers have equal (and sometimes superior) access to data. As a result, transparency becomes all the more crucial. Today’s stakeholders … crave a true, authentic story. They will be interested in how a company thinks and how it makes decisions. …

4. Companies That Care

… The ability of a company to identify with its customers is now a prerequisite for any brand in the post-crisis age. Today, openness, humility, and understanding are critical. Generosity binds a company to its community and its stakeholders.

The rising importance of generosity reflects the fact that the post-crisis era will be defined by inclusion rather than exclusion. … Spend Shifters are buying artisanal food because they trust companies that reveal how their food is produced and handled. They patronize cooperative small businesses because such businesses use their profits to build up their local regions. Passionate customer groups will also band together to fund niche offerings that speak directly to the areas about which they feel most strongly. Because 71 percent of U.S. consumers are now aligning their spending with their values, businesses that practice in a new way will find a vibrant marketplace. Instead of selling shoes, such businesses sell empathy and respect. … Instead of serving food, companies create communities of hope. Instead of making cars, they promise fairness, openness, and shared discourse.

Consumers will be looking for signs that companies care about their impact on communities and are investing in making things better. … The vanguard companies understand that showing kindness and humanity is now a competitive advantage.

Microsoft is a telling example. … In our BAV survey, Microsoft always scores high on measures of its reputation, exceeding Apple by a wide margin. … Despite its massive size, Microsoft is still widely associated with the single personality of its founder, Bill Gates. He gives Microsoft a human face and, more important, his philanthropy gives the company a heart. …

When we talked to Akhtar Badshah, Microsoft’s senior director of global community affairs, he told us that in its response to the recession, Microsoft pursued three main areas of focus: education, innovation, and jobs and economic opportunity. … The key point is that Microsoft uses both its money and its true areas of expertise to maximize the good it can do as a citizen corporation, showing how a company can be charitable by redeploying its existing assets and infrastructure as tools for social and economic development.

The Consumer Connection

… Although the growth of consumer spending appears to be slowing, we believe that people are simply reallocating the way they spend — looking for a connection to the creator of the product; banding together to get better deals; and pushing service and product creators to do more, price better, and connect more deeply to their wants and needs.

Image via WikipediaEven as people find themselves less rich, they are deploying their dollars in a more calculated and strategic way to influence institutions such as corporations and government. …

The most successful companies will respond to this shift by adopting a business model in which all three parties — the business, the customer, and the community — win in every transaction. Although the Spend Shift will dampen domestic demand for some products, the market for values-oriented goods and services offers opportunities for growth in what might otherwise be considered mature categories. We examined the performance of a group of companies and brands that scored in the top 20 percent in the BAV survey on the values we had noted were becoming increasingly important — self-reliance, adaptability, honesty, quality, and community. And we found that in aggregate they enjoyed nearly three times as much usage and preference as brands that did not represent these values.

We believe that the future face of capitalism will be defined by delivering value and values. Those that embrace this reality and adapt will find extraordinary opportunities. Those that ignore it will do so at their peril.

Reprint No. 11107

Author Profile:

• John Gerzema is president of Brand Asset Consulting, a Young & Rubicam Brands company. He is a pioneer in the use of data to identify social change and to help companies both anticipate and adapt to new consumer interests and demands. Gerzema oversees the BrandAsset Valuator, the world’s largest database of consumer insights. Follow him on Twitter at @johngerzema/Twitter.
• Michael D’Antonio is a Pulitzer Prize–winning journalist based in New York. He is the author of more than a dozen books, including Forever Blue: The True Story of Walter O’Malley, Baseball’s Most Controversial Owner, and the Dodgers of Brooklyn and Los Angeles (Riverhead Books, 2009).

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Volkswagen turns off Blackberry email after work hours

BBC News
23 December 2011 Last updated at 06:59 ET

Volkswagen has agreed to stop its Blackberry servers sending emails to some of its employees when they are off-shift.

The carmaker confirmed it made the move earlier this year following complaints that staff's work and home lives were becoming blurred. …

A spokesman for VW said: "We confirm that this agreement between VW and the company's work council exists", but would not comment further. …

"We wanted to take a preventative approach to tackling the issue," said Gunnar Killian, VW's works council spokesman. …

Spare time

Image via WikipediaThe move follows criticism of internal emails by Thierry Breton, chief executive of the French information technology services giant, Atos. He said workers at his firm were wasting hours of their lives on internal messages both at home and at work. He has taken the more radical step of banning internal email altogether from 2014.

Last month the maker of Persil washing powder, Henkel, also declared an email "amnesty" for its workers between Christmas and New Year saying messages should only be sent out as an emergency measure.
Industry watchers say the moves reflect growing awareness of a problem.

"It's bad for the individual worker's performance being online and available 24-7. You do need downtime, you do need periods in which you can actually reflect on something without needing instantaneously to give a reaction," said Will Hutton, chair of the Big Innovation Centre at The Work Foundation.
"Secondly it has a poor impact on an individual's well-being. I think that one has to patrol quite carefully the borderline between work and non-work.” …

Consultations

Union officials in the UK have also cautioned other firms against repeating Volkswagen's move without consultation.

Image via Wikipedia"The issue of employees using Blackberrys, computers and other devices out of working time is a growing one that needs to be addressed as it can be a source of stress," Trades Union Congress (TUC) secretary general Brendan Barber told the BBC.

"However other organisations will need different solutions and what works in VW may not work elsewhere.

"By working in partnership with their union, Volkswagen's policy will have the support of all their employees. Where employers simply introduce policies on their own, however well-meaning they may be, they are unlikely to be successful."

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The 10 Biggest Mistakes Entrepreneurs Make

Growing Your Empire Newsletter

By Paul Lemberg

It's hard to avoid certain mistakes, especially when you face a situation for the first time. In fact, many of the following mistakes are hard to avoid even if you're an old hand. Of course, these are not the only mistakes CEOs make, but they sure are common enough. …

1. Big Customer Syndrome
If more than 50 percent of your revenues come from any one customer you may be headed for a meltdown. … [You] are so busy servicing that one big account that you fail to develop additional customers and revenue streams. Then suddenly, for one reason or another, that customer goes away and your business borders on collapse.

Use that burgeoning account as both a cause for celebration and a danger signal. Always look for new business. And always seek to diversify your revenue sources.

2. Creating products in a vacuum.

Image by ronploof via FlickrYou and your team have a great idea. … When you finally bring it to market, no one is interested. Unfortunately you were so in love with your idea you never took the time to find out if anyone else cared enough to pay money for it. …

… Do the market research up front. … Talk to potential customers, at least a dozen of them. … If enough people say "yes" go ahead and build it. Better yet, sell the product at pre-release prices. Fund it in advance. If you don't get a good response, go on to the next idea.

3. Equal partnerships
Suppose you are the world's greatest salesman, but you need an operations guy to run things back at the office. Or you are a technical genius, but you need someone to find the customers. Or maybe you and a friend start the company together.

In each case, you and your new partner split the company 50/50. That seems fine and fair right now, but as your personal and professional interests diverge, it is a sure recipe for disaster. Either party's veto power can stall the growth and development of your company, and neither holds enough votes to change the situation.
Almost as bad is ownership split evenly among a larger number of partners, or worse, friends. … No one has the final say, every little decision becomes a debate, and things bog down quickly.

Image via WikipediaTo paraphrase Harry Truman, the buck has to stop somewhere. Someone has to be in charge. Make that person CEO and give them the largest ownership stake, even if it's only a little more. 51/49 works much better than 50/50. If you and your partner must have total equality, give a one percent share to an outside advisor who becomes your tie-breaker.

4. Low prices
Some entrepreneurs think they can be the low price player in their market and make huge profits on the volume. Would you work for low wages? Why do you want to sell at low prices? … Remember, low margins = no profits = no future. So the grosser the better.

Set your prices as high as your market will bear. Even if you can sell more units and generate greater dollar volume at the lower price (which is not always the case) you may not be better off. … Figure all your incremental costs. Figure in the extra stress as well. For service companies, low price is almost never a good idea. How do you decide how high? Raise prices. Then raise them again. When customers or clients stop buying, you've gone too far.

5. Not enough capital
… Regardless of the cause, many businesses are simply undercapitalized. Even mature companies often do not have the cash reserves to weather a downturn.

Be conservative in all your projections. Make sure you have at least as much capital as you need to make it through the sales cycle, or until the next planned round of funding. Or lower your burn rate so that you do.

6. Out of Focus
… [Many] entrepreneurs - hungry for cash and thinking more is always better - feel the need to seize every piece of business dangled in front of them, instead of focusing on their core product, service, market, distribution channel. Spreading yourself too thin results in sub-par performance.

Concentrating your attention in a limited area leads to better-than-average results, almost always surpassing the profits generated from diversification. …

… Don't spread yourself thin. Get known in your niche for the thing you do best, and do that exceedingly well.

Image via Wikipedia7. First class and infrastructure crazy

Many a startup dies an untimely death from excessive overhead. … Your management team should earn the bulk of their compensation when the profits roll in, not before.

… Spend all the money really necessary to achieve your objectives. Ask the question, will there be a sufficient return on this expenditure? Everything else is overhead.

8. Perfectionitis
… Finishing the last 20 percent of the last 20 percent could cost you more than you spent on the rest of the project. When it comes to product development, Zeno's paradox rules. Perfection is unattainable and very costly at that.

Plus, while you're getting it right, the market is changing right out from under you. On top of that, your customers put off purchasing your existing products waiting for the next new thing to roll out your doors.

… Focus on creating a market-beating product within the allotted time. … Know when you have to stop development to make a delivery date. When your time's up, it's up. Release your product.

Image via Wikipedia9. No clear return on investment

Can you articulate the return which comes from purchasing your product or service? … You say it's too hard to quantify? … If it's too difficult for you to figure, what do you expect your prospect to do?

… Talk to your customers, create case studies. Come up with ways to quantify the benefits. … If you can demonstrate the great return on investment your product provides, sales are a slam dunk.

10. Not admitting your mistakes.
… At some point you realize the awful truth: you have made a mistake. Admit it quick. Redress the situation. … Sometimes this is hard, but, believe me, bankruptcy is harder.


Assume your costs are sunk. Your money is lost. There is good news: your basis is zero. From this perspective, would you invest fresh money in this idea? If the answer is no, walk away. Change course. Whatever. But do not throw any more good money after bad.
OK, everybody makes mistakes. Just try to catch them quickly, before they kill your company.

***
Paul Lemberg helps small business owners become wealthy. Since 1995, Paul has helped hundreds of small business owners achieve outstanding success. He has written three books, including Faster Than the Speed of Change, Earn Twice As Much with Half The Stress (co-authored with Tom Matzen), and his latest, the business best seller, Be Unreasonable. On television, Paul has appeared on Good Morning America, CNN, Financial News Network, and dozens of national radio programs. His work has been featured in over eighty magazines and publications including the New York Times and the Los Angeles Times, as well as the world's largest circulation newsletter, Bottom Line Personal. You can learn more about Paul at http://www.paullemberg.com/.

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The Top 10 M&A Fallacies and Self-Deceptions

Image via Wikipedia

With merger and acquisition activity heating up, here’s a due diligence checklist for regaining clarity.

strategy+business magazine
by Barry Jaruzelski, Marian Mueller, and Peter Conway

Imagine that you have just concluded a major merger or acquisition. … Having crossed off every item on your due diligence checklist, you expect big savings from restructuring; more importantly, you know that a year from now this newly created company will be the leader in its industry, with significant growth in revenue and higher profit levels.

Then flash forward to the first anniversary of your M&A deal announcement. The company’s performance is below expectations and you’re left with a nagging sense of doubt about the transaction. …
…Often, when you look closely, a common set of attitudes is at play — implicit assumptions held by the leaders who put the M&A deals together and conducted the due diligence. These attitudes fall into two broad groups. First are fallacies, … Second are self-deceptions, … By becoming more aware of them, you can raise the success rate of all your M&A deals significantly.

Five Fallacies to Avoid

M&A fallacies are often ingrained in a company’s legacy practices, including the due diligence practices that have been successful in the past. It’s not enough to recognize these fallacies. You must take specific precautions to keep from being blindsided by them.

1. “We can’t walk away from this deal.” This fallacy about M&A seems to make intuitive sense. The people who put a deal together — often the business unit general manager and his or her staff … are subject to the vagaries of human nature. When they are too close to a deal, it clouds their ability to make an objective, unbiased decision. They are far too likely to focus on details that confirm their preconceptions and ignore details that contradict them. This is known in the field as “deal fever.” …

You can generally avoid deal fever with a layered decision-making process. The deal team, including the business leader who champions the acquisition, should present the case to a separate group or individual who can review its attractiveness more objectively. You must balance these prudent checks and balances against your need for speed. The most effective companies adopt “high-speed lanes” for decisions that must be fast-tracked, as well as top-layer deal review committees staffed by executives who agree to make themselves available quickly if needed. …

2. “Any experienced negotiator can negotiate deals.” …Unfortunately, the auction-like nature of competitive deals can make mergers and acquisitions very different from negotiating a product launch or joint venture–related agreement.

For example, the acquiring management team may fall prey to a seller’s overoptimistic projections or their own synergy estimates. … It is easy to lose sight of the fact that if the price and terms aren’t right, “winning” the deal can be worse than losing.

The answer is to think ahead of time about what you are willing to pay and to develop a true “walk-away” price. During negotiations, as you learn about the sellers’ motivations and as new options are suggested, this preparation can help you turn down any new arrangement that doesn’t give you what you need. … You can also put measures in place that share some upside potential while still staying below the walk-away price. For example, you can prearrange a performance bonus for the sellers, to be awarded when agreed-upon financial milestones are reached. …

3. “M&A performance is all in the numbers.” Many executives assume that if the financial arrangements are secure, the rest of the deal will follow. But all deals have two other significant factors to consider that are often not accounted for in the numbers: the human element and the need to develop the capabilities required to succeed in the new or merged business. … A comprehensive due diligence process should take into account both the cultural and capability aspects of the deal….

4. “Information in the M&A process will naturally be kept confidential.” When middle- and low-level employees get wind of a possible acquisition, leaks are possible, and they can have major consequences. Confidentiality should be taken very seriously and enforced during the due diligence process; leaks can come from a variety of sources….

Other ways of enforcing confidentiality include extending the NDA requirements to administrative staff, highlighting the importance of confidentiality during key due diligence checkpoints, prohibiting e-mail about the deal, and instituting preannounced penalties for leaks and breaches. Sometimes, key components of the due diligence process can be outsourced to a third party to reduce internal communications. …

5. “There’s time for detailed postmerger planning after the merger takes place.” This fallacy … rarely leads to good results. Unless you define a detailed merger integration plan before the submission of the binding bid, you risk losing the momentum that you need to drive change and integrate the companies. …
Identify a postmerger integration team and a leader during due diligence, as soon as it is clear that a binding bid will be submitted. This will help you identify some of the key integration risks and issues, and the resources required for integration. It will also lay the groundwork for postmerger review processes and metrics that can help hold the integration and business leaders accountable.

Self-Deception vs. Reality

Self-deceptions are often more difficult to address than fallacies, since practitioners think that they are already following the best practices. Our experience suggests otherwise.

1. “Our company’s M&A process is strategy-led.” [Even] in a sophisticated company, strategic definition can be surprisingly incomplete. This leads to significant delays in conducting due diligence, or to a lack of preparation in responding to deals when they become available …

… Deals need to be generated with strategic intent, no matter how attractive the financials appear to be. This means that the acquired business should bring in capabilities that fit with the capabilities system of the larger company — or bring in new products and services for which the acquiring company’s capabilities system is relevant. Otherwise, a deal may put the core business at risk or drain attention, time, and resources. In particular, mergers and acquisitions should reinforce and help build the capabilities that distinguish the core business from its competition.

2. “We have a thorough understanding of our markets.” Most business leaders are predisposed to believe this. … However, a merger or acquisition can easily bring a company face-to-face with aspects of its market that it doesn’t know well….

Draw on multiple perspectives, whether from inside or outside the company, to help you become aware of these sorts of issues. As you conduct due diligence, make sure you have a reasonably complete and up-to-date picture of the value chain for your target company’s industry; the relevant market size, relevant segmentation data, and trends and growth drivers in each segment; customer needs by segment; customer attitudes toward the target company; current profit and profit potential by segment; technology trends and potential substitute products; geographic nuances by segment and product; competitive landscape (including as much as you can glean about products, pricing, and costs); and barriers to entry and new disruptive entrants.

3. “Our core market success is replicable in adjacent markets.” The traditional definition of an adjacency is products and services that share some qualities or characteristics with your core market. … In reality, however, most moves into adjacent markets are unsuccessful, especially those made through M&A. … [Only] companies that have a well-defined M&A process that recognizes the importance of existing capabilities and the changes that will be required to evolve those capabilities have successfully executed such transactions with regularity.

Thus, when beginning an acquisition campaign, you should begin by evaluating your capabilities. Examine how well these will apply to the businesses in the company you are acquiring — and how well the capabilities you acquire will mesh with your own lineup of products and services.

The best acquirers take a strongly disciplined approach to business building, with strict criteria for acquisitions. These could include criteria related to target market size, degree of market fragmentation, gross margin targets, cyclicality and volatility, brand strength, customer concentration, and robust replacement parts or other streams of ongoing business. … When you reject target companies that do not fit your strictest criteria, you put a stake in the ground indicating that any company acquired will set up your company for above-market growth.

4. “We have a well-defined due diligence process.” Many corporate leaders learn the hard way that this isn’t true, particularly when their company is an infrequent acquirer or when they consider acquiring companies in different markets. They underestimate the amount of effort and time consumed by an acquisition or merger. Even when experienced senior executives are overseeing various functions, enthusiastic junior staff are executing the requisite tasks, and some due diligence processes are in place, there is still a tremendous amount of work to be done in a compressed time frame.

You may find, as you begin due diligence, that your processes are incomplete, and your team lacks the expertise to evaluate commercial prospects; technologies; legal issues; manufacturing footprints; procurement concerns; intellectual property; tax questions; regulatory issues; export controls; or issues related to health, safety, and the environment. At the least, you will need detailed standard questionnaires covering these issues; more likely, you will need to bring in experts who can answer questions with confidence….

To avoid these types of problems, arrange regular meetings of new business development practitioners across internal boundaries. Document what went well and what did not go well following each transaction, to share with the group. Use these meetings to drive best practice development; share basic information about the market, as well as simple tips and tricks. Create due diligence templates and questionnaires, such as data request templates, so that work can flow seamlessly, even if individual staff members depart in the middle of a project.

5. “Our legacy due diligence team knows what they are doing.” Even experienced due diligence staff may not have the right skills for every deal. It is important to bring in pertinent expertise to fully analyze a given opportunity, especially for adjacent markets, new geographies, and unfamiliar technologies…
M&A is a complex process that requires significant and diverse skills and resources to execute well. By being aware of the trap these common fallacies and self-deceptions present, teams can design and execute an M&A process that is more effective and yields outcomes that consistently create rather than destroy value.

Author Profiles:

• Barry Jaruzelski is a partner with Booz & Company based in Florham Park, N.J., and the leader of the global engineered products and services practice. He specializes in due diligence, corporate strategy, and transformation of core innovation processes for high technology and industrial clients.
• Marian Mueller is a principal with Booz & Company based in Florham Park, N.J. He serves industrial and automotive clients as well as associated financial investors by focusing on organic growth, mergers and acquisitions, organizational design, emerging market growth, and portfolio management.
• Peter Conway is a senior associate with Booz & Company based in Chicago. He specializes in M&A due diligence and organic growth strategy, as well as helping clients develop the capabilities required for each.
• Also contributing to this article were Booz & Company senior associate Prashant Vishnupad and associates Michael Zarrilli, Tushar Kanungo, and Abhishek Jha.

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Five Things You Should Stop Doing in 2012

Image via Wikipedia

Harvard Business Review
2:55 PM Thursday December 15, 2011
by Dorie Clark
I recently got back from a month's vacation — the longest I've ever taken, and a shocking indulgence for an American. … The distance, though, helped me hone in on what's actually important to my professional career — and which make-work activities merely provide the illusion of progress. Inspired by HBR blogger Peter Bregman's idea of creating a "to ignore" list , here are the activities I'm going to stop cold turkey in 2012 — and perhaps you should, too.

1. Responding Like a Trained Monkey. Every productivity expert in the world will tell you to check email at periodic intervals — say, every 90 minutes — rather than clicking "refresh" like a Pavlovian mutt. … [Spending] a month away — and only checking email weekly — showed me how little really requires immediate response. In fact, nothing. A 90 minute wait won't kill anyone, and will allow you to accomplish something substantive during your workday.
2. Mindless Traditions. … In the moment, not fulfilling an "obligation" (like sending holiday cards) can make you feel guilty. But if you're in search of professional advancement, is a holiday card (buried among the deluge) going to make a difference? If you want to connect, do something unusual — get in touch at a different time of year, or give your contacts a personal call, or even better, meet up face-to-face. You have to ask if your business traditions are generating the results you want.
3. Reading Annoying Things. I have nearly a dozen newspaper and magazine subscriptions, … But after detoxing for a month, I was able to reflect on which publications actually refreshed me — and which felt like a duty. … I'm weeding out and paring down to literary essentials. What subscriptions can you get rid of?
4. Work That's Not Worth It. Early in my career, I was thrilled to win a five-year, quarter-million dollar contract. That is, until the reality set in that it was a government contract, filled with ridiculous reporting mechanisms, low reimbursement rates and administrative complexities that sucked the joy and profit out of the work. …These days, I'm eschewing any engagement, public or private, that looks like more trouble than it's worth.
5. Making Things More Complicated Than They Should Be. … As Eric Ries points out in his new book The Lean Startup , developing the best code or building the best product in the world is meaningless if your customers don't end up wanting it. Instead, test early and often to ensure you're not wasting your time. What ideas should you test before you've gone too far?

Eliminating these five activities is likely to save me hundreds of hours next year — time I can spend expanding my business and doing things that matter. What are you going to stop doing? And how are you going to leverage all that extra time?

Dorie Clark is a strategy consultant who has worked with clients including Google, Yale University, and the National Park Service. She is the author of the forthcoming What's Next?: The Art of Reinventing Your Personal Brand (Harvard Business Review Press, 2012). You can follow her on Twitter at @dorieclark.

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Top Ten Reasons Why Large Companies Fail To Keep Their Best Talent

Forbes


Eric Jackson, Contributor

Image via WikipediaWhether it’s a high-profile tech company like Yahoo!, or a more established conglomerate like GE or Home Depot, large companies have a hard time keeping their best and brightest in house. …

Yet, Yahoo!, GE, Home Depot, and other large established companies have a tremendous advantage in retaining their top talent and don’t. … Here’s my Top Ten list of what large companies do to lose their top talent :

1. Big Company Bureaucracy. This is probably the #1 reason we hear after the fact from disenchanted employees. … No one likes rules that make no sense. But, when top talent is complaining along these lines, it’s usually a sign that they didn’t feel as if they had a say in these rules. They were simply told to follow along and get with the program. No voice in the process and really talented people say “check please.”

2. Failing to Find a Project for the Talent that Ignites Their Passion. Big companies … usually don’t have people going around to their best and brightest asking them if they’re enjoying their current projects or if they want to work on something new that they’re really interested in which would help the company. … Top talent isn’t driven by money and power, but by the opportunity to be a part of something huge, that will change the world, and for which they are really passionate. …

3. Poor Annual Performance Reviews. You would be amazed at how many companies do not do a very effective job at annual performance reviews. … The impression this leaves with the employee is that my boss — and, therefore, the company — isn’t really interested in my long-term future here. … This one leads into #4….

4. No Discussion around Career Development. Here’s a secret for most bosses: most employees don’t know what they’ll be doing in 5 years. … However, everyone wants to have a discussion with you about their future.  … If your best people know that you think there’s a path for them going forward, they’ll be more likely to hang around.

Image by learningexecutive via Flickr5. Shifting Whims/Strategic Priorities. … Top talent hates to be “jerked around.” If you commit to a project that they will be heading up, you’ve got to give them enough opportunity to deliver what they’ve promised.

6. Lack of Accountability and/or telling them how to do their Jobs. Although you can’t “jerk around” top talent, it’s a mistake to treat top talent leading a project as “untouchable.” … [Top] talent demands accountability from others and doesn’t mind being held accountable for their projects. Therefore, have regular touch points with your best people as they work through their projects. They’ll appreciate your insights/observations/suggestions — as long as they don’t spillover into preaching.

Image via Wikipedia7. Top Talent likes other Top Talent. … Many organizations keep some people on the payroll that rationally shouldn’t be there. … [Doing]exit interviews with the best people leaving big companies you often hear how they were turned off by some of their former “team mates.” If you want to keep your best people, make sure they’re surrounded by other great people.

8. The Missing Vision Thing. This might sound obvious, but is the future of your organization exciting? … What is the vision you want this talented person to fulfill? Did they have a say/input into this vision? If the answer is no, there’s work to do — and fast.

9. Lack of Open-Mindedness. The best people want to share their ideas and have them listened to. However, a lot of companies have a vision/strategy which they are trying to execute against — and, often find opposing voices to this strategy as an annoyance and a sign that someone’s not a “team player.” If all the best people are leaving and disagreeing with the strategy, you’re left with a bunch of “yes” people saying the same things to each other. You’ve got to be able to listen to others’ points of view — always incorporating the best parts of these new suggestions.

10. Who’s the Boss? If a few people have recently quit at your company who report to the same boss, it’s likely not a coincidence. …You’re better off trying to find another spot for them in the organization — or, at the very least, not overseeing your high-potential talent that you want to keep.

It’s never a one-way street. Top talent has to assume some responsibility as much as the organization. However, with the scarcity of talent — which will only increase in the next 5 years — Smart Organizations are ones who get out in front of these ten things, rather than wait for their people to come to them, asking to implement this list.

Related articles

• Top Ten Keys to Building a Talent Firewall In Your Organization (forbes.com)
• One Page Talent Management (blogs.hbr.org)
• 6 Things Best-In-Class Companies Do To Grow Leaders (forbes.com)

Five New Management Metrics You Need To Know

Image via CrunchBase Forbes

12/13/2011 @ 10:58AM |128,876 views

James Slavet, Greylock Partners
This is a guest post from James Slavet of venture firm Greylock Partners. Slavet’s investments include Coupons.com, Groupon, One Kings Lane and Redfin. Greylock Partners has invested in Facebook, LinkedIn and Pandora..

…“If you can measure it, you can manage it” is a business saying that goes way back. … Regardless, most managers only measure outputs, not inputs… Similarly, most companies measure traffic, revenue or earnings, without considering how to improve the company at an atomic level: how to make a meeting better, or an engineer more productive.

Here are five metrics that great teams should measure:

Image by Jordanhill School D&T Dept via FlickrMetric 1: Flow State Percentage

Jobs that require a lot of brainpower—software programming for instance—also demand deep concentration. You know that feeling when you’re “in the zone,” … That is flow, a term coined by psychologist Mihaly Csikszentmihalyi. Unfortunately, most of us are constantly interrupted during the day … Studies have shown that each time flow state is disrupted it takes fifteen minutes to get back into flow, if you can get back at all. And programmers who work in the top quartile of proper (i.e. uninterrupted) work environments are several times more productive than those who don’t.

Ideally … knowledge workers can spend 30% – 50% of their day in uninterrupted concentration. Most office environments don’t even come close. To get started, ask your engineers to track for a few days their personal flow state percentages: how many hours each day are they in flow, divided by the number of total hours they’re at the office. And then brainstorm ways that the team can move this number up. … Tom Demarco has written insightfully on the topic of flow.

Image by Wesley Fryer via FlickrMetric 2: The Anxiety-Boredom Continuum

Years ago, … [an] instructor said something that really stuck with me. He said that his goal was to keep all of his students in the pocket between boredom and anxiety – but closer to anxiety. In other words, we shouldn’t be so overwhelmed that we break down and give up, but we also shouldn’t be coasting either. …

… Star performers can get bored easily, and often function best when they’re expected to rise to great challenges. You want expectations to be high, but not completely overwhelming. With this in mind, check in with your employees periodically … If they have low energy, or are showing up late and leaving early, they may be bored. If they’re responding to small setbacks with anger or frustration, or getting sick a lot, they may be pushing too hard.

Metric 3: Meeting Promoter Score
…[A] one-hour meeting of six software engineers costs $1,000 at least. …Nobody tracks whether meetings are useful, or how they could get better. And all you have to do is ask.

In the last minute of a meeting, ask the participants to each rate from 1 to 10 how effective the meeting was, with one suggestion for making the meeting better. … Verne Harnish has some good ideas about running better meetings.

Metric 4: Compound Weekly Learning Rate
… Joi Ito wrote recently about “neotony”, the retention of childlike attributes in adulthood. This ability to learn is like the compounding interest on an investment: after two or three years, a relentless learner stands head and shoulders above his peers. … So try asking your team this question: how did you get 1% better this week? Did you learn something valuable from our customers, or make a change to our product that drove better results? As your team gets into a learning rhythm, you can review this as a group. 1% per week adds up.

Image via WikipediaMetric 5: Positive Feedback Ratio

…John Gottman …, a psychologist, is the author of “Why Marriages Succeed or Fail”.

In his research, he found that marriages that succeed tend to have five times as many positive interactions as negative ones. And when a couple falls below that ratio, their relationship falls down too.

Cover via AmazonThe same is true at the office, … Catch people doing good things. Never miss a chance to say something nice, even if you feel a little silly. Then when you have feedback on areas to improve, they‘ll really listen. It may be hard to manage to the 5:1 ratio at the office, but you should be mindful of the balance.

So, there you have it, 5 metrics that will never show up in the best companies’ financial statements or a Wall Street Journal article, but are the kinds of reasons those companies succeed. Tracking these five metrics isn’t glamorous. But it’s something everyone can do. And it really works.

Related articles

• Greylock Recruiting Team Targets New Hiring Challenges (blogs.wsj.com)
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7 Things Highly Productive People Do

You have more important things to focus on than, um, focusing. Get back on track with these tips.
Inc.com
By Ilya Pozin |  @ilyaNeverSleeps   |  Dec 13, 2011

Flickr/ryantron
…Want to be more productive and get your focus back? There are no secret tricks here… do one thing at a time. Stop multitasking—it’s just another form of distraction. ...
Recently I sat down with Tony Wong, a project management blackbelt whose client list includes Toyota, Honda, and Disney, to name a few. He’s an expert in keeping people on task, so I thought he’d be a good person to ask.
Here are his tips for staying productive:

1. Work backwards from goals to milestones to tasks. 
   … Break down the work into smaller and smaller chunks until you have specific tasks that can be accomplished in a few hours or less: Sketch a wireframe, outline an introduction for the homepage video, etc. That’s how you set goals and actually succeed in crossing them off your list.
2. Stop multi-tasking. No, seriously—stop. In fact, changing tasks more than 10 times in a day makes you dumber than being stoned. When you’re stoned, your IQ drops by five points. When you multitask, it drops by an average of 10 points, 15 for men, five for women (yes, men are three times as bad at multitasking than women). 
3. Be militant about eliminating distractions. Lock your door, put a sign up, turn off your phone, texts, email, and instant messaging. …Go to a quiet area and focus on completing one task.
4. Schedule your email. Pick two or three times during the day when you’re going to use your email. …
5. Use the phone. Email isn’t meant for conversations. Don’t reply more than twice to an email. Pick up the phone instead. 
6. Work on your own agenda. … Most people go right to their emails and start freaking out. You will end up at inbox-zero, but accomplish nothing. After you wake up, drink water so you rehydrate, eat a good breakfast to replenish your glucose, then set prioritized goals for the rest of your day. 
7. Work in 60 to 90 minute intervals. Your brain uses up more glucose than any other bodily activity. Typically you will have spent most of it after 60-90 minutes. …So take a break: Get up, go for a walk, have a snack, do something completely different to recharge. And yes, that means you need an extra hour for breaks, not including lunch, so if you’re required to get eight hours of work done each day, plan to be there for 9.5-10 hours.

Ilya Pozin

Ilya Pozin founded his first company, Ciplex, at age 17. The digital marketing and creative agency caters to small businesses and start-ups. Ciplex, which has received the Inc.500|5000 award for two consecutive years,  is headquartered in Los Angeles with offices in New York, Jerusalem, Serbia, and Germany. In 2010 Ilya hired a new CEO and moved into the President/CMO role so that he could focus on building new ventures.   Originally from Russia, he currently resides in L.A. with his wife and daughter.

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Getting Out of a Conversation

Getting Out of a Conversation
Think Growth! newsletter
Bridget diCello

...While it's good fun to visit with friends and family, in the business setting, the professional who attends a good deal of events probably does so with a business agenda in mind. While still enjoyable, the event also turns into an opportunity to build current relationships, initiate new connections and discuss business opportunities. When you wish to accomplish those objectives, getting "stuck" in a non-strategic conversation can be a problem. ...It's important to make sure you see all those people important to your success this time of year.

Why do we get "stuck"?

•  There are a lot of people who are not good at getting into conversations, so they don't want to leave the security of the one they are in. If this is you...get out there, make eye contact, shake a hand, go get food or drink - but get comfortable getting into conversations.
• Maybe the person with whom you are speaking does not think you have learned enough about them and their company yet! If this is you, this is a major networking mistake. Ask more questions about the other person to build a relationship. Talk less and you will be considered much more interesting.
• The person who you are speaking with is not there to make multiple connections, just to socialize. If this is you, more power to you - enjoy yourself, but also open the door for the other person to leave if they are looking for more concrete results from their attendance at events.
• You don't want to hurt their feelings by cutting off what they are saying. If this is you, realize that many people will speak to fill the silence, and may be relieved if you end the conversation.

How can you politely get out of a conversation?
 Start with a thank you such as: It was good talking to you... I've enjoyed our conversation... I was surprised to learn (something you learned about them...)I hope your (vacation, business venture, event they mentioned) goes well...

And finish the sentence with something that says you are thinking about them. I will let you go mingle and meet some more of the attendees. I'd like you to meet... (Identify someone you want to introduce them to and take them there.)

Or finish the sentence with something you need to do.I'm going to go try that delicious looking food.I'm going to go get myself something to drink.If you'll excuse me, I see someone I need to catch up with.

There is no requirement that you stay in a conversation for as long as it can possibly last. Especially in a business setting, most people have objectives in their head for what they'd like to accomplish.

Have you ever felt "stuck" in a conversation?

Bridget DiCello is an expert in getting things done by effectively navigating difficult conversations. She inspires audiences to take action in the relationships most important to their business and their success. Bridget is the author of Opportunity Space: Purposeful Interactions, Energizing People, Producing Powerful Business Results.

For nearly a decade, Bridget has been working with executive teams and professionals using her powerful concept of Opportunity Space to transform their teams and their businesses.

Related articles

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WTE: Next-Generation Sustainable Energy

Image by Colt Group via Flickrhttp://accessintelligence.imirus.com/Mpowered/imirus.jsp?volume=pow10&issue=6&page=78
WTE: Next-Generation Sustainable Energy
by Marco J Castaldi
Power Magazine July 2010

excerpts:
The typical question I hear after lectures and presentations on WTE technologies is, "Why aren't we doing more of this?" The simple answer I give is that preconceived notions, based on incinerator emissions before the MACT regulations, have held back development. But that is changing.

Image via WikipediaCurrently, WTE constitutes about 25% of the renewable energy produced in the U.S. That percentage has the potential to grow because only 7% of waste is converted to energy via WTE, 64% if landfilled, and the remaining 29% is recycled.

Encouragingly, WTE was identified among eight emerging green technologies in a report from the Davos World Economic Forum in 2009 entitled "Green Investing: Towards a Clean Energy Infrastructure."

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Richard Branson on How to Avoid Common Startup Mistakes

Image via CrunchBase

Entrepreneur.com
BY Richard Branson

Editor's Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. What follows is the latest edited round of insightful responses. …

Q: What are some of the most common mistakes entrepreneurs make when starting out? -- John Gachiri

A: Making mistakes is part of the process of building a company; quickly recovering from them is what's most important. …

But your way forward is not entirely uncharted: When you notice an opportunity that has never occurred to anyone else, there are certain steps to turning your vision into reality. You must formulate an innovative business plan, find funding, hire the right people to carry out the plan, and then step back from your role in the business at exactly the right moment.

Step 1: Stay on Target
A mistake often associated with the first step is signaled by an entrepreneur's inability to clearly and concisely convey his idea. You have to be able to generate buy-in from investors, partners and potential employees, so nail down your "elevator speech" -- what you would say if you ran into an important potential investor in an elevator. Try using a Twitter-like template to refine the essence of your concept into just 140 characters. Once you've done that, expand your message to a maximum of 500 characters. Remember, the shorter your pitch is, the clearer it will be.

An associated error is lack of focus. ... Clearly define your goals and strategies, then establish a timeline. Don't let the other possibilities or hazy dreams distract you from achieving your goal.
Getting too far ahead of yourself is also dangerous. If your product or service is still on the drawing board, don't get sidetracked by plans for future versions. As a general guideline, looking two or three years ahead is best, but the nature of your business and feedback from your investors will help you determine just how far ahead you should plan.

Be flexible, because just as lack of planning can be a problem, adhering blindly to your plan is a surefire way to steer your company off a cliff. A successful entrepreneur will constantly adjust course without losing sight of the final destination.

Step 2: Be Realistic About Costs
Don't shortchange your start-up when estimating the funds you will require -- you'll just diminish your chances of success. Keeping your expenses under control is vital, but don't confuse capitalization with costs. …

Step 3: Hire the People You Need, Not the People You Like
As tempting as it may be to staff your new business with friends and relatives, this is likely to be a serious mistake. If they don't work out, asking them to leave will be very tough.

When Virgin starts any new business, we always hire a core team of smart people who already know the industry and its inherent risks. … One of your goals should be to find a manager who truly shares your vision, and to whom you can someday confidently hand the reins so that you can carry out the next step.

Step 4: Know When to Say Goodbye
A great entrepreneur knows when the time has come to leave the CEO role. It's seldom easy, but it has to be done: few entrepreneurs make great managers. …

Stepping back doesn't mean turning your back on your business. …

Image via CrunchBaseImage via CrunchBaseFounders shouldn't hesitate to re-insert themselves into their businesses when necessary -- look at Larry Page, who temporarily returned to the CEO role at Google in April. That said, I had to laugh when I heard this news, wondering how many managers at Virgin businesses had thought, "Wow, I hope this doesn't give Richard any ideas."

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