April 2014

The CEO of Automattic on Holding “Auditions” to Build a Strong Team

Reprint: R1404A

Mullenweg founded Automattic, the company behind WordPress, in 2005, and began hiring in the traditional way: using résumé screening, reference checks, and interviews. He focused on the experience candidates had and paid special attention to what other start-ups they’d worked for. He and his colleagues invested a lot of energy in the process and believed that they were being as rigorous as they could. But when some hires didn’t work out, they began to examine their approach in light of Automattic’s unconventional philosophy: Work where you want and when you want; you’ll be measured by outputs, not by time spent at a desk in an office. They realized that being well-spoken or charming in an interview often had little bearing on how a candidate would perform the job in question. So they introduced tryouts. After an initial screening, promising candidates are required to work with the company for three to eight weeks (with pay), performing real tasks that are closely related to the jobs they’re applying for, and working alongside the people who will be their colleagues if they’re hired. They can size up the company as it evaluates and provides feedback to them, benefiting all concerned.

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Making Business Personal

Reprint: R1404B

Most people expend a lot of energy at work attempting to hide their inadequacies from colleagues. The authors believe that this is the single biggest cause of wasted resources in nearly every company today. When they went in search of firms where people see their mistakes not as vulnerabilities but as prime opportunities for growth, they found only a handful. Two stood out: Bridgewater Associates, an East Coast investment firm, and the Decurion Corporation, a West Coast real estate manager, cinema operator, and senior living center owner. Both are committed to developing every one of their people by weaving personal growth into daily work—and both are highly successful businesses.

The authors spent hundreds of hours observing their practices and interviewing employees at all levels. What they saw was people working together, in meetings, in one-on-one sessions, and in the course of their everyday work, to get at the root causes of problems and devise more-productive ways of doing things. Many companies conduct root cause analysis but stop short of crossing into an employee’s interior world, where so many problems begin—in, for example, a tendency to avoid confrontation, to act before thinking things through, to be overly aggressive if one’s ideas are criticized, and other counterproductive thinking and behavior. At Decurion and Bridgewater, everyone from the CEOs on down to the teenage ushers works on identifying and overcoming these patterns as part of doing the job well.

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Resilience in a Hotter World

Reprint: R1404C

As the planet warms, storms and floods are becoming wilder—killing thousands, disrupting supply chains and power grids, and causing billions of dollars in damage. Meanwhile, supplies of all kinds of resources are dwindling, and demand is rising. These two megachallenges—extreme weather and resource scarcity—could have an unprecedented impact on corporate profits and global prosperity, warns Winston. To manage these threats, companies must do what he calls “the big pivot.”

The big pivot represents a radical change in strategy, operations, and mind-set. Instead of focusing first on short-term earnings and treating environmental challenges as niche issues, firms must prioritize tackling the world’s big problems and use the tools of capitalism to do so profitably. That means taking new approaches to vision, valuation, and collaboration: Companies must set long-term goals based on science and pursue innovations that seem heretical (dyes that don’t need water, say, or services that replace products). They’ll need new ROI tools that factor in unpriced costs and benefits. And they’ll have to work with other organizations, including competitors, to reduce resource dependency (for instance, sharing methods for reducing energy use).

By making these moves, firms will increase their resilience to volatile resource prices, electrical outages, and shifts in customer needs. They will improve business performance while advancing the common good.

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Sustainability a CFO Can Love

Reprint: R1404D

As the CFO of UPS—and a founding member of its sustainability steering committee—Kuehn wrestled with the question of where and how to most effectively direct the company’s resources. The approach he developed is rooted in two beliefs: Companies have a responsibility to contribute to society and the environment, and every investment a company makes should return value to the business. These beliefs don’t have to be at odds, he writes, although they often mean that sustainability programs must be subjected to alternative financial evaluation models. In fact, the programs with the most impact not only align with companies’ strategies but move in tandem with their activities.

UPS’s breakthrough came when it recognized that efficiency would be greatest in any initiative where momentum existed and where the company was positioned to make a pivotal or tipping-point difference. To guide its sustainability choices and investments, UPS has implemented a clear process of (1) assessing its strengths; (2) choosing its spots; (3) finding momentum; (4) building productive partnerships; and (5) convening other sources of strength. This approach avoids missteps such as executive pet projects and directing the volunteerism of employees to tasks at which they are not actually good. Kuehn draws lessons from UPS’s own experience and from that of others, including Campbell Soup, Pfizer, and Marks & Spencer.

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The Collaboration Imperative

Reprint: R1404E

Addressing global sustainability challenges—including climate change, resource depletion, and ecosystem loss—is beyond the individual capabilities of even the largest companies. To tackle these threats, and unleash new value, companies and other stakeholders must collaborate in new ways that treat fragile and complex ecosystems as a whole.

In this article, the authors draw on cases including the Latin American Water Funds Partnership, the Sustainable Apparel Coalition (led by Nike, Patagonia, and Walmart), and Action to Accelerate Recycling (a partnership between Alcoa, consumer packaged goods companies, and local governments, among others) to describe four new collaboration models that create shared value and address environmental protection across the value stream.

Optimal collaborations focus on improving either business processes or outcomes. They start with a small group of key organizations, bring in project management expertise, link self-interest to shared interest, encourage productive competition, create quick wins, and, above all, build and maintain trust.

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How to Survive Climate Change and Still Run a Thriving Business: Checklists for Smart Leaders

Reprint: R1404F

Climate change presents clear and pressing threats to business—materials and product shortages, price volatility, legal bans or consumer backlash, and damaged transportation infrastructure, to name just a few. But there are opportunities as well. Lowitt, a consultant in the sustainability field, has developed a series of detailed checklists that will help smart managers reduce operational, regulatory, and reputational risk while finding new ways to cut costs, improve performance, enhance customer relationships, and otherwise increase competitiveness.

The checklist recommendations, tested and refined through Lowitt’s research into and work with firms including Coca-Cola, GE, and Owens Corning, cover four broad areas in the product life cycle: sourcing, manufacturing, distribution, and consumption. Actions range from educating and incentivizing employees to use climate change–conscious behavior to measuring and reporting key metrics to determining when alternative materials, methods, sites, or contract partners may be called for.

Like any such tool, the checklists don’t provide a one-size-fits-all plan. Rather, they equip executives to customize their strategies according to factors such as their goods and services, risk tolerance, customer needs, and reliance on third parties throughout the value chain.

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The Limits of Scale

Reprint: R1404G

The value of many products and services rises or falls with the number of customers using them; the fewer fax machines in use, the less important it is to have one. These network effects influence consumer decisions and affect companies’ ability to compete.

Strategists have developed some well-known rules for navigating business environments with network effects. “Move first” is one, and “get big fast” is another. In a study of dozens of companies, however, the authors found that quite often the conventional wisdom was dead wrong. And when the rules failed, the reason was always the same: Companies trip up when they try to attract large volumes of customers without understanding (1) the strength of mutual attraction among various customer groups and (2) the extent of asymmetric attraction among them.

Looking at examples such as TripAdvisor, Wikipedia, and the New York Times, the authors offer strategies for competing in markets with network effects. New entrants should focus on customer groups that they are uniquely positioned to serve or appeal to the most attractive customers in a market. Incumbents pursuing growth strategies in adjacent markets or new geographies should consider how similar the needs of new customers are to those of existing customers. Offering complements also allows incumbents to reach additional customer groups.

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Coaching the Toxic Leader

Reprint: R1404H

In his work as an executive coach, psychotherapist Kets de Vries sometimes comes across bosses with mental demons. The four kinds he encounters most frequently are pathological narcissists, who are selfish and entitled, have grandiose fantasies, and pursue power at all costs; manic-depressives, who can leave a trail of emotional blazes behind them; passive-aggressives, who shy away from confrontation but are obstructive and underhanded; and the emotionally disconnected—literal-minded people who cannot describe or even recognize their feelings.

Left unchecked, these personalities can warp the interactions, plans, and systems of entire organizations. But with appropriate coaching, toxic bosses can learn to manage their conditions and become effective mentors and leaders. This article describes how to recognize each pathology and, step by step, guide people who suffer from it toward healthier and more-productive interactions.

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Europe’s Solution Factories

Reprint: R1404J

Manufacturers in developed countries can no longer rely on lean management practices to stay profitable. They face increasing competition from plants in large emerging economies that are able to produce on a large scale at a lower cost, while still providing high quality. The way forward, the authors suggest, can be glimpsed from analyzing past winners of Europe’s annual Industrial Excellence Award. Those companies have succeeded by using one or more of these strategies:

Leveraging data flows to integrate closely with supply chain partners.

Germany’s Schmitz Cargobull, for example, has become a leading trailer manufacturer by using sophisticated information technology to help customers monitor their vehicles.

Creating value downstream in other parts of the supply chain.

One example is Markem-Imaje, a maker of industrial printers for coding products; the company adds value for customers by offering a variety of ancillary services.

Collaboratively designing manufacturing processes that can rapidly evolve to meet customers’ needs.

A prime example is ASML, which works closely with customers and suppliers to make innovations in production technology for the semiconductor industry.

Specializing in customized products.

Focusing on small runs of custom-designed products has been an effective strategy for companies like BuS Elektronik and the Daimler Group’s Smart car division.

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15 Rules for Negotiating a Job Offer

Reprint: R1404K

The author, a professor of negotiation at Harvard Business School, offers specific pieces of advice for job candidates:

• Don’t underestimate the importance of likability.

• Help prospective employers understand why you deserve what you’re requesting.

• Make it clear that they can get you.

• Understand the person across the table from you.

• Understand his or her constraints.

• Be prepared for tough questions.

• Focus on the questioner’s intent, not on the question.

• Consider the whole deal.

• Negotiate multiple issues simultaneously, not serially.

• Don’t negotiate just for the sake of negotiating (a pitfall for recent MBA graduates).

• Think through the timing of offers.

• Avoid, ignore, or downplay ultimatums.

• Remember that your interviewer isn’t out to get you.

• Stay at the table.

• Maintain a sense of perspective.

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