Lots of great research and market stats bubbled up this month. Toss in some top leadership turnover and bad metrics and the month gets interesting. And, of course, we also got our annual bad boys of high-tech story to round out the shock factor angle. On with the Top 10 stories to catch the eye.
Leadership - CEO changes & the Harvard Business Review perspective
Big CEO changes occurred recently with Bill McDermott recently stepping away from SAP only to take the helm at ServiceNow just a few days later. Bill was named co-CEO in 2010 and sole CEO in 2014. ServiceNow’s CEO announced he’ll be moving to Nike to run things there.
In a fortuitous event, the Harvard Business Review published “The CEO Life Cycle” recently and it’s definitely worth a read. This piece lays out what happens over the years of a CEO’s tenure and what boards can expect from good and poorly performing CEOs during each phase. In the 6-10-year phase, what the authors call the “complacency trap” you can see a lot that can bury a CEO. The article notes:
For boards, the onset of the complacency trap presents a crucial question: Is our CEO a sprinter or a marathoner? Directors grapple with whether to bring in someone new or commit to a long-term vision with the incumbent. Our data shows that performance often spikes in the year of a significant event—a major acquisition, a technological innovation, a transition in a product cycle, a geographic expansion—with depressed returns in the preceding or following years. The board may begin to wonder whether the CEO is simply running out of ideas. One director said, “Some people have a clear view of how to steer the ship in the early years. I won’t call them one-trick ponies, but they do then struggle in their second act.” Even if directors begin mulling a leadership change, they tend to be hesitant. “The downside of a change in CEO seems huge to a board,” said one director. Our data suggests that boards should act decisively: Either accelerate the succession or protect the CEO from outside pressure.
The presence of Elliott Management at SAP clearly represents an ‘outside pressure’ and while we’ll likely never know all that went on with Bill’s departure from SAP, this article is one to refer to as you evaluate other leadership changes in enterprise technology firms.
After you read the article, examine it for clues re: Mr. Donahoe’s short tenure at ServiceNow. He was made CEO there in February 2017.
Leadership - software bad boy story(ies)
Seems like every year or so I get the gift of following another software vendor so full of hubris that they think that normal rules don’t apply to them. Phil Wainwright, Den Howlett and I tag-teamed a mondo story on Zenefits in 2016 that prompted my own wife to ask “Did they really do all that? Where was the board in this?” Folks, if my wife is raising eyebrows, there’s trouble afoot. (Note: Kudos to the new team at Zenefits for really turning this around!)
Today, the story involves another firm. The Wall Street Journal had a big piece on the WeWork implosion. Now, I’m at that seasoned executive age when Silicon Valley investors call me to ‘provide some adult supervision’ on their investments. I can honestly say I rarely see the excesses quite like the ones that make the big business publications. But I do uncover some eyeopeners along the way. After reading the WeWork piece, it makes me want to get on a plane and fire someone. Read this piece and ask whether your firm would tolerate such acts.
For a runner-up, colleague Phil Fersht of Horses for Sources wrote about another bad boy story – this one involved UiPath. Phil’s story talks of a $8 million party in Vegas one week followed by mass firings the next. You just can’t make this stuff up, folks!
Leadership - metrics
Don’t Let Metrics Undermine Your Business is a boffo piece from HBR, too. It introduces us to the term “surrogation” and provides numerous examples of how metrics change one’s strategy. They state:
Here’s a common scenario: A company selects “delighting the customer” as a strategic objective and decides to track progress on it using customer survey scores. The surveys do tell managers something about how well the firm is pleasing customers, but somehow employees start thinking the strategy is to maximize survey scores, rather than to deliver a great customer experience.
It’s easy to see how this could quickly become a problem, because there are plenty of ways to boost scores while actually displeasing customers. For example, what happened the last time you were urged to rate your experience a 10 on a satisfaction survey “because anything but a 10 is considered a failure”? That request may have turned negative feedback into a nonresponse or an artificially high score, and the pressure was probably off-putting. And think about all the pop-up windows, follow-up emails, and robocalls that pester you with surveys you would rather ignore. Such tactics tend to lower a customer’s satisfaction with a company, but surrogation can lead those charged with delighting the customer to use them despite the strategy.
I certainly see a lot of this in enterprise software. From my viewpoint, I’ve seen:
- ERP companies confuse the quest for a higher NPS (net promoter score) with delivering an outstanding customer experience. So, employees find ways to game the NPS score (by only sending the survey to customers they believe will give a favorable rating) versus fixing the numerous problems that exist with their sales processes, implementation channel partners, etc.
- Vendors claim they want to provide a great customer experience but their investors/activist shareholders/etc. are demanding they deliver outsized margin growth. The pressure to meet a margin metric (and the customer wallet fracking, litigation and audits that ensue) will destroy any strategy to improve the customer experience.
- Software sales pros that will do anything to meet their personal sales targets (and qualify for President’s Club) will often present a prospect with an implementation services schedule that they know to be insufficient to cause a successful implementation. They do this as they want the total price of the deal to fit within the buyer’s budget. Because they aren’t measured on a whether a downstream implementation is successful or not, they don’t care. The metrics that impact their commission pay in the short-term trump the company’s strategy to have successful implementations and satisfied customers.
Leadership - Disruptive flywheels
Disruptive Strategic Flywheels are discussed in a recent Strategy + Business piece. If your firm is seriously contemplating its future and how to respond, then you might want to review this one. In short, the authors are using some of the techniques Peter Senge popularized in The Fifth Discipline to help companies understand how firms will/will not adapt to new, rapid changes from innovators, competitors, customers, etc. It’s a smart read and the techniques can help people think through a new world that behaves more like a war game exercise than simple linear (if this, then that) decision making.
HR - Where are my tips?
Living on Tips is a detailed piece by Time magazine that shows how troubled the services economy is. If you’re in HR you need to read this especially if your firm is using gig economy or other outsourced services providers. No real discussion re: income disparity, quality of life, etc. can happen until you do.
On a related note, the career site, The Ladders quoted from a University of Chicago study on who tips Uber drivers. You better be sitting down for this: “While the average rider only tips on 16% of their transactions, 60% of rideshare customers never tip, and only 1% of these always tip.” Maybe the tip issue that Time is reporting on needs more analysis as the problem may have less to do with employers and more to do with people like you and I. Maybe I’m old school but I almost always tip people who provide me a service (e.g., Uber drivers, shoeshine stand operators, wait staff, etc.). I know it’s a big part of their personal income. If I ever noticed my children skipping out on paying a tip, I’d call them out on it.
Whatever the cause, there’s a big issue and smart firms will get ahead of it now.
HR - experience
Experience Doesn’t Predict a New Hire’s Success is the title of short but great piece in Harvard Business Review. Here’s a piece every recruiting software and HR analytics vendor needs to take to heart as what so many employers seek are applicants who possess a prior work history that matches the current role. Turns out that may be ill-advised. According to HBR:
It seems so intuitive that applicants who have general work experience or have already done the job that they’re applying for would be at an advantage. But when we looked at all these studies—and we sifted through thousands to find the 81 with pertinent data—we discovered a very weak relationship between prehire experience and performance, both in training and on the job. We also found zero correlation between work experience with earlier employers and retention, or the likelihood that a person would stick with his or her new organization.
HR - upskilling
Upskilling (not Reskilling) could really help as companies need ever more skilled workers while workforce demographics keep pointing to growing skills shortages. Strategy + Business published its Strategists Guide to Upskilling recently. It states:
Imagine that you’re one of millions of people whose job is threatened by digital technology. You’re the compliance officer at a bank, an operations manager on an assembly line, a technical writer, a programming debugger, or a lighting coordinator for a photographer. Sometimes your job is so bound up in routine, you joke that it could be handled by a computer. Then the joke becomes reality. You are asked to help design the automated processes that will replace your position in a year.
You are shocked at first; then worried; and then, if you’re very lucky, you find out that an upskilling initiative has been set up in your company, perhaps in partnership with other organizations in your region. The initiative is made possible by advances in learning methods and analytics. It uses shared data about skills, tasks, and employment prospects to match people who would otherwise be laid off with new digitally oriented jobs and the training needed to fill them. To take a new job would mean changing roles, maybe changing companies, and undergoing an intensive 15-week training program. You talk it through with one of the initiative’s personal counselors, decide to apply for a position, and are accepted.
The article dives into upskilling (not its less ambitious cousin ‘reskilling’) and the subtleties are definitely worth paying attention to.
HR - global thinking
USA Today reports: “The Global Competitiveness Report said the U.S. is losing ground in preparedness for skills needed in the 21st century.” That report was prepared by the World Economic Forum. So let’s call it, skills in spreadsheet development, ERP and on-premises systems are 20th century things when the market needs smarts in algorithms, workflow design, anomaly detection, analytics design, alternate business model development, etc. If we want to quit falling behind, we need new academic and work training – stat! I guess it’s time I quit postponing my algorithm training course….
Technology - just because you can doesn’t always mean you should
USA Today reports of a battle brewing between the large and growing number of employers that are snooping on their workers and the privacy advocates that object to this. While I’ve known about a number of individual technologies that companies use, seeing a number of them in one piece is indeed chilling. To understand where this is going, go to a highly automated dairy farm and you’ll think George Orwell is alive and well there, too.
Employers really need to look at the totality of what they’re monitoring and why they are doing it. One tool to capture engagement data might be acceptable but if your firm is also monitoring people’s locations via infrared detection, reviewing the public portions of employees’ social media profiles, mining their office automation tools to determine their internal connectiveness, etc., then the employer may be overreaching and crossing a practical and ethical line in needless prying. A relative recently asked about their firm’s use of keylogger tracking of their computer at work and how it is used to capture productivity statistics. We had a frank conversation about it and the bottom line is that this person will be looking to work for a more trusting employer soon.
How bad is this problem? USA Today related these stats:
By 2020, some 80% of businesses will be monitoring employees, using a range of tools and data sources, according to Gartner. This is up from 50% currently and just 30% in 2015. Gartner surveyed 239 "large" corporations to come up with its conclusions.
Finance - Phew!
The inflation rate in Venezuela is finally coming down! I know many of you don’t watch this but this tidbit from the Wall Street Journal is eye-opening:
Inflation has fallen from a peak 12-month rate of 2.6 million percent in January to 135,000% in August, the National Assembly says.
Aeons ago, I did a lot of work in Venezuela but I’d need a monster scientific calculator to do an expense report if I went there today.
What big stories did you see this month?