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Making Adaptability A Habit

Making Adaptability a Habit

Adam Kingl

We are living in an age of unprecedented rates of change.  We’re well versed in narratives about shifts in landscape, industry, market needs, and redundant strategies.  However, familiarity with the challenge does not necessarily create a solution.  What do we have to do as leaders to navigate these waters?  What skills do we require to keep our organisations relevant and successful in the 21st century?  There are mindsets, tools and practices that you can use for yourself and in the development of others to make adaptability and agility a habit.

In my consulting and executive education practice, I consistently see three barriers to adaptability, no matter the size or industry of the company.  First, the organisational culture punishes failure, or at least attaches a strong stigma to failure.  As a result, the priority is for perfection and predictability.  Generally, new practices, processes, products or services that we create are but tiny, incremental adjustments or improvements to what already exists.  Such an enterprise rarely develops the sort of game changing, supernova innovations that create exponential rewards and disrupts its industry.  So the first area to work on is the organisation’s attitude toward adaptability.  After all, you can be error-free or your can be agile; you can’t be both. 

Second, a huge reason that companies struggle to adapt is that their people don’t have clarity about what the change is supposed to look like.  Too many of us are familiar with the scenario:

Boss: After the board meeting, we’ve all received a memo that we need to encourage agility and innovation.

Put-upon employee: OK.  What should I be doing?

Boss: What do you mean?

Put-upon employee: What do I need to do that’s different to what I’m doing now that would demonstrate that I’m being agile and innovative?

Boss: You’ll work it out.  You know – explore! 

Since routines and habits are so difficult to disrupt at the best of times, it is incumbent on leaders not only to set direction but to suggest, not dictate, a vision for what a new direction could resemble, how it might impact the team’s day-to-day, and what behaviours are encouraged. 

Third, I have found it immensely helpful to suggest lenses through which leaders and their teams can practice adaptability and innovation with a little more focus.  For example, perhaps a team could run a 24-hour hackathon where they create experiments and then prototypes of innovations that they wish to develop.  That activity automatically moves the organisational needle forward in terms of enhancing its creative capacity.  Or a department could conduct some interviews with customers, suppliers and partners about what emerging trends they’re seeing in the marketplace.  This exercise would by definition break that team out of its internal perspective.  How many times do we try to adapt to a new world, but we only discuss the potential responses amongst a small set of colleagues?  Yet at the same time, we decry that we keep coming up with the same solutions to any problem!  It’s probably because we’re drawing from a toolkit that rarely refreshes. 

Change usually feels like a difficult, drawn-out, top-down, military campaign instead of an organic, market-driven, exciting prospect.  It can be the latter, but we have to question some of our long-held management paradigms about leading change that have fostered some our collective disabilities. 

  • Adam Kingl, www.adamkingl.com, is the author of Next Generation Leadership (www.nextgenerationleadershipbook.com) and is a keynote speaker, educator and advisor.  Adam was previously the Regional Managing Director, Europe, for Duke Corporate Education – Duke University, and the Executive Director of Thought Leadership and Learning Solutions at London Business School.  He is a writer, keynote speaker, educator and advisor.    

*First published in Michael Page and Future Talent Group, Adapting is Thriving in a Post-Pandemic World, 2020, p.9

https://view.joomag.com/michael-page-ebook-adapting-is-thriving/0887990001597657398?short&

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Spare A Thought For Middle Managers

Perspectives: Spare a thought for middle managers
Written by
Adam Kingl, author, keynote speaker and advisor

Published
04 Aug 2020

Though they are often highly adaptable, middle managers can be the most overlooked element of any company. For Adam Kingl, a little more empathy for the ‘squeezed’ middle wouldn’t go amiss.
My recent book, Next Generation Leadership, explores how to engage and better manage Generation Y, the most junior segment of the workforce. In researching generational theory for the book, my sympathy for my own generation, X, grew exponentially. Gen X is crammed between two huge generations, the Baby Boomers and Gen Y, unable to enjoy the privileges and prerogatives of the Boomers and at the same time managing the most difficult group that the workforce has seen in the Ys. Gen X is currently our sandwich generation and is a perfect metaphor for middle management – pushed from above and pulled from below, unthanked, unloved and overworked. Yet we all acknowledge that our middle managers make the gears turn, hold the culture and need to pivot and have to adapt faster than anyone else in the company.

If our organisations depend upon middle managers, what paradigms about this critical segment might we need to revise?

‘Uncrunch’ the middle layer
First, I firmly believe we must challenge the assumption that the executive suite decides on new or revised products or services, and middle managers are responsible for executing those decisions. One of the greatest difficulties implicit in a hierarchical organisational architecture is that the more we are promoted, the less we talk to actual customers! Yet in too many companies it is the enterprise leader who decides the customer offer, and that leader’s concept of what the market may want could be years or even decades out of date. Instead, perhaps the external-facing employees and their managers should be incentivised to develop new and adapted products and services and submit the evolved prototypes and business plans to executives for sign-off.

Second, we must offer development to the middle management layer for what they require now, and not only what skills they need at the next level. In my many years of working in executive education, I find that too often organisational learning is around the skills that one will need at the next level, yet I observe so many capabilities that the employee needs right now! If we consider the areas that will help to ‘uncrunch’ the squeezed middle layer, they would be themes that would free capacity for expanded exploration and empowerment. These include customer-centric innovation, trends we perceive in the market and the consequences of those trends; experimenting and prototyping in order for the organisation to enjoy a constant pipeline of adaptations and creative outputs; articulating one’s purpose in work and enabling one’s team to do the same – this last theme is perhaps the most critical in a world that is wracked with disappointment about the role of business in society.

In these manners, learning initiatives are directed toward including the customer voice, enhancing the agility of the organization, focusing intent, and engaging and retaining the largest segment of the workforce. A little dose of extra empathy for the squeezed middle manager wouldn’t go amiss either. Perhaps my favourite phrase that I’ve ever heard from a colleage is ‘How can I help?’

Adam Kingl, is the author of Next Generation Leadership and is a keynote speaker, educator and advisor. Adam was previously the Regional Managing Director, Europe, for Duke Corporate Education – Duke University, and the Executive Director of Thought Leadership and Learning Solutions at London Business School. He is a writer, keynote speaker, educator and advisor.

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You’ve got to fight for your right to innovate

If reaching optimal brain function requires longer than an hour-long meeting, we must schedule time for innovation, argues Adam Kingl.

Written by
Adam Kingl, author, keynote speaker and advisor

Published
15 Jul 2020

In my many conversations with organisations about their quest to be more creative, the challenge that I hear more than any other is, ‘We just don’t have enough time.’ Yet these same organisations complain that their relevance is declining daily because they are not as innovative as they need to be, governed by the tyranny of the daily schedule, the hundred emails, the endless conference calls.

So I offer one hack for individuals and organisations to be more creative that has little to do with bringing in jugglers, sticky notes on the wall, or foosball tables – be disciplined about carving out time to dream, brainstorm, prototype and look outside your immediate silo. After advising companies whose very existence depends on their creative capacity, such as Disney and Pixar, I found one crystal clear distinction in their daily habits versus those in organisations from just about any other industry. Companies who depend on innovation prioritise it in their daily activities. I know – shocking idea, right?

But I’m not asking you to trust my own experience or instinct. Let’s look to the neuroscience as to why this advice may be mission critical. We cannot trust that only hurried, captured moments of precious time for creativity will yield anything but paltry results. Our brains can’t turn on the creative magic for such short, unsustained periods of time.

It’s a state of mind

There are several brain states from deep sleep to normal consciousness to deep focus and peak performance. The higher the performing brain, the higher the brain wave frequency, hence Hertz is the degree of measurement. Our typical brain state during a normal work day is beta (14-30 Hz). You might disagree and suggest it’s theta (4-8 Hz), which is light sleep, and I would neither agree or disagree with you until I experienced your employer! But beta is probably our normal state and theta when we’re in committee meetings, agreed? Beta is what we require of our brains to accomplish our normal tasks of answering emails and solving our workaday problems.

Neuroscientific research has revealed that our brains can stay in beta for a long time and in fact are conditioned to stay there. As a result, if we crank the mental engine to get up to gamma (30-70 Hz) for peak performance and creative thinking the brain through habit easily and proactively usually drags us back to beta. Therefore, if we need our brains to be in gamma in order to be truly innovative, genuinely adding previously unheard of insight and exponentially big ideas, our brains would struggle to do that in, say, a one-hour meeting once a week, no doubt in the creative committee meeting! Beta state is like a constant and familiar noise; it’s the ever-present static of our work lives that can block gamma state. I compare it to how it’s hard for me to think when I’m eating an apple because I have this magnified constant crunching noise in the echo chamber of my skull.

We can’t shut off the laundry list of actions and decisions we have to make, even if we’re completely confident in our ability to make them. Beta is our habit, our rhythm, our tyranny. Because we don’t have balance between the mundane and the creative, we can’t achieve innovation even if we give ourselves those fleeting thirty minutes a week to do so. We have to fight for our right to be innovators.


 

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Should We Focus On Our Strengths Or Our Weaknesses?

Perspectives: Should we focus on our strengths or our weaknesses?
Written by
Adam Kingl, author, keynote speaker and advisor

Published
04 Nov 2019

Our willingness to focus on negatives has persisted since the post-war era, and this includes our approach to talent management. Shifting emphasis from weakness to strengths can help transform personal development, argues Adam Kingl.

The ways in which we consider and develop talent are still largely derived from military influence on leadership in the wake of the Second World War, as imported into the business world from generations entering the workforce upon their release from service, and the “delete all errors” foundations of scientific management.

Our talent experiences these foundations as a two-pronged pincer assault on their weaknesses. The implications are that they are never good enough, always wary of slipping up, and their fleeting moments of pride and job satisfaction are quickly subsumed by frequent reminders of their own inadequacies.

Assessing strengths vs weaknesses

Consider your own experience of talent-assessment reports in the organisations in which you have worked; 99% of you will probably recall an almost universal way in which these reports are organised: your strengths and your weaknesses.

Now remember how you read and reflected on this assessment. For most of us it went something like this:

Strengths: “Oh, I’m pleased that I have done well here. I know that I’m good at these things.”

Reader now dismisses and forgets this section entirely. Similarly, their manager opens a development conversation with these strengths for all of five minutes, then never mentions them again.

Weaknesses: “Oh no, I’m not good enough. I’m a terrible colleague and an embarrassment to my family. I’m wholly inadequate. And who was that traitor who gave me ones across the board in my 360?!”

Reader obsesses about this section for the next eight months, and their manager is similarly obsessed, beginning every conversation with a progress report and feedback on how well the weaknesses are being addressed.

The positive effect of building on strengths
This is a deficits-based approach to talent assessment. It implies that the best way for our people to develop is to focus on and improve those things at which they are terrible. There’s a massive and obvious problem with this philosophy. Allow me to explain with a personal story.

When I was about 12 years old, my parents took me on holiday to a ski resort. I was hopeless on skis; ragingly atrocious. I was holding onto a rope (my only job was to hang onto the rope quietly and do nothing else) that would drag me up the kiddy slope…and I fell over. Since no one behind me could ski either, and I couldn’t navigate out of the way, everyone fell on top of me – a novice skier puppy pile. My nose met my tonsils, as I was squashed into the bottom of a Black Forest Gateau of helmets, scarves and skis, a tartiflette of flattened bodies and egos.

Now, here’s the point: imagine I’d spent the rest of my life attempting to be a world-class professional skier. That was never going to happen, and I don’t regret it. I pursued hobbies that I enjoyed and academic topics about which I was either curious or had some natural aptitude.

I’m sure that for most people this is completely normal and ‘commonsensical’. Yet in most companies today, incredibly, we assess and spend our development resources as if we want to turn our ‘worst skiers’ into ‘average skiers’.

Developing world-class qualities

Wouldn’t our organisations be stronger and our people more fulfilled and successful if we identified their strongest skills and invested in turning those great attributes into absolutely world-class skills?

The shift we are just beginning to experience is from deficit-focused performance management (improving one’s weaknesses) to a focus on strengths. If we work on our weaknesses, most likely we can at best hope to improve those areas from ‘weak’ to ‘mediocre’ or ‘barely passable’ and only after an unconscionable amount of unfulfilling graft and attention.

If we work on our strengths, we have at least some chance, maybe even a reasonable one, of improving those qualities to ‘world class’, which will have a stronger impact on us individually and on the success of our organisations.

What do you want to tell your customers?

“Everyone in our company is world class at something, and we’ve worked hard on that.”

Or: “Everyone in our company is at least average in everything, and we’ve worked hard on that.”

Generational shifts
This shift from weakness-based assessment to strength-based assessment will only accelerate as generation Y (millennials) grow in numbers to become the majority of the global working population. As one typical way in which a generation develops its attitudes is its reaction to previous generation(s), gen Y is clearly embracing a healthier approach to self-regard, celebrating what colleagues can bring to the table.

Positive psychology is also a harbour from the ceaseless economic and socio-political breakers crashing into generation Y’s already justifiably shaky sense of security and confidence.

Adam Kingl is the author of Next Generation Leadership and a keynote speaker, educator and advisor. He was previously the regional managing director, Europe, for Duke Corporate Education (Duke University), and the executive director of Thought Leadership and Learning Solutions at London Business School.

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How Lockdown Is Changing Decision Making

By Dawn Cowie, The Financial Times

People Feature

28 April 2020

 

The Covid-19 lockdown should be used to usher in a new era of more devolved decision making and put an end to control freakery, say experts.

Leaders have an opportunity to learn from the crisis by stamping out micromanagement and trusting more in the expertise of managers that have kept businesses running smoothly in unprecedented times.

Some firms have been taking the lockdown as an opportunity to streamline and speed up decision-making procedures that are too cumbersome.

Adam Kingl, author of Next Generation Leadership and keynote speaker, says: “Your people, customers and community are looking for transparency and quick answers. This is not the time for bureaucracy to encumber action.”

Having never run a business remotely before, leaders have been deferring more to specialists in their operational, technology and digital teams.

Chris Mills, a financial services expert at technology consultancy 6point6, says decisions about day-to-day issues, such as client reporting, are being taken “faster than ever”.

People in operations and technology teams at fund firms say getting authorisation to push ahead with existing projects has become much quicker, according to Mr Mills.

Typically, business leaders ask if everything is “as expected” and, if there are no problems, then they give the green light, he adds.

Increased levels of trust in IT and operations chiefs over the lockdown period may have lasting consequences, says Mr Mills.

Now that technology and digital strategy are being recognised as business critical, Mr Mills expects more chief technology and digital officers to be given seats on boards.

Remote working has, however, thrown up particular challenges for firms going through strategic change.

Tim McEwan, culture coach, and former head of leadership and development at Henderson Global Investors, says remote working has slowed down the pace of decision making at one firm going through a transaction.

In normal times, “corridor conversations” play an important role in allowing people to clarify points, where there might be a lack of understanding, he says.

Without these side conversations, people tend to have to go over the issues again in another round of Zoom calls, which may lead to better-quality decisions but it takes longer, says Mr McEwan.

The inability to micromanage the business at a time of crisis has been a real shock for some leaders, particularly traditional owner managers.

Mr McEwan says it has been “an uncomfortable time” for leaders who prefer “closer management” because they cannot “eyeball everyone”.

“Bosses don’t need this level of control,” says Mr McEwan.

“They need to be clear about who holds the decision rights. This must be discussed, agreed and signed off. Then they need to trust people.”

In a “shocking” attempt to retain control, one boss asked staff to wear jackets and ties on Zoom calls at the start of the lockdown, Mr McEwan says.

At another firm, managers wanted daily team gatherings at 5:15pm to talk about what had been done during the day.

The idea backfired because it was seen as a way of checking up on staff and an indication that managers did not trust them, he says.

The flaws that undermine effective decision making in physical meetings can be even worse in virtual meetings, say experts.

While meetings should be about “idea creation”, the reality is that people often sit around “waiting for the leader to say something”, says Mr Kingl.

“This dynamic risks being even worse when teams work remotely. It’s scarily easy for people to be even more silent in a virtual meeting,” he says.

Mr Kingl suggests that managers try holding team discussions on an online discussion board, where everyone is asked to contribute at least three ideas and comment constructively on at least two others.

This means that “introverts can reflect before answering, the less confident can reply thoughtfully and bravely”, says Mr Kingl.

Adding anonymity to contributions reduces the senior voices from owning the lion’s share of the conversation, he adds.

A virtual forum can then be used for part of the discussion or for teams that are particularly diverse.

This approach can help leaders to “bring out the best in everyone”.

Leaders need to be “much more aware of the composition of virtual meetings”, says Mr McEwan, who adds that 20 people on a Zoom call is a nightmare.

“The chair has to work really hard to control the discussion, which may mean they take their eye off the content,” he says.

It may be better for bosses to let someone else control the meeting so they can focus on “the meat” of the discussion.

Experts say the pandemic should not be used as an excuse for putting important decisions on hold, even if they involve a change in direction.

“The pandemic may very well have changed priorities or assumptions about our organisations’ business models, operations models, talent strategies, channels to market or customer segments,” says Mr Kingl.

“It might be a once-in-a-generation opportunity to really take a moment to examine our organisations’ long-held beliefs and ask if they’re still fit for purpose,” he says.

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Next Generation Leadership

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Ten Steps to composing a world-class Learning & Development RFP

L&D Insights

Ten steps to composing a world-class Learning & Development RFP

Diane Nowell

Headspring recently hosted a webinar to explore how a well-constructed RFP can drive excellence when it comes to matching businesses with best-fit L&D providers. Adam Kingl, consultant and author of ‘The Next Generation Leadership’, joined forces with Headspring’s Corporate Partnership VP, Jean-Marie Ardisson, to share their insights and to demystify what can be a daunting exercise. Here’s what we learned.

While it’s not essential to frame every fragment of outsourcing within a formal procurement procedure, large or complex L&D projects often demand a more measured approach.

This is where an RFP, or a request for proposal, comes into play. Outlining project specifics in a document that invites potential service providers to return a considered bid for the work not only standardises criteria but also allows businesses to probe the strengths and weaknesses of vendors in the most cost- and resource-effective way possible.

Crucially, an RFP can tease out the tricky non-tangibles, too. Finding the right cultural fit can be every bit as important as securing the keenest price.

Rather than considering the RFP an end in itself, it’s helpful to view it instead as an invitation to establish a dialogue with both internal business partners and potential providers and partners. It’s an opportunity to collect new ideas about learning and development, in the broader sense, as well as to search specifically for programmes that deliver the most significant impact, given financial and time constraints.

Jean-Marie describes an RFP as a framework for conducting L&D operational conversations.

‘When we are asked to create a learning journey for a client, we invite them to tell us what they are looking for and how that connects to broader strategic challenges they’re facing within the business’.

If an RFP is the key to kick-starting this dialogue, how can companies construct RFPs in a way that engages interest, communicates project essentials and invites bids from the best-qualified and most closely aligned providers?

1.      Be yourself

The RFP offers an ideal opportunity to let prospective providers into your world. First and foremost, prospects will need to know more about you than can be gleaned from browsing your website or Wikipedia entry. Project your corporate personality and be frank about the qualities you’re seeking in the perfect partner. You aim to attract bids from organisations that are excited to work with you, so you’ll want to show them who you really are.

2.      Establish context

It will help L&D providers immeasurably if you take the time to create some background around your ‘why’: why this initiative, and why now? Whether the L&D project is a response to changing market conditions, regulatory requirements or perhaps forming part of a broader transformational journey within your organisation, the context will impact programme scope and L&D outcomes for all parties.

As Adam says: ‘Programmes are best when they’re deeply contextualised rather than generic. Anything we create together has an impact on participants and the organisation; we need to address both things and appeal to both. The energy we generate will mean that participants become ambassadors in their organisation, disseminating information long after the L&D programme has reached its conclusion’.

3.      Define your goals

Be clear about the expected scope of work. Clarity is essential. L&D providers will be wary of so-called ‘scope creep’ from RFPs that lack detail, so, including as much information as you can about your requirements is essential and will keep time-wasting (on both sides) to a minimum. Including all stakeholders – sponsors, HR, procurement and learners – in the discussion process will help to create an informed RFP.

4.      Set evaluation criteria

Generally speaking, if you haven’t yet decided on the metrics for measuring success, you’re probably not yet ready to distribute your RFP. Until you know what success looks like, you won’t be able to evaluate the impact of your L&D programme. That said, outcomes can be slippery when it comes to measuring learning impact. For instance, traditional ROI metrics are only applicable if the organisational objectives are related to growth in revenue or market share.

Adam suggests considering ROL (return on learning) as an alternative metric: ‘Measuring success could be linked to how the learning has affected participants, how it’s continuing or if there are changes in behaviour. You don’t want to start looking at those until a few months down the road’.

5.      Agree on a budget

Any potential L&D supplier will need to have an idea of budget so they can factor it in when planning a response. It can be presented as a range rather than a specific number, but it must be approved before the RFP is completed. No budget is a recipe for disaster. An RFP without an approved budget will act as a red flag for most providers as it’s usually considered indicative of a project that hasn’t been fully embraced internally and is perhaps still in its early stages. Before you create your RFP, ensure you have engagement from sponsors who are ready to agree on the project and sign off on the funding.

6.      Be transparent

It’s essential to be honest about what you’re looking for. While the RFP is intended to formalise the procurement process, it shouldn’t become so constrained that it becomes purely transactional. If you can be transparent about your needs, you’ll invite more open and honest dialogue and be more likely to secure a good fit for your project. The RFP should go way beyond acting as a tick-box exercise.

7.      Remain open to ideas

While defining criteria is a crucial aspect of any RFP, it’s also vital to leave room for fresh input. A challenging idea or design you hadn’t contemplated. A contributor, location or simulation that wasn’t discussed. Consider framing questions in a way that swerves stock answers and encourages creativity. Give the provider a chance to show their expertise.

As Adam says: “At its best and RFP process is an invitation to innovation. In other words, is the organisation saying: ‘Here’s where we’ve got to, and we’ve thought very hard about it, and we’ve talked to many people in the organisation. Now build on that for us’?”

8.      Propose a schedule

Ensure enough time is baked in for co-creation. This planning will vary depending on the client and the project, but, remember that the design and development process is critical: if the design isn’t right, we are less likely to meet objectives. Iteration is an essential step in the process and shouldn’t be considered optional; often, a design will need to be socialised to ensure it’s a good fit. Conversely, an unlimited amount of time isn’t always conducive to a good programme – every project needs boundaries in terms of time and budget.

9.      Offer insight

Consider what you can bring to the process. If you can offer programme support, a learning platform or expertise, it will affect how any programme is created and delivered. Similarly, including a profile of the participants will be invaluable to programme designers who will want to know about the learning culture in your organisation. Do people work in teams? Are they prepared to put aside a couple of days for learning, or does it need to be delivered in bite-sized amounts?

10. Keep it real

Be realistic about your expectations: don’t ask for every detail of the solution at this stage. You want to know what it’s like to work with potential suppliers, what kind of solution are they going to put forward in terms of skills, creativity, professionalism and resources, but they shouldn’t be expected to prepare the detail until you’ve awarded the project. Finally, don’t issue your RPF until the project – and the accompanying budget – has been approved.

To access the full recording of this webinar and learn directly from our experts, please visit our collection of free developmental webinars HERE.

London Business School

How To Fail Successfully

How to fail successfully
The most innovative companies embed experimentation in their strategy and extract maximum learning from their mistakes.

JULIAN BIRKINSHAW AND KATHY BREWIS
27 MARCH 2020

Everything has shifted – and it continues to shift. Being able to adapt quickly could make the difference between staying afloat and foundering. Most fundamentally, says Julian Birkinshaw, Professor of Strategy and Entrepreneurship at London Business School, business leaders and managers should reevaluate and think afresh about risk, uncertainty and failure.

“Many organisations have highly structured ‘stage-gate’ processes for managing innovation, as a way of keeping things as orderly and predictable as possible,” he says. “But the reality is that innovation is messy and requires an acceptance of high failure rates. And never more so than in these unprecedented times.”

Many businesses will struggle to embrace this new reality. They might know in theory that failure is meant to be valued, but they’ve not quite put this into practice. Old habits die hard: bosses used to holding postmortems when projects or products fail are now going to need to focus on genuine learning.

“I have seen several companies adopt a zero-tolerance approach to failure,” says Professor Birkinshaw. “The person who failed gets fired, the failure gets swept under the carpet and everyone gets the message that this must not happen again. This creates a fear culture – people follow the rules, whether they make sense or not, and no-one dares try anything new. Not a recipe for success in this world where the context is changing daily.”

Experimentation takes courage
Fortunately, there are some lessons we can all learn from businesses that have taken learning from failure seriously. Tim Harford, author of Adapt, said there were three essential steps: try new things, in the expectation that some will fail; make failure survivable, because it will be common; and make sure that you know when you’ve failed.

Professor Birkinshaw advocates an essential strategic shift for business leaders: fail methodically, through robust experimentation – and learn to maximise your return on failure. This sounds like an excellent plan. So why don’t more people do it?

“When you actually take a business person with responsibilities and a budget and sit them down and say, why don’t you do this as an experiment? They’ll say, ‘No, that won’t work: let’s pilot it or do some more research’,” says Professor Birkinshaw. “Experimentation is beautiful in concept but it’s very difficult for people to have the guts to follow through. An experiment says, let’s run two different pilots. You have to admit that you don’t know the right way forward – and nobody likes to admit that.”

Rajesh Chandy, Professor of Marketing and Academic Director, Wheeler Institute for Business and Development at London Business School, has studied how innovative companies incorporate failure in their corporate culture. He says: “Innovative companies often have asymmetric incentives for enterprise. Enterprising employees in these companies understand that the rewards for success will be much higher than any punishment for failure.”

“It’s not the case that failure has no negative consequences in these companies,” he points out. “Those responsible for failure may get their wings clipped, or may face higher burdens of justification the next time they propose something. But the incentive structure is such that if they succeed, the rewards will be disproportionately higher than any negative consequences should they fail.”

“Moreover, innovative companies manage risk by having a diverse portfolio of innovation projects – some that are quite risky, and many others that are quite safe. They also look outside and capitalise on the risks that others are taking. By letting the ecosystem do some of the risk-taking, they reduce the risks to themselves.”

Professor Birkinshaw recommends drawing up a balance sheet to assess a project’s return on failure. On one side, consider your ‘assets’. These might include: What have you learned about your customers’ needs and preferences? Do you need to change any of your assumptions? What insights have you gained into future trends? What have you discovered about how you work as a team? On the other side, look at your ‘liabilities’: costs, both financial and less tangible costs such as damage to reputation or morale. Bottom line: What are the key insights and takeaways for your business?

Costas Markides, Professor of Strategy and Entrepreneurship at LBS, agrees that experiments are crucial in identifying which of your ideas will fly, especially if you’re trying (or indeed forced) to innovate in a company that’s resistant to your big ideas.
“How do you select the good ideas? Try them out. Get the data and then you can say, ‘Look, what do you think about it now?’ Design clever little experiments to try your ideas. Small-scale, low-cost experiments, that get results quickly.”

Great idea – now prove it

This is the tricky part. “You have to bring the learning into the workplace,” says Adam Kingl, an executive education programme director at London Business School. “Realigning our position on failure, risk and experimentation is key. Aim to build a capability throughout the whole organisation so that as many people as possible have a chance to spot and respond to what’s coming in the distance. Leadership is about enabling your team continually to respond, experiment and get in front. If you experiment, by definition you will be more agile.

“Aristotle said, if you want to be a braver person, find a brave person and imitate them. Just by imitating ‘brave’, you will automatically be braver. That’s what experiments are. They give you the opportunity to try or even just imitate ‘agility’. In so doing, you will be more agile in a year’s time. Why do you need to be agile? Because, as one CEO put it, business used to be like trying to spot trends and opportunities when you’re on a swing – you’re are always moving but you can still keep an eye out. Today, it’s like trying to do so while you’re on a rollercoaster. So you need to experiment to build your agility muscles.”

Here is a four-step risk-mitigation framework Professor Birkinshaw suggests you keep in mind when you’re designing experiments:

1. Make your hypotheses explicit – a good experiment is designed so that whatever the outcome, you’ve learned something new. It’s much better to be able to say your hypothesis wasn’t supported than to say the project failed.

2. Limit the scope of the experiment. In the world of IT, the ‘sandbox’ is the offline testing environment where you try out new code. The same concept applies in business more generally – try the experiment in a limited way and make sure to run the new in parallel with the old.

3. Start at home. You want to stay under the radar during the early days of your experiment, while you figure out if it’s really a good idea. So this means trying it out in your own department or business first, and using volunteers to help you. You don’t want to expose yourself to formal review until you’re well down the track.

4. Iterate. You never get everything right first time. So learn the power of iteration and continuous improvement. James Dyson famously tried more than 5,000 prototypes before his bagless vacuum cleaner worked. Hopefully you won’t need quite that many.

Ultimately, what’s required is a shift in mindset. Kingl carried out a survey asking more than 100 UK HR directors about their company’s reaction to failure. Answers ranged from “A: Anyone who fails is quickly fired” through “B: We never speak of it – it’s shameful”, “C: ‘Good’ failure is tolerated but not shared” and “D: Failure is shared to a point, but there’s a stigma” to, finally, “E: Failure is shared and even celebrated”. Only 3% of the HR directors said their company’s attitude was an E.

The attitude you want to emulate is that of Tom Watson, CEO of IBM, in the company’s 1960s and 70s heyday. When a top salesman lost US$5 million on a project, Watson didn’t fire him. “Why would l fire you?” he said. “I’ve just spent five million dollars on your education.”

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THE ROI OF GEN Y

Profits are lower-priority for the next generation of leaders, and they’ll deliver better results because of it, says Adam Kingl.
This August, an association of CEOs from America’s top companies, called the Business Roundtable, issued a statement on the purpose of a corporation. Signed by 181 chief executives, including those of Apple and JPMorgan Chase, the statement argued companies should no longer focus exclusively on the interests of shareholders. Rather, they must do more: invest in employees, protect the environment, deal fairly with their suppliers, and deliver value to customers and communities.

This view is increasingly common. It reflects growing distress in the corporate world amidst global discontent over income inequality, harmful products, climate change, and poor work-life balance. Business as usual is no longer acceptable. Today’s circumstances may look unique, but capitalism has faced challenging times before and has a terrific track record of successfully reinventing itself over the centuries. The next reinvention is now set to be facilitated by Generation Y, or Millennials: and at the heart of this change is Gen Y’s attitude to ROI and the pursuit of financial returns at all costs.

Gen Y’s priorities

Gen Y – those born between 1982 and 2004 – composes fully half of the European and American workforces today and will make up 75% of the global workforce by 2025. Organizations now have a critical mass of employees from this generation, who almost invariably demand that their organizations shift focus from shareholder to stakeholder capitalism, taking more account of customers, employees, community, and the planet. To test this hypothesis, over the course of five years, I surveyed Gen Ys nominated by their employers as “high potentials.” I asked what they would focus on if they were the chief executives of their organizations (see Figure 1).

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The results make clear how little import ‘financial worth’ bears for this Gen Y population. But does this mean that the Gen Y chief executive would not want to earn a profit? Absolutely not: these emerging leaders know that business needs profits to survive and thrive. It is, though, a reaction against the dominance of financial analysts’ opinions, which shape the approach of the investment community with neat ratios and metrics for assessing company health. Chasing ratio optimization is a short-term game. Before one knows it, the purpose of the business is tacitly or implicitly about pleasing analysts. Long-term objectives take a back seat in decision-making. If the chief executive or chief financial officer starts adopting someone else’s KPIs (key performance indicators), using analysts’ ratios as their primary measures of performance, they risk creating drift from the organization’s mission. In the long-term, this can make sustained success far harder to achieve.

Unfortunately, that is exactly what has happened on a massive scale. But we are now on the threshold of stakeholder capitalism. Gen Ys have their priorities right, focusing on renewing and strengthening their purpose in everyday activities. Gen Y is leading the way in reinventing capitalism in a way that serves society – and ultimately, their companies – better.

Purpose-driven performance

As one example, take a look at Facebook, founded and led by one of the first Gen Y Fortune 500 chief executives, Mark Zuckerberg. Evidently, Facebook is far from perfect: but its early history as a publicly-traded company, and the way it catalyzed investor confidence, is a thought-provoking case study. In his letter to prospective shareholders as part of the company’s initial public offer in 2012, Zuckerberg did not emphasize revenue and profit forecasts. Instead, he explained Facebook’s purpose and simply stated that if you believe in that goal, then you might consider investing. Zuckerberg wrote: “Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected. We think it’s important that everyone who invests in Facebook understands what this means to us.”

This idealistic approach was far from off-putting for investors, and in the company’s first two years of public trading, Facebook shareholders earned about a 100% year-on-year return on their investments. By comparison, the ten-year average return for the US stock market index S&P 500 over the past 90 years is 9.8%.

Aggregated research has further proven that purpose-focused firms outperform their rivals. Research by Raj Sisodia, David Wolfe and Jag Sheth for their book Firms of Endearment revealed that, over the decade to June 2006, the 10% of firms with the strongest stakeholder focus returned 1,025% to their shareholders, compared to a 122% average return-on-investment from the S&P 500 overall. Just to be clear: purpose-driven organizations rewarded their investors better than the market average by a multiple of ten!

This shows that there need not be a trade-off between ‘mission’ and ‘financial return.’ The two forces serve each other powerfully. As David Williams and Mary Scott argued in their HBR article, ‘It’s Time to Balance Profits and Purpose’ (September 2012): “The most successful companies, both in profitability and longevity, are the ones who recognize the absolute necessity of profits as well as the equally high necessity of having a purpose beyond shareholders’ wealth.”

The rise of Gen Y marks a critical inflection point in the history of business. The vanguard companies of the near future will be those that resist the lure of analysts’ reductive metrics and instead build businesses that are noble at their core, that honor creative impulse, and that stir the hearts and minds of their people and their customers.

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MAKING SENSE OF GEN Y – AND WHAT IT MEANS FOR THE FUTURE OF WORK

The Great Recession provides insights into the preferences and behaviors of Generation Y in the workplace, says Adam Kingl.

Sceptics of generational theory believe we’re all the same fundamentally – that generational differences are just a matter of life stage. The quickest retort is to point out that if every generation is the same, then patterns of education, work and retirement should be identical at corresponding ages. But if those patterns are different, then there must be something more going on.

It’s clear that Generation Y is, indeed, different. Motivating, engaging and retaining this oft-misunderstood generation is a challenge for many organizations, especially in the face of fundamental challenges to the psychological contract created by pay and pension provision. Understanding this complex demographic starts with a look back at the crisis that rocked the global economy a decade ago.

Defining a generation

The differences between any generation and another are of course those of nurture rather than nature – of social context, not biology or genetic code. Any generation, with all its strengths and maddening quirks, is shaped by the epoch or context in which it is raised – a point made by Karl Mannheim in his essay on “The Problem of Generations” as long ago as 1952. I would define an epoch as the political situation, economic state, dominant parenting style, national and world attitudes that dominate each generation’s developmental years. This explains why the number of birth years used to define one generation is not the same as another: rather, it is when the dominant paradigms change significantly that we draw a line and begin to define a new generation, raised in different circumstances.

A common word of caution about generations – with which I entirely agree – is that one cannot make sweeping statements that apply fully and equally to every individual within a generation. Inevitably, in characterizing huge populations, we must make generalizations: for any given example, I have no doubt that you could think of one, several, or many people for whom the common claims do not apply. The point is that if these claims are broadly true, then they are helpful for decision-making and planning for the future, whether looking at generational issues through the lens of a company, government, family or community. A little more clarity about trends can only help us to be confident in navigating the future.

Generation Y

Clarity is much in demand when it comes to Generation Y. By Gen Y, I mean those in their mid-teens to mid-thirties today. I intentionally avoid the term ‘Millennials’, which is sometimes misunderstood to mean people born in the new millennium – rather than its usual meaning of those who came of age around, or soon after, the year 2000.

One of the epoch-defining events with which Gen Y grew up was the most traumatic economic convulsion of the past 80 years, the Great Recession of 2007-2009. While the crash and downturn that followed weren’t as severe as the Great Depression of 1929-1939, its impact on Gen Y’s sense of security and trust was fundamental.

Observing their parents losing their jobs, overhearing hushed conversations behind half-closed doors about money, seeing banks closing their doors, pension plans decimated, and houses foreclosed, Gen Y’s attitude toward economic security was formed by some tough life experiences in these years. The lessons they learned? You must be self-reliant. Companies will not look after you for life, so as soon as you have acquired what you sought from one employer, you move on somewhere else.

What sometimes looks like impatience with employers can also be seen as seizing the present, since we may not be here tomorrow. After all, Gen Y also watched as terrorism became more prevalent, both in the West – not least on 9/11 – and globally. This contributed to a carpe diem philosophy.

Bluntly, it became apparent to many of Gen Y in the late noughties that betting on the long-term was for suckers. The Great Recession was what academic Warren Bennis would call a “crucible of experience” or “a transformative experience through which an individual comes to a new or altered sense of identity” (Bennis and Thomas, Crucibles of Leadership, Harvard Business Review, September 2002).

Gen Y’s world of work

Against the backdrop of upheaval and change in Gen Y’s formative years, we can also see two related macro-trends that make the world of work fundamentally different for younger employees.

1
Significantly longer forecasted life-spans offer young people an uncertain retirement, but more opportunity to explore and experience different jobs, and even different careers.

2
Today’s typical pension plans contribute to an uncertain retirement and are dramatically less attractive in their ability to retain employees.

Today’s youngest employees know that they will live much longer and will enjoy a higher quality of life for more of their old age. As Lynda Gratton and Andrew Scott pointed out in their influential 2016 book, The 100-Year Life, people born today in developed countries have a better than 50% chance of living beyond
100 years.

As the reality of their likely longevity becomes apparent to Gen Y, they will take a much more flexible, evolutionary and personal approach to their careers than that of generations past. This means that the classic retirement age of 65 is quickly becoming anomalous. If graduates expect that they can and will work from, say, the ages of 22-82, they have huge scope to reinvent themselves professionally several times over. One could earn a degree, train and work as a doctor for 30 years, then earn a degree, train and work as a lawyer for another 30 years. Forget loyalty to a single company: Generation Y, with the luxury of time, doesn’t even have to be loyal to a single career.

Retirement risk

The second macro-trend is related to the first. Companies started to break the psychological contract with employees in the 1990s, when contract terms moved from ‘employment for life’ to ‘employability for life’ – that is, the opportunity to update skills and stay employable, though not always with the same company. The golden handcuffs were off.

The pension crisis that followed only exacerbated this trend. Because of longer life spans, companies have had to radically change their pension plans over the last 25 years, in order for both pension funds and corporate balance sheets to be sustainable.

The most significant change has been the switch from Defined Benefit (DB) to Defined Contribution (DC) pensions. A DB pension is correlated to one’s final salary on retirement. The retiree earns a fraction of their final year’s salary – the fraction being a function of the number of years of service – which is guaranteed for every year of their retirement until death, after which any surviving spouse often earns a fraction too. While the annual payment is usually adjusted for inflation, it is fixed, hence a ‘defined’ benefit. Obviously, this is hugely desirable, because it is a guaranteed income, regardless of how long one lives. It is essentially an annuity, without the exorbitant cost that a bank usually charges for an annuity off the shelf.

Like all pensions and public schemes, such as social security, the plan only funds itself if the revenue put into the pot by current employees exceeds the outgoing costs. Today, with life expectancy in the developed world over ten years longer than it was in the 1980s (and rising), the DB pension plan doesn’t balance.

This imbalance has been the source of a full-blown crisis over recent decades. In response, many companies have turned their plans into DC schemes.

Under these, employees pay into investment funds, portfolios of assets which operate like mutual funds, often with some employer-matching payments. In this manner, companies have insulated themselves from the risk of not knowing how long retirees will live. But employees now assume the risk that the value of the DC retirement pot might decline if investments don’t perform well.

While DC pensions offer retirees flexibility about how much to withdraw at any one time, the total value of an individual’s fund is finite. If the retiree withdraws all their money, and they’re still alive, they had better have another source of income. It is typically estimated that a middle-aged person needs to invest at least 20-25% of their income to finance their retirement. The conclusion most of us reach: we will simply have to delay retirement.

We’re facing a perfect storm of longevity, disintegrating pensions and social security (or ‘national insurance’ in some countries). This storm will force Gen Y to consider the unpalatable truth that their old age will be more uncertain and difficult than that of any previous generation in almost a century.

Rebuilding loyalty

DB plans rewarded employees for staying with their company for as long as possible, but most of today’s DC plans allow the employee to carry their pension anywhere – known in the US as the 401(k) – so employers have lost what was historically their most powerful tool for retaining talent. Is it any wonder that businesses now find it difficult to keep their young employees?

Pension problems have been compounded by the fact that average salaries have failed to keep pace with inflation, especially since the Great Recession. For example, adjusted for inflation, the US federal minimum wage has slipped from $10.90/hour in 1960 to $7.25 in 2015, a drop of a third.

There’s no point in blaming Gen Y for their lack of loyalty. They’re only responding to the world of work that older generations created.

What, then, can managers do to engage and retain their Gen Y employees? As tangible benefits like salary and pension are watered down, companies must turn to the intangible yet hugely powerful levers of personal and professional development, creating a strong culture, and helping their employees articulate their purpose and how it relates to the company purpose. It means changing the classic job interview question, “Why do you want to work here?” A better question for understanding applicants is, “Why do you work in this function, in this industry, in this country, or for these customers or clients?”

This human-centric approach, versus a traditional KPI-centric approach to success, will help companies navigate turbulence in the employment market – and begin to demystify Gen Y.