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G100 Network Notebook | September 2015

Apple’s Angela Ahrendts: “Chief Emotive Officer”

That characterizes her new role at Apple leading an ambitious effort to revitalize store culture and merge retail with online operations, says Fortune. The story offers a delightful account of how Tim Cook lured Ahrendts away from the helm at Burberry after she drove a remarkable turnaround. The move appears to be paying off. In her short time at Apple, retail employee satisfaction is at a record high, the byproduct of more thoughtful communication and development. From the exclusive:

Ahrendts believes the key to the company’s future is not just marvelous products, but also engaging and energizing its nearly 100,000 employees, 60% of whom now work in the $21.5 billion retail division. “If you’re going to employ people anyway,” she says, “why not make them the differentiator? They’re not a commodity.”

 

How to Make College More Affordable, Relevant

Income share agreements, where students pledge to investors a percentage of future income over a set time period, argues former Illinois Governor Mitch Daniels, the Dean of Purdue University, where you can “Bet on a Boiler.” This “debt-free” financing alternative, backed by respected think tanks and the subject of congressional legislation, looks attractive when viewed against the grim backdrop of rising student debt that Daniels outlines in a Washington Post op-ed. Of the agreements, he says:

Best of all, they shift the risk of career shortcomings from student to investor: If the graduate earns less than expected, it is the investors who are disappointed; if the student decides to go off to find himself in Nepal instead of working, the loss is entirely on the funding providers, who will presumably price that risk accordingly when offering their terms. … As an ISA market develops, students will benefit further from the market signaling that tells them which fields are most likely to be rewarded economically.

As The New York Times pointed out earlier this month, it is far from clear that all university education is a good investment:

At Bennington College in Vermont, over 48 percent of former students were earning less than $25,000 per year. A quarter were earning less than $10,600 per year. At Bard College in Annandale-on-Hudson, the median annual earnings were only $35,700. Results at the University of New Mexico were almost exactly the same.

 

What Happens When We Get Better at Measuring Worker Productivity?

Economist Tyler Cowen, a repeat speaker at G100, gives careful consideration to what will happen when technology enables us to measure precisely how much value each worker produces on the job:

As information about productivity improves, the better workers demand more and can get it; in fact, bosses will want to offer more to preëmpt them from leaving. Workers also stop thinking of themselves as bringing the same value to the table, and that can make inegalitarian pay structures less damaging to morale and thus more attractive.

But Cowen also considers the downsides, including the fact that most workers don’t like being constantly assessed and that tensions between “good” workers and “poor performers” will likely grow.

 

Aging and Innovation

How do firms innovate around the demographic challenge of global population aging to unlock opportunity? New research explores several cases of entrepreneurship across different industries. An excerpt from the first empirical study of “silver” opportunity recognition and exploitation:

Companies identifying demographic change as a major and relevant opportunity to innovate need to (re-)allocate resources to generate solutions, products, and services addressing those changing needs. Moreover, they need to ensure that their employees have the right empathic capabilities and customer orientation toward older people and they have to generate the appropriate marketing research intelligence on their customers’ needs and preferences.

 

Finding Rhythm in the Organization

A short, upbeat interview with Cardinal Health CEO George Barrett offers a glimpse of how musical talent informs his authentic leadership style. Barrett also shares some of his best advice (at the 2:37 mark) and a disciplined approach to overcome CEO isolation:

I do a town hall every quarter. I communicate with employees regularly through email. I wander the halls and talk to people. I sit down with them at lunch and ask what it’s like to be at Cardinal Health. And, we tell stories. We tell stories about who we are, where we’re going, and how we connect with those patients at the other end of our work.

 

A Guide to Network Leadership

Brook Manville, former Knowledge Manager at McKinsey and author of Judgment Calls, highlights a new study of hospital leadership with good insight into performance management. One unexpected takeaway: Simply firing underperforming surgeons did not lower a hospitals’ rate of coronary patient deaths. The dangers of such hasty decision-making will only multiply as more businesses move from hierarchical to distributed organizational structures, predicts Manville. He asks in Forbes:

When products are co-created across crowds and networks of customers, when competitors thrive not on the basis of their own businesses but rather the strength and reinforcing strategies of broader ecosystems, when talent is being mobilized from beyond traditional boundaries and organizational units—what leader can easily and quickly identify “just a few guilty parties” when a problem arises? What’s the right way to learn and improve from mistakes or shortfalls of performance, when results are the collective work and innovation of more and more hands?

 

The Future of HR

Fallout from Ram Charan’s call last year to split HR functions continues, thanks to a provocative spread in HBR that suggests “blowing up HR.” One critic of this hyperbole, Ed Lawler at the Center for Effective Organizations, suggests a better solution for companies lacking a strategic business partner in HR:

Create a new unit that focuses on organizational effectiveness. This may or may not include “traditional HR,” but it should definitely include business strategy, sustainability, organization design, organization development, and the interface among them and talent management. The creation of this “organization effectiveness” function may be key to ending the criticism of HR for its failure to address key business issues in organizations.

 

What Silicon Valley Does Best

Build start-ups? Guess again, says LinkedIn Executive Chairman Reid Hoffman, who notes that startup hubs can exist anywhere with the right access to technical talent and capital. A disproportionate number of high valuation companies call Silicon Valley home because the area recognizes that first-scaler advantage trumps first-mover advantage, Hoffman argues in the Financial Times. For example:

The key success factor is actually a comprehensive and adaptable approach to scale. A scale-up grows so fast that conventional management approaches are doomed to fail. … With each order of magnitude of scale, you must rethink and rebuild your organisation and processes.

This approach, dubbed “blitzscaling” in Silicon Valley, is the subject of a new course at Stanford that Hoffman was inspired to teach while guest-lecturing a start-up class taught by Y Combinator President Sam Altman.

 

Is Upskilling a New Trend?

Perhaps, specifically for front-line workers at large retail and service companies, says a glowing profile of how one US firm plans to lead the charge. Under Wal-Mart’s pilot program, entry-level employees receive on-the-job training in the form of short videos and games and supervisors partake in workshops to build management skills. The ultimate goal? Work with other retailers to create an official credential, such as a certification in customer service. The economics of retention is also a powerful motivator:

Employee turnover costs money—by industry estimates as much as $5,000 per front-line worker, or 20% to 30% of an entry-level salary. Standard turnover in retail is 50% in the first six months. If Wal-Mart can reduce this churn, persuading people to stay at least 12 to 18 months, it will save “tens of millions of dollars a year,” according to [Wal-Mart’s Kristen] Oliver.