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Forecasting is one of the most important parts of the management team, and the correct and effective performance of it can result in a very successful organization. 

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Forecasting is one of the most important parts of the management team, and the correct and effective performance of it can result in a very successful organization. 

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Bill Gates uses his incredibly powerful mind to prevent and use every possible output of the ecnomy in order to upgrade and update his company. this is one of the reasons why it is always has been one of the top companies along the las 20 or 30 years.

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Chip Somodevilla / Getty In 1999, Bill Gates wrote a book titled "Business @ the Speed of Thought."

In the book, Gates makes 15 bold predictions that at the time might have sounded outrageous.

But as business student Markus Kirjonen pointed out on his blog, Gates' forecasts turned out to be "eerily prescient."

Get the latest Microsoft stock price here.

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Bill Gates made these 15 predictions in 1999 - it's scary how accurate he was

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Chip Somodevilla / Getty In 1999, Bill Gates wrote a book titled "Business @ the Speed of Thought." In the book, Gates makes 15 bold predictions that at the time might have sounded outrageous. But as business student Markus Kirjonen pointed out on his blog, Gates' forecasts turned out to be "eerily prescient."

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How BofAML Developed a Cash Management Solution for Eastman Chemical

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Discover how Eastman Chemical Company chose a cash management solution that suited them with the help of BofAML.

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A great example of globalization and merge innitiatives, similar to the  Marriot case, but in the destilled beverages industry. 

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A great example of globalization and merge innitiatives, similar to the  Marriot case, but in the destilled beverages industry. 

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Jose Cuervo Case Study: Preparing for Treasury Transformation

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Learn about Jose Cuervo's treasury transformation when acquiring Bushmills from this Jose Cuervo Case Study from BofAML.

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Very surprising and different way to control consistently performance of employees, very EFFECTIVE too. 

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Very surprising and different way to control consistently performance of employees, very EFFECTIVE too. 

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Idea in Brief

The Problem

By emphasizing individual accountability for past results, traditional appraisals give short shrift to improving current performance and developing talent for the future. That can hinder long-term competitiveness.

The Solution

To better support employee development, many organizations are dropping or radically changing their annual review systems in favor of giving people less formal, more frequent feedback that follows the natural cycle of work.

The Outlook

This shift isn't just a fad-real business needs are driving it. Support at the top is critical, though. Some firms that have struggled to go entirely without ratings are trying a "third way": assigning multiple ratings several times a year to encourage employees' growth.

When Brian Jensen told his audience of HR executives that Colorcon wasn't bothering with annual reviews anymore, they were appalled. This was in 2002, during his tenure as the drugmaker's head of global human resources. In his presentation at the Wharton School, Jensen explained that Colorcon had found a more effective way of reinforcing desired behaviors and managing performance: Supervisors were giving people instant feedback, tying it to individuals' own goals, and handing out small weekly bonuses to employees they saw doing good things.

Back then the idea of abandoning the traditional appraisal process-and all that followed from it-seemed heretical. But now, by some estimates, more than one-third of U.S. companies are doing just that. From Silicon Valley to New York, and in offices across the world, firms are replacing annual reviews with frequent, informal check-ins between managers and employees.

As you might expect, technology companies such as Adobe, Juniper Systems, Dell, Microsoft, and IBM have led the way. Yet they've been joined by a number of professional services firms ( Deloitte, Accenture, PwC), early adopters in other industries (Gap, Lear, OppenheimerFunds), and even General Electric, the longtime role model for traditional appraisals.

Without question, rethinking performance management is at the top of many executive teams' agendas, but what drove the change in this direction? Many factors. In a recent article for People + Strategy, a Deloitte manager referred to the review process as "an investment of 1.8 million hours across the firm that didn't fit our business needs anymore." One Washington Post business writer called it a "rite of corporate kabuki" that restricts creativity, generates mountains of paperwork, and serves no real purpose. Others have described annual reviews as a last-century practice and blamed them for a lack of collaboration and innovation. Employers are also finally acknowledging that both supervisors and subordinates despise the appraisal process-a perennial problem that feels more urgent now that the labor market is picking up and concerns about retention have returned.

But the biggest limitation of annual reviews-and, we have observed, the main reason more and more companies are dropping them-is this: With their heavy emphasis on financial rewards and punishments and their end-of-year structure, they hold people accountable for past behavior at the expense of improving current performance and grooming talent for the future, both of which are critical for organizations' long-term survival. In contrast, regular conversations about performance and development change the focus to building the workforce your organization needs to be competitive both today and years from now. Business researcher Josh Bersin estimates that about 70% of multinational companies are moving toward this model, even if they haven't arrived quite yet.

The tension between the traditional and newer approaches stems from a long-running dispute about managing people: Do you "get what you get" when you hire your employees? Should you focus mainly on motivating the strong ones with money and getting rid of the weak ones? Or are employees malleable? Can you change the way they perform through effective coaching and management and intrinsic rewards such as personal growth and a sense of progress on the job?

With traditional appraisals, the pendulum had swung too far toward the former, more transactional view of performance, which became hard to support in an era of low inflation and tiny merit-pay budgets. Those who still hold that view are railing against the recent emphasis on improvement and growth over accountability. But the new perspective is unlikely to be a flash in the pan because, as we will discuss, it is being driven by business needs, not imposed by HR.

First, though, let's consider how we got to this point-and how companies are faring with new approaches.

How We Got Here

Historical and economic context has played a large role in the evolution of performance management over the decades. When human capital was plentiful, the focus was on which people to let go, which to keep, and which to reward-and for those purposes, traditional appraisals (with their emphasis on individual accountability) worked pretty well. But when talent was in shorter supply, as it is now, developing people became a greater concern-and organizations had to find new ways of meeting that need.

TIMELINE

Talent Management

The tug-of-war between accountability and development over the decades

Accountability

Development

A hybrid "third way"

Accountability

Development

A hybrid "third way"

WWI

The U.S. military created merit-rating system to flag and dismiss poor performers.

WWII

The Army devised forced ranking to identify enlisted soldiers with potential to become officers.

1940s

About 60% of U.S. companies were using appraisals to document workers' performance and allocate rewards.

1950s

Social psychologist Douglas McGregor argued for engaging employees in assessments and goal setting.

1960s

Led by General Electric, companies began splitting appraisals into separate discussions about accountability and growth, to give development its due.

1970s

Inflation rates shot up, and organizations felt pressure to award merit pay more objectively, so accountability again became the priority in the appraisal process.

1980s

Jack Welch championed forced ranking at GE to reward top performers, accommodate those in the middle, and get rid of those at the bottom.

1990s

McKinsey's War for Talent study pointed to a shortage of capable executives and reinforced the emphasis on assessing and rewarding performance.

2000

Organizations got flatter, which dramatically increased the number of direct reports each manager had, making it harder to invest time in developing them.

2011

Kelly Services was the first big professional services firm to drop appraisals, and other major firms followed suit, emphasizing frequent, informal feedback.

2012

Adobe ended annual performance reviews, in keeping with the famous "Agile Manifesto" and the notion that annual targets were irrelevant to the way its business operated.

2016

Deloitte, PwC, and others that tried going numberless are reinstating performance ratings but using more than one number and keeping the new emphasis on developmental feedback.

FROM   "The Performance Management Revolution," October 2016 ©HBR.ORG

From accountability to development.

Appraisals can be traced back to the U.S. military's "merit rating" system, created during World War I to identify poor performers for discharge or transfer. After World War II, about 60% of U.S. companies were using them (by the 1960s, it was closer to 90%). Though seniority rules determined pay increases and promotions for unionized workers, strong merit scores meant good advancement prospects for managers. At least initially, improving performance was an afterthought.

And then a severe shortage of managerial talent caused a shift in organizational priorities: Companies began using appraisals to develop employees into supervisors, and especially managers into executives. In a famous 1957 HBR article, social psychologist Douglas McGregor argued that subordinates should, with feedback from the boss, help set their performance goals and assess themselves-a process that would build on their strengths and potential. This "Theory Y" approach to management-he coined the term later on-assumed that employees wanted to perform well and would do so if supported properly. ("Theory X" assumed you had to motivate people with material rewards and punishments.) McGregor noted one drawback to the approach he advocated: Doing it right would take managers several days per subordinate each year.

By the early 1960s, organizations had become so focused on developing future talent that many observers thought that tracking past performance had fallen by the wayside. Part of the problem was that supervisors were reluctant to distinguish good performers from bad. One study, for example, found that 98% of federal government employees received "satisfactory" ratings, while only 2% got either of the other two outcomes: "unsatisfactory" or "outstanding." After running a well-publicized experiment in 1964, General Electric concluded it was best to split the appraisal process into separate discussions about accountability and development, given the conflicts between them. Other companies followed suit.

Back to accountability.

In the 1970s, however, a shift began. Inflation rates shot up, and merit-based pay took center stage in the appraisal process. During that period, annual wage increases really mattered. Supervisors often had discretion to give raises of 20% or more to strong performers, to distinguish them from the sea of employees receiving basic cost-of-living raises, and getting no increase represented a substantial pay cut. With the stakes so high-and with antidiscrimination laws so recently on the books-the pressure was on to award pay more objectively. As a result, accountability became a higher priority than development for many organizations.

Three other changes in the zeitgeist reinforced that shift:

First, Jack Welch became CEO of General Electric in 1981. To deal with the long-standing concern that supervisors failed to label real differences in performance, Welch championed the forced-ranking system-another military creation. Though the U.S. Army had devised it, just before entering World War II, to quickly identify a large number of officer candidates for the country's imminent military expansion, GE used it to shed people at the bottom. Equating performance with individuals' inherent capabilities (and largely ignoring their potential to grow), Welch divided his workforce into "A" players, who must be rewarded; "B" players, who should be accommodated; and "C" players, who should be dismissed. In that system, development was reserved for the "A" players-the high-potentials chosen to advance into senior positions.

Further Reading

Assessing performance Magazine Article

How Deloitte is rethinking peer feedback and the annual review, and trying to design a system to fuel improvement

Second, 1993 legislation limited the tax deductibility of executive salaries to $1 million but exempted performance-based pay. That led to a rise in outcome-based bonuses for corporate leaders-a change that trickled down to frontline managers and even hourly employees-and organizations relied even more on the appraisal process to assess merit.

Third, McKinsey's War for Talent research project in the late 1990s suggested that some employees were fundamentally more talented than others (you knew them when you saw them, the thinking went). Because such individuals were, by definition, in short supply, organizations felt they needed to take great care in tracking and rewarding them. Nothing in the McKinsey studies showed that fixed personality traits actually made certain people perform better, but that was the assumption.

So, by the early 2000s, organizations were using performance appraisals mainly to hold employees accountable and to allocate rewards. By some estimates, as many as one-third of U.S. corporations-and 60% of the Fortune 500-had adopted a forced-ranking system. At the same time, other changes in corporate life made it harder for the appraisal process to advance the time-consuming goals of improving individual performance and developing skills for future roles. Organizations got much flatter, which dramatically increased the number of subordinates that supervisors had to manage. The new norm was 15 to 25 direct reports (up from six before the 1960s). While overseeing more employees, supervisors were also expected to be individual contributors. So taking days to manage the performance issues of each employee, as Douglas McGregor had advocated, was impossible. Meanwhile, greater interest in lateral hiring reduced the need for internal development. Up to two-thirds of corporate jobs were filled from outside, compared with about 10% a generation earlier.

Back to development...again.

Another major turning point came in 2005: A few years after Jack Welch left GE, the company quietly backed away from forced ranking because it fostered internal competition and undermined collaboration. Welch still defends the practice, but what he really supports is the general principle of letting people know how they are doing: "As a manager, you owe candor to your people," he wrote in the Wall Street Journal in 2013. "They must not be guessing about what the organization thinks of them." It's hard to argue against candor, of course. But more and more firms began questioning how useful it was to compare people with one another or even to rate them on a scale.

So the emphasis on accountability for past performance started to fade. That continued as jobs became more complex and rapidly changed shape-in that climate, it was difficult to set annual goals that would still be meaningful 12 months later. Plus, the move toward team-based work often conflicted with individual appraisals and rewards. And low inflation and small budgets for wage increases made appraisal-driven merit pay seem futile. What was the point of trying to draw performance distinctions when rewards were so trivial?

The whole appraisal process was loathed by employees anyway. Social science research showed that they hated numerical scores-they would rather be told they were "average" than given a 3 on a 5-point scale. They especially detested forced ranking. As Wharton's Iwan Barankay demonstrated in a field setting, performance actually declined when people were rated relative to others. Nor did the ratings seem accurate. As the accumulating research on appraisal scores showed, they had as much to do with who the rater was (people gave higher ratings to those who were like them) as they did with performance.

And managers hated doing reviews, as survey after survey made clear. Willis Towers Watson found that 45% did not see value in the systems they used. Deloitte reported that 58% of HR executives considered reviews an ineffective use of supervisors' time. In a study by the advisory service CEB, the average manager reported spending about 210 hours-close to five weeks-doing appraisals each year.

As dissatisfaction with the traditional process mounted, high-tech firms ushered in a new way of thinking about performance. The "Agile Manifesto," created by software developers in 2001, outlined several key values-favoring, for instance, "responding to change over following a plan." It emphasized principles such as collaboration, self-organization, self-direction, and regular reflection on how to work more effectively, with the aim of prototyping more quickly and responding in real time to customer feedback and changes in requirements. Although not directed at performance per se, these principles changed the definition of effectiveness on the job-and they were at odds with the usual practice of cascading goals from the top down and assessing people against them once a year.

So it makes sense that the first significant departure from traditional reviews happened at Adobe, in 2011. The company was already using the agile method, breaking down projects into "sprints" that were immediately followed by debriefing sessions. Adobe explicitly brought this notion of constant assessment and feedback into performance management, with frequent check-ins replacing annual appraisals. Juniper Systems, Dell, and Microsoft were prominent followers.

CEB estimated in 2014 that 12% of U.S. companies had dropped annual reviews altogether. Willis Towers Watson put the figure at 8% but added that 29% were considering eliminating them or planning to do so. Deloitte reported in 2015 that only 12% of the U.S. companies it surveyed were not planning to rethink their performance management systems. This trend seems to be extending beyond the United States as well. PwC reports that two-thirds of large companies in the UK, for example, are in the process of changing their systems.

Three Business Reasons to Drop Appraisals

In light of that history, we see three clear business imperatives that are leading companies to abandon performance appraisals:

The return of people development.

Companies are under competitive pressure to upgrade their talent management efforts. This is especially true at consulting and other professional services firms, where knowledge work is the offering-and where inexperienced college grads are turned into skilled advisers through structured training. Such firms are doubling down on development, often by putting their employees (who are deeply motivated by the potential for learning and advancement) in charge of their own growth. This approach requires rich feedback from supervisors-a need that's better met by frequent, informal check-ins than by annual reviews.

Now that the labor market has tightened and keeping good people is once again critical, such companies have been trying to eliminate "dissatisfiers" that drive employees away. Naturally, annual reviews are on that list, since the process is so widely reviled and the focus on numerical ratings interferes with the learning that people want and need to do. Replacing this system with feedback that's delivered right after client engagements helps managers do a better job of coaching and allows subordinates to process and apply the advice more effectively.

Kelly Services was the first big professional services firm to drop appraisals, in 2011. PwC tried it with a pilot group in 2013 and then discontinued annual reviews for all 200,000-plus employees. Deloitte followed in 2015, and Accenture and KPMG made similar announcements shortly thereafter. Given the sheer size of these firms, and the fact that they offer management advice to thousands of organizations, their choices are having an enormous impact on other companies. Firms that scrap appraisals are also rethinking employee management much more broadly. Accenture CEO Pierre Nanterme estimates that his firm is changing about 90% of its talent practices.

The need for agility.

When rapid innovation is a source of competitive advantage, as it is now in many companies and industries, that means future needs are continually changing. Because organizations won't necessarily want employees to keep doing the same things, it doesn't make sense to hang on to a system that's built mainly to assess and hold people accountable for past or current practices. As Susan Peters, GE's head of human resources, has pointed out, businesses no longer have clear annual cycles. Projects are short-term and tend to change along the way, so employees' goals and tasks can't be plotted out a year in advance with much accuracy.

At GE a new business strategy based on innovation was the biggest reason the company recently began eliminating individual ratings and annual reviews. Its new approach to performance management is aligned with its FastWorks platform for creating products and bringing them to market, which borrows a lot from agile techniques. Supervisors still have an end-of-year summary discussion with subordinates, but the goal is to push frequent conversations with employees (GE calls them "touchpoints") and keep revisiting two basic questions: What am I doing that I should keep doing? And what am I doing that I should change? Annual goals have been replaced with shorter-term "priorities." As with many of the companies we see, GE first launched a pilot, with about 87,000 employees in 2015, before adopting the changes across the company.

The centrality of teamwork.

Moving away from forced ranking and from appraisals' focus on individual accountability makes it easier to foster teamwork. This has become especially clear at retail companies like Sears and Gap-perhaps the most surprising early innovators in appraisals. Sophisticated customer service now requires frontline and back-office employees to work together to keep shelves stocked and manage customer flow, and traditional systems don't enhance performance at the team level or help track collaboration.

Gap supervisors still give workers end-of-year assessments, but only to summarize performance discussions that happen throughout the year and to set pay increases accordingly. Employees still have goals, but as at other companies, the goals are short-term (in this case, quarterly). Now two years into its new system, Gap reports far more satisfaction with its performance process and the best-ever completion of store-level goals. Nonetheless, Rob Ollander-Krane, Gap's senior director of organization performance effectiveness, says the company needs further improvement in setting stretch goals and focusing on team performance.

Implications.

All three reasons for dropping annual appraisals argue for a system that more closely follows the natural cycle of work. Ideally, conversations between managers and employees occur when projects finish, milestones are reached, challenges pop up, and so forth-allowing people to solve problems in current performance while also developing skills for the future. At most companies, managers take the lead in setting near-term goals, and employees drive career conversations throughout the year. In the words of one Deloitte manager: "The conversations are more holistic. They're about goals and strengths, not just about past performance."

Perhaps most important, companies are overhauling performance management because their businesses require the change. That's true whether they're professional services firms that must develop people in order to compete, companies that need to deliver ongoing performance feedback to support rapid innovation, or retailers that need better coordination between the sales floor and the back office to serve their customers.

Of course, many HR managers worry: If we can't get supervisors to have good conversations with subordinates once a year, how can we expect them to do so more frequently, without the support of the usual appraisal process? It's a valid question-but we see reasons to be optimistic.

As GE found in 1964 and as research has documented since, it is extraordinarily difficult to have a serious, open discussion about problems while also dishing out consequences such as low merit pay. The end-of-year review was also an excuse for delaying feedback until then, at which point both the supervisor and the employee were likely to have forgotten what had happened months earlier. Both of those constraints disappear when you take away the annual review. Additionally, almost all companies that have dropped traditional appraisals have invested in training supervisors to talk more about development with their employees-and they are checking with subordinates to make sure that's happening.

Moving to an informal system requires a culture that will keep the continuous feedback going. As Megan Taylor, Adobe's director of business partnering, pointed out at a recent conference, it's difficult to sustain that if it's not happening organically. Adobe, which has gone totally numberless but still gives merit increases based on informal assessments, reports that regular conversations between managers and their employees are now occurring without HR's prompting. Deloitte, too, has found that its new model of frequent, informal check-ins has led to more meaningful discussions, deeper insights, and greater employee satisfaction. (For more details, see "Reinventing Performance Management," HBR, April 2015.) The firm started to go numberless like Adobe but then switched to assigning employees several numbers four times a year, to give them rolling feedback on different dimensions. Jeffrey Orlando, who heads up development and performance at Deloitte, says the company has been tracking the effects on business results, and they've been positive so far.

Challenges That Persist

The greatest resistance to abandoning appraisals, which is something of a revolution in human resources, comes from HR itself. The reason is simple: Many of the processes and systems that HR has built over the years revolve around those performance ratings. Experts in employment law had advised organizations to standardize practices, develop objective criteria to justify every employment decision, and document all relevant facts. Taking away appraisals flies in the face of that advice-and it doesn't necessarily solve every problem that they failed to address.

Here are some of the challenges that organizations still grapple with when they replace the old performance model with new approaches:

Aligning individual and company goals.

In the traditional model, business objectives and strategies cascaded down the organization. All the units, and then all the individual employees, were supposed to establish their goals to reflect and reinforce the direction set at the top. But this approach works only when business goals are easy to articulate and held constant over the course of a year. As we've discussed, that's often not the case these days, and employee goals may be pegged to specific projects. So as projects unfold and tasks change, how do you coordinate individual priorities with the goals for the whole enterprise, especially when the business objectives are short-term and must rapidly adapt to market shifts? It's a new kind of problem to solve, and the jury is still out on how to respond.

Rewarding performance.

Appraisals gave managers a clear-cut way of tying rewards to individual contributions. Companies changing their systems are trying to figure out how their new practices will affect the pay-for-performance model, which none of them have explicitly abandoned.

They still differentiate rewards, usually relying on managers' qualitative judgments rather than numerical ratings. In pilot programs at Juniper Systems and Cargill, supervisors had no difficulty allocating merit-based pay without appraisal scores. In fact, both line managers and HR staff felt that paying closer attention to employee performance throughout the year was likely to make their merit-pay decisions more valid.

But it will be interesting to see whether most supervisors end up reviewing the feedback they've given each employee over the year before determining merit increases. (Deloitte's managers already do this.) If so, might they produce something like an annual appraisal score-even though it's more carefully considered? And could that subtly undermine development by shifting managers' focus back to accountability?

Identifying poor performers.

Though managers may assume they need appraisals to determine which employees aren't doing their jobs well, the traditional process doesn't really help much with that. For starters, individuals' ratings jump around over time. Research shows that last year's performance score predicts only one-third of the variance in this year's score-so it's hard to say that someone simply isn't up to scratch. Plus, HR departments consistently complain that line managers don't use the appraisal process to document poor performers. Even when they do, waiting until the end of the year to flag struggling employees allows failure to go on for too long without intervention.

We've observed that companies that have dropped appraisals are requiring supervisors to immediately identify problem employees. Juniper Systems also formally asks supervisors each quarter to confirm that their subordinates are performing up to company standards. Only 3%, on average, are not, and HR is brought in to address them. Adobe reports that its new system has reduced dismissals, because struggling employees are monitored and coached much more closely.

Still, given how reluctant most managers are to single out failing employees, we can't assume that getting rid of appraisals will make those tough calls any easier. And all the companies we've observed still have "performance improvement plans" for employees identified as needing support. Such plans remain universally problematic, too, partly because many issues that cause poor performance can't be solved by management intervention.

Avoiding legal troubles.

Employee relations managers within HR often worry that discrimination charges will spike if their companies stop basing pay increases and promotions on numerical ratings, which seem objective. But appraisals haven't prevented discriminatory practices. Though they force managers to systematically review people's contributions each year, a great deal of discretion (always subject to bias) is built into the process, and considerable evidence shows that supervisors discriminate against some employees by giving them undeservedly low ratings.

Leaders at Gap report that their new practices were driven partly by complaints and research showing that the appraisal process was often biased and ineffective. Frontline workers in retail (disproportionately women and minorities) are especially vulnerable to unfair treatment. Indeed, formal ratings may do more to reveal bias than to curb it. If a company has clear appraisal scores and merit-pay indexes, it is easy to see if women and minorities with the same scores as white men are getting fewer or lower pay increases.

A classic study by Edward Jones and Victor Harris in the 1960s demonstrated that people tend to attribute others' behavior to character rather than circumstances.

When a car goes streaking past us, for instance, we think that the driver is a jerk and ignore the possibility that there might be an emergency. A good workplace example of this cognitive bias-known as the "fundamental attribution error"-is to assume that the lowest performers in any year will always be the worst performers and to fire them as a result. Such an assumption overlooks the impact of good or poor management, not to mention business conditions that are beyond employees' control.

Of course, this model is highly flattering to people who have advanced into executive roles-"A" players whose success is, by definition, credited to their superior abilities, not to good fortune. That may be partly why the model has persisted so long in the face of considerable evidence against it.

Even when "A" players seem to perform well in many contexts (and that's rarely measured), they may be coasting on the "halo effect"-another type of bias, akin to self-fulfilling prophecy. If these folks have already been successful, they receive more opportunities than others, and they're pushed harder, so naturally they do better.

Biases color individual performance ratings as well. Decision makers may give past behavior too much weight, for instance, or fall prey to stereotypes when they assign their ratings.

But when you get rid of forced ranking and appraisal scores, you don't eradicate bias. Discrimination and faulty assumptions still creep into qualitative assessments. In some ways the older, more cumbersome performance systems actually made it harder for managers to keep their blinders on. Formal feedback from various stakeholders provided some balance when supervisors were otherwise inclined to see only the good things their stars did and failed to recognize others' contributions.

Anytime you exercise judgment, whether or not you translate that to numerical ratings, intuition plays a part, and bias can rear its head.

All that said, it's not clear that new approaches to performance management will do much to mitigate discrimination either. Gap has found that getting rid of performance scores increased fairness in pay and other decisions, but judgments still have to be made-and there's the possibility of bias in every piece of qualitative information that decision makers consider.

Managing the feedback firehose.

In recent years most HR information systems were built to move annual appraisals online and connect them to pay increases, succession planning, and so forth. They weren't designed to accommodate continuous feedback, which is one reason many employee check-ins consist of oral comments, with no documentation.

The tech world has responded with apps that enable supervisors to give feedback anytime and to record it if desired. At General Electric, the PD@GE app ("PD" stands for "performance development") allows managers to call up notes and materials from prior conversations and summarize that information. Employees can use the app to ask for direction when they need it. IBM has a similar app that adds another feature: It enables employees to give feedback to peers and choose whether the recipient's boss gets a copy. Amazon's Anytime Feedback tool does much the same thing. The great advantage of these apps is that supervisors can easily review all the discussion text when it is time to take actions such as award merit pay or consider promotions and job reassignments.

Of course, being on the receiving end of all that continual coaching could get overwhelming-it never lets up. And as for peer feedback, it isn't always useful, even if apps make it easier to deliver in real time. Typically, it's less objective than supervisor feedback, as anyone familiar with 360s knows. It can be also "gamed" by employees to help or hurt colleagues. (At Amazon, the cutthroat culture encourages employees to be critical of one another's performance, and forced ranking creates an incentive to push others to the bottom of the heap.) The more consequential the peer feedback, the more likely the problems.

Not all employers face the same business pressures to change their performance processes. In some fields and industries (think sales and financial services), it still makes sense to emphasize accountability and financial rewards for individual performers. Organizations with a strong public mission may also be well served by traditional appraisals. But even government organizations like NASA and the FBI are rethinking their approach, having concluded that accountability should be collective and that supervisors need to do a better job of coaching and developing their subordinates.

Ideology at the top matters. Consider what happened at Intel. In a two-year pilot, employees got feedback but no formal appraisal scores. Though supervisors did not have difficulty differentiating performance or distributing performance-based pay without the ratings, company executives returned to using them, believing they created healthy competition and clear outcomes. At Sun Communities, a manufactured-home company, senior leaders also oppose eliminating appraisals because they think formal feedback is essential to accountability. And Medtronic, which gave up ratings several years ago, is resurrecting them now that it has acquired Ireland-based Covidien, which has a more traditional view of performance management.

Other firms aren't completely reverting to old approaches but instead seem to be seeking middle ground. As we've mentioned, Deloitte has backpedaled from giving no ratings at all to having project leads and managers assign them in four categories on a quarterly basis, to provide detailed "performance snapshots." PwC recently made a similar move in its client-services practices: Employees still don't receive a single rating each year, but they now get scores on five competencies, along with other development feedback. In PwC's case, the pushback against going numberless actually came from employees, especially those on a partner track, who wanted to know how they were doing.

At one insurance company, after formal ratings had been eliminated, merit-pay increases were being shared internally and then interpreted as performance scores. These became known as "shadow ratings," and because they started to affect other talent management decisions, the company eventually went back to formal appraisals. But it kept other changes it had made to its performance management system, such as quarterly conversations between managers and employees, to maintain its new commitment to development.

It will be interesting to see how well these "third way" approaches work. They, too, could fail if they aren't supported by senior leadership and reinforced by organizational culture. Still, in most cases, sticking with old systems seems like a bad option. Companies that don't think an overhaul makes sense for them should at least carefully consider whether their process is giving them what they need to solve current performance problems and develop future talent. Performance appraisals wouldn't be the least popular practice in business, as they're widely believed to be, if something weren't fundamentally wrong with them.

A version of this article appeared in the October 2016 issue (pp.58-67) of Harvard Business Review.

# data[].attributes.attachment_link.description
Idea in Brief The Problem By emphasizing individual accountability for past results, traditional appraisals give short shrift to improving current performance and developing talent for the future. That can hinder long-term competitiveness. The Solution To better support employee development, many organizations are dropping or radically changing their annual review systems in favor of giving people less formal, more frequent feedback that follows the natural cycle of work.

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Netflix incredibly innovative approach to HR management. 

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Netflix incredibly innovative approach to HR management. 

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Sheryl Sandberg has called it one of the most important documents ever to come out of Silicon Valley. It's been viewed more than 5 million times on the web. But when Reed Hastings and I (along with some colleagues) wrote a PowerPoint deck explaining how we shaped the culture and motivated performance at Netflix, where Hastings is CEO and I was chief talent officer from 1998 to 2012, we had no idea it would go viral. We realized that some of the talent management ideas we'd pioneered, such as the concept that workers should be allowed to take whatever vacation time they feel is appropriate, had been seen as a little crazy (at least until other companies started adopting them). But we were surprised that an unadorned set of 127 slides-no music, no animation-would become so influential.

People find the Netflix approach to talent and culture compelling for a few reasons. The most obvious one is that Netflix has been really successful: During 2013 alone its stock more than tripled, it won three Emmy awards, and its U.S. subscriber base grew to nearly 29 million. All that aside, the approach is compelling because it derives from common sense. In this article I'll go beyond the bullet points to describe five ideas that have defined the way Netflix attracts, retains, and manages talent. But first I'll share two conversations I had with early employees, both of which helped shape our overall philosophy.

Netflix founder and CEO Reed Hastings discusses the company's unconventional HR practices.

HBR: Why did you write the Netflix culture deck? Hastings: It's our version of Letters to a Young Poet for budding entrepreneurs. It's what we wish we had understood when we started. More than 100 people at Netflix have made major contributions to the deck, and we have more improvements coming.

Many of the ideas in it seem like common sense, but they go against traditional HR practices. Why aren't companies more innovative when it comes to talent management? As a society, we've had hundreds of years to work on managing industrial firms, so a lot of accepted HR practices are centered in that experience. We're just beginning to learn how to run creative firms, which is quite different. Industrial firms thrive on reducing variation (manufacturing errors); creative firms thrive on increasing variation (innovation).

What reactions have you gotten from your peers to steps such as abolishing formal vacation and performance review policies? In general, do you think other companies admire your HR innovations or look askance at them? My peers are mostly in the creative sector, and many of the ideas in our culture deck came from them. We are all learning from one another.

Which idea in the culture deck was the hardest sell with employees? "Adequate performance gets a generous severance package." It's a pretty blunt statement of our hunger for excellence.

Have any of your talent management innovations been total flops? Not so far.

Patty talks about how leaders should model appropriate behaviors to help people adapt to an environment with fewer formal controls. With that in mind, how many days off did you take in 2013? "Days off" is a very industrial concept, like being "at the office." I find Netflix fun to think about, so there are probably no 24-hour periods when I never think about work. But I did take three or four weeklong family trips over the past year, which were both stimulating and relaxing

The first took place in late 2001. Netflix had been growing quickly: We'd reached about 120 employees and had been planning an IPO. But after the dot-com bubble burst and the 9/11 attacks occurred, things changed. It became clear that we needed to put the IPO on hold and lay off a third of our employees. It was brutal. Then, a bit unexpectedly, DVD players became the hot gift that Christmas. By early 2002 our DVD-by-mail subscription business was growing like crazy. Suddenly we had far more work to do, with 30% fewer employees.

One day I was talking with one of our best engineers, an employee I'll call John. Before the layoffs, he'd managed three engineers, but now he was a one-man department working very long hours. I told John I hoped to hire some help for him soon. His response surprised me. "There's no rush-I'm happier now," he said. It turned out that the engineers we'd laid off weren't spectacular-they were merely adequate. John realized that he'd spent too much time riding herd on them and fixing their mistakes. "I've learned that I'd rather work by myself than with subpar performers," he said. His words echo in my mind whenever I describe the most basic element of Netflix's talent philosophy: The best thing you can do for employees-a perk better than foosball or free sushi-is hire only "A" players to work alongside them. Excellent colleagues trump everything else.

The second conversation took place in 2002, a few months after our IPO. Laura, our bookkeeper, was bright, hardworking, and creative. She'd been very important to our early growth, having devised a system for accurately tracking movie rentals so that we could pay the correct royalties. But now, as a public company, we needed CPAs and other fully credentialed, deeply experienced accounting professionals-and Laura had only an associate's degree from a community college. Despite her work ethic, her track record, and the fact that we all really liked her, her skills were no longer adequate. Some of us talked about jury-rigging a new role for her, but we decided that wouldn't be right.

So I sat down with Laura and explained the situation-and said that in light of her spectacular service, we would give her a spectacular severance package. I'd braced myself for tears or histrionics, but Laura reacted well: She was sad to be leaving but recognized that the generous severance would let her regroup, retrain, and find a new career path. This incident helped us create the other vital element of our talent management philosophy: If we wanted only "A" players on our team, we had to be willing to let go of people whose skills no longer fit, no matter how valuable their contributions had once been. Out of fairness to such people-and, frankly, to help us overcome our discomfort with discharging them-we learned to offer rich severance packages.

With these two overarching principles in mind, we shaped our approach to talent using the five tenets below.

Hire, Reward, and Tolerate Only Fully Formed Adults

Over the years we learned that if we asked people to rely on logic and common sense instead of on formal policies, most of the time we would get better results, and at lower cost. If you're careful to hire people who will put the company's interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we'd made a hiring mistake.

Adultlike behavior means talking openly about issues with your boss, your colleagues, and your subordinates. It means recognizing that even in companies with reams of HR policies, those policies are frequently skirted as managers and their reports work out what makes sense on a case-by-case basis.

Let me offer two examples.

When Netflix launched, we had a standard paid-time-off policy: People got 10 vacation days, 10 holidays, and a few sick days. We used an honor system-employees kept track of the days they took off and let their managers know when they'd be out. After we went public, our auditors freaked. They said Sarbanes-Oxley mandated that we account for time off. We considered instituting a formal tracking system. But then Reed asked, "Are companies required to give time off? If not, can't we just handle it informally and skip the accounting rigmarole?" I did some research and found that, indeed, no California law governed vacation time.

So instead of shifting to a formal system, we went in the opposite direction: Salaried employees were told to take whatever time they felt was appropriate. Bosses and employees were asked to work it out with one another. (Hourly workers in call centers and warehouses were given a more structured policy.) We did provide some guidance. If you worked in accounting or finance, you shouldn't plan to be out during the beginning or the end of a quarter, because those were busy times. If you wanted 30 days off in a row, you needed to meet with HR. Senior leaders were urged to take vacations and to let people know about them-they were role models for the policy. (Most were happy to comply.) Some people worried about whether the system would be inconsistent-whether some bosses would allow tons of time off while others would be stingy. In general, I worried more about fairness than consistency, because the reality is that in any organization, the highest-performing and most valuable employees get more leeway.

We also departed from a formal travel and expense policy and decided to simply require adultlike behavior there, too. The company's expense policy is five words long: "Act in Netflix's best interests." In talking that through with employees, we said we expected them to spend company money frugally, as if it were their own. Eliminating a formal policy and forgoing expense account police shifted responsibility to frontline managers, where it belongs. It also reduced costs: Many large companies still use travel agents (and pay their fees) to book trips, as a way to enforce travel policies. They could save money by letting employees book their own trips online. Like most Netflix managers, I had to have conversations periodically with employees who ate at lavish restaurants (meals that would have been fine for sales or recruiting, but not for eating alone or with a Netflix colleague). We kept an eye on our IT guys, who were prone to buying a lot of gadgets. But overall we found that expense accounts are another area where if you create a clear expectation of responsible behavior, most employees will comply.

Tell the Truth About Performance

Many years ago we eliminated formal reviews. We had held them for a while but came to realize they didn't make sense-they were too ritualistic and too infrequent. So we asked managers and employees to have conversations about performance as an organic part of their work. In many functions-sales, engineering, product development-it's fairly obvious how well people are doing. (As companies develop better analytics to measure performance, this becomes even truer.) Building a bureaucracy and elaborate rituals around measuring performance usually doesn't improve it.

Traditional corporate performance reviews are driven largely by fear of litigation. The theory is that if you want to get rid of someone, you need a paper trail documenting a history of poor achievement. At many companies, low performers are placed on "Performance Improvement Plans." I detest PIPs. I think they're fundamentally dishonest: They never accomplish what their name implies.

One Netflix manager requested a PIP for a quality assurance engineer named Maria, who had been hired to help develop our streaming service. The technology was new, and it was evolving very quickly. Maria's job was to find bugs. She was fast, intuitive, and hardworking. But in time we figured out how to automate the QA tests. Maria didn't like automation and wasn't particularly good at it. Her new boss (brought in to create a world-class automation tools team) told me he wanted to start a PIP with her.

I replied, "Why bother? We know how this will play out. You'll write up objectives and deliverables for her to achieve, which she can't, because she lacks the skills. Every Wednesday you'll take time away from your real work to discuss (and document) her shortcomings. You won't sleep on Tuesday nights, because you'll know it will be an awful meeting, and the same will be true for her. After a few weeks there will be tears. This will go on for three months. The entire team will know. And at the end you'll fire her. None of this will make any sense to her, because for five years she's been consistently rewarded for being great at her job-a job that basically doesn't exist anymore. Tell me again how Netflix benefits?

"Instead, let's just tell the truth: Technology has changed, the company has changed, and Maria's skills no longer apply. This won't be a surprise to her: She's been in the trenches, watching the work around her shift. Give her a great severance package-which, when she signs the documents, will dramatically reduce (if not eliminate) the chance of a lawsuit." In my experience, people can handle anything as long as they're told the truth-and this proved to be the case with Maria.

When we stopped doing formal performance reviews, we instituted informal 360-degree reviews. We kept them fairly simple: People were asked to identify things that colleagues should stop, start, or continue. In the beginning we used an anonymous software system, but over time we shifted to signed feedback, and many teams held their 360s face-to-face.

HR people can't believe that a company the size of Netflix doesn't hold annual reviews. "Are you making this up just to upset us?" they ask. I'm not. If you talk simply and honestly about performance on a regular basis, you can get good results-probably better ones than a company that grades everyone on a five-point scale.

Managers Own the Job of Creating Great Teams

Discussing the military's performance during the Iraq War, Donald Rumsfeld, the former defense secretary, once famously said, "You go to war with the army you have, not the army you might want or wish to have at a later time." When I talk to managers about creating great teams, I tell them to approach the process in exactly the opposite way.

In my consulting work, I ask managers to imagine a documentary about what their team is accomplishing six months from now. What specific results do they see? How is the work different from what the team is doing today? Next I ask them to think about the skills needed to make the images in the movie become reality. Nowhere in the early stages of the process do I advise them to think about the team they actually have. Only after they've done the work of envisioning the ideal outcome and the skill set necessary to achieve it should they analyze how well their existing team matches what they need.

If you're in a fast-changing business environment, you're probably looking at a lot of mismatches. In that case, you need to have honest conversations about letting some team members find a place where their skills are a better fit. You also need to recruit people with the right skills.

We faced the latter challenge at Netflix in a fairly dramatic way as we began to shift from DVDs by mail to a streaming service. We had to store massive volumes of files in the cloud and figure out how huge numbers of people could reliably access them. (By some estimates, up to a third of peak residential internet traffic in the U.S. comes from customers streaming Netflix movies.) So we needed to find people deeply experienced with cloud services who worked for companies that operate on a giant scale-companies like Amazon, eBay, Google, and Facebook, which aren't the easiest places to hire someone away from.

Our compensation philosophy helped a lot. Most of its principles stem from ideals described earlier: Be honest, and treat people like adults. For instance, during my tenure Netflix didn't pay performance bonuses, because we believed that they're unnecessary if you hire the right people. If your employees are fully formed adults who put the company first, an annual bonus won't make them work harder or smarter. We also believed in market-based pay and would tell employees that it was smart to interview with competitors when they had the chance, in order to get a good sense of the market rate for their talent. Many HR people dislike it when employees talk to recruiters, but I always told employees to take the call, ask how much, and send me the number-it's valuable information.

In addition, we used equity compensation much differently from the way most companies do. Instead of larding stock options on top of a competitive salary, we let employees choose how much (if any) of their compensation would be in the form of equity. If employees wanted stock options, we reduced their salaries accordingly. We believed that they were sophisticated enough to understand the trade-offs, judge their personal tolerance for risk, and decide what was best for them and their families. We distributed options every month, at a slight discount from the market price. We had no vesting period-the options could be cashed in immediately. Most tech companies have a four-year vesting schedule and try to use options as "golden handcuffs" to aid retention, but we never thought that made sense. If you see a better opportunity elsewhere, you should be allowed to take what you've earned and leave. If you no longer want to work with us, we don't want to hold you hostage.

We continually told managers that building a great team was their most important task. We didn't measure them on whether they were excellent coaches or mentors or got their paperwork done on time. Great teams accomplish great work, and recruiting the right team was the top priority.

Leaders Own the Job of Creating the Company Culture

After I left Netflix and began consulting, I visited a hot start-up in San Francisco. It had 60 employees in an open loft-style office with a foosball table, two pool tables, and a kitchen, where a chef cooked lunch for the entire staff. As the CEO showed me around, he talked about creating a fun atmosphere. At one point I asked him what the most important value for his company was. He replied, "Efficiency."

"OK," I said. "Imagine that I work here, and it's 2:58 PM. I'm playing an intense game of pool, and I'm winning. I estimate that I can finish the game in five minutes. We have a meeting at 3:00. Should I stay and win the game or cut it short for the meeting?"

"You should finish the game," he insisted. I wasn't surprised; like many tech start-ups, this was a casual place, where employees wore hoodies and brought pets to work, and that kind of casualness often extends to punctuality. "Wait a second," I said. "You told me that efficiency is your most important cultural value. It's not efficient to delay a meeting and keep coworkers waiting because of a pool game. Isn't there a mismatch between the values you're talking up and the behaviors you're modeling and encouraging?"

When I advise leaders about molding a corporate culture, I tend to see three issues that need attention. This type of mismatch is one. It's a particular problem at start-ups, where there's a premium on casualness that can run counter to the high-performance ethos leaders want to create. I often sit in on company meetings to get a sense of how people operate. I frequently see CEOs who are clearly winging it. They lack a real agenda. They're working from slides that were obviously put together an hour before or were recycled from the previous round of VC meetings. Workers notice these things, and if they see a leader who's not fully prepared and who relies on charm, IQ, and improvisation, it affects how they perform, too. It's a waste of time to articulate ideas about values and culture if you don't model and reward behavior that aligns with those goals.

The second issue has to do with making sure employees understand the levers that drive the business. I recently visited a Texas start-up whose employees were mostly engineers in their twenties. "I bet half the people in this room have never read a P&L," I said to the CFO. He replied, "It's true-they're not financially savvy or business savvy, and our biggest challenge is teaching them how the business works." Even if you've hired people who want to perform well, you need to clearly communicate how the company makes money and what behaviors will drive its success. At Netflix, for instance, employees used to focus too heavily on subscriber growth, without much awareness that our expenses often ran ahead of it: We were spending huge amounts buying DVDs, setting up distribution centers, and ordering original programming, all before we'd collected a cent from our new subscribers. Our employees needed to learn that even though revenue was growing, managing expenses really mattered.

The third issue is something I call the split personality start-up. At tech companies this usually manifests itself as a schism between the engineers and the sales team, but it can take other forms. At Netflix, for instance, I sometimes had to remind people that there were big differences between the salaried professional staff at headquarters and the hourly workers in the call centers. At one point our finance team wanted to shift the whole company to direct-deposit paychecks, and I had to point out that some of our hourly workers didn't have bank accounts. That's a small example, but it speaks to a larger point: As leaders build a company culture, they need to be aware of subcultures that might require different management.

Good Talent Managers Think Like Businesspeople and Innovators First, and Like HR People Last

Throughout most of my career I've belonged to professional associations of human resources executives. Although I like the people in these groups personally, I often find myself disagreeing with them. Too many devote time to morale improvement initiatives. At some places entire teams focus on getting their firm onto lists of "Best Places to Work" (which, when you dig into the methodologies, are really based just on perks and benefits). At a recent conference I met someone from a company that had appointed a "chief happiness officer"-a concept that makes me slightly sick.

During 30 years in business I've never seen an HR initiative that improved morale. HR departments might throw parties and hand out T-shirts, but if the stock price is falling or the company's products aren't perceived as successful, the people at those parties will quietly complain-and they'll use the T-shirts to wash their cars.

Instead of cheerleading, people in my profession should think of themselves as businesspeople. What's good for the company? How do we communicate that to employees? How can we help every worker understand what we mean by high performance?

Here's a simple test: If your company has a performance bonus plan, go up to a random employee and ask, "Do you know specifically what you should be doing right now to increase your bonus?" If he or she can't answer, the HR team isn't making things as clear as they need to be.

At Netflix I worked with colleagues who were changing the way people consume filmed entertainment, which is an incredibly innovative pursuit-yet when I started there, the expectation was that I would default to mimicking other companies' best practices (many of them antiquated), which is how almost everyone seems to approach HR. I rejected those constraints. There's no reason the HR team can't be innovative too.

A version of this article appeared in the January-February 2014 issue of Harvard Business Review.

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Sheryl Sandberg has called it one of the most important documents ever to come out of Silicon Valley. It's been viewed more than 5 million times on the web.

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Examples of different companies struggling due to questionable management processes in different areas of the company such as environmental, accounting departments. Including the Hewlett-Packard untrustworthy management team.

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Poor corporate governance and questionable accounting practices.

That's what these 10 big companies have in common, according to a list compiled for us by GovernanceMetric's International, an independent research firm that analyzes business risk.

According to GMI, all these companies present a "high level of concern" for both their short and long-term prospects thanks to a variety of risky management issues -- ranging from exorbitant executive compensation to lack of board independence.

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10 Companies With Huge Management Red Flags

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Poor corporate governance and questionable accounting practices. That's what these 10 big companies have in common, according to a list compiled for us by GovernanceMetric's International, an independent research firm that analyzes business risk.

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Importance of influencing and communications, and examples on how the mafunction of this parts of the organizational scheme can results in fatal results. 

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Importance of influencing and communications, and examples on how the mafunction of this parts of the organizational scheme can results in fatal results. 

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A leading mobile-phone maker falls out of step with its market - and struggles to catch up.

An energy-trading company rises high - and then suddenly implodes.

A luxury cruise ship takes a wrong turn - and the parent cruise-line company finds itself on troubled waters.

A mighty oil company presides over an environmental disaster - one that spills over to become a PR disaster as well.

The board of an airline hires a CEO - and then cancels his contract after just three years.

Five big companies. Five big problems. One of these companies is a high-tech manufacturer, two of them are in the energy sector, and two of them are in the consumer transport business. Otherwise, they have almost nothing in common. The problems that each company has faced vary widely, too.

Or so it might seem. In fact, each of these cases of organizational failure involves - right at the crux of the matter - a grievous lapse in communication. Let's look further at these five companies and their problems.

Nokia: For more than a decade, Nokia was the world's largest mobile-phone manufacturer. But when the smartphone became the next big thing within the mobility market, the company lost its competitive edge. According to an in-depth account of why Nokia has "struggle[d] to turn its good ideas into products," much of the problem stems from habits of communication that favor unfocused discussions about strategy over clear plans to bring new phone models to market.

Enron: A scholarly investigation into the problems that led to Enron's collapse pinpointed several "communication-based leader responsibilities" that senior managers failed to meet - responsibilities such as "communicating appropriate values" and "maintaining openness to signs of problems."

Star Princess Cruise Lines: In April 2012, passengers on the cruise ship Star Princess told members of the ship's crew that they had spotted a fishing boat that showed signs of being in distress. Yet the ship didn't stop to provide aid, and two people on the fishing boat later died of dehydration. Later, the cruise-line company issued a statement that cited a "breakdown in communication in relaying the passengers' concern."

British Petroleum: The blowout of the Deepwater Horizon offshore oil rig, in April 2010, resulted in a massive crisis for BP and its partners. Among the key factors that contributed to the disaster were "poor communications" and a failure "to share important information," according to a report on the White House commission that studied the incident.

Thai Airways: When Piyasvasti Amranand lost his job as CEO of Thai Air, in May 2012, the reason for his dismissal was somewhat elusive. After all, he had held the post for a mere three years, and the company's board had recently given him a positive annual review. According to one media report, however, the chairman of the airline said that "communication problems between Piyasvasti and the board were hampering the company's effort to meet [its] profit target."

We didn't select these examples entirely at random. But neither did we work very hard to find them. Even a cursory survey of high-profile organizational failures will turn up numerous stories that fit the same pattern. Thumb through the business pages of your daily newspaper. Or browse the virtual pages of a business news Web site. Very often, if you didn't know better, it would be easy to conclude that you were reading case notes from the field of communication studies.

Every leader keenly understands the consequences of taking a lax approach to financial management. And most leaders today recognize how dangerous it can be to take a lax approach to people management. But how many leaders appreciate the risks that come with taking a lax approach to communication management - with failing to manage the way that ideas and information flows within their organization?

Those leaders who do effectively manage the flow of information within their company tend to share a certain outlook - and a certain set of practices. They adopt communication methods that enable them to get closer to employees. They put in place communication systems that promote dialogue, as opposed to monologue. They engage employees by allowing them to become active participants in the communication process. They rigorously pursue an agenda that aligns their communication efforts with organizational strategy.

They put a premium on ensuring that people in their organization talk with each other, and not just to each other.

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A leading mobile-phone maker falls out of step with its market - and struggles to catch up. An energy-trading company rises high - and then suddenly implodes. A luxury cruise ship takes a wrong turn - and the parent cruise-line company finds itself on troubled waters.

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Joanne Elek

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Managing Director, Toronto at Stanton Chase - Executive Search Consultants| Founding Partner, Ambit Search

The idea of immortality has been with us since the beginning of time. Whether it was in myths like the fountain of eternal youth, or Walt Disney's famous cryogenic freezing (so that he can be unfrozen and brought back to life) we have always been fascinated with the idea of living forever. It's also a hot topic in Silicon Valley now (with serious financial backing), and though it doesn't look like we'll become immortal any time soon, there is no doubt that we are and will continue to be, on average, living much longer.

We hear a lot about an aging workforce and how with mass retirements looming the baby boomers will be effectively carried by successive generations (i.e. generation X-ers and millennials). But while it's true the boomers will live longer, it's also true that they are working longer. One of the effects of this is that we are seeing many instances where people in their late 60s and 70s are working alongside those in their 20s and 30s. Workplaces are set to become much more age-diverse than they have ever been before.

From a management and HR point of view, this presents a few challenges but, more than that, many opportunities. There are clear benefits of having an age-diverse organization.

First of all, experience counts for a lot. Technology has changed the way we work on a day to day basis, but in many industries the core ideas and core business remains the same. The knowledge gained over a forty or fifty year career is worth something to your organization. To ensure a seamless transfer of knowledge, consider setting up a mentoring system, either formally or informally.

Good managers will recognize that employees will have different priorities at different stages of their lives and will give them as much flexibility as possible. Family time and work/life balance will be a priority for some and not for others. Figure out a way of making it possible for those who need it without over-burdening those who don't. Maybe you want to offer people semi-retirement or consultancy positions in order to retain them. At the same time, maybe it's possible to let staff with young children work from home one day a week.

When making new appointments, try to avoid making broad generalizations about people based on age. Businesses need top talent regardless of age or background. Don't assume that just because someone is, say, in their late 50s they don't share a point view with someone in their mid-20s. There will always be common ground. Organizations need to integrate workers of different generations - it's how they build a 'pipeline of talent'.

The final point we want to make is that age-diversity is itself a good thing for any company. The wider the range of outlooks and perspectives, the better the decision making. And it's a two-way street: younger employees have a lot to teach their more senior colleagues as well; new ways of doing business, new ways of solving problems, and spotting new opportunities.

Looking for more WIT + WISDOM and career advice? Visit our website www.ambitsearch.com and follow Ambit Search on LinkedIn and Twitter: @AmbitSearch

Managing Director, Toronto at Stanton Chase - Executive Search Consultants| Founding Partner, Ambit Search

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The idea of immortality has been with us since the beginning of time. Whether it was in myths like the fountain of eternal youth, or Walt Disney's

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All of that said, you can be responsible only for the aspects of the process that are under your control. While it's jarring when someone who just hired you immediately moves on (it's happened to me), that is also part of the reality of the work world, in plenty of fields. (And after all, any given hiring manager may also be transferred, or even fired.) Operate according to a genuine belief that this new employee and the organization will ultimately prove a good match. That way, any unpleasant surprise will fade, and the relationship will take its course whether you're in the picture or not.

Newbie's Time Off
I am graduating college and will soon be starting my first job. My family has an annual beach vacation and reunion, and this year it is scheduled about five weeks after my job's start date. I am debating whether it is appropriate to ask for three or four days off so soon, especially because I am aiming for a small promotion at the four-month mark. My manager has mentioned that this company does not have specified limits for time off (number of days or seniority), so I do not think that there is any company protocol that would prevent me from taking the time. I do not want to make a bad impression, but I would really like to be able to see my extended family. Would you suggest sending an email to my man a ger as soon as possible, waiting until a few weeks after I start, or just accepting that fact that I will not be going to the beach this year?
SYLVIA, BOSTON

While it may not hurt to ask - if you frame it very carefully - you should be prepared to gracefully accept a "no."

To get in the right mind-set, think about this from your new manager's perspective. He or she may wonder why, if this is so important, it didn't come up in the interview process. After all, it's an annual event, not some just-announced one-off occasion that you couldn't have anticipated. And given that it happens every year, the manager may further wonder if you couldn't just skip it this one time - or at least settle for a visit that didn't require four days off - out of excitement for or engagement with your new job.

Maybe you have good answers; maybe the company really does have a laissez-faire attitude about days off. And maybe you have other reasons for confidence in that rather ambitious goal of earning a promotion in just four months, let alone whether this may undercut it.

But certainly emailing your request before your first day sounds like the wrong tactic; that will come across as though you're still negotiating after accepting an offer. If you bring this up, do it in person, soon after you start. That way you can make sure it is coming across as a humble inquiry, not a presumptuous and tone-deaf demand. You can also more clearly gauge the reaction - and this soon into a new job, I suggest dropping the request if you detect any hint that it's going over poorly. More important, if you accept and understand the possibility of a "no," you will not be so disappointed. And maybe you will be pleasantly surprised.

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All of that said, you can be responsible only for the aspects of the process that are under your control. While it's jarring when someone who just hired you immediately moves on (it's happened to me), that is also part of the reality of the work world, in plenty of fields.

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Sad to see that only the previous establishment of the society and the market enviroment has prevent many women from following their dreams and create such potential succesful companies based on great ideas.

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They're also less likely to have the management experience that can lead to starting a company. Just 19 percent of top executives are women, according to a LeanIn.org and McKinsey report, and a main reason they don't rise is because they are less likely to have mentors in senior leadership.

That changes when women run companies. The gender pay gap shrinks, and women are more likely to be promoted, according to research of public companies by Linda Bell, an economist and provost of Barnard College. "Whether by cause or effect, the presence of a top woman executive has a really robust impact," she said.

Women are also left out of financing networks, which are predominantly male and often operate through referrals from friends. They are more likely to invest their own money instead of outside capital in their businesses, and when they seek investors, they ask for less.

Networks are important for another reason: emotional support. "Launching an entrepreneurial venture is a lonely and sometimes scary undertaking, and you need to have people to talk to," Ms. Coleman said.

Incubators - physical spaces where people start businesses and meet other entrepreneurs as well as lawyers, accountants and investors - don't help. In a study of 18,000 firms started in incubators, only 6 percent were by women.

Another factor could also be at play. Women are generally more risk-averse than men. That makes them better equity investors over the long term, studies have shown. It also discourages some from entrepreneurship, and from trying to build high-growth businesses. In some cases, that might be a wise investment decision, too, considering about half of new businesses fail within five years.

Jennifer Dionisio said she had no female role models when she started her company, Three Sisters Farm and Dairy, last year. She sells goat milk and beef, and she hopes to start a cheese shop and farm-to-table restaurant.

Living in a small town, Pueblo, Colo., made it easier, she said, because she knows the local lawyer and bankers. "I would be apprehensive if I didn't," she said. Even so, she says, people at the local feed store assume she can't load bags of feed or drive tractors, and others come to the farm and ask for her boss.

She said she was trying to be a role model for her three daughters. She named the farm after them and hopes they will take over someday. "Then they can work for themselves, be independent and still make a living," she said. "Even my 7-year-old daughter can run a Bobcat" tractor now.

Silicon Valley is even more of a bubble than the rest of small-business America.

Founders of start-ups financed by venture capitalists are almost all male and white or Asian, according to a study by Paul Gompers, a professor at Harvard Business School, and Sophie Wang, a Harvard graduate student.

They wanted to find out whether the problem was not enough women with the education, training or desire to start companies, or whether it was factors like bias or closed-off networks.

They concluded there were plenty of qualified women. Women earn 40 percent to 50 percent of degrees in science and engineering, and they represent 30 percent of the software industry work force. But they are less likely to have information about how to become an entrepreneur, to see female role models and to know venture capitalists.

Female venture capitalists are more likely to invest in female entrepreneurs, Mr. Gompers has found. Yet 91 percent of venture capitalists are male. Eighty-six percent are white, and 11 percent are Asian. Most worked in investment banking, private equity or consulting, and went to Harvard, Stanford or the University of Pennsylvania.

Unsurprisingly, the backgrounds of venture-backed entrepreneurs are pretty much the same. Ninety-one percent are men, 80 percent are white and 16 percent are Asian. Most have degrees from a similar set of colleges and have worked at big tech companies like Google or Microsoft.

"The problem when you have five white men who all went to the same business school and worked in the same firms is their networks overlap, so they don't draw from a very wide source of entrepreneurial deal flow," Mr. Gompers said.

Sheila Lirio Marcelo, the founder of Care.com, a service for helping families find caregivers, was surprised to see that insularity after growing up in the Philippines, where both her parents started businesses. She said one of the most important things she did was seek out male role models and mentors, not just women.

"Closing the gender gap in business is often a conversation that women have with other women," she said. "We absolutely need to provide a supportive community for each other, but if we're truly going to level the playing field, men have to be part of the equation."

There are other ways to close the gap. In another paper by Mr. Gompers and Ms. Wang, they found that when venture capitalists had daughters, they were less biased against women. Networking groups for women, like Astia, or women-led investment firms, like Broadway Angels, can help. So can female entrepreneurs who speak publicly about their careers and mentor women, and would-be entrepreneurs who introduce themselves on social media or at conferences, Ms. Marcelo said.

She also advised women to develop thicker skin. "Men tend to shake off rejection more quickly than women," she said, "but it's absolutely true that entrepreneurs are made or broken by how they bounce back from adversity."

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Why Women Don't See Themselves as Entrepreneurs

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They're also less likely to have the management experience that can lead to starting a company. Just 19 percent of top executives are women, according to a LeanIn.org and McKinsey report, and a main reason they don't rise is because they are less likely to have mentors in senior leadership.

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Very interesting to observe how the planning process start taking place, and the capacity and dimension forecast of the breweries and taste rooms takes place in these new artist shops (craft beer is the art that I feel passion for)

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But now, consumers are increasingly seeking beer at the source: Since 2010, sales at breweries and brew pubs have risen more than 500 percent, according to the Alcohol and Tobacco Tax and Trade Bureau. Beer lovers routinely troop to breweries for releases of cans and bottles, and a sense of belonging to a particular place has become as important as the beer itself.

That places contract brewers in a pickle. "If you don't have a brewery, you're kind of homeless," said Mikkel Borg Bjergso, Mikkeller's founder and chief executive. "You don't have anything to show people."

As a result, many itinerant beer makers are dropping anchor, opening breweries with tasting rooms for thirsty patrons.

Evil Twin, in Queens, and Grimm Artisanal Ales, in Brooklyn, are building breweries and taprooms. Stillwater aims to start its own beer production plant next spring in Greenpoint, Brooklyn. In June, Almanac Beer Company revealed plans to construct a brewery and taproom in Alameda, Calif., near Oakland.

And this month, Mr. Bjergso announced that he would create a brewery at Citi Field, home of the New York Mets. Scheduled to open this year, Mikkeller Brewing NYC will brew and can beers like its Say Hey Sally pilsner, served alongside food from Fuku and Pat LaFrieda. "Next year at Citi Field, people will be drinking beer made at the ballpark," said Jim Raras Jr., Mikkeller NYC's executive vice president.

Notch Brewing's session beers eventually found their niche, and last summer, Mr. Lohring converted a riverside warehouse in Salem, Mass., into a brewery, taproom and beer garden. In the afternoons, customers clink glass steins of corn-laced lagers and smoked beers that are produced on the premises.

"Say you're sitting there as a contract brewer, and you've got a million bucks," Mr. Lohring said. "Do you spend the old-fashioned way with advertising and marketing, or do you spend a million bucks on a facility where you serve beer to consumers? It's a pretty easy decision."

Taprooms also serve as consumer focus groups. Mr. Lohring uses his to test richly flavored Old World lagers and pale ales featuring new hop varieties. "We get immediate feedback from customers and sales," he said, "and that informs us on our next steps."

Even more traditional brewers are planting roots. In February, the 127-year-old Narragansett Brewing Company, which once produced New England's top-selling beer (and one of its catchiest slogans: "Hi, neighbor! Have a 'Gansett"), resumed brewing in Rhode Island for the first time in decades.

The beer was discontinued in 1983, but Mark Hellendrung, a former president of Nantucket Nectars, bought the brand rights in 2005 and soon began contract-brewing its landmark lager in Rochester. Last year, he moved the company into the cooperative Isle Brewers Guild in Pawtucket, R.I., and, in February, started making smaller batch beers like It's About Time I.P.A.

Previously, fans passing through Rhode Island could visit only the brand's headquarters, then in Providence. Now Mr. Hellendrung can meet fans at the brewery, as he did recently with a North Carolina couple who stopped by while driving to Maine. "We were able to sit down and have a beer," he said. "It was just awesome to have a great conversation."

All the same, many of these beer companies still outsource much of their brewing.

Narragansett makes most of its beer, including its lager, in Rochester, at North American Breweries, which also produces Genesee beer. That brewery's mix of lager-making expertise, speed and economies of scale is hard to beat, Mr. Hellendrung said, noting that the Rochester brewery can make 1,200 to 1,400 cans a minute, compared with 240 in Pawtucket.

Mr. Bjergso's Mikkeller beers are mostly contract-made in Europe, where he operates the Warp igs B rewpub in Copenhagen in tandem with 3 Floyds Brewing Company of Munster, Ind.

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Beer Makers Who Used Other Breweries Are Opening Their Own

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But now, consumers are increasingly seeking beer at the source: Since 2010, sales at breweries and brew pubs have risen more than 500 percent, according to the Alcohol and Tobacco Tax and Trade Bureau. Beer lovers routinely troop to breweries for releases of cans and bottles, and a sense of belonging to a particular place has become as important as the beer itself.

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Importance of rewarding employees, and how to do it not only monetary or with presents, but actually improving their workplace and the environment around the company. 

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Importance of rewarding employees, and how to do it not only monetary or with presents, but actually improving their workplace and the environment around the company. 

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More and more, companies are stepping up to fill that void by consistently reaching their population of employees (and their families) across the full continuum of health, including those who do not seek care.

Congruent with their own corporate culture and strategy, companies develop and maintain a wide variety of programs to serve tens of thousands of employees wherever they are. Investments are made to identify, communicate, implement, integrate and evaluate physical activity, weight management, chronic condition management, tobacco cessation, stress management, financial well-being and other employee services which are offered on-site, online, telephonically and in community settings. Some of these are internally developed, although most are in partnership with health plans and other organizations.

To attract employee attention and promote participation, most employers offer financial incentives for healthy practices or good health outcomes such as blood pressure within nationally recommended guidelines, or both. Annual incentive amounts are increasing, with the median amount rising to $600 per employee this year, according to a survey done by Fidelity and our organization.

Outcome-based incentives

Roughly three in four large companies currently use some type of health and wellness incentive with many of those linking the incentive award to one or more specific health outcomes. This is a trend that will continue over the next several years.

"Roughly three in four large companies currently use some type of health and wellness incentive with many of those linking the incentive award to one or more specific health outcomes. This is a trend that will continue over the next several years."

The most frequently targeted health outcome or goal is becoming tobacco-free. In fact, the majority of the nation's largest companies provide either an incentive for not using tobacco or a penalty for use. The incentive may be earned, or penalty waived, by participation in a company-paid tobacco cessation program. In addition, achieving or making progress toward recommended guidelines for BMI, blood pressure, glucose and cholesterol may be part of an outcome-based incentive program. In every case, "reasonable alternative" pathways to earn the same incentive are offered to employees who may be unable to achieve a particular outcome for health reasons.

These outcome-based incentives complement the growing use of high deductible health plans which promote consumerism and responsible use of medical resources. An emphasis on employee self-care and lifestyle management reinforces the consumer mindset needed to manage in the present health care environment.

The bottom line

Rewarding progress toward or achievement of better health is compelling given the cost and productivity impact of behavior-linked and potentially modifiable health risks such as poor diet, sedentariness and lack of exercise, unhealthy weight and tobacco use. The significant cost burden of lifestyle-related disease and disability, including type 2 diabetes, obesity and heart disease, is distributed among all employees and their employer; it seems appropriate that those willing to take steps to maintain better health should benefit. And despite much misinformation, the costs of an outcome-based incentive program by regulation are paid by those who choose not to participate. Incentives must also be available to those who are not able to participate.

While each company's strategy looks a little bit different, the common theme of recognizing a value on investment in employee health comes through loud and clear. Through a human capital management lens, companies are beginning to analyze the impact of moving the health and well-being needle on standard business performance metrics like customer service levels, same store sales, and profitability.

The bottom line - companies view the investment in health and well-being no differently than investments in learning, development, training and safety; it's good business to attract, retain and have the best intellectual, creative and productive talent possible.

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Improving Workforce Health: An Investment in Employees and Business

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More and more, companies are stepping up to fill that void by consistently reaching their population of employees (and their families) across the full continuum of health, including those who do not seek care. Congruent with their own corporate culture and strategy, companies develop and maintain a wide variety of programs to serve tens of thousands of employees wherever they are.

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Forecasting the Workplace 10 years ahead.

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Forecasting the Workplace 10 years ahead.

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It is very important that leaders also are aware of the probable workplace environment that their organizations might need to adapt to in the short and long term. Planning ahead and making decisions in order to prevent the company from staying behind to the marketing trends are two of the most important steps that any leader should keep in mind.

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Predicting the future is not a science. It's a series of educated, thoughtful guesses interpreted through past trends and a measure of common sense. And there are a lot of very intelligent people seeking to find out what's coming down the road for the American workforce in 2025.

Human resources professionals who focus on employee rewards have a unique view of an organization, its staff, its mission and the strategic plans for its future. So it's not unreasonable for those in our industry to offer their predictions about what the American workplace will look like in five or 10 years.

Individualism vs. collectivism

Several thoughtful studies have started the discussion. A recent PwC study described three worlds of work, which provide a lens through which to examine how organizations might operate in the future and understand the aspirations of the people who want to work for them. The idea of individualism versus collectivism is an important aspect of these findings because they represent not only future businesses, but also future workers. Their wants and needs will also be significantly different from what we see today.

Fostering diversity

Another study from Hay Group and Z Punkt described key megatrends that are impacting the business environment and corporate organizations. This study pointed to the need for more diversity, corporate social responsibility, and flexibility for employees who will be keenly aware of their global career options. The study also highlighted a need to manage dispersed individuals who are technically savvy and loyal more to themselves than their employer.

These are all important indicators to which organizations need to pay attention as they continue to strive to engage their key talent. When attempting to attract talent to an organization, it will be important that chief human resources officers and CEOs recognize the changing "human" in human capital. Their wants and desires will be paramount in understanding what a future 2025 employee might look like, and in turn the future value proposition exchange between employer and employee.

There is no doubt that each generation brings something new to the table in terms of their optimal employee value proposition. Employees will always look for cash, health care and retirement options, but what else will they want?

The power of flexibility

Today's newest generations in the workforce are looking for purpose and flexibility in what they do, how they do it and where they do it. They also care a great deal about the community in which they work. Not only do studies show they want to impact their environment, but that the organizations for which they work are socially responsible.

The concept of career will continue to change over the next 10 years. Where a Generation X'er may or may not want to be associated with only one employer his or her entire career, Generations Y and Z may be more inclined to change entire careers two to five times during their lifetime. And employment for these younger generations doesn't necessarily end in what boomers today view as retirement, but rather a later stage in life to be lived to its fullest. Keeping engagement high for long periods of time for these employees will be a challenge for employers who count on productive, long-term top talent.

Engagement is key

We are seeing these changes in total rewards programs when offering employees more work-life flexibility and well-being. The employer cultures that embrace this attitude as a way of doing business today see higher results in terms of employee engagement and satisfaction, and they experience lower turnover.

"Employees in our near future will be engaged in new business models through programs and initiatives that help them efficiently use new forms of business and technology. And human resources and total rewards professionals excel at managing and engaging people in the workplace."

Regardless of what form jobs will take in 2022 or 2025, people will still be at the center of all these changes. Employees in our near future will be engaged in new business models through programs and initiatives that help them efficiently use new forms of business and technology. And human resources and total rewards professionals excel at managing and engaging people in the workplace.

Human resources and benefits professionals will use analytics and data to improve their strategic outlook and human capital utilization. Administrative and transactional functions in human resources will become secondary to assisting C-suite executives in finding the right balance of people, skills, compensation, benefits, work-life and development themes.

Engaging employees in the right way - however that phrase will be defined - will be our workplace future. It's not too difficult to predict that what worked in the 1930s or 1990s workplace isn't going to work in the American workforce of 2025.

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What Will the American Workplace of 2025 Look Like?

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Predicting the future is not a science. It's a series of educated, thoughtful guesses interpreted through past trends and a measure of common sense. And there are a lot of very intelligent people seeking to find out what's coming down the road for the American workforce in 2025.

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The comments from Marcus Lemonis About Sweet Pete's (the company I work for) and how important the planning stage of the management process is to the success of an organization.

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The comments from Marcus Lemonis About Sweet Pete's (the company I work for) and how important the planning stage of the management process is to the success of an organization.

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When Marcus Lemonis showed up in Jacksonville, the star of CNBC's "The Profit" could see the potential in Sweet Pete's confectionery.

But even though he knew it could grow, he said in a Friday interview with the Business Journal, he didn't foresee the brand going national.

As of Friday, though, the candy store has started the process of growing outside the area. Sweet Pete's has bought Jolly Good Fellows Sweet Boutique in Lake Forest, Illinois, a suburb of Chicago.

The store will be converted into a smaller version of the candy shop in Downtown Jacksonville, complete with its own candy factory and dessert bar as well as a 2,000-square-foot event space.

Lemonis lives in Chicago, one reason he said it made sense for the second Sweet Pete's location: He can keep a closer eye on it as it begins operations.

The expansion is a testimony to Pete and Allison Behringer, the founders and - with Lemonis - co-owners of the business, he said. "It's really about them," he said. "I love that I get to be part of it."

Since Lemonis bought into the business, Sweet Pete's has expanded from five employees to 90 and went from $300,000 in annual revenue to $4 million, he said.

The growth has come as Sweet Pete moved from a smaller location in the Springfield neighborhood to the 23,000-square-foot building on Hogan Street. As well as the manufacturing and retail areas, the facility also houses Candy Apple Cafe & Cocktails, a rooftop patio and space for candy-making classes.

The smaller version in Chicago is the "express" version of Sweet Pete's, Lemonis said; also in the works - a larger, "more experiential" store.

That's not the only change being looked at by the store, which has grown a robust online presence in the past year. On the horizon: selling packaged goods in grocery stores and other retailers.

"This brand," Lemonis said, "has no ceiling."

Timothy is editor in chief of the Jacksonville Business Journal.

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Marcus Lemonis talks about why Sweet Pete's candy store is expanding to Chicago - Jacksonville Business Journal

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When Marcus Lemonis showed up in Jacksonville, the star of CNBC's "The Profit" could see the potential in Sweet Pete's confectionery. But even though he knew it could grow, he said in a Friday interview with the Business Journal, he didn't foresee the brand going national.

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Marcus Lemonis: Entrepreneur. I am always intrigued about how is Marcus doing, He is the person who made the company I work for the size it has right now. 

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Marcus Lemonis: Entrepreneur. I am always intrigued about how is Marcus doing, He is the person who made the company I work for the size it has right now. 

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When asked about the biggest obstacle facing small businesses, CEO, inventor and reality TV personality Marcus Lemonis doesn't hesitate:

"The number one problem is that you have two different sectors in small business: those that understand the importance of numbers and having their people focused and having a good product, and those that decided to get into business because they thought it was cool and hip and forgot they needed to bring money to the table and have a business plan."

Building basics

According to Lemonis, the Small Business Administration should provide financial literacy tools to individuals before they apply for loans, so they will appear sophisticated and knowledgeable about their businesses when dealing with an investor or bank. This includes the basics like understanding the difference between a credit and a debit and being able to create a balance sheet.

"We're not putting any sort of resources behind teaching people," he says. "And we're not giving any sort of education about the process."

Character counts

So what does Lemonis look for when making an investment in a small business?

" Another possible way to raise money is to put some of your personal assets at risk, so that you're showing a true commitment to the lender."

"I obviously have to be comfortable with the people I'm investing in. You have to believe in their work ethic and their knowledge of their business. You want people who actually understand their craft."

It's also not about how much entrepreneurs have in the bank, he explains. "It isn't the strength of the financial statement, it's the accuracy and the transparency," says Lemonis, adding, "I want to hear humility from people- that they understand what they're good at, and what they're not good at. I want them to acknowledge where their weaknesses are, and be willing to ask for help and be willing to change.

"Owning a small business is a serious thing. You're employing people. You are taking care of customers. You have to have your act together."

COMFORT COUNTS: "I obviously have to be comfortable with the people I'm investing in. You have to believe in their work ethic and their knowledge of their business." Photo: Sandro

Secret to success

When it comes to raising capital, Lemonis cautions, "I don't recommend the friends and family route, typically, because it ends up putting a lot of strain. If you really believe you have something that works, you should put a plan together and pitch it to everyone possible. Another possible way to raise money is to put some of your personal assets at risk, so that you're showing a true commitment to the lender. If you want to find a traditional lender, then you have to have some collateral. If you want to find a non-traditional lender, then you have to be willing to give up some equity, or pay a higher interest rate."

As for new episodes of "The Profit," Lemonis refuses to let the past determine how he handles the next transaction.

"I don't let things that worked well or didn't work well cloud my judgment. You have to go into it with a fresh mindset every time. You have to look at every individual with a clean slate. You've got to find ways to make the deal work," Lemonis reckons, "not look for reasons the deal can't happen."

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Before the Profit: Marcus Lemonis Lends Advice to Small Business Owners

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When asked about the biggest obstacle facing small businesses, CEO, inventor and reality TV personality Marcus Lemonis doesn't hesitate: "The number one problem is that you have two different sectors in small business: those that understand the importance of numbers and having their people focused and having a good product, and those that decided to get into business because they thought it was cool and hip and forgot they needed to bring money to the table and have a business plan."

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I believe being a leader is a combination of several traits, each of them very important and valuable to the development of an integral Leader 

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I believe being a leader is a combination of several traits, each of them very important and valuable to the development of an integral Leader 

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Executive Summary

Senior leaders are balancing increasingly complicated and conflicting demands. To do this well, you need to not only marshal your strengths, but avoid overusing them, and at the same time cultivate the "positive opposites" of those strengths. Developing complementary traits - like spontaneity for self-control, or open-mindedness for decisiveness - makes you a more wholly human leader, better able to handle complexity. How can you achieve this balance? The first step is self-awareness.

For years, when I spoke with CEOs or senior leaders, it was because they were interested in how my consulting firm could help their employees become more engaged, or innovative, or sustainably high-performing. During the past year - and especially the past six months - I've been hearing a different and much more personal initial question: "Can you help me better manage my own life?"

Consider the challenges that modern corporate leaders - and especially CEOs - now face, in addition to running their companies every day:

A high likelihood that the company they run has a business model that is being seriously disrupted, most often as a result of technology.

A far more vocal and influential group of stakeholders, including employees, customers, and the public at large, all emboldened by their access to social media and by the speed at which their opinions can go viral.

A highly volatile political climate that has prompted fear and uncertainty both inside and outside companies.

Ambivalence about how to best attract, manage, and retain Millennials, who now represent the largest generation in the workforce, expect more flexibility in the way they work, and prefer to work for employers with a mission that goes beyond maximizing profit.

How can leaders balance these complex and often competing demands? The core challenge for modern leaders, I believe, is to become more wholly human - to actively develop a wider range of capabilities and to more deeply understand themselves.

Is there any doubt these are desirable strengths for any leader? Most of us think in binary terms. What's good is absolutely good, and the alternative is bad. Given a choice between an employee with the profile on the left, and the one on the right, it's a no-brainer, isn't it?

Common as it is to see the world through an either-or lens, it's more limiting than we recognize. And relying on one set of relatively fixed strengths turns out to be insufficient to manage the complex environment leaders must now navigate.

Here's what happens, for example, when we overuse or rely too exclusively on the strengths on the left.

Think for a moment about one of your own strengths - a quality that has served you well at work and has been admired by others.

Now try to recall a situation in which you have overused or over-relied on this quality. Are there occasions when your strength became a liability, causing more harm than good and even leading to the opposite of what you intended?

We most often overuse our strengths under stress. When we're not getting what we want, our instinct is to double-down on whatever has worked best in the past. It's the same sort of impulse that prompts an addict to increase the dose when the drug of choice no longer produces the same high it originally did.

I recognize this inclination in myself. When I think of qualities that have served me well at work, drive and perseverance are high up on my list. But during the past year, as we introduced a new business model, I felt compelled to push harder and exercise more control than I had in the past. It was a rocky road. At times, I know my colleagues felt intimidated and discounted, rather than inspired and empowered.

Simply noticing this inclination has reminded me of the choices I can make every day at work. But that's not enough. It is also important to build complementary strengths or "positive opposites." Consider the qualities in the right-hand column below:

In Good to Great, Jim Collins wrote that the best leaders were characterized by a blend of "humility and fierce resolve."

In my experience, it's rare to find leaders who equally value the qualities on both the left and the right. Our tendency is to favor one, rather than recognizing the ways that each can serve as a balancing function for the other.

A leader who values directness is more likely to give feedback that others can hear and apply if she balances her honesty with care and compassion. The opposite is also true. A compassionate leader who avoids difficult conversations for fear of hurting people ends up impeding their growth.

The first step is simply deepening self-awareness. We can't change what we don't notice. What are your signal strengths? What does it look like when you overuse them? What potentially balancing qualities have you undervalued?

The goal is not to find a perfect balance, but to build a complementary set of strengths, so that we can move gracefully along a spectrum of leadership qualities. Embracing our own complexity makes us more wholly human and gives us additional resources to manage ourselves and others in an increasingly complex world.

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How to Become a More Well-Rounded Leader

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Executive Summary Senior leaders are balancing increasingly complicated and conflicting demands. To do this well, you need to not only marshal your strengths, but avoid overusing them, and at the same time cultivate the "positive opposites" of those strengths.

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Poor leadership Vs Job Satisfaction. The impact of the Leaders in their subordinates psychological states during the work hours is amazingly important. 

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Poor leadership Vs Job Satisfaction. The impact of the Leaders in their subordinates psychological states during the work hours is amazingly important. 

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Burnout is a work-related process of chronic stress and disengagement and has been called the occupational hazard of the 21st century. The formula for job burnout is simple: too many job demands, too few job resources, and not enough recovery or time to re-charge your batteries. Burnout impacts just about every type of industry and has been shown to effect quality of care and customer service, attrition and turnover, and in healthcare, patient satisfaction.

Good leadership, whether in the form of an inspiring manager, getting regular feedback, or simply knowing that your leader has your back, can help prevent burnout. According to a new study, we now know that the opposite is also true. Bad leaders aren't just toxic to an organization - they drive burnout and decrease job satisfaction.

As part of a regular survey process Mayo Clinic uses to foster a cohesive organization, 2,813 physicians and scientists provided a detailed evaluation of the leadership qualities of their direct supervisor. The respondents were asked to numerically rate the extent to which they agreed or disagreed with the following statements about their immediate supervisor:

** Holds career development conversations with me

** Inspires me to do my best

** Empowers me to do my job

** Is interested in my opinion

** Encourages employees to suggest ideas for improvement

** Treats me with respect and dignity

** Provides helpful feedback and coaching on my performance

** Recognizes me for a job well done

** Keeps me informed about changes taking place at Mayo Clinic

** Encourages me to develop my talents and skills

** I would recommend working for (name of immediate supervisor)

** Overall, how satisfied are you with (name of immediate supervisor)

What the study found was that for each 1-point increase in composite leadership score, there was a commensurate 3.3% decrease in likelihood of burnout and a 9.0% increase in the likelihood of job satisfaction. Think about how that translates into bottom line dollars - less attrition and turnover, higher patient/client satisfaction scores, and a reduced instance of errors.

I personally think that companies across industries should implement the same type of survey system so that managers can be held accountable and get the coaching they need to change bad practices.

It always surprises me how long an organization will tolerate a bad manager, because based on this list, being a good manager shouldn't be that hard. Bad managers drive burnout and dissatisfaction which not only impacts the bottom line, but also the engagement and well-being levels of the people the organization relies on to grow the business.

Leaders need to be educated about the impact burnout has in an organization. With the right training and coaching, ineffective managers can build the five dimensions of effective leadership cited in the study: inform, engage, inspire, develop, and recognize.

______________________________________________________________________

For more tips and information about ways to Burnout Proof your life, download Paula's e-book, Addicted to Busy: Your Blueprint for Burnout Prevention, at www.pauladavislaack.com.
Reference
Shanafelt, T.D., et al. (2015). Impact of organizational leadership on physician burnout and satisfaction. Mayo Clinic Proceedings, 90(4), 432-440.

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The Impact of Poor Leadership on Burnout & Job Satisfaction

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Good leadership, whether in the form of an inspiring manager, getting regular feedback, or simply knowing that your leader has your back, can help prevent burnout. According to a new study, we now know that the opposite is also true. Bad leaders aren't just toxic to an organization - they drive burnout and decrease job satisfaction.

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I stayed very interested in the term "Employee Burnout" because I feel very identified with the feelings and situations which prompts this phenomenon in my current Work place. 

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I stayed very interested in the term "Employee Burnout" because I feel very identified with the feelings and situations which prompts this phenomenon in my current Work place. 

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Executive Summary

Executives tend to think of employee burnout as an individual issue rather than a broader organizational challenge. That's a mistake. The psychological and physical problems of burned-out employees, which cost an estimated $125 billion to $190 billion a year in healthcare spending in the US, are just the most obvious impacts. The true cost to business can be far greater, thanks to low productivity across organizations, high turnover and the loss of the most capable talent. Leaders need to own up to their role in creating the workplace stress that leads to burnout - heavy workloads, job insecurity, and frustrating work routines that include too many meetings and far too little time for creative work. Once leaders confront the problem at an organizational level, and address the three most common organizational culprits of burnout as discussed in this article, they can reduce burnout and raise productivity.

Employee burnout is a common phenomenon, but it is one that companies tend to treat as a talent management or personal issue rather than a broader organizational challenge. That's a mistake.

The psychological and physical problems of burned-out employees, which cost an estimated $125 billion to $190 billion a year in healthcare spending in the U.S., are just the most obvious impacts. The true cost to business can be far greater, thanks to low productivity across organizations, high turnover, and the loss of the most capable talent. Executives need to own up to their role in creating the workplace stress that leads to burnout-heavy workloads, job insecurity, and frustrating work routines that include too many meetings and far too little time for creative work. Once executives confront the problem at an organizational level, they can use organizational measures to address it.

In our book Time, Talent and Energy, we note that when employees aren't as productive as they could be, it's usually the organization, not its employees, that is to blame. The same is true for employee burnout. When we looked inside companies with high burnout rates, we saw three common culprits: excessive collaboration, weak time management disciplines, and a tendency to overload the most capable with too much work. These forces not only rob employees of time to concentrate on completing complex tasks or for idea generation, they also crunch the downtime that is necessary for restoration. Here's how leaders can address them.

Excessive collaboration

Excessive collaboration is a common ailment in organizations with too many decision makers and too many decision-making nodes. It manifests itself in endless rounds of meetings and conference calls to ensure that every stakeholder is heard and aligned. Many corporate cultures require collaboration far beyond what is needed to get the job done. Together, these structural and cultural factors lead to fragmented calendars and even fragmented hours during the day. Our research found that senior executives now receive 200 or more emails per day. The average frontline supervisor devotes about eight hours each week (a full business day) to sending, reading and answering e-communications-many of which shouldn't have been sent to or answered by those managers.

Burnout is also driven by the always-on digital workplace, too many priorities, and the expectation that employees can use their digital tools to multitask and power through their workloads. Multitasking turns out to be exhausting and counterproductive as we switch back and forth between tasks. The costs of context switching are well documented: switching to a new task while still in the middle of another increases the time it takes you to finish both tasks by 25%. A Microsoft study found that it takes people an average of 15 minutes to return to an important project after an e-mail interruption.

Companies can begin to address the collaboration overload problem by adjusting organizational structures and routines. One easy step is to look at the number of nodes in the organization. These are intersections in the organizational matrix where a decision maker sits. A proliferation of nodes is a sign of unnecessary organizational complexity, and nodes act as organizational speedbumps, slowing down the action and stealing organizational time and energy.

Companies can also systematically examine how people go about their work. You can, for example, zero-base meeting calendars to determine which meetings are really necessary, how frequently they should be scheduled, how long they last and who really needs to attend. You can also look at how you staff teams. Instead of isolating star players by distributing them across teams, companies can often get better results by putting the high-energy, high-achieving players together on the same squad and having them tackle the highest priority work.

In addition to formal organizational changes, leaders can reduce burnout and raise enterprise productivity through softer interventions. For example, by adopting agile principles, leaders can motivate and energize teams, and give individual team members a way to own the results. With Agile approaches, teams focus on fewer, more critical activities. Initiative backlogs are used to set priorities, and the team reprioritizes the list whenever they add new tasks. This provides a mechanism for sustained focus on the most important priorities and constant pruning of less important ones. Projects are time-boxed and focused so that there is more doing and less energy-draining process.

Executives can also work on culture and coaching. Leaders can help establish new cultural norms around time and make clear that everyone's time is a precious resource.

Weak time-management disciplines

In most large organizations today, the demand for collaboration has significantly outpaced the development of tools, disciplines and organizational norms to manage it. Most often, employees are left on their own to figure out how to manage their time in ways that will reduce stress and burnout. They have limited ability to fight a corporate culture in which overwork is the norm and even celebrated. And few employees have the power-or temerity-to call off unnecessary meetings.

But company leaders can do something. The first step is to get a handle on the problem. While executives like to measure the benefits of collaboration, few have measured the costs. But there are useful tools to measure how employee time is spent and how that affects burnout and organizational productivity. Ryan Fuller, the cofounder of a workplace analytics start-up acquired by Microsoft, notes that executives often simply do not know how much time employees spend on activities that contribute to enterprise productivity, nor do they know how much time is lost or spent on less productive activities. His company's product is now marketed as Microsoft Workplace Analytics and provides one way to estimate how employee time is spent.

Using data from such tools, you can map the places in your organizations where too much time is spent in meetings, emails, or online collaboration. With this information you can target changes in specific groups and functions to reduce the organizational drag that drains productivity and leads to burnout. Our data suggest that most executives have an opportunity to liberate at least 20% of their employees' time by bringing greater discipline to time management. Equally important, doing so gives employees back control over their calendars. We find that one of the greatest sources of organizational energy is giving employees a sense of autonomy. It pays to give people back control of their days. It also helps to avoid micromanaging, which is another contributor to stress.

Overloading of the most capable

Employee workloads have increased in many organizations in which hiring has not matched growth; companies overestimate how much can be accomplished with digital productivity tools and rarely check to see if their assumptions are correct. The overload problem is compounded for companies because the best people are the ones whose knowledge is most in demand and who are often the biggest victims of collaboration overload. In one company we studied, the average manager was losing one day a week to email and other electronic communications and two days a week to meetings. The highly talented managers will lose even more time to collaboration as their overwork earns them more responsibility and an even larger workload.

The same workplace analytic tools that can measure how much employee time is lost to unproductive activities can also measure the excess demands on the time of the best managers, enabling their bosses to redesign workflows or take other steps to avoid overload and burnout.

Everyone knows the human toll of burnout. Unchecked organizational norms insidiously create the conditions for burnout-but leaders can change them to make burnout less likely. Giving people back the time to do work that drives the company's success will pay huge dividends by raising productivity, increasing productive output and reducing burnout. Everybody wins.

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Employee Burnout Is a Problem with the Company, Not the Person

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Executive Summary Executives tend to think of employee burnout as an individual issue rather than a broader organizational challenge. That's a mistake. The psychological and physical problems of burned-out employees, which cost an estimated $125 billion to $190 billion a year in healthcare spending in the US, are just the most obvious impacts.

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To become Effective AND efficient it is very important to priorize what is needed to be done first and what objective is more important than the rest.

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Why is a conceptual framework of objectives important in decision making?

What are the most important characteristics of good objectives?

How should objectives be chosen and established?

How can objectives be used profitably by management?

We are all faintly amused by the aptness of the old quotation, "Having lost sight of our objective, we redoubled our efforts." Everyone admits to having been caught in this situation atone time or another. But is it possible that most large organizations are in this predicament a good part of the time?

Evidence indicates that this may indeed be true. The main trouble seems to be a lack of clear understanding of questions such as the above. In discussing these questions I shall use the term objective in the relatively broad, nonspecific sense which it commonly has in everyday business language. In this sense an objective is "an aim or end of action"; it is also used as an aim or guide to intermediate decisions and actions. For example, a sales manager might say, "Our objective is to have our salespeople make as many calls possible"-but he or she might be very conscious of the fact that a more fundamental objective is to develop high sales volume.

Role & Importance

Everyone will admit that objectives are important. But is it really necessary to analyze them? Can they be taken for granted? On a larger scale we have evidence like this:

In a $50-billion-a-year organization, Secretary Robert S. McNamara and professional military people are in serious dispute because of a new way of looking at objectives.

The Roman Catholic Church has called some 2,500 of its highest officials from their pressing daily business to help rethink that organization's objectives.

The American Telephone and Telegraph Company was perhaps saved from government ownership in the 1930's by having thought out its objectives.

Sears, Roebuck and Co. has expanded from being a catalog merchant into a fabulous range of services as a result of a continuing redefinition of its objectives.

Theodore Levitt proposes that some leading industries may be in danger of going the way of the railroads because of inappropriate objectives.¹

Less dramatic examples, because they are so much more numerous, probably have even greater importance. Think of the waste from the countless decisions made every day which could have been made better if the desired objectives had been more apparent to the decision-maker. In many organizations, if you ask a number of managers to write down their principal objectives, you may get strongly conflicting answers. The results? Research and development money is sometimes spent on projects which are later abandoned because they are inconsistent with broader corporate objectives. Committees spend countless hours thrashing over problems unrelated to the over-all purposes of their organizations. Vacillation on acquisition policies is often attributable to inadequately defined objectives. And so on.

Organization planning, marketing planning, R & D planning, financial planning, to say nothing of total corporate planning, properly begin with the question, "What are our over-all objectives?" Moreover, proponents of Douglas McGregor's "Theory Y" stress the importance of integrating the objectives of the individual with the objectives of the organization. But how can this be done if the organization's objectives are not really known? It seems that there is a major opportunity for increased effectiveness if our objectives can be made clearer by even a small amount.

Subtle Conflicts

Clarity is not the only question. Balance is important, too. Thus:

Many a company is in trouble because customer-service objectives are not properly related to profit objectives.

One utility will tell you (privately) that it ran into a serious earnings problem because its managers overstressed customer-service objectives to the slighting of profit objectives, a condition that took some years to correct.

Some companies recruit too many top-rate college graduates to be consistent with the rather modest objectives of the over-all organization. When after a few years it becomes apparent to these high-potential individuals that the organization does not really intend to pursue very challenging objectives, the result is wasteful high turnover.

Lyndall F. Urwick sums up such problem sin a refreshing and often-overlooked way:

"Unless we have a purpose there is no reason why individuals should try to cooperate together at all or why anyone should try to organize them. This, however, is very easily forgotten. Once an organization is set up, a human group is in being, all the individual and personal motives which have induced persons to join the group, which keep them in the game and playing the game, assume great importance in their minds. Most of us suspect that the main purpose of the undertaking which employs us is to provide us personally with a job... People derive social satisfactions from working together. And they build up, often unconsciously, very elaborate codes of behavior, and loyalties, and affections and antipathies, which may have little or nothing to do with the formal organization of the undertaking, the official relationships which their superiors recognize... Every organization and every part of every organization must be an expression of the purpose of the undertaking concerned or it is meaningless and therefore redundant." ²

Is a Theory Necessary?

Management literature is teeming with titles such as "How to Set Objectives," "How We Set Our Objectives," and even with articles on the appropriateness of one objective as opposed to another-profits versus survival, volume versus customer-service, and the like. Less attention has been given to the structure of objectives, pseudo-objectives, and constraints. Some sort of conceptual framework embracing the whole range of objectives seems necessary if we are ultimately going to use objectives more effectively. In some orderly way we must relate the "grand design" type of objective with the much more limited objectives lower down in the organization. And we have to examine how one type of objective can be derived from another. Again quoting Urwick:

"We cannot do without theory. It will always defeat practice in the end for a quite simple reason. Practice is static. It does and does well what it knows. It has, however, no principle for dealing with what it doesn't know... Practice is not well adapted for rapid adjustment to a changing environment. Theory is light-footed. It can adapt itself to changed circumstances, think out fresh combinations and possibilities, peer into the future." ³

Tests of Validity

How can the validity of an objective be tested? What should an objective accomplish? Here are some important criteria to be applied to an objective:

1. Is it, generally speaking, a guide to action? Does it facilitate decision making by helping management select the most desirable alternative courses of action?

2. Is it explicit enough to suggest certain types of action? In this sense, "to make profits" does not represent a particularly meaningful guide to action, but "to carry on a profitable business in electrical goods" does.

3. Is it suggestive of tools to measure and control effectiveness? "To be a leader in the insurance business" and "to be an innovator in child-care services" are suggestive of measuring tools in a helpful way; but statements of desires merely to participate in the insurance field or child-care field are not.

4. Is it ambitious enough to be challenging? The action called for should in most cases be something in addition to resting on one's oars. Unless the enterprise sets objectives which involve reaching, there is a hint that the end of the road may be at hand. It might be perfectly appropriate for some enterprises which have accomplished their objectives to quietly disband. However, for an undertaking to have continuity, it needs the vitality of challenging objectives.

5. Does it suggest cognizance of external and internal constraints? Most enterprises operate within a framework of external constraints (e.g., legal and competitive restrictions) and internal constraints (e.g., limitations in financial resources). For instance, if objectives are to be a guide to action, it appears that American Motors, because of its particular set of constraints, should have somewhat different objectives than General Motors.

6. Can it be related to both the broader and the more specific objectives at higher and lower levels in the organization? For example, are the division's objectives relatable to the corporate objectives, and in turn do they also relate to the objectives of the research department in that division?

If such tests as these are valid indications of the meaningfulness of objectives, then several further propositions become apparent. First, objectives, as aims or ends of action, are intimately involved in a complex of other important considerations or guides to action, such as definitions of the business, internal and external constraints, measurements of success, budgets, and long-range plans. Secondly, there is a ranking or hierarchy of objectives, proceeding in concept from the very broad to the specific. Logically, the specific or more limited objectives should not be in conflict with the broad objectives. The second proposition in particular deserves further consideration.

Complete Framework

Much of the confusion which apparently exists about objectives can be alleviated by viewing objectives as a whole framework or complex of "aims or ends of action" and other guiding considerations. In this framework it is not helpful to think there is one overriding consideration, such as "profit," since we must also concede in the next breath that another objective is to "stay within the law." Profit may indeed be the factor to be maximized in a particular case, but it cannot be viewed as the sole objective. The concept of a hierarchy is illustrated in Exhibit I.

Exhibit I. Hierarchy of objectives in terms of level of need or activity

Leading Characteristics

Granted the existence of this hierarchy, what is significant about it? What are its important characteristics and implications?

1. The full range of objectives and guiding considerations is distressingly broad. No one individual in a large organization could consciously make each decision in light of the total framework of objectives and guiding considerations. Hence, in practice many managers are guided in their decision making by what they themselves view as their own key objectives. This creates quite a problem. Recognition that there is such a problem does not mean that we should shrug our shoulders and ignore the whole subject. It suggests the need for a greater effort to organize and compartmentalize objectives into classes that are useful for each decision-maker in the organization.

2. The rate of change with time decreases as we go up the scale. Short-term programs and budgetary objectives may change in less than a year. But long-range plans may exist for several years without major revision, and the "grand design" of an enterprise may last throughout the leadership tenure of its chief executive.

3. For most enterprises even the broad objectives are subject to change in 20 years. The argument is sometimes advanced that the very broad objectives of an enterprise are tied in with human values which are essentially immutable or subject to change only in terms of millennia. A good case could be made for this in terms of some organizations such as the Church. In other fields, however, the "grand design" even of many large organizations has changed within a leadership generation. The airframe industry, Sears, Roebuck and Co., the Tuberculosis Association, and the U.S. Air Force are examples. In smaller organizations it is not unusual to see the needs and values of the leader change-for instance, from financial security to esteem or creative contribution to society-with a discernible change in objectives of the organization. Management consulting firms are keenly aware of the fact that, when a new chief executive comes into power, there is considerable potential for consulting services in helping the organization to rethink and redetail its objectives in line with the new values, creeds, and grand design of the incoming chief executive.

4. Debates on how specific an objective should be are not especially helpful. One sometimes encounters the argument that an objective "to earn a fair return for the stockholder" is a pious but meaningless mouthing; 20% pre-tax return on invested capital (or some such specific target) is advanced as a more appropriate alternative. The scale of objectives in Exhibit I suggests that both of these are necessary (along with others). On the one hand, if we intend to use objectives as a tool for measuring progress, we are certainly much better able to do so if we have a certain percentage figure like 20% appropriate to the year. On the other hand, 20% (or any other fixed per cent) may be ridiculous for a recession year when nobody in the industry can even approach the figure; it then becomes meaningless. Thus, to derive a valid measurement we must fall back on our broader objective of fair return to the stockholders.

5. Debates on the merit of one type of objective as opposed to another are only meaningful in light of the particular circumstances. For example:

One frequently hears arguments as to whether profitability, public service, or perhaps customer-service or survival of the enterprise should be the ascendant objective. Arguments of this kind can quickly degenerate into a chicken-or-egg type of controversy.

Exhibit I suggests that the relative merit of a particular type of objective can only be evaluated in light of the particular circumstances being faced-the internal and external constraints, the values of the individuals who control the destiny of the enterprise, and so on. It might be entirely appropriate for a large undertaking, threatened with nationalization or government-directed splitting up which it deems against its best interests, to emphasize public service objectives more than profit objectives. H. Igor Ansoff points out that the near-term profits of many rather large firms are relatively secure anyway. ⁴

6. The obviousness of the need for stated objectives appears to decrease as we approach the upper end of the hierarchy. Consider the experience of the Defense Department:

Until the McNamara era, much Congressional debate centered around budgetary allocations in the traditional service categories (Army, Navy, Air Force, and so on), each broken down by personnel, operation and maintenance, procurement, R & D, and military construction. These traditional budget categories represent objectives of a sort and are still being used. But Secretary McNamara and his colleagues revolutionized the concept of objectives in government by taking this line of reasoning: It is not a fundamental objective simply to have so many men in the Marine Corps or to build such and such an Army base. The real objective is maximum national security. Within what might be called a grand design of national security, a number of "missions" were established, including strategic retaliation, continental air and missile defense, and general-purpose warfare capability. Now, for example, the Fleet Ballistic Missile System can be evaluated in terms of its contribution and cost/effectiveness relationships to the mission of the strategic retaliatory forces.

Although the advantages of evaluating the Defense Department program in light of its objectives seem obvious after the fact, and although such a system was long advocated by the Hoover Commission and other bodies, the Defense Department is the only major government department to have done this on a large scale.

This apparent casual approach to objectives is not a phenomenon of government organizations. How many talented leaders from business and other endeavors sit on boards of various churches, educational institutions, charities and the like, struggling with budgets in cases where the less obvious but more fundamental objectives have not been thought out? It is not an easy job. For example, one large church organization, after much preparatory staff work, required six early-morning-to-late-evening sessions of two days each (including the time of a large group of nationally prominent individuals) to redefine its objectives (the equivalent of grand design, missions, and charters in Exhibit I) and related matters.

While formalized statements of grand design and missions apparently exist only in a small percentage of business organizations, formalized charters and policy statements are relatively common; long-range plans are becoming much more so, and almost every business has a budget.

7. The need for broad objectives of the grand design and mission type is not restricted to the very large company. For example:

One moderate-size New England company is founded on a variety of specialized technologies in mechanical sealing devices. The head of this company views its grand design as "stopping the leaks around the world." Bizarre as this first sounds, it is a perfectly workable concept for a grand design for a highly successful undertaking-which it already is on a moderate scale. From it are spawned missions relating to certain markets and applications. There is a network of charters relating to various operating divisions both in this country and abroad. This organization seems to have a unified sense of purpose and destiny which it would otherwise lack. The whole management team seems to know where it is going, and the individual managers are excited and enthusiastic about their common purpose.

The unfortunate cases are the organizations which lack such an over-all sense of purpose and are not doing anything to correct it; or perhaps their grand design is substantially accomplished or no longer appropriate to the current environment. These are the business enterprises in declining or static industries, the philanthropies for which the needs are now only marginal, and so on. The objectives of these organizations seem to be "to keep on doing what we have been doing," but the people in them are troubled and perplexed because they see that their results are not particularly satisfactory by a number of standards. A business enterprise in this situation may view its over-all objective as "10% net profit on stockholder investment"-but it does not have a ghost of a chance of achieving it on a consistent basis. People in the organization become engrossed in their personal objectives of holding onto their jobs. If only the board of directors in such cases would insist on having a written statement of the grand design!

8. Objectives should not only guide action but also stimulate it. Frederick R. Kappel, chairman of the board at AT&T, observes:

"Unless the business sets demanding and exciting goals, it runs a heavy risk of losing vitality. This is an area where people in top management positions have heavy responsibilities... If these goals fail to stimulate, there is something missing at the top... In the sense that I am using the word, a goal is something presently out of reach; it is something to strive for, to move toward, or to become. It is an aim or purpose so stated that it excites the imagination and gives people something they want to work for, something they don't yet know how to do, something they can be proud of when they achieve it." ⁵

Steps in Derivation

When we choose and establish directives, we cannot logically proceed in one step from a grand design to a budget, although companies undoubtedly often attempt this. We are in effect confronted with a situation of goals within goals within goals.

We must start with the given statement of the broader objective (see Exhibit II). Next comes the process of setting up yardsticks, criteria, "key result areas," or some other form to measure the success of the stated objective. Obviously the more tangible such yardsticks are, the more usable they will be. But if they are going to be specific and realistic (for example, so many dollars in world trade), then it is necessary to consider both the internal resources of the enterprise ("How much physically can we export?") and the environmental conditions ("What share of which world markets can we obtain?"). Hence both an analysis of internal resources and an environmental analysis are called for in setting up realistic and adequately challenging criteria.

Exhibit II. Process of deriving specific objectives from broader objectives

The next step requires that management define the range of possible activities which it might use to accomplish the larger objective. For example, the question for a furniture company might be: What balance of emphasis is best between office and home furnishings? The alternatives must be weighed in terms of their effectiveness in accomplishing the objective, on the one hand, and of the consumption of available resources, on the other hand.

As the preferred new subobjectives and subprograms begin to emerge, one can expect numerous conflicts and inconsistencies. In the case of the exporter, for example, protection of domestic sales may not always be consistent with expansion of foreign trade. Hence some sort of reiteration or recycling is called for to minimize the inconsistencies before the final subobjectives can be decided on.

So much for the general process. What are the problems of making it work? What requirements must be observed?

Role of Creativity

Establishing even a subobjective within the framework of a broader objective is a creative act. It involves the conceptual creation of a number of possible subobjectives, testing them against the realities of (1) consistency with internal resources, (2) consistency with environmental conditions, and (3) effectiveness/cost relationships in accomplishing the broader objective. Here we see the familiar concepts of creativity: exposure (to the broader objectives, internal and environmental constraints, and challenges), gestation, idea emergence, testing against reality, recycling.

Borrowing from the studies of creativity, we can see that individuals who are creative on the practical level, provided they have had appropriate exposure to the company situation, can be very helpful in establishing objectives. On the other hand, we have to beware of situations in which objectives are set without adequate exposure to environmental conditions (not all would-be staff planners are conscious of this); likewise we must beware of situations where objectives are set without adequate analysis of both internal and environmental conditions (not all line managers are conscious of this).

The creation of a workable grand-design type of objective thus emerges as an especially creative act. There are no broader objectives to be guided by. Creators of grand designs have as tools only their needs, values, and drives, and the company's environmental and internal constraints and challenges.

Motives & Appeals

In setting meaningful objectives, much help can come from creative people-those with high idea-emergence, good at censoring their own ideas against reality, persistent at recycling their ideas for improvement, having adequate exposure to internal and external factors, and possessing adequate drives. Moreover, Douglas McGregor's "Theory Y" approach to management suggests that the higher-order personal drives (such as those based on ego needs and self-fulfillment needs) of these people should be coupled with the objectives of the undertaking for the most effective accomplishment of the mission. This may be especially true in the higher echelons of a large organization. To oversimplify the thought, pay raises and threats of discharge may work with blue-collar workers, but the higher motives may be more effective with the financially more secure managers.

Frederick R. Kappel cites the visionary goal of AT&T-"the big dream stated without equivocation, the dream of good, cheap, fast, worldwide telephone service for everyone." He observes that such a goal is "not a wishful fancy. It is not a speculation. It is a perfectly clear statement that you are going to do something." He then points out three conditions which in his opinion favor setting the right goal at the right time:

1. An instinctive feeling for quality throughout the organization.

2. Freedom to make some mistakes.

3. A recognition of the pressure of external factors.

He further points out that "part of the talent or genius of the goal-setter is the ability to distinguish between the possible and the impossible-but to be willing to get very close to the latter." ⁶

Eric Hoffer takes a stronger view, at least in regard to the goals of large undertakings or "mass movements." He suggests that the goals for a vital undertaking should be impossible of achievement (for example, achieving God's Kingdom on earth), and points out that the best climate for setting these visionary goals is among the groups who are down but not quite out. ⁷ For example, the Black Muslim movement apparently cannot reach the most abject Negroes, who seem to have little interest in anything beyond a day-to-day existence, nor does it apparently appeal much to Negroes who are currently "successful" in American society.

Does this apply to companies in the business world? Are there any indications that the downtrodden business organization, like pre-Hitler Germany, is most susceptible to a brilliant renaissance, and all that it lacks is a deliverer, a leader who electrifies its members with visionary goals? One could say that George Romney did something of this sort with American Motors. But such examples seem rare. Why aren't there more of them? There is certainly no lack of prospective candidates! Perhaps there is a lack of George Romneys, or perhaps they find themselves called into other fields. But any organization, in however severe straits, can probably boast a few young hotbloods who can establish visionary objectives, but who lack the other qualities of drive and leadership to carry them out.

Need for Renewal

There is probably merit in reestablishing objectives every so often just for the sake of reestablishing them. One might think that if objectives were once set, and if internal and external conditions did not change too much, the objectives would be valid for a good long time. But the same old objectives repeated over and over produce no impact, no challenge.

Perhaps this is a failing of many religious organizations. Canonical types of objectives, produced many years ago by undoubtedly brilliant churchmen, simply do not inspire the organization members of today unless they themselves have gone through the process of thinking out the objectives and reached similar conclusions.

Some "Theory Y" practitioners have gone to an extreme; they favor changing the objectives at a given level and position every time a new individual comes into the job. In other words, the new appointee, along with his own superior and others with the need to know, sits down and writes a new job description including new objectives for the work. "Theory Y" practitioners claim to have encouraging results with this approach.

Locating Responsibility

Should the superior set the objectives for individual subordinate groups? It is apparent that she must at least approve them in order to discharge her own duties. Beyond this, she probably has broader exposure to internal and environmental conditions than subordinates. But she may or may not be the creative type who can visualize a whole range of subobjectives, one for each of the various groups, the best of which are chosen after analyzing effectiveness and costs. Some subordinates may be better at this creation of alternatives than the superior is. Certainly they should have had greater exposure in depth (if not in breadth) to internal and environmental constraints, challenges, and opportunities. Accordingly, it would seem that to combine the best of these talents, the objectives for the subgroups should be worked out jointly by the leader of the subgroup and the superior.

How much help can staff give the line in this process? Certainly staff can conduct the internal analyses of resources and the environmental analyses of external conditions, always using the line for appropriate inputs in these analyses. Most line managers are accustomed to using their staffs in a similiar capacity. Staff people can also propose and analyze a number of alternative subobjectives, and can sometimes make particularly brilliant contributions in proposing possible alternatives which might otherwise have been overlooked. This can be a major contribution of creative staff workers. Consultants, who are a form of temporary staff, do this frequently.

But the old principle holds true: the people with the ultimate responsibility have to make the ultimate decisions. Furthermore, they have to be brought into the decision-making process at sufficiently fundamental levels so they can have a full understanding of the context in which the final decision choices are being made. No responsible line people could be expected to accept ready-made objectives proposed by a staff person or researcher unless they had personally weighed and debated the relation to internal and external conditions and the range of possible alternatives.

Working-Upwards Approach

Now suppose, as is often the case, that a company has not in recent years formally developed a written statement of objectives, and that (as should more often be the case) a member of the board of directors convinces fellow members that they should have a written statement of objectives. Where should the job begin?

One might reason that logic calls for starting at the top of the hierarchy displayed in Exhibit I, starting with needs, values, and drives of the key individuals, and proceeding on down to creeds, grand designs, missions, and the like. For instance, Secretary McNamara and his associates, in the recent installation of program budgeting in the Defense Department, appear to have gone from a grand design to missions, to program elements (analogous to charters).

However, in our consulting practice with both business and nonbusiness enterprises, my associates and I have found that as a practical measure the top of the scale is not the best place to start. We have found that profit objectives in terms of growth in earnings per common share are typically the most readily graspable starting point in business. They lead very understandably to environmental analysis (first in terms of profit results of comparable companies in industry, then to analysis of market requirements, technical trends, and competitive trends in the business environment) and analysis of internal resources.

People seem to have little difficulty in understanding the need and value of analyzing profit goals. Once this understanding has been obtained, it is not too painful to work up and down the hierarchy to fill it out; going up to other key result areas, charters, policies, missions, and even grand designs, and down to long-range plans, strategic programs, budgets, and short-term programs. Suddenly there is a new clarity to the growth directions for the enterprise, the type of management development needed, and the like.

As already indicated, there is a continual process of reiteration. In this reiteration one objective is adjusted in light of another, and in light of new developments in resources and in environmental conditions. Hence it does not really matter that some managers do not readily see the need for defining the higher-level objectives, and that attempts to attack the broader questions of creeds and grand designs make them squirm. When they start with some very tangible aspect such as profits, then work into the other types of objectives as the need to do so becomes demonstrated, they can achieve as good an understanding as anyone can.

Practical Uses

What are the practical uses of objectives? What tangible results come from giving thought and time to the clarification of objectives? An analysis was recently made by the American Management Association of companies that had developed formal company creeds. ⁸ In all too many cases this analysis indicated that the benefits were along the lines of "having opened up our thinking" or "a beneficial exercise for those who took part," but the practical results were rather hard to measure. This is unfortunate, for there are practical benefits indeed to be obtained.

Better Planning

Probably the most significant use of objectives is in planning. Not many organizations can conscientiously answer the question, "What should we be doing, and how much?" But carefully worked out objectives can narrow the target area, if not altogether pinpoint it. For example:

The new programing system in the Department of Defense is based on the nine types of missions or broad objectives of that organization (e.g., strategic retaliation). For the first time on an over-all, formalized basis, the cost of each Defense Department activity has been related to its effectiveness in fulfilling these missions. Alternate systems are presented for top-level consideration in terms of cost and effectiveness analyses. The practical results include "thumbs down" for the RS-70, the Skybolt missile, and the Nike-Zeus antimissile system.

A major charity had been moving along on its natural momentum, doing an effective job in many ways, but not quite sure of just how large it should grow in the future, what new programs it should be undertaking, and what financial and other plans it should be making to ensure its future effectiveness. It has now developed a number of specific subobjectives in light of a definition of its broader objectives. Practical results are taking place in the way of organizational changes, staff recruitment and development, long-range financing plans, and development of new service programs-all based on a general agreement at the policy-making level of what the organization should look like in 1973.

The management of Sears, Roebuck, in speaking of its objectives, says: "The Company sees itself not so much as a catalog merchant or retailer, but as an organized system for efficient and economical distribution, dedicated to serving the public with a broad range of goods and services [italics added], and to meeting any change in demand." Probably 90 out of 100 large organizations have some stated objectives of this general type. But the difference is that Sears not only states its objectives; it lives by them. In the last ten years the number of mail-order plants has remained steady at 11, and the number of retail stores has increased slightly from 694 to 748 (although many have been modernized and expanded). But the company is now upgrading itself into a style house, as its recent advertising demonstrates. Here are examples of the variety of Sears, Roebuck activities-

- It runs a fleet of 5,000 service and installation trucks.

- Through Allstate it is the largest stock company insurer of automobiles in the country, and fourth largest in the fire and casualty field.

- It is in the life insurance business.

- The Allstate Motor Club and Allstate Tours operate in the travel field.

- It has entered the savings and loan business.

- Homart Development Company recently opened its first shopping center, with a half-dozen others in various stages of planning.

- Sears, Roebuck Acceptance Corp. has about $500 million of installment contracts.

In short, Sears, Roebuck has not occupied itself with perpetuating its existing form. It has arrived at broad objectives and derived a wide and changing range of supporting missions, or subobjectives. All this has led to handsome results, with earnings per share increasing in eight out of the last ten years.

A major drug company has staked out a grand design in the field of human health and well-being. In accordance with this broad objective, the research group has identified some 40 potential and actual program areas-e.g., cardiovascular ailments, fertility control, and cancer. In annual program planning reviews within the research group, scientists and managers go through a series of steps for deriving specific program objectives. They have environmental analysis material on hand-for instance, "If we develop a tranquilizer with such and such characteristics, it will capture X per cent of the market." They also have organized information inputs on the long-range needs in the health field (e.g., dermatology). At the same time they have conducted resources analyses so they know their abilities in certain specialized lines of research.

Choice of Alternatives

The hierarchy of objectives is also valuable in analyzing and choosing alternative courses of action. (This benefit is obviously related to the planning values just discussed, but it deserves separate emphasis.) To use the experience of the drug company again:

To stimulate thinking about alternative courses of action, management encourages scientists to attend association meetings; invites a considerable number of outside technical consultants-usually university people-to meet with executives; and stresses the study of data from marketing research and the detail sales force.

Three important questions stand out in the criteria for screening the wide range of alternate subprograms-

1. How important is the proposed program? Importance is usually measured in terms of profit potential.

2. Can we do it? This question is usually related to the availability of skills and knowledge to overcome the technical problems involved.

3. What will it cost? Here the company has what amounts to a cost/effectiveness analysis of alternative programs, much along the lines described earlier in the case of the Department of Defense.

Of course, the process of exploring alternatives ends with a good deal of reiteration or recycling to cut out nonessentials here, fill out a program there, and to make the total research effort consistent with a practical budget. In practice, as might be expected, the general program areas do not change radically from year to year. Once a specialized staff and momentum are built up in a given area, a program may last for some time, uncovering new opportunities as time goes along. However, specific detailed projects are changed, and the over-all emphasis in the program also changes as a result of management's approach.

Management Development

One of the most interesting uses of a framework of objectives is in management development. Most executives are keenly aware that the difference between their organization and other organizations in its field is its personnel. They recognize that development of its own people is a key issue in the health and success of any enterprise.

Recent theory as well as actual practice in management development has stressed the concept of identifying the objectives of the individual with the objectives of the enterprise. It also stresses making these objectives as specific as possible, and measuring their exact success in meeting them. For example, contrast the effectiveness you might expect in an organization where a supervisor says, "I'm responsible for quality-whatever that means," with effectiveness in an organization where he or she says:

"I'm responsible for rejects which come off the rotary machines and I've agreed on the standard with the Chief Inspector. Each day I get an analysis of rejects so I can put things right. At present the General Manager and I agree on 2.7 per cent rejects as acceptable, but we have a plan to get this down to 2.2 per cent by next November." ⁹

There is ample evidence that this concept of management by objectives and by specific results actually works, and works well. However, the question not always thoroughly explored is, "Are we doing the right thing to begin with?" Possibly the quality control supervisor in the foregoing example is inspecting beautiful products for which there is little demand, for a market where quality is not a key result area, in a situation where the products could better be purchased from the outside, or where the entire company would be better off merged into a larger organization.

If a framework of objectives has been worked out for the whole organization, there is not so much danger of misdirected effort. Top management can be assured that all employees are working toward common purposes which are mutually consistent, appropriately challenging, and realistic in light of both internal and external opportunities and threats. It can be assured that people's potentials are being developed along lines which will increase the effectiveness of the company.

Organizational Efficiency

It should not be inferred from the foregoing discussion that the formal organization structure should be rearranged to conform closely with objectives in various parts of the company. Rearrangement may or may not be appropriate, depending on the circumstances. For example:

In the Department of Defense we find that both the B-52 and the Polaris submarines are program elements in the Strategic Retaliatory Forces. Nevertheless, organizationally they fit into conventional Air Force and Navy formats. Support elements of an organization (for instance, the payroll department) are frequently organized separately as one distinct entity supporting a number of departments or divisions which may have widely differing objectives. This is done for the sake of efficiency.

Non-Linear Systems, Inc., a specialized California instruments manufacturer with 350 employees, has developed a curious form of organization which ties in closely with the theory of objectives.¹⁰ The company has a president and seven vice presidents, each responsible for an area such as innovation, market standing, profitability, or productivity. It shows evidence of having excellent results with this system.

However, we must not forget that in business true efficiency-unlike the dictionary definition-is not merely producing a certain result at the lowest cost; worthwhile efficiency is producing a desired result at the lowest cost. It is a ratio in which cost is the denominator, and the degree of effectiveness in producing some desired result is the numerator. Thus we can hardly consider efficiency without considering a range of objectives. The cost/effectiveness studies in the Department of Defense and "value analysis" studies at General Electric ¹¹ illustrate the application of such thinking to logical cost reduction and efficiency improvement.

Conclusion

It is curious that so many discussions of management begin with exhortations to clarify objectives, and then, as if the nature of objectives were well known, proceed to explore some other aspect of the matter at hand. In reality we know very little about the nature of objectives. And it is abundantly clear that we cannot quickly set up some objectives for an enterprise and then proceed on the assumption that they will be meaningful guides to action.

Taking stock of the little knowledge we do possess, we find that we know a few bare essentials. For instance, there are certain minimum tests which an objective, or a set of objectives, should pass. Thus, objectives-

...need not begin with the broad grand design of the enterprise, but all objectives in the hierarchy should be consistent with it;

...should make the people in the enterprise reach a bit;

...should be realistic in terms of (a) the internal resources of the enterprise, and (b) the external opportunities, threats, and constraints;

...should take into account the creative conception of a range of alternatives and the relative effectiveness and cost of each;

...should be known to each person so that he or she understands the work goals and how they relate to the broader objectives of the total enterprise;

...should be periodically reconsidered and redefined, not only to take account of changing conditions, but for the salutary effect of rethinking the aims of organizational activities.

Objectives, properly developed and applied, can tell us in what paths, new and old, our total undertakings should be moving. They can guide both the day-to-day activities and the personal development of individuals in an organization. If we in management can clarify the objectives of our undertakings by even a small amount, we can greatly increase the effectiveness and efficiency of our businesses.

1. "Marketing Myopia," HBR July-August 1960, P.45.

2. Notes on the Theory of Organization (New York, American Management Association, 1952), pp. 18-19.

3. Ibid., p. 10.

4. Business Objectives (Pittsburgh, Carnegie Institute of Technology, unpublished paper, 1962).

5. Vitality in a Business Enterprise (New York, McGraw-Hill Book Company, Inc., 1960), pp. 37-38.

6. Vitality in a Business Enterprise (New York, McGraw-Hill Book Company, Inc., 1960), pp. 40, 56-58.

7. The True Believer (New York, Harper & Brothers, 1951).

8. Stewart Thompson, Management Creeds and Philosophies, Research Study No. 32 (New York, 1958).

9. John W. Humble, "Programmitis and Crown Princes," The Manager, December 1963, p. 47.

10. See, for example, Arthur H. Kuriloff, "An Experiment in Management, Putting Theory Y to the Test," Personnel, November-December 1963, p. 12.

11. See, for example, Hugh McCullough, "New Concepts in Defense Planning, Programming and Budgeting," The Federal Accountant, September 1962, p. 70; also, L. D. Miles, "Purchasing Must Analyze Values," Purchasing, January 4, 1960, p. 65.

A version of this article appeared in the May 1964 issue of Harvard Business Review.

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Why is a conceptual framework of objectives important in decision making? What are the most important characteristics of good objectives? How should objectives be chosen and established? How can objectives be used profitably by management? We are all faintly amused by the aptness of the old quotation, "Having lost sight of our objective, we redoubled our efforts."

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Hotel guests are always seeking bigger rooms, beds and TVs. Marriott CEO Arne Sorenson is giving them a bigger company.

A merger between Marriott International and Starwood Hotels and Resorts will yield the largest hotel chain in the world. With 30 brands and 1.1 million rooms between the two, the combined company will eclipse rival Hilton Worldwide, which has 12 brands and 745,074 rooms, and InterContinental Hotels Group, with ten brands and 727,000 rooms.

Sorenson sees size as a distinct advantage. In an interview with USA TODAY, he said Starwood's lifestyle portfolio, with brands known for cutting-edge design and cuisine, will complement Marriott's, which is stronger in the both the luxury and limited-service tiers.

"We can do better by being bigger," says Sorenson.

Marriott on Monday announced that it has agreed to buy Starwood in a $12.2 billion deal. The boards of directors of both companies unanimously approved a merger agreement. Pending regulatory and shareholder approval, the combined companies will operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide. The deal is expected to close by mid-2016.

A number of companies, including Chicago-based Hyatt Hotels and Resorts and a few China-based operations, had been courting Starwood, according to news media reports, which sent out signals in April that it would be open to a sale soon after its longtime CEO Frits van Paasschen resigned.

Marriott won out because of the strength of its upscale brands and its sheer size, said Bruce Duncan, chairman of Starwood's board, during a call with analysts on Monday. Starwood had considered buying another company, selling or continuing on its own, he said.

"As part of a larger company we will have a more competitive financial position and we will be better equipped to provide long-term value for our shareholders more so than if we had pursued a standalone path or chosen one of the other options we evaluated," he said.

Marriott is expecting that the combined company will realize at least $200 million in annual cost savings starting in the second full year of closing the deal because of operating efficiencies.

Sorenson says becoming a bigger company is the right move because it will allow Marriott to invest more in technology and marketing.

Starwood also appealed to Marriott partly because brands such as W Hotels, Element and Aloft tend to attract younger travelers. Marriott has aggressively tried to target Millennials with the introduction of such brands as AC hotels and Moxy.

The Stamford, Conn.-based Starwood also brings with it a strong international presence that Sorenson says will help Marriott increase its global footprint. Starwood, with its 1,270 hotels, is in 100 countries. Marriott, which has 4,300 properties, is in 85 countries.

"We really like the global platform that Starwood has. We think this is a global industry," he says. "Whether you think of the new group of Chinese traveling abroad or Indians traveling abroad or people wanting to get around and see the world. We think it's good to accelerate our global distribution that way."

Starwood had trailed it competitors in recent years in its brand growth in North America. The company has recently made moves to counteract that. Last week it announced a deal to expand its presence in Las Vegas by bringing the stylish, 1,600-room SLS Hotel on the Strip into its portfolio.

"To be successful in today's lodging space, a wide distribution of brands and hotels across price points is critical," interim Starwood CEO Adam Aron said during the call with analysts. "Today size matters ... Marriott and Starwood will have that wide brand and hotel distribution of brands."

Starwood's 11 brands will join Marriott's 19. Marriott brands include The Ritz-Carlton, Renaissance Hotel, Residence Inn, and Courtyard.

Sorenson says there are no plans to ditch any of the brands, even though some like Marriott's Renaissance hotels and Starwood's Le Meridien serve similar audiences.

"The philosophy is to keep the brands," he says. "Remember these brands are all competing in the marketplace today. This is not a case where someone is thinking of creating 10 new brands ... There may be some places where there will be tweaking or some nipping and tucking but by and large we think these brands can compete well and they belong together."

In some cases, Starwood is already working on revamping some of its brands, in particular Sheraton Hotels.

Other hotel chains may need to consider following Marriott's and Starwood's lead. Some have already started consolidating. Most recently, InterContinental Hotels Group bought Kimpton Hotels and Restaurants, a boutique hotel chain.

"Hilton has such a diverse portfolio of product they don't need to do an acquisition,'' says Scott Kim, research director for Kellner Capital. "But could they? Potentially. . . Choice Hotels or Extended Stay or even Hyatt, those in the mid level, $5 to $10 billion dollar valuations, those companies may need to do acquisitions or even be sold to a larger (company) to increase their inventory of hotels. to either gain leverage during negotiations with the online travel players or offer more on their (own) websites.''

Marriott and Starwood also will have strength in numbers in terms of their loyalty program. The Marriott Rewards program has 54 million members while Starwood Preferred Guest has 21 million.

It will take some time for Marriott to decide whether or not to merge the programs, Sorenson says. But he says consumers should not be worried about losing their points in either program.

"We want to keep the best of both programs and make them stronger," Sorenson says.

Sorenson says that in general, the merger will not impact the guest stay in the near future.

"I think for now, (it's) business as usual," he says. "Our hotels will continue to be operated by the Marriott teams and Starwood teams with the people that are in place."

Read or Share this story: http://usat.ly/1j4qeP3

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Marriott CEO: 'Do better by being bigger'

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Hotel guests are always seeking bigger rooms, beds and TVs. Marriott CEO Arne Sorenson is giving them a bigger company. A merger between Marriott International and Starwood Hotels and Resorts will yield the largest hotel chain in the world.

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Servant Leadership, in my opinion should be the most important and most commonly used. Her ewe can observed how effective it is. 

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Servant Leadership, in my opinion should be the most important and most commonly used. Her ewe can observed how effective it is. 

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When Cheryl Bachelder started at Popeyes Louisiana Kitchen, the struggling restaurant chain needed help.

Its stock had sunk from a peak of $34 per share in 2002 to just $13 when she took over as CEO in 2007.

In her new book, " Dare to Serve: How To Drive Superior Results While Serving Others," Bachelder describes how becoming a "servant leader" helped her achieve a dramatic turnaround at Popeyes, which now has a market cap of $1.4 billion.

By executing an aggressive growth plan and aiming to serve the interests of the franchise owners, average restaurant sales jumped 25%, profitability improved, market share increased, and the stock is now trading in the $60 range.

In an interview with Business Insider, Bachelder discusses how she did it, her leadership style, and her most humbling career moment.
This interview has been edited for clarity and length. Business Insider: Your book is a case study in servant leadership. Why did you decide to write it?
Cheryl Bachelder: About 14 years ago, I met Jim Collins around the time he wrote " Good To Great." He said that great leaders have a paradoxical mix of personal humility and professional will. They're ambitious for the company, not themselves. Research suggests this certain kind of leader can deliver superior results. I wanted to practice it, and Popeyes is that case study.
How can a manager become a servant leader?
When you ask someone to tell you about their best boss, they tell you about the ambitious accomplishment they had under the leader, and how the leader made it possible for them to have this remarkable achievement.

It's being courageous by setting aspirational goals combined with the humble serving of others along that journey. The tension between daring and humble is what creates the best circumstances.
What's different about this versus other leadership styles?
The biggest distinction of a leader who serves others versus themselves is the ability to listen. When you listen, you hear people's objections, anxieties, and fears - and you also hear the solutions.
What's the hardest part?
We're all trained to win, to be exceptionally competitive. There's nothing wrong with that, except when it's for your purpose and not your enterprise.

Being a servant leader means I'm going to do this regardless of the recognition I might miss out on. I don't claim to do that well every day. I'm imperfect like everyone else. That's the point. I aspire to do better. Every day I hold a mirror and ask, Did I live up to my values today?

Courtesy of Cheryl Bachelder
Maybe a CEO can be humble. They've got the top job. But what if you're a middle manager? Can't it hurt you to fade into the background?
I don't think this is invisible leadership. I think it's effective leadership. What's wrong with the recognition of a leader coming from their results rather than them taking the spotlight?

One of the things I've learned at Popeyes is how much introverted leaders help performance. They quietly do great things.
What's the biggest misconception about servant leadership?
Most people discount this as nice-guy leadership that's about hugs and campfires. Very few people have considered it might be the most effective. The greatest benefit is superior performance.

Our goals are more aspirational, so the company is braver. We give dignity to human beings, and we attempt to be humble. People perform better under those conditions.
How has this worked in practice at Popeyes?
This company hadn't been performing well in years. We asked ourselves who we would serve, and we decided on the franchise owners. We put every decision we made through the filter of how well it served the franchise owner. Then, over the course of the next several years we checked performance against the measures of what makes franchise owners successful. Together, we've created this high-performing company.

That doesn't sound like rocket science. But as simple as it sounds, it appears to be successful, and the shareholders have been served well, too.

Courtesy of Cheryl Bachelder
Do you attribute the turnaround only to this style?
It's how we worked and what we've done that's created success. Either one alone is not enough.

We wanted to build more than 100 restaurants a year in the US and expand internationally. We did a lot of hard work on the brand and our operations. We improved profitability by 40% by finding supply chain savings. We absolutely had a business plan with bold goals, and we married that with our decision to serve owners well.
You write that early in your career your mantra was: "Think like a man, act like a lady, work like a dog." When did that view shift?
Like most people, my head was down working hard to demonstrate skills, get results, and find development and growth opportunities. It was when I looked up and questioned what type of leader I wanted to be that my views started to shift.
When did it become clear that you needed to do things differently?
My humbling experience was leading KFC and getting fired. I wasn't achieving results, and you have to have a strong strategic plan to serve the people well. I had the right style but not the right substance, and I wasn't successful.

It was unsettling. It forced a lot of reflection. But I came out a better leader.
What's your mantra now?
Leadership is an extreme sport. People who participate in extreme sports grow in both courage and humility. This experience has only made me more humble - I know I didn't do it myself - but it's also made me more courageous. I can't wait to set the next big goals.

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The CEO of Popeyes says becoming a 'servant leader' helped her turn around the struggling restaurant chain

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When Cheryl Bachelder started at Popeyes Louisiana Kitchen, the struggling restaurant chain needed help. Its stock had sunk from a peak of $34 per share in 2002 to just $13 when she took over as CEO in 2007.

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As a homebrewer I am always paying attention of how is the craft beer industries developing in this city, and in prospect cities where I would like to start my own brewery.

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Craft beer is continuing to grow in market share and volume, even as larger companies are starting to buy up some craft beer brands - and Florida represented one of the fastest-growing states for the industry.

Independent craft breweries now represent 12 percent market share of the beer industry as a whole, according to data released this week by craft beer advocacy group the Brewers Association.

Craft beer had an even bigger jump in volume, producing 24.5 million barrels - a 13 percent rise in volume. The retail dollar value also grew to $22.3 billion, a 16 percent increase year-over-year. Overall, craft beer represents 21 percent of the market share in the retail realm.

The number of breweries across the U.S. also continues to grow. There were a total of 4,269 breweries across the U.S. in 2015, which has passed levels that existed pre-Prohibition. While microbreweries still represent the largest percentage of that number - there are 2,397 of them overall - brewpubs are rising in number, with 1,650 up-and-running in the U.S.

In addition, regional craft breweries, like SweetWater or Cigar City Brewing, represent the smallest percentage, with 178 in existence.

The South saw some of the biggest gains in craft beer in the past year, with Florida, North Carolina, Virginia and Texas seeing a net increase of more than 20 breweries.

Chief Economist for the Brewers Association Bart Watson previously said Florida was one of the markets he was watching the closest. In a statement, he said there are still opportunities for growth in the industry, especially as it continues to grow so rapidly.

"For the past decade, craft brewers have charged into the market, seeing double digit growth for eight of those years," Watson said in a statement. "There are still a lot of opportunities and areas for additional growth. An important focus will remain on quality as small and independent brewers continue to lead the local, full-flavored beer movement."

There are eight craft breweries in Jacksonville, overall, including Intuition Ale Works, Aardwolf Brewing, Bold City Brewing, Green Room Brewing, Engine 15, Pinglehead Brewing Company, Veterans United Brewing and Zeta Brewing. In addition, there are two microbreweries in St. Augustine: Ancient City Brewing and Bog Brewing. Wicked Barley, which will be opening near Mandarin, is planning a summer opening.

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Craft beer continues to grow, with Florida being one of the biggest markets - Jacksonville Business Journal

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Craft beer is continuing to grow in market share and volume, even as larger companies are starting to buy up some craft beer brands - and Florida represented one of the fastest-growing states for the industry.

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March 1 marked Employee Appreciation Day. And for the first time in history, there are four different generations working side-by-side in the workplace - and each of these groups has different motivators.

According to Michael C. Fina, a global incentives and rewards company, there are 154,316,000 employees in the workforce today, and those employees consist of Traditionalists (1922-1945); Baby Boomers (1946-1964); Generation X workers (1965-1978); and Generation Y workers (1979-1997).

Here's a breakdown of these generations by percentage:

Traditionalists make up 5% of the workforce

Baby Boomers 38%

Generation X 32%, and

Generation Y 25%.

While Boomers are the most prevalent generation in the workforce at the moment, by 2015 Gen Y workers will outnumber both Gen X and Boomers.

Because each generation has its own unique background, a one-size-fits-all-motivation strategy won't cut it for companies that have a number of different generations working together.

What motivators work best for each generation? This infographic by Michael C. Fina does a nice job answering that question:

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Multigenerational workforce: What motivates today's employees [Graphic]

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March 1 marked Employee Appreciation Day. And for the first time in history, there are four different generations working side-by-side in the workplace - and each of these groups has different motivators. According to Michael C.

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A very smple and useful extra explanation for some of the key terms studied at chapter #1 

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A very smple and useful extra explanation for some of the key terms studied at chapter #1 

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Efficiency & Effectiveness, 3 Levels of Managers

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Not trying to enter in a political discussion, but I am always alarmed and insulted when I see stepback like the mentioned in this article.

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President Trump's cabinet is shaping up to have a smaller percentage of women and nonwhites than the first cabinets of Barack Obama, George W. Bush, Bill Clinton and George Bush.

If Mr. Trump's remaining nominees are confirmed, women and nonwhites will hold six of 24 cabinet or cabinet-level positions. This includes R. Alexander Acosta, Mr. Trump's second nominee for labor secretary. Mr. Acosta would be the only Hispanic member of Mr. Trump's cabinet.

"Donald Trump is rolling back the clock on diversity in the cabinet," said Paul Light, a professor at New York University's Wagner Graduate School of Public Service.

Number of white men in the first cabinet of each president

Those six members will also be in some of the lowest-ranking positions. None of them are in the so-called inner cabinet, the four positions in place since George Washington's presidency: the attorney general and the secretaries of state, Treasury and defense (formerly called the secretary of war).

The cabinet members below are listed in order of presidential succession. The inner cabinet comes after the vice president, House speaker and president pro tempore of the Senate.

The first cabinets of each president

Some positions, such as the United Nations ambassador and the Office of Management and Budget director, are given cabinet-level rank by individual presidents but are not traditionally considered part of the cabinet.

Historically, white women were named to inner-cabinet positions before nonwhite men and women. Madeleine K. Albright served as secretary of state during Mr. Clinton's second term, and Janet Reno served as attorney general during both of his terms.

The first black person to run the State Department was Colin L. Powell in 2001. Eric H. Holder Jr., nominated by Mr. Obama in 2009, was the first black attorney general.

"Secretary of Treasury and secretary of defense have never been a woman or a person of color," said Anne O'Connell, professor of law at the University of California, Berkeley. Mr. Trump's choices continue that pattern.

Number of women and minorities in the first cabinet of each president

The few women and minorities in his cabinet occupy lower-ranking positions.

▪ Betsy DeVos was chosen as secretary of education.

Dr. Light, an expert on the presidential appointment process, said that having diversity in the cabinet became standard as nonwhites and women moved up the ranks in politics. "That happened over time, but presidents also became more sensitive to it," he said.

During his first presidential campaign, Mr. Clinton said he would have a cabinet that " looks like America." In the weeks before his inauguration, he was criticized by women's organizations for not selecting women fast enough, but he ultimately appointed more women and African-Americans than his predecessors.

"They come from diverse backgrounds, and we will all be better and stronger for that diversity," he said in 1992. "I can say with pride that I believe this cabinet and these other appointees represent the best in America."

The first cabinets of George W. Bush and Mr. Obama were both noted for their diversity. In Mr. Bush's initial administration, 45 percent of the cabinet and cabinet-level officials were women or nonwhite men. In Mr. Obama's first cabinet, that figure was 64 percent.

Women in Cabinet Positions

Minorities in Cabinet Positions

Norman Y. Mineta became the first Asian-American cabinet member when he ran the Commerce Department at the end of Mr. Clinton's second term. He later served as secretary of transportation in George W. Bush's first cabinet. Robert C. Weaver, who served under President Lyndon B. Johnson, became the first black cabinet member and the first-ever Housing and Urban Development secretary in 1966.

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Trump's First Cabinet: The Whitest and Most Male Since Reagan's

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President Trump's cabinet is shaping up to have a smaller percentage of women and nonwhites than the first cabinets of Barack Obama, George W. Bush, Bill Clinton and George Bush. If Mr. Trump's remaining nominees are confirmed, women and nonwhites will hold six of 24 cabinet or cabinet-level positions.

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We still have a long way down to achieve gender equiality; however, we have fortunately advanced considerably.

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1940's Guide to hiring Women - sexist film

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This are 2015 statistics; however, i thought that by that year the gender diversity at the labor force at the board level was not as alarming as it is shown here.