How Successful People Stay Calm

Travis Bradberry, 

The ability to manage your emotions and remain calm under pressure has a direct link to your performance. TalentSmart has conducted research with more than a million people, and we’ve found that 90% of top performers are skilled at managing their emotions in times of stress in order to remain calm and in control. 

If you’ve followed my work, you’ve read some startling research summaries that explore the havoc stress can wreak on one’s physical and mental health (such as the Yale study, which found that prolonged stress causes degeneration in the area of the brain responsible for self-control). The tricky thing about stress (and the anxiety that comes with it) is that it’s an absolutely necessary emotion. Our brains are wired such that it’s difficult to take action until we feel at least some level of this emotional state. In fact, performance peaks under the heightened activation that comes with moderate levels of stress. As long as the stress isn’t prolonged, it’s harmless.

New research from the University of California, Berkeley, reveals an upside to experiencing moderate levels of stress. But it also reinforces how important it is to keep stress under control. The study, led by post-doctoral fellow Elizabeth Kirby, found that the onset of stress entices the brain into growing new cells responsible for improved memory. However, this effect is only seen when stress is intermittent. As soon as the stress continues beyond a few moments into a prolonged state, it suppresses the brain’s ability to develop new cells.


“I think intermittent stressful events are probably what keeps the brain more alert, and you perform better when you are alert,” Kirby says. For animals, intermittent stress is the bulk of what they experience, in the form of physical threats in their immediate environment. Long ago, this was also the case for humans. As the human brain evolved and increased in complexity, we’ve developed the ability to worry and perseverate on events, which creates frequent experiences of prolonged stress.

Besides increasing your risk of heart disease, depression, and obesity, stress decreases your cognitive performance. Fortunately, though, unless a lion is chasing you, the bulk of your stress is subjective and under your control. Top performers have well-honed coping strategies that they employ under stressful circumstances. This lowers their stress levels regardless of what’s happening in their environment, ensuring that the stress they experience is intermittent and not prolonged.

While I’ve run across numerous effective strategies that successful people employ when faced with stress, what follows are ten of the best. Some of these strategies may seem obvious, but the real challenge lies in recognizing when you need to use them and having the wherewithal to actually do so in spite of your stress.

They Appreciate What They Have
Taking time to contemplate what you’re grateful for isn’t merely the “right” thing to do. It also improves your mood, because it reduces the stress hormone cortisol by 23%. Research conducted at the University of California, Davis found that people who worked daily to cultivate an attitude of gratitude experienced improved mood, energy, and physical well-being. It’s likely that lower levels of cortisol played a major role in this.

They Avoid Asking “What If?”
“What if?” statements throw fuel on the fire of stress and worry. Things can go in a million different directions, and the more time you spend worrying about the possibilities, the less time you’ll spend focusing on taking action that will calm you down and keep your stress under control. Calm people know that asking “what if? will only take them to a place they don’t want—or need—to go.

They Stay Positive
Positive thoughts help make stress intermittent by focusing your brain’s attention onto something that is completely stress-free. You have to give your wandering brain a little help by consciously selecting something positive to think about. Any positive thought will do to refocus your attention. When things are going well, and your mood is good, this is relatively easy. When things are going poorly, and your mind is flooded with negative thoughts, this can be a challenge. In these moments, think about your day and identify one positive thing that happened, no matter how small. If you can’t think of something from the current day, reflect on the previous day or even the previous week. Or perhaps you’re looking forward to an exciting event that you can focus your attention on. The point here is that you must have something positive that you’re ready to shift your attention to when your thoughts turn negative.

They Disconnect
Given the importance of keeping stress intermittent, it’s easy to see how taking regular time off the grid can help keep your stress under control. When you make yourself available to your work 24/7, you expose yourself to a constant barrage of stressors. Forcing yourself offline and even—gulp!—turning off your phone gives your body a break from a constant source of stress. Studies have shown that something as simple as an email break can lower stress levels.

Technology enables constant communication and the expectation that you should be available 24/7. It is extremely difficult to enjoy a stress-free moment outside of work when an email that will change your train of thought and get you thinking (read: stressing) about work can drop onto your phone at any moment. If detaching yourself from work-related communication on weekday evenings is too big a challenge, then how about the weekend? Choose blocks of time where you cut the cord and go offline. You’ll be amazed at how refreshing these breaks are and how they reduce stress by putting a mental recharge into your weekly schedule. If you’re worried about the negative repercussions of taking this step, first try doing it at times when you’re unlikely to be contacted—maybe Sunday morning. As you grow more comfortable with it, and as your coworkers begin to accept the time you spend offline, gradually expand the amount of time you spend away from technology.

They Limit Their Caffeine Intake
Drinking caffeine triggers the release of adrenaline. Adrenaline is the source of the “fight-or-flight” response, a survival mechanism that forces you to stand up and fight or run for the hills when faced with a threat. The fight-or-flight mechanism sidesteps rational thinking in favor of a faster response. This is great when a bear is chasing you, but not so great when you’re responding to a curt email. When caffeine puts your brain and body into this hyperaroused state of stress, your emotions overrun your behavior. The stress that caffeine creates is far from intermittent, as its long half-life ensures that it takes its sweet time working its way out of your body.

 They Sleep
I’ve beaten this one to death over the years and can’t say enough about the importance of sleep to increasing your emotional intelligence and managing your stress levels. When you sleep, your brain literally recharges, shuffling through the day’s memories and storing or discarding them (which causes dreams), so that you wake up alert and clear-headed. Your self-control, attention, and memory are all reduced when you don’t get enough—or the right kind—of sleep. Sleep deprivation raises stress hormone levels on its own, even without a stressor present. Stressful projects often make you feel as if you have no time to sleep, but taking the time to get a decent night’s sleep is often the one thing keeping you from getting things under control.

They Squash Negative Self-Talk
A big step in managing stress involves stopping negative self-talk in its tracks. The more you ruminate on negative thoughts, the more power you give them. Most of our negative thoughts are just that—thoughts, not facts. When you find yourself believing the negative and pessimistic things, your inner voice says, “It’s time to stop and write them down.”

 Literally stop what you’re doing and write down what you’re thinking. Once you’ve taken a moment to slow down the negative momentum of your thoughts, you will be more rational and clear-headed in evaluating their veracity.

You can bet that your statements aren’t true any time you use words like “never,” “worst,” “ever,” etc. If your statements still look like facts once they’re on paper, take them to a friend or colleague you trust and see if he or she agrees with you. Then the truth will surely come out. When it feels like something always or never happens, this is just your brain’s natural threat tendency inflating the perceived frequency or severity of an event. Identifying and labeling your thoughts as thoughts by separating them from the facts will help you escape the cycle of negativity and move toward a positive new outlook.

They Reframe Their Perspective
Stress and worry are fueled by our own skewed perception of events. It’s easy to think that unrealistic deadlines, unforgiving bosses, and out-of-control traffic are the reasons we’re so stressed all the time. You can’t control your circumstances, but you can control how you respond to them. So before you spend too much time dwelling on something, take a minute to put the situation in perspective. If you aren’t sure when you need to do this, try looking for clues that your anxiety may not be proportional to the stressor. If you’re thinking in broad, sweeping statements such as “Everything is going wrong” or “Nothing will work out,” then you need to reframe the situation. A great way to correct this unproductive thought pattern is to list the specific things that actually are going wrong or not working out. Most likely you will come up with just some things—not everything—and the scope of these stressors will look much more limited than it initially appeared.


They Breathe
The easiest way to make stress intermittent lies in something that you have to do everyday anyway: breathing. The practice of being in the moment with your breathing will begin to train your brain to focus solely on the task at hand and get the stress monkey off your back. When you’re feeling stressed, take a couple of minutes to focus on your breathing. Close the door, put away all other distractions, and just sit in a chair and breathe. The goal is to spend the entire time focused only on your breathing, which will prevent your mind from wandering. Think about how it feels to breathe in and out. This sounds simple, but it’s hard to do for more than a minute or two. It’s all right if you get sidetracked by another thought; this is sure to happen at the beginning, and you just need to bring your focus back to your breathing. If staying focused on your breathing proves to be a real struggle, try counting each breath in and out until you get to 20, and then start again from 1. Don’t worry if you lose count; you can always just start over.

This task may seem too easy or even a little silly, but you’ll be surprised by how calm you feel afterward and how much easier it is to let go of distracting thoughts that otherwise seem to have lodged permanently inside your brain.

They Use Their Support System
It’s tempting, yet entirely ineffective, to attempt tackling everything by yourself. To be calm and productive, you need to recognize your weaknesses and ask for help when you need it. This means tapping into your support system when a situation is challenging enough for you to feel overwhelmed. Everyone has someone at work and/or outside work who is on their team, rooting for them, and ready to help them get the best from a difficult situation. Identify these individuals in your life and make an effort to seek their insight and assistance when you need it. Something as simple as talking about your worries will provide an outlet for your anxiety and stress and supply you with a new perspective on the situation. Most of the time, other people can see a solution that you can’t because they are not as emotionally invested in the situation. Asking for help will mitigate your stress and strengthen your relationships with those you rely upon.

Abraham Lincoln's Brilliant Method for Handling Setbacks

BY Ilan Mochari

 ,

Today would've been Lincoln's 215th birthday. Here's what the legendary leader can teach you about keeping a reasonable temperament during hard times.

What was the secret of Abraham Lincoln's success in dealing with people?

Incredibly, this is not just a question that a business journalist would ask. Dale Carnegie himself--the legendary author of How to Win Friends and Influence People--asked the exact same question on page 8 of that famous book. 

Carnegie was in a unique position to know the answer. Four years before How to Win Friends came out, he authored a book called Lincoln the Unknown, which he spent three years working on. 

How Lincoln Practiced Patience
The point is that Carnegie--America's preeminent expert on networking, arguably the person who first codified networking as a skill--analyzed Lincoln's life for his people skills.

As an example, Carnegie cites a letter Lincoln wrote to a general who disobeyed his orders during the Civil War. Here's a snippet: 

"I do not believe you appreciate the magnitude of the misfortune involved in Lee's escape. He was within your easy grasp, and to have closed upon him would, in connection with our other late successes, have ended the war. As it is, the war will be prolonged indefinitely. If you could not safely attack Lee last Monday, how can you possibly do so South of the river, when you can take with you very few more than two thirds of the force you then had in hand? It would be unreasonable to expect, and I do not expect you can now effect much. Your golden opportunity is gone, and I am distressed immeasureably because of it."

Clearly, this is a stern rebuke. You could even argue that it is personal.

But the lesson Carnegie has to offer is a simple one. The lesson is that Lincoln never sent the letter. It was found among his papers after his death. 

The Art of Empathy
Carnegie's speculation about why Lincoln never sent the letter is fascinating and, more importantly, plausible. His best guess is that Lincoln's thought process went something like this: 

"Maybe I ought not to be so hasty. It is easy enough for me to sit here in the quiet of the White House and order Meade to attack; but if I had been up at Gettysburg, and if I had seen as much blood as Meade has seen during the last week, and if my ears had been pierced with the screams and shrieks of the wounded and dying, maybe I wouldn't be so anxious to attack either. If I had Meade's timid temperament, perhaps I would have done just what he had done. Anyhow, it is water under the bridge now. If I send this letter, it will relieve my feelings, but it will make Meade try to justify himself. It will make him condemn me. It will arouse hard feelings, impair all his further usefulness as a commander, and perhaps force him to resign from the army." 

There are three takeaways you can glean from this informed sketch of Lincoln's throught process.

1. When delivering feedback, think about how it will affect both the recipient and your overall goal. If the ultimate aim of any feedback is to improve employee performance--and therefore, the organization's performance--than you need to consider whether the timing and the wording of the feedback will accomplish those goals. In Carnegie's view, Lincoln believed that his feedback to Meade would both "impair" the general's performance and damage the army's performance. Therefore, the feedback was not worth delivering to Meade at this juncture. 

2. Before you criticize an employee, put yourself in his shoes. Hindsight is 20-20, the cliche goes. Second guessing is always easy. Wrong as Meade was, in Lincoln's view, Lincoln was aware enough to realize that bullets were flying around Meade--so perhaps he could be forgiven or, at least, understood, if he wasn't in his right mind on the battlefield. Pressure creates mistakes. If you've got feedback for your employees, consider first the pressures they are under to make the decisions they make. 

3. If you're angry about an outcome, give yourself an outlet for venting. Just because Lincoln didn't send the letter doesn't mean writing the letter didn't help. The notion that writing down your frustrations can help you vent is well known. The trick is actually doing it in practice. At the very least, that's what Lincoln accomplished here.

And remember this, too: If you're upset at an employee, on some level you're the one to blame. After all, it's your organization--and perhaps even you, directly--who hired him. This was certainly the case with Lincoln and Meade. If Lincoln didn't want Meade to make big decisions, Lincoln should've relied on another general. 

Finally, the last thing you want is an employee who is too scared to act, for fear that you will criticize their actions. You'll end up with an employee who bugs you about every little detail, to prevent your critiques from coming later. 

It doesn't mean you should eliminate feedback from your employee-evaluation process. It just means you need to consider how--and when--you do it.

5 Solid Pieces Of Advice From A Startup CEO

The path to entrepreneurial success is far from paved in gold. Rather, it’s lined with bumps, turns and even dead ends. Still, entrepreneurship has hit a record high in the U.S. as more people than ever before venture down the road less traveled.

Prominent startup CEO George Bell learned far more from his entrepreneurial journey than he could have by staying on the straight and narrow. I recently chatted with Bell and he recounted the valuable business experience and insight he gained by going off the beaten path.

Bell’s rise to entrepreneurial success was less than traditional. He began his career as an acclaimed adventure documentary writer and producer, and then moved into the corporate world where he climbed the ranks at Times Mirror Magazines. Still, his passion was startups: He served as CEO for Excite, Excite@Home, UPromise, and Jumptap. He then transitioned to General Catalyst, a venture capital and growth equity firm that manages over $1.7B in assets. Having just sold Jumptap to Millennial Media for $200 million, Bell’s exciting entrepreneurial journey continues.

The many lessons Bell learned throughout his career are not only inspiring, they’re downright essential for every budding entrepreneur. Here are five lessons you can learn from him:

1. “You have to adjust on the fly.”
You have to remain resilient throughout all of the “unexpecteds” that come with this winding startup path. You must be willing to be flexible and resort to alternative plans when the situation calls for it.

When Bell began as an adventure documentary writer and producer, he would often pitch an idea or prepare for filming only to have other circumstances such as weather or budget pull the rug from underneath him. He learned early in his career that he had to be flexible and think on his feet.

2. “We all need someone to give us a chance.” 
As an entrepreneur, you must never be afraid to throw your hat in the ring and seek out opportunities that may be a bit of a stretch. Ask yourself, “Why not me?” You never know who has the ability to open the door for a whole new opportunity.

When Bell wanted to break into the corporate world, he approached Times Mirror Magazines for a job. He knew he was underqualified, but this didn’t stop him from trying. Times Mirror Magazines ultimately took a chance, giving him the break he needed. He then climbed the ranks, eventually founding the Outdoor Life Network (now NBC Sports Network).

3. “Taking risks increases your value.” 
Being an entrepreneur requires you to stretch your limits, but even in failure, the experience and connections you form along the way are the most valuable piece.

When Bell chose to leave his stable job with Times Mirror Magazines and move across the country to work for the startup Excite, it was a challenging and risky decision. If the startup failed, he knew it wouldn’t be hard to get back into a corporate job. Plus, the experience he gained would only add to his skill set.

4. “Go after what gets you excited.”
You should never make the mistake of letting money drive your career choices. Entrepreneurship is about chasing your passion, not a paycheck.

Based on his own journey, Bell stresses that you should seek out opportunities foremost because of passion, conviction, and excitement. If your main concern is money, you will never outlast the ups and downs of entrepreneurship.

5. “The best entrepreneurs are both optimists and realists.”
It takes a double mindset to be a successful entrepreneur. You have to set your expectations overly high to be inspired to push further. Still, you must be realistic about money and finances. Bell advises that entrepreneurs should be optimistic with their ability to reach their goals, but realistic with expenses.

Entrepreneurship is not for the timid or uncertain. The lessons George Bell learned through his less-than-traditional career should help cast a light on this unbeaten path and guide you along your own entrepreneurial journey.

Skiddy von Stade

 
Bio:  Skiddy von Stade is the founder and CEO of OneWire, the leading career site for finance professionals. Skiddy is also the host of Open Door – an exclusive interview series with influential leaders across the financial services sector and beyond.

Women Owned-Businesses: Canada needs more female entrepreneurs

Published on Wed Jan 30 2013

By: Hadaf Zubi

Of the 2.4 million businesses registered in Canada at the end of 2011, 1.1 million were small businesses, and they employed 48% of Canadians in the private sector. 

Industry Canada’s most recent estimates put the proportion of women-owned small businesses at 17%, which would represent about 187,000 firms. Since 2001 the proportion of Canadian women employed in senior management positions has risen 5%, and the proportion employed in natural and applied sciences has risen 10%.

The proportion in women in the workforce stayed virtually the same, so it is surprising that even though the number of professional women employed in Canada has risen since 2001, the ratio of self-employed women to men has hovered around a 35-65 split. With more and more women working in professional occupations, what are the major obstacles holding them back from starting businesses of their own, and what can be changed? 

The University of Ottawa’s Telfer School of Management’s “Taskforce for Women’s Business Growth” 2011 report discusses some of the challenges faced by women-owned businesses, such as the absence of a national women’s entrepreneurial strategy, a lack of supplier diversity initiatives, and a shortage of commercial lending. The resolution of these issues would enable more women to form small businesses, so what is being done to fix these problems?

Canada lacks a coordinated national women’s economic development strategy. As the Telfer report suggests, “(A) national strategy would support increased funding to existing women-focused small business training programs and program expansion in those regions that do not currently support such programs, including Quebec, Southern Ontario and Northern Canada.”

Although it is the centre of the Canadian economy, the GTA has no women-specific government-sponsored funding program analogous the Government of Canada-sponsored Women’s Enterprise Initiative Loan Program. The Program, funded through Western Economic Diversification Canada, provides loans of up to $150,000, along with advisory services and networking opportunities for women-owned businesses west of Ontario.

Women-owned businesses in the GTA have access to several networking and support groups, though. Organizations like The Toronto Business and Professional Women’s Club, the toronto chapter of the Women’s Entrepreneurs’s Meetup.com group, or the Hamilton Immigrant Women’s Centre all provide training and advisory services for women who want to start or grow their business. The availability of mentorship is essential to the formation of Women-owned businesses. According to recent research by BMO, 83% of potential female entrepreneurs surveyed said having access to mentors would be important if they were to start their own business. 

A second important element to supporting women’s business growth is a focus on leveraging supplier diversity.

In the USA the Small Business Administration has set aside small business funding for Women-owned small businesses (WOSBs) bidding on government contracts that are under $5 million for manufacturing, or under $3 million otherwise. 

In addition to providing loans or loan guarantees, the SBA maintains Women’s Business Centers in major population centers in every state. These funding programs were established to help the US Government fulfill its stated goal of 5% Women-owned procurement. 

WEConnect Canada, an organization that certifies businesses as Women-owned, states that the 5% goal has never been met because of a lack of consequences. But they still think the program is beneficial, and that the Canadian government should “establish procurement targets for SMEs and in particular, women-owned enterprises.“

They go on to suggest that “strategic SME procurement policy is an under-utilized mechanism to enhance supplier diversity and hence, Canadian competitiveness.”

Government procurement targets are essential to encourage supplier diversity on Canadian government contracts, which the Canadian Federation of Independent Business has consistently pointed out are perceived by their members as being opaque, if not outright unfair.

A third element that would clear the path for more Women-owned businesses would be increased access to commercial capital and dedicated financial resources. Although overall loan volume is growing in Canada, much of that growth is occurring in Quebec and Alberta. Ontario loan volumes are declining, especially in the sub-$500,000 space. 

Government sponsored Women-focused lending programs, such as those offered in the USA or other parts of Canada, would certainly alleviate the cash crunch for Women-owned businesses in the GTA.

Leaning Into Difference: The Key to Solving Tough Problems

By Craig Weber

"Honest differences are often a healthy sign of progress." — Mahatma Gandhi 

"Life is a series of problems," observed M. Scott Peck. A more accurate statement was never made. But when it comes to solving them it's important to realize that not all problems are created equal. All our difficulties fall somewhere on a spectrum; at one end of this spectrum we find routine problems, and, at the other end, adaptive challenges. A routine problem isn't considered routine because it happens regularly, but because we have a routine for dealing with it – a protocol, a process, or expert on which we can depend for a reliable fix. A routine problem may be irksome and expensive, but at least we're in familiar territory and know what to do about it. When we're facing an adaptive challenge, on the other hand, we're off the familiar trail in uncharted territory where there are no proven routines, protocols, solutions, or experts. To successfully negotiate an adaptive challenge we must work and learn with others to navigate the alien terrain. All the problems we face in life fall somewhere between these two distinct poles.

It's easy to see these two types of problems in the workplace. If our corporate computer loses connectivity, for example, there's a clear process for getting the problem fixed. It might be frustrating, but the problem is routine. If our corporate culture is trashing our strategy, however, we're in highly adaptive territory, because, unlike the computer problem, there is no simple solution, no established process, no ready expert who can solve the problem for us.

Performing effectively in today's world is increasingly difficult because the number of adaptive challenges we face is snowballing. The culprits driving this trend are well known – rampant technological, social, economic, and political upheaval, and all the unpredictable change, surging complexity, and expanding globalization that comes with it.

Given this shift, it's more important than ever to recognize the distinction between routine and adaptive issues because they each require a profoundly different problem solving approach. For a routine problem a bias for action is appropriate. We have a routine, we know what to do, so as Nike suggests, we should "just do it." But for an adaptive challenge – where there is no clear routine, no proven process, no ready expert who can save the day – a bias for learning is essential. Why? To navigate our way over unfamiliar ground we must roll up our cognitive sleeves and work with others to figure out the best way forward. We must orchestrate, in other words, a process of adaptive learning.

The key to adaptive learning is leaning into difference – the act of seeking out and exploring conflicting ideas and views. "If people don't engage across the divide of their differences there is no learning," says Ron Heifetz. "People don't learn by looking in the mirror. They learn by talking with people who have different points of view. In a sense then, conflict is really the engine of adaptive work, the engine of learning." And a critical competence that enables our ability to learn from difference is something I refer to as conversational capacity – the ability to have open, balanced, learning-focused dialogue about tough, heated, adaptive issues. High conversational capacity transforms how we react to people with different perspectives and information because our strong bias for learning leads us to see them as rich opportunities to expand our awareness and learn, not petty nuisances to be avoided or attacked. Rather than cave in or argue when someone has a different point of view, we get curious: "What might their perspective teach me about how I am looking at this issue?"

This learning-focused orientation dramatically expands our ability to make informed choices, because, as Peter Elbow explains, "The surest way to get hold of what your present frame binds you to is to adopt the opposite frame. A person who can live with contradiction and exploit it – who can use conflicting models – can simply see and think more." And when working in unfamiliar territory nothing is more important than the ability to see and think more.

Abraham Lincoln understood this. Facing an adaptive challenge of historic proportions – a civil war and the utter failure of the American experiment – he did something unusual: he pulled into his cabinet people with political agendas that clashed not only with his own views but with each other's. He didn't create this hornets' nest of conflicting perspectives because he yearned for comfortable cabinet meetings, nor did he do it because he wanted to get his way all the time. He did it because he knew a room full of contrasting points of view would help him make wiser, more informed decisions about the adaptive realities he was facing. The diversity of Lincoln's cabinet helped him to see and think more.

Vistage (In Canada: TEC Canada @ www.tec-canada.com) gets this too. Vistage/TEC-Canada is a global organization of over 17,000 CEOs, business owners, and top executives that meet in peer advisory groups to facilitate conversation, spark insight, and spur growth. I've spent over fourteen years working with hundreds of Vistage groups and I'm impressed with the learning the experience generates. As with Lincoln's cabinet, the power of a Vistage/TEC meeting isn't in the sameness around the table – it's in the difference. The candid dialogue and open-minded exposure to the varying personalities, organizations, educations, cultures, and life experiences of the group members allows each executive to see and think more about their important leadership problems. After a CEO explores an adaptive challenge she's facing with her Vistage/TEC group, she drives home with an expanded field of vision and clearer set of choices precisely because she leaned into – and learned from – the diverse views of her colleagues.

But mere exposure to difference isn't enough. Our differences only facilitate adaptive work if we have a bias for learning that is greater than our natural defensiveness to new and conflicting ideas. To truly learn from different perspectives we need the conversational capacity to balance candor and courage with curiosity and humility, to genuinely approach conversations with people who see the world differently as opportunities to trigger an "aha" moment – the exhilarating experience of having a blind spot in the mental map of our predicament unexpectedly illuminated.

Because it enables us to think smarter, faster, and together, the adaptive learning provoked by leaning into difference is invaluable in any organization facing tough challenges (and what organization isn't?). So let me leave you with a few questions to consider and discuss: What are the major issues facing your team and organization? What aspects of those issues are predominantly routine and which are more adaptive? When it comes to the adaptive challenges you're up against, does your team have the appropriate bias for learning needed to do the necessary adaptive work? If not, what can you do to build their conversational capacity so they can engage these challenges in a more balanced, healthy, learning-focused way?

Craig Weber is the author of the groundbreaking book, Conversational Capacity: The Key To Building Successful Teams That Perform When The Pressure Is On (McGraw-Hill, 2013) and the founder of The Weber Consulting Group, an alliance of experts committed to helping organizations and teams build their capacity for engaging tough, wicked, adaptive challenges. 

The Myth of the Bell Curve

Josh Bersin

Principal and Founder, Bersin by Deloitte

 

There is a long standing belief in business that people performance follows the Bell Curve (also called the Normal Distribution). This belief has been embedded in many business practices: performance appraisals, compensation models, and even how we get graded in school. (Remember "grading by the curve?")

Research shows that this statistical model, while easy to understand, does not accurately reflect the way people perform. As a result, HR departments and business leaders inadvertently create agonizing problems with employee performance and happiness.

Witness Microsoft's recent decision to disband its performance management process - after decades of use the company realized it was encouraging many of its top people to leave. I recently talked with the HR leader of a well known public company and she told me her engineer-CEO insists on implementing a forced ranking system. I explained the statistical models to her and it really helped him think differently.

Does human performance follow the bell curve? Research says no.
Let's look at the characteristics of the Bell Curve, and I think you'll quickly understand why the model doesn't fit.

The Bell Curve represents what statisticians call a "normal distribution." A normal distribution is a sample with an arithmetic average and an equal distribution above and below average like the curve below. This model assumes we have an equivalent number of people above and below average, and that there will be a very small number of people two standard deviations above and below the average (mean).

As you can see from the curve, in the area of people management the model essentially says that "we will have a small number of very high performers and an equivalent number of very low performers" with the bulk of our people clustered near the average. So if your "average sales per employee" was $1M per year, you could plot your sales force and it would spread out like the blue curve above.

In the area of performance management, this curve results in what we call "rank and yank." We force the company to distribute raises and performance ratings by this curve (which essentially assumes that real performance is distributed this way). To avoid "grade inflation" companies force managers to have a certain percentage at the top, certain percentage at the bottom, and a large swath in the middle.

This practice creates the following outcomes:

• First, we ration the number of "high performance ratings." If you use a five point scale (similar to grades), many companies say that "no more than 10% of the population gets a rating of 1" and "10% of the population must be rated a 5."
• Second, we force the bottom 10% to get a low rating, creating "losers" in the group. So if your team is all high performers, someone is still at the bottom. (The "idea" behind this is that we'll continuously improve by lopping off the bottom.)
• Third, most of the people are always in the middle - rated more or less "average." And implicit in this last assumption is the idea that most of the money and rewards go to the middle of the curve.

Does the World Really Work This Way? 

The answer is no. 

Research conducted in 2011 and 2012 by Ernest O’Boyle Jr. and Herman Aguinis (633,263 researchers, entertainers, politicians, and athletes in a total of 198 samples). found that performance in 94 percent of these groups did not follow a normal distribution. Rather these groups fall into what is called a "Power Law" distribution.




A "Power Law" distribution is also known as a "long tail." It indicates that people are not "normally distributed." In this statistical model there are a small number of people who are "hyper high performers," a a broad swath of people who are "good performers" and a smaller number of people who are "low performers." It essentially accounts for a much wider variation in performance among the sample.

It has very different characteristics from the Bell Curve. In the Power Curve most people fall below the mean (slightly). Roughly 10-15% of the population are above the average (often far above the average), a large population are slightly below average, and a small group are far below average. So the concept of "average" becomes meaningless.

In fact the implication is that comparing to "average" isn't very useful at all, because the small number of people who are "hyper-performers" accommodate for a very high percentage of the total business value.

(Bill Gates used to say that there were a handful of people at Microsoft who "made" the company and if they left there would be no Microsoft.)

Why We Have Hyper-Performers
If you think about your own work experience you'll probably agree that this makes sense.

Think about how people perform in creative, service, and intellectual property businesses (where all businesses are going). There are superstars in every group. Some software engineers are 10X more productive than the average; some sales people deliver 2-3X their peers; certain athletes far outperform their peers; musicians, artists, and even leaders are the same.

These "hyper performers" are people you want to attract, retain, and empower. These are the people who start companies, develop new products, create amazing advertising copy, write award winning books and articles, or set an example for your sales force. They are often gifted in a certain way (often a combination of skill, passion, drive, and energy) and they actually do drive orders of magnitude more value than many of their peers.

If we're lucky we can attract a lot of these people - and when we do we should pay them very well, give them freedom to perform and help others, and take advantage of the work they do. Investment banks understand this - that's why certain people earn 10-fold more than others.

Today's businesses drive most of their value through service, intellectual property, innovation, and creativity. Even if you're a manufacturer, your ability to sell, serve, and support your product (and the design itself) is more important than the ability to manufacture. So each year a higher and higher percentage of your work is dependent on the roles which have "hyper performer" distributions. (I would argue that every job in business follows this model.)

What About Everyone Else?
The power law distribution (also called a Paretian Distribution) shows that there are many levels of high performance, and the population of people below the "hyper performers" is distributed among "near hyper-performers" all the way down to "low performers."

As you can see from the example above (and this chart varies depending on population) you still have a large variation in people and there will be a large group of "high-potentials," a group of people who are "potential high-potentials," and a small group who just don't fit at all.

The distribution reflects the idea that "we want everyone to become a hyper-performer" if they can find the right role, and that we don't limit people at the top of the curve - we try to build more of them.

Companies that understand this model focus very heavily on collaboration, professional development, coaching, and empowering people to do great things. In retail, for example, companies like Costco give their people "slack time" to clean up, fix things, and rearrange the store to continuously improve the customer experience.

How the Bell Curve Model Hurts Performance
Right now there is an epidemic of interest in revamping employee performance management processes, and it's overdue. I just had several of my best friends (generally in senior positions) tell me how frustrated they are at their current jobs because their performance appraisals were so frustrating.

Here are the reasons the current models don't work:

1. No one wants to be rated on a five point scale.
First, much research shows that reducing a year of work to a single number is degrading. It creates a defensive reaction and doesn't encourage people to improve. Ideally performance evaluation should be "continuous" and focus on "always being able to improve."

2. Ultra-high performers are incented to leave and collaboration may be limited.
The bell curve model limits the quantity of people at the top and also reduces incentives to the highest rating. Given the arbitrary five-scale rating and the fact that most people are 2,3,4 rated, most of the money goes to the middle.

If you're performing well but you only get a "2" or a "3" you'll probably feel under-appreciated. Your compensation increase may not be very high (most of the money is held for the middle of the curve) and you'll probably conclude that the highest ratings are reserved for those who are politically well connected.

Since the number of "1's" is limited, you're also likely to say "well I probably wont get there from here so I'll work someplace where I can really get ahead."

Also, by the way, you may feel that collaboration and helping others isn't really in your own self interest - because you are competing with your team mates for annual reviews.

2. Mid level performers are not highly motivated to improve.
In the bell curve there are a large number of people rated 2, 3, and 4. These people are either (A) frustrated high performers who want to improve, or (B) mid-level performers who are happy to stay where they are.

If you fall into category (B) you're probably pretty happy keeping the status quo - you know the number of "1's" is very limited so you won't even strive to get there. In a sense the model rewards mediocrity.

3. Compensation is inefficiently distributed.
People often believe the bell curve is "fair." There are an equal number of people above and below the average. And fairness is very important. But fairness does not mean "equality" or "equivalent rewards for all." High performing companies have very wide variations in compensation, reflecting the fact that some people really do drive far more value than others. In a true meritocracy this is a good thing, as long as everyone has an opportunity to improve, information is transparent, and management is open and provides feedback.

Many of the companies I talk with about this suddenly realize the have to rethink their compensation process - and find ways to create a higher variability in pay. Just think about paying people based on the value they deliver (balanced by market wages and scarcity of skills) and you'll probably conclude that too much of your compensation is based on tenure and history.

4. Incentives to develop and grow are reduced.
In a bell curve model you tend to reward and create lots of people in the "middle." People can "hang out" in the broad 80% segment and rather than strive to become one of the high-performers, many just "do a good job." This is fine of course, but I do believe that everyone wants to be great at something - so why wouldn't we create a system where every single person has the opportunity to become a star?

If your company focuses heavily on product design, service, consulting, or creative work, (and I think nearly every company does), why wouldn't you want everyone to work harder and harder each day to improve their own work or find jobs where they can excel?

(By the way, internal mobility is a critical part of this model. If I find I'm not very good at the job I'm in now, I would hope my manager will help me move to assignments or jobs where I can become a superstar. Companies that simply rate me a 3 may not give me that opportunity. If we create a more variable and flexible process of evaluation we have to enable people to move into higher value positions. So having a talent mobility program is critical to success.)

Time to Re-Engineer Performance Management
As I go out and talk with HR leaders about this process I'm finding that almost every major company wants to revamp their current approach. They want to make it simpler, focused on feedback, and more developmental.

But in addition to considering these practices, make sure you consider your performance philosophy. Does your management really believe in the bell curve? Or do you fundamentally believe there are hyper-performers to be developed and rewarded? If you simplify the process but keep the same distribution of rewards and ratings you may not see the results you want.

Look at how sports teams drive results: they hire and build super-stars every single day. And the pay them richly. If you can build that kind of performance management process in your team, you'll see amazing results.

Posted by:Josh Bersin

The Five Competitive Forces That Shape Strategy

by Michael E. Porter 

Editor’s Note: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic research and business practice. With prodding and assistance from Harvard Business School Professor Jan Rivkin and longtime colleague Joan Magretta, Porter here reaffirms, updates, and extends the classic work. He also addresses common misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for strategy today.

In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.

As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same. The global auto industry, for instance, appears to have nothing in common with the worldwide market for art masterpieces or the heavily regulated health-care delivery industry in Europe. But to understand industry competition and profitability in each of those three cases, one must analyze the industry’s underlying structure in terms of the five forces. (See the exhibit “The Five Forces That Shape Industry Competition.”)

If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment. If the forces are benign, as they are in industries such as software, soft drinks, and toiletries, many companies are profitable. Industry structure drives competition and profitability, not whether an industry produces a product or service, is emerging or mature, high tech or low tech, regulated or unregulated. While a myriad of factors can affect industry profitability in the short run—including the weather and the business cycle—industry structure, manifested in the competitive forces, sets industry profitability in the medium and long run. (See the exhibit “Differences in Industry Profitability.”)

Differences in Industry Profitability
Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time. A healthy industry structure should be as much a competitive concern to strategists as their company’s own position. Understanding industry structure is also essential to effective strategic positioning. As we will see, defending against the competitive forces and shaping them in a company’s favor are crucial to strategy.

Forces That Shape Competition
The configuration of the five forces differs by industry. In the market for commercial aircraft, fierce rivalry between dominant producers Airbus and Boeing and the bargaining power of the airlines that place huge orders for aircraft are strong, while the threat of entry, the threat of substitutes, and the power of suppliers are more benign. In the movie theater industry, the proliferation of substitute forms of entertainment and the power of the movie producers and distributors who supply movies, the critical input, are important.

The strongest competitive force or forces determine the profitability of an industry and become the most important to strategy formulation. The most salient force, however, is not always obvious.

For example, even though rivalry is often fierce in commodity industries, it may not be the factor limiting profitability. Low returns in the photographic film industry, for instance, are the result of a superior substitute product—as Kodak and Fuji, the world’s leading producers of photographic film, learned with the advent of digital photography. In such a situation, coping with the substitute product becomes the number one strategic priority.

Industry structure grows out of a set of economic and technical characteristics that determine the strength of each competitive force. We will examine these drivers in the pages that follow, taking the perspective of an incumbent, or a company already present in the industry. The analysis can be readily extended to understand the challenges facing a potential entrant.

Michael E. Porter is the Bishop William Lawrence University Professor at Harvard University, based at Harvard Business School in Boston. He is a six-time McKinsey Award winner, including for his most recent HBR article, “Strategy and Society,” coauthored with Mark R. Kramer (December 2006).