iq insigniam quarterly® spring 2017 — making the big decision

TRANSFORMING THE PRACTICE OF MANAGEMENT AND LEADERSHIPVolume 5 Issue 2 | Spring 2017 | quarterly.insigniam.com

FOR PITNEY BOWES CEO MARC LAUTENBACH, MAKING A DECISION MEANS STICKING WITH IT FOR THE LONG HAUL

PAGE 24

MAKING THE BIG DECISION

A LEADERSHIP CHARTER UNEARTHS AGILITY AND COORDINATED ACTION IN AN ORGANIZATIONPAGE 32

HOW BC HYDRO’S DEPUTY CEO GARNERS SUPPORT EVEN FOR HIS UNPOPULAR DECISIONSPAGE 42

FORD’S FUTURIST HELPS EXECUTIVES COMBAT BIAS TOWARD THE STATUS QUOPAGE 48

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INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. ALL RIGHTS RESERVED. CONFIDENTIAL AND PROPRIETARY. MAY NOT BE REPRODUCED IN ANY FORM, BY ELECTRONIC OR PRINT OR ANY OTHER MEANS,

WITHOUT THE EXPRESS WRITTEN PERMISSION OF INSIGNIAM. VISIT WWW.INSIGNIAM.COM FOR CONTACTS.

SPRING 2017

“When executive teams are coordinated in the actions they take, they are better

positioned to pivot in the face of disruption and capitalize on

new opportunities.” —SHIDEH SEDGH BINA, FOUNDING PARTNER, INSIGNIAM,

AND EDITOR IN CHIEF, INSIGNIAM QUARTERLY

Over 30 years ago, Insigniam pioneered the field of organizational transformation. Today, executives in large, complex organizations use Insigniam’s consulting services to generate breakthroughs in their critical business results. Insigniam’s innovation consulting enables enterprises to identify and cross into new strategic frontiers to rapidly generate new income streams. Insigniam provides executives of the world’s largest companies with management consulting services and solutions that are unparalleled in their potency to quickly deliver on strategic imperatives and boost dramatic growth. Insigniam solutions include Enterprise Transformation, Strategy Innovation and Innovation Projects, Breakthrough Projects, Transformational Leadership and Managing Change. Offices are located in Philadelphia, Laguna Beach, London, Paris and Hong Kong. For more information, please visit www.insigniam.com.



SPRING 2017

quarter ly. insigniam.com | INSIGNIAM QUARTERLY 1

In 1952, Boeing’s then-president, Bill Allen, made a game-changing decision to launch the 707. It was a bold, bet-the-company move. Boeing had no orders in hand and at the time was known for warplanes, not commercial jets. Mr. Allen, however, was not deterred. Instead, he was convinced that the future of air travel lay in commercial. So, with a $16 million budget in hand, he built the first U.S. transatlantic commercial jetliner—and changed the course of a company.

Mr. Allen’s move exemplifies the impact executives can have by doing what they do every day: making big decisions. By going against the grain or exploring the path less traveled, they can change the course of an entire organization or the makeup of an industry.

That impact, however, goes both ways. For every transcendent decision made by an executive, there are the ones that fizzle, that flop and that possibly even fold a company. The examples are plentiful. Take Western Union’s then-president, William Orton, who in 1876 had the opportunity to purchase the patent for the telephone. He ultimately passed, defending his decision by calling the invention a toy, rather than technology.

Not every decision an executive makes will turn out to be the right call, but the big ones define not only careers but legacies. While the Jack Mas and Steve Jobses of the business world are likely to be renowned for the good decisions they make, the opposite must be said of the John Stumpfs and Elizabeth Holmeses.

Game-changing decisions do not occur by happenstance. They are not made on a whim or peddled with luck. They are bold and strategic and purposeful. And ultimately, their success or failure falls at the feet of the leaders at the top.

To succeed—and stomach it—these leaders must possess not only the right combination of brains and guts, but also an iron will and a daring heart.

As Peter Drucker once said, “Wherever you see a successful business, someone once made a courageous decision.”

DECISION TIME

LETTER FROM THE EDITOR

Shideh Sedgh BinaFounding Partner, Insigniam

EDITOR IN CHIEFShideh Sedgh [email protected]

EXECUTIVE DIRECTORNathan Owen Rosenberg [email protected]

CHIEF FINANCIAL OFFICERJeff [email protected]

MANAGING DIRECTOR OF INSIGNIAM QUARTERLYNatalie [email protected]

PUBLISHERJames [email protected]

EXECUTIVE VICE PRESIDENT & CHIEF CONTENT OFFICERKim Caviness

EXECUTIVE VICE PRESIDENT, DESIGNDouglas Kelly

VP, EDITORIAL DIRECTORCyndee Miller

CONTENT DIRECTORKelley Hunsberger

EXECUTIVE EDITORJeremy Gantz

EDITORSBecky MaughanJulie Ortega

SENIOR ART DIRECTORHugo Espinoza

CONTRIBUTING WRITERSJonathan Ball, Sarah Fister Gale, Samuel Greengard, Joseph Guinto, Tegan Jones, Novid Parsi, Kate Rockwood

Insigniam Quarterly is a thought leadership publication committed to transforming the world of business by offering content relevant to the C-suite and their executive teams at large, complex, global enterprises.

Insigniam Quarterly is published by Imagination, 600 W. Fulton St., Suite 600, Chicago, IL 60661, (312) 887-1000, www.imaginepub.com. No part of this publication may be reproduced in any form or by any means without prior written permission of the publisher and Insigniam. Printed in the U.S.A. Magazine patents pending. For subscriptions, please visit quarterly.insigniam.com.

Insigniam and its publisher, Imagination, distribute this editorial magazine to share the opinions and insights of companies and their leaders on impactful global business issues. Insigniam Quarterly’s inclusion of a company or individual does not indicate that they are a client of Insigniam. Remuneration is not provided for editorial coverage. Individuals appearing in Insigniam Quarterly have done so with direct consent, or provided consent by a designated authorized agent in addition to being disclosed on the magazine’s audience and purpose. The INSIGNIAM QUARTERLY mark is a registered trademark in the United States, European Union, and other foreign countries.

For every transcendent decision made by an executive, there are the ones that fizzle, that flop and that possibly even fold a company.



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Contents

COVER STORYSTAY THE COURSEFor Pitney Bowes CEO Marc Lautenbach, decision-making is all about the follow-through. The company’s current transformation effort is a case in point.By Joseph Guinto

GAME CHANGERSBALANCE OF POWERHigh-dollar decisions are part of daily life for BC Hydro Deputy CEO Chris O’Riley. To make the right calls, he avoids relying on his gut. By Sarah Fister Gale

ALL TOGETHER NOWTrust, accountability, coordination. A leadership charter helps these three essential pieces fall into place, setting the stage for breakthrough results.By Shideh Sedgh Bina

DO YOU LEAD WITH INTEGRITY?Harvard Business Professor Michael Jensen delves into the philosophy of integrity and why all strong leaders must honor their word—even if they cannot keep it.Interview by Karen Christensen

TAMING BIG DATAAvoid analysis paralysis. Deriving strategic value from big data starts with asking the right questions—and engineering initiatives around desired outcomes.By Samuel Greengard

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“My job is not to predict the future and have it come out right. It is to help others see things coming and make sure the company is never blindsided.”—Sheryl Connelly, futurist, Ford Motor Company

On the CoverMarc Lautenbach, CEO of Pitney Bowes, Stamford, Connecticut, USA

Photo by Christopher Beauchamp

Q&A: THE FUTURIST IS HERE PAGE 48

04 THE TICKERNews and trends affecting the C-suite

08 NUMBERSDecision-making by the numbers

12 BROWSER HISTORYApps to ease your mind, making time for family and more

68 IQ BOOSTThe key to driving a powerful transformation in an organization is to inspire and enroll others to join the cause.

16 BLOOD, SWEAT & TEARSWade Jones would not settle for “good enough.” Instead, Sabre Travel Network’s SVP of marketing and strategy devised a plan to reach the company’s true potential—and prove its critics wrong.

20 FROM THE BOARDROOMGroupthink and complacency in the boardroom can spell disaster for a company. Cultivating an outspoken board with a diversity of expertise is the antidote.

64 PERSPECTIVESExecutives from around the world gathered with Pope Francis and Fortune in December to discuss how the private sector can help combat poverty and advance sustainability.

DEPARTMENTS

INSIGHT



SPRING 2017

lectric cars are taking off. And Toyota wants in.At the end of 2016, 2 million electric vehicles (EVs) were

predicted to have hit the roads worldwide, with a steadily upward trend projected. The surging market, especially in China, has fueled renewed interest—and a possible strategic shift—from one of the world’s biggest automakers: Toyota.

Toyota has said, according to Fortune, that it would reserve EVs for short-distance commuting, and instead promoted hydrogen fuel cell vehicles (FCVs) and plug-in gasoline-electric hybrid cars as the best bet for long- to

medium-range commuting. But FCVs, which have yet to transition into the current

mainstream fleet of cars, may fail to reach the critical mass Toyota was betting on. According to a new study from IHS Automotive, by 2027 annual fuel cell vehicle production will surpass 70,000 units—less than 0.1 percent of all vehicles produced that year.

The biggest roadblocks for these vehicles are the lack of public hydrogen fueling stations available and the expense of building them. According to IHS Automotive analyst Ben Scott, today’s market simply does not justify the price. “[T]hat market needs to be created to encourage investment in upstream hydrogen production capability,” he said in the study.

This, along with improvements to the lithium ion batteries EVs rely on, seems to be spurring Toyota’s reported pivot. According to a report by Japanese newspaper Nikkei Asian Review, Toyota has plans to establish a team in early 2017 devoted to developing electric cars that can travel more than 300 kilometers (186 miles) on a single charge. With a goal of pushing the cars to market in Japan, California and China by 2020, the automaker aims to act fast.

It will face stiff competition. Volkswagen, Nissan and Tesla have already bet big on EVs. The Renault-Nissan partnership, for example, is launching an effort to build a low-cost EV to put on the market in China possibly in the next two years, according to CNBC, while Volkswagen has announced plans to unveil 30 all-electric cars by 2025, according to the BBC. Will Toyota be able to catch up?

E

THE TICKER

TOYOTA’S NEW BET

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Top 5 Best-Selling Electric Vehicles

Source: EV-volumes.com Note: Rankings reflect global sales numbers through the first half of 2016.

1 32 4 5Nissan Leaf

Tesla Model S

BYD Tang SUV

BYD Qin

Chevrolet Volt

The Toyota C-HR Hybrid was recently

introduced in Europe.



SPRING 2017

6 INSIGNIAM QUARTERLY | Spr ing 2017

THE TICKER

What happened to integrity in the workplace?

For many companies, it has seemingly been lost in the mix and mire of greed or pressure to perform. In 2015, scandals rocked Volkswagen and Toshiba. Last year, there was Wells Fargo and Theranos, just to name a few. It seems as if no industry or country is exempt.

According to the 2016 Global Business Ethics Survey produced by the Ethics & Compliance Initiative (ECI), a company’s risk of an ethical breakdown correlates to how integrity ranks in the corporate culture.

The survey, which included responses from 1,000 employees in each of the reported countries, highlighted four key metrics that “provide insight into the ethics environment by highlighting the risks that emerge from lapses of workplace integrity”:1. The pressure to compromise organizational standards: This is an important warning sign of future workplace misconduct.

DO THE RIGHT THING

Percentage of Reporting Employees Who Have

Experienced Retaliation

2. Observed misconduct: This is an indicator of whether or not employees follow the rules and live out the company’s core values.3. The reporting of observed misconduct: Silence around observed misconduct is an indicator that wrongdoing will continue and potentially worsen. 4. Retaliation against reporters (including verbal harassment, demotions, undesirable assignments or even violence): Perceived retaliation will erode trust and often deters employees from reporting misconduct, which in turn allows bad behavior to broaden.

So which countries have the worst integrity track record, according to employees working in those countries? Here is how several stack up against each of the ECI’s metrics.

Percentage of Employees Who Have Felt Pressure to

Compromise Standards

Percentage of Employees Who Have Observed

Misconduct

Percentage of Employees Who Have Reported

Misconduct They ObservedBrazil

India

Russia

France

Italy

Germany

South Korea

United Kingdom

United States

China

Japan

Mexico

Spain

Russia

Brazil

India

China

Italy

France

Mexico

United States

United Kingdom

South Korea

Germany

Spain

Japan

India

United States

United Kingdom

Brazil

Mexico

Japan

Italy

France

China

Germany

Spain

South Korea

Russia

India

United Kingdom

United States

Germany

Spain

Brazil

South Korea

Italy

Japan

Russia

France

Mexico

China

74%

37%

45%47%

43%

50%

34%24%

34%

63%

29%22%

63%

41%

43%40%

37%

53%

33%22%

34%

64%

28%20%

53%

46%

40%33%

36%59%33%22%

33%

71%

26%15%

50%

50%

34%30%

35%

61%

30%22%

31%

76%

21%13%

29%

82%

15%10%

Silence around observed misconduct is an indicator that wrongdoing will continue and potentially worsen.

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The best CEOs in the world focus on the long game and they stick around, according to Harvard Business Review (HBR). On average, the 100 executives on HBR’s best-performing CEOs list have been with their companies for 17 years and have generated a

20.2 percent annual return. The CEOs who made the cut undoubtedly face what HBR calls “the lure of short-termism.” Their ability to nevertheless deliver strong multiyear results is what puts them ahead of the pack. The top 10 CEOs of 2016 are:

ON TOP OF THE WORLD

Last year was, for all intents and purposes, a disaster for South Korea-based Samsung.

In August, several of the company’s popular Galaxy Note 7 smartphones started to spontaneously combust. After diagnosing the problem as a battery malfunction and switching vendors, Samsung recalled 2.5 million phones worldwide, exchanging about 60 percent in South Korea and the United States with replacement phones.

Soon, however, reports began to surface that the replacement phones were also becoming too hot to hold or catching fire, and Samsung, which had approximately $170 billion in revenue in 2015, was forced to kill the Galaxy Note 7 line entirely. The cost of the recall will total $5.3 billion through the first quarter of 2017, the company reported.

To make matters worse, in November Samsung recalled nearly 3 million of its top-loading washing machines after it was discovered that “vibrations during the spin cycle could cause parts to fail or separate, causing injuries or damaging property,” according to Consumer Reports. The same month, South Korea’s government raided Samsung headquarters as part of an ongoing corruption probe of the country’s president.

What might revive the beleaguered company’s fortunes? New and improved smartphones, maybe. In November, the

SAMSUNG SEEKS REDEMPTION

company announced plans to equip its Galaxy S8 smartphones with a Siri-like voice-enabled digital assistant called Viv. The new push is mostly possible due to the company’s recent acquisition of Viv Labs, the startup company formed by the creators of Siri. According to the Daily Express, Viv takes Siri to the next level by being contextually aware and having the ability to answer follow-up questions.

“Samsung is setting its sights on becoming a major player in software and services, and specifically AI,” said Viv Labs CEO Dag Kittlaus. The company has “installed a new cadre of senior [software-]savvy management stretching all the way to the top with a mission.”

RANK CEO COMPANY INDUSTRY COUNTRY

1 Lars Rebien Sørensen Novo Nordisk Health Care Denmark2 Martin Sorrell WPP Consumer Services United Kingdom3 Pablo Isla Inditex Retail Spain4 Herbert Hainer* Adidas Consumer Goods Germany5 Roberto Egydio Setubal Itaú Unibanco Financial Services Brazil6 Jen-Hsun Huang Nvidia Information Technology United States7 Bernard Arnault LVMH Consumer Goods France8 Elmar Degenhart Continental Automobile Germany9 Benoît Potier Air Liquide Materials France10 Jacques Aschenbroich Valeo Automobile France

*Herbert Hainer stepped down in August 2016.

“Samsung is setting its sights on becoming a major player in software and services, and specifically AI.” —Dag Kittlaus, CEO, Viv Labs

A Samsung Galaxy Note 7 ad in

Bangkok, Thailand

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8 INSIGNIAM QUARTERLY | Spr ing 2017 quarter ly. insigniam.com | INSIGNIAM QUARTERLY 9

FORKS IN THE ROADThere is no shortage of concerns and techniques that drive executive decision-making.

42%Cut operating expenses

How do executives plan to respond and adapt?*

Types of risks that most concerned them:

Their top strategic priorities over the next three years:

TOP CEO CONCERNS86% of CEOs worry they lack the time to think strategically about the forces of disruption and innovation shaping their company’s future.

TORCHBEARERS VS. FOLLOWERS**

Those at each end of the spectrum have different strategic priorities and approaches.

For example, torchbearers are more ambitious …

**In this survey, companies with strong reputations as innovators and strong financial track records are labeled “torchbearers.” Companies with much lower market profiles (in the opinions of the executives who head them) and far less financial success are labeled “market followers.”

Sources: Corporate Visions, Losses and Gains: Does Loss Aversion Influence Executive Decision-Making?, 2016; Heidrick & Struggles and Saïd Business School at the University of Oxford, The CEO Report, 2015; IBM Institute for Business Value, Redefining Competition: Insights from the Global C-suite Study – The CEO perspective,

2016; Redefining Boundaries: Insights from the Global C-suite Study, 2015; KPMG, Now or never: 2016 Global CEO Outlook, 2016.

63% of CEOs believe they use data and analytics (D&A) effectively, but 59% do not fully trust

the accuracy of their D&A activities.

LEVERAGING DATA AND ANALYTICS

Regulatory and legislative

complexity and increasing rules

THE POWER OF UNCERTAINTYIf you sometimes doubt yourself, you are not alone.

LOSS AVERSIONExecutives are more likely to take a risk if it seems like a way to avoid a loss.

Top company uses for D&A:

71% of CEOs say they havedoubted themselves.

10% say they do not, but they do use techniques to reduce uncertainties.

19% say they never do.

When a decision was framed by its potential gains:

74% chose the safe plan of action

26% went for the riskier plan

When the same decision was framed by its potential losses:

55% said they would play it safe

45% would take the riskier action

PREDICTING THE FUTUREExecutives use these techniques to foresee what is next in their industries:

Emerging technologies

Strategic GeopoliticalRegulatory

Fostering innovation

Cybersecurity

Stronger client focus

Implementing disruptive technology

Talent development/management

Stronger marketing,

branding and communications

30% 28% 26% 25% 24%

21% 19% 18% 18% 17%

0

5

10

15

20

25

%%%%%777711118%118%1%%%%%%9999111

30% 78% 62% 45%of more experienced* CEOs adopt a more strategic approach to innovation, compared to 25% of less experienced CEOs.

of more experienced CEOs believe it is important to foster a culture of innovation, compared to 63% of less experienced CEOs.

77%

59%

68%

50%

… and more adaptable:

Torchbearers prefer more decentralized decision-making:

67%

57%

100%

66%

67%

46%

Torchbearers

Market followers

Torchbearers

Market followers

Torchbearers

Torchbearers

Market followers

Torchbearers

Market followers

Market followers

Torchbearers

Market followers

Explore new delivery channels

Reassess and alter customer segments

Embrace agility Experiment extensively or somewhat

Enter new geographic markets

Nearly all CEOs emphasize the pace or speed of change as a complicating factor in their decisions.94%

Driving process and cost efficiency:

44% Driving strategy

and change:

44%Finding new customers:

43%Developing new

products and services:

43%

Predictive analytics:

63%

Brainstorming:

80%

Simulations:

51%Prescriptive analytics:

46%Crowdsourcing:

23%Cognitive computing:

13%

This is a 73% increase in

selection of the risky plan when

framed bypossible losses.

*In this study, more experienced means more than five years.

NUMBERS



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10 INSIGNIAM QUARTERLY | Spr ing 2017 quarter ly. insigniam.com | INSIGNIAM QUARTERLY 11

FORKS IN THE ROADThere is no shortage of concerns and techniques that drive executive decision-making.

42%Cut operating expenses

How do executives plan to respond and adapt?*

Types of risks that most concerned them:

Their top strategic priorities over the next three years:

TOP CEO CONCERNS86% of CEOs worry they lack the time to think strategically about the forces of disruption and innovation shaping their company’s future.

TORCHBEARERS VS. FOLLOWERS**

Those at each end of the spectrum have different strategic priorities and approaches.

For example, torchbearers are more ambitious …

**In this survey, companies with strong reputations as innovators and strong financial track records are labeled “torchbearers.” Companies with much lower market profiles (in the opinions of the executives who head them) and far less financial success are labeled “market followers.”

Sources: Corporate Visions, Losses and Gains: Does Loss Aversion Influence Executive Decision-Making?, 2016; Heidrick & Struggles and Saïd Business School at the University of Oxford, The CEO Report, 2015; IBM Institute for Business Value, Redefining Competition: Insights from the Global C-suite Study – The CEO perspective,

2016; Redefining Boundaries: Insights from the Global C-suite Study, 2015; KPMG, Now or never: 2016 Global CEO Outlook, 2016.

63% of CEOs believe they use data and analytics (D&A) effectively, but 59% do not fully trust

the accuracy of their D&A activities.

LEVERAGING DATA AND ANALYTICS

Regulatory and legislative

complexity and increasing rules

THE POWER OF UNCERTAINTYIf you sometimes doubt yourself, you are not alone.

LOSS AVERSIONExecutives are more likely to take a risk if it seems like a way to avoid a loss.

Top company uses for D&A:

71% of CEOs say they havedoubted themselves.

10% say they do not, but they do use techniques to reduce uncertainties.

19% say they never do.

When a decision was framed by its potential gains:

74% chose the safe plan of action

26% went for the riskier plan

When the same decision was framed by its potential losses:

55% said they would play it safe

45% would take the riskier action

PREDICTING THE FUTUREExecutives use these techniques to foresee what is next in their industries:

Emerging technologies

Strategic GeopoliticalRegulatory

Fostering innovation

Cybersecurity

Stronger client focus

Implementing disruptive technology

Talent development/management

Stronger marketing,

branding and communications

30% 28% 26% 25% 24%

21% 19% 18% 18% 17%

0

5

10

15

20

25

%%%%%777711118%118%1%%%%%%9999111

30% 78% 62% 45%of more experienced* CEOs adopt a more strategic approach toinnovation, comparedto 25% of lessexperienced CEOs.

of more experienced CEOs believe it isimportant to foster a culture of innovation, compared to 63% ofless experienced CEOs.

77%

59%

68%

50%

… and more adaptable:

Torchbearers prefer more decentralized decision-making:

67%

57%

100%

66%

67%

46%

Torchbearers

Market followers

Torchbearers

Market followers

Torchbearers

Torchbearers

Market followers

Torchbearers

Market followers

Market followers

Torchbearers

Market followers

Explore new delivery channels

Reassess and alter customer segments

Embrace agility Experiment extensively orsomewhat

Enter new geographicmarkets

Nearly all CEOs emphasize the pace or speed of change as a complicating factor in their decisions.94%

Driving process and cost efficiency:

44% Driving strategy

and change:

44%Finding new customers:

43%Developing new

products and services:

43%

Predictive analytics:

63%

Brainstorming:

80%

Simulations:

51%Prescriptive analytics:

46%Crowdsourcing:

23%Cognitive computing:

13%

This is a 73% increase in

selection of the risky plan when

framed by possible losses.

*In this study, more experienced means more than five years.

NUMBERS



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BROWSER HISTORY

FRAME OF MINDA roundup of books, apps and other resources from and for the C-suite.

How Women Decide: What’s True, What’s Not, and What Strategies Spark the Best Choices by Therese Huston. Houghton Mifflin Harcourt, 2016.

“Society has been underestimating women’s abilities to make astute choices for years.” This

is just one of many declarations Ms. Huston, a cognitive psychologist, makes in How Women Decide. Her goal is to smash gender stereotypes about female managers and their decision-making processes, while offering practical advice to help readers gain confidence in their own decisions. While Ms. Huston’s frequent use of social science examples throughout the book may drive some readers away, How Women Decide is truly a book for everyone—including men.

Sustaining Capitalism: Bipartisan Solutions to Restore Trust & Prosperity by Steve Odland and Joseph J. Minarik. The Conference Board, 2017.

Capitalism has created unparalleled prosperity, yet there is a growing crisis of confidence in

both business and the economic system. In this book, Mr. Odland and Mr. Minarik—veteran leaders of corporate America and U.S. politics, respectively—argue that today’s executives and policymakers need to deliver more value to more people. The authors identify reforms to both public policy (including health care and education) and corporate-specific practices (such as rejecting short-termism) that can lead to long-term prosperity. The main takeaway is clear: The system can be fixed.

Managing in the Gray: Five Timeless Questions for Resolving Your Toughest Problems at Work by Joseph L. Badaracco. Harvard Business Review Press, 2016.

If only all business decisions were black and white, with options that were clearly good or bad. But of course, more often than not we are faced with the gray areas of decision-making. In Managing in the Gray, Mr. Badaracco, the John Shad professor of business ethics at Harvard Business School, presents a framework of five questions to help managers tackle their hardest decisions. Sometimes analytics are not enough, he asserts; human judgment must come into play. Mr. Badaracco finds time in the book to cover everything from groupthink to character, offering dozens of solid case studies. Managing in the Gray will not solve all your problems, but it may help you handle them better.

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BRAIN MASSAGEBreak out of unhealthy mental habits—check out these apps to help you focus,

stay calm and wake up more refreshed.

Stop, Breathe & Think provides customized meditations based on your current state of mind.

Developing a sense of mindfulness can help you stay focused,

present and calm, according to stopbreathethink.org. It can offer vital support while making tough

business decisions.Available on: iOS, Android, Web

The music on focus@will is specifically selected to facilitate intense focus. The songs have no lyrics,

and their sequence aims to induce what the site calls a flow state—which is why it

has no pause button.Available on: iOS, Android, Web

Grogginess can result from waking up in the wrong sleep

phase. To avoid this, Sleep Cycle analyzes your sleep and

wakes you up during your lightest sleep phase. The goal: to feel refreshed when you get

out of bed.Available on: iOS, Android

TUNE INNeed a new podcast to follow? Check

out Rationally Speaking. Every two weeks, the series hosted by Center for Applied Ratio-

nality co-founder Julia Galef explores a different angle of decision-making with a thought leader. In a December episode, for instance, Stanford University

Professor of Health and Policy John Ioannidis discusses evidence-based medicine, a movement

that advocates for doctors to use quantitative methods when determining treatments

rather than intuition or prevailing common wisdom.

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Over the course of 18 months ending in October, German retailer Hugo Boss saw the value of its shares fall by almost 50 percent. The primary culprits? A devaluation of the brand (which has seen prices cut in department stores as well as much of its merchandise moved to discount shops) and poor performance in China. Leadership

had some tough decisions to make. Fortunately, CEO Mark Langer—

who was promoted from CFO in the middle of the fray—has been unafraid to make them. In October, he announced the brand would no longer pursue the luxury market (and move away from womenswear), instead returning to its premium men’s clothing roots. “The effort to make in-roads in the luxury market didn’t prove to be particularly helpful for our business,” he told German newspaper Handelsblatt.

BROWSER HISTORY

NEW BOSS, NEW STRATEGY AT HUGO BOSS

Mark Langer,

CEO, Hugo Boss

A Boss Store window in London



SPRING 2017


THIS IS YOUR LIFE: BALANCING ACTThe average CEO works 10 to 11 hours per day, according to a survey by CEO.com and software company Domo. That does not leave much time for family. Here are some balancing tricks top CEOs recommend.

1 Keep track: Pat Gelsinger, CEO of Dell subsidiary VMware, has his secretary maintain a family-time balance sheet with point accruals, he told The Wall Street Journal. Coming home at 5 p.m. earns him

two points, while a 6:15 p.m. arrival wins him one point. Points are deducted any time he spends weekend days away from his family.

Similarly, Bloomin’ Brands CEO Liz Smith uses a “time bank account,” according to Joann S. Lublin’s book Earning It: Hard-Won Lessons From Trailblazing Women at the Top of the Business World. Her goal is four hours a day with her sons. If work causes her to fall short, she makes up the deficit the following week. “Some days, I would cancel my meetings that morning because I was in the hole to them,” she said in the book.

3 Meet in the airport: Traveling is a large part

of being a successful executive, so why not make the most of your time in the airport? For example, because Ms. Smith of Bloomin’ Brands and her husband both travel frequently, in the past they have arranged catch-up meals at New York’s John F. Kennedy International Airport, according to Earning It. “I was flying out and he was flying in. We would see each other in passing,” she recalled.

2 Be ruthless with your calendar: In Earning It, former Yahoo and Autodesk CEO Carol Bartz recalled saying to her assistant during one scheduling

rendezvous, “I don’t care if the pope comes to audit us. I am going to [my daughter’s] Christmas Sing.” Eric Poirier of investment management software company Addepar told The Wall Street Journal he marks dedicated family time on a calendar that everyone in the company can see so they know he has a life outside work—and they should too.

Ms. Lublin suggested regular family meetings to organize schedules, sometimes a year in advance, so everyone’s needs can be addressed.

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SHARPENING SABREWade Jones was given a tall order at Sabre Travel Network: help push an already good company to become great. By Novid Parsi

ometimes good is no longer good enough. Sometimes it is a sign of complacency, and in order to avoid future obsolescence, a shake-up becomes necessary.

Such was the case for Sabre Travel Network. Although the company’s top-line business had been consistently profitable, in 2015 the CEO of parent company

Sabre Corp. decided that to drive long-term growth, the $3.2 billion technology company needed to reassess and sharpen its value proposition. Sabre Travel Network would be a key contributor to that growth.

For decades, Sabre Travel Network has connected travel buyers (corporate travel departments, travel agents, individuals) with

travel sellers (airlines, hotels, car rental

companies) through its global distribution

system (GDS). Whenever someone makes a

reservation on Expedia, for example, Sabre is the behind-

the-scenes platform that makes that transaction possible. The Southlake, Texas-based company has offices on five continents and handles around

100,000 data transactions per second; it is the leading provider

of air bookings in North America. Sabre’s executive team was convinced

Sabre Corp. was not reaching its true potential and had grown complacent. The CEO wanted to put to rest any doubts about the value of its GDS: Some naysayers called it a “dumb pipe,” mere middleware that facilitated transactions

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“Just because our results were good didn’t mean we shouldn’t aspire for better.” —Wade Jones

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but did not add real value. To catalyze a leap in the Travel Network business and help Sabre Corp. fulfill on the opportunity in front of it, Wade Jones was brought on in 2015 to identify how Travel Network ought to transform itself and then be the change-maker that pushes the company toward bold financial goals.

“Just because our results were good didn’t mean we shouldn’t aspire for better,” says Mr. Jones, Travel Network’s senior vice president of marketing and strategy. “We were under-leveraging the assets we had—meaning we could be bigger and more profitable. We wanted to make sure we weren’t complacent.”

“Wade brings new thinking to an already strong organization,” says Scott Beckett, a partner with Insigniam who works closely with Sabre. “His ability to see new horizons and opportunities was a real complement to Sabre’s innovative and growth-minded culture.”

In his almost three-decade career, Mr. Jones had often helped organizations in crisis make immediate and radical changes to survive. Such companies had “a burning platform” for change, he says. But the situation at Sabre was different—and that attracted his interest. “What appealed to me about Sabre when I walked into it was that it was a very successful company that had a desire to drive more growth using a profitable underpinning,” Mr. Jones says.

Not too long after joining the company, Mr. Jones’ direct boss—and the president of Travel Network—retired. Sabre named Sean Menke, a longtime and highly successful airline executive, as the new president of the division. Mr. Menke and Mr. Jones quickly found common ground. The pair knew they had time, but not much, to make things happen: Sabre had given them just a three-year window to make the necessary transformational changes, whatever they might be. “Nobody was prescriptive about how we should go about doing it,” Mr. Jones says. “To me, that’s where the fun work is.”

A THREE-POINT PLAN To determine where exactly the organization

needed to go, Mr. Jones and his strategy team first had to understand where it was. To start, he went on a listening tour, meeting with employees throughout Sabre as well as its customers. Mr. Jones asked two simple questions: What is Sabre doing well, and what could it do even better? “I didn’t look for anyone to be held accountable for what was wrong. But you have to get the truth out on the table,” he says.

After just one week of these conversations, Mr. Jones identified three key things Sabre needed to do: better leverage its data and analytics, break down its organizational silos and develop a clearer sense of its purpose and value proposition.

“Sabre is the clear market leader in several critical segments, and with such success comes competitors desperate to steal share and topple the leader from its perch,” Mr. Beckett says.

Sabre has a treasure trove of data and analytics, Mr. Jones says, “but we weren’t turning that into insights and taking action based on it.” So he decided to push the company to deepen its understanding of exactly how customers use its platform and how their activity creates the most value and profit. Then Sabre would be armed with the right insights to decide how to improve features and how to price them.

The company’s ability to optimize product investments to power growth hooked directly to Mr. Jones’ next goal: breaking down silos. The organization’s three distinct business units were obstacles to strategic innovations, in his view. He spotted a major opportunity: “We could collaborate more effectively, particularly with our colleagues in technology, product development and sales,” he says.

Sabre had been divided into three product areas: The first was responsible for managing the content sold through the network, the second for making that content available to customers and the third for fulfilling customer transactions. While those units remain, Mr. Jones recommended restructuring them to drive interactions.

QUICK HITSThe Challenge: Despite a track record of profitabili-ty, the leadership at Sabre Corp. was concerned the technology company had grown complacent and needed a shake-up to drive future growth.

The Plan: The executive team decided to drive growth via the Sabre Travel Network division and hired Wade Jones to do so. He was given three years to chart a course for transformational change within Travel Network.

The Execution: With insights from a listening tour of customers and employees, Mr. Jones identified a three-point plan: better leverage data and analytics, break down organizational silos and develop a clearer value proposition.

The Result: Two years into the three-year transformation, teams are interacting more closely, Travel Network has a clear value prop-osition and Mr. Jones is consistently building buy-in and engagement with the strategy from employees.



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“Our customers are very good at what they do, but our role as a business-to-business partner is to help them be more successful.” —Wade Jones

right buyer at the right time. They wanted automation of non-value-adding platform features. Travel consultants wanted to spend more time doing what they are good at: selling travel.

Building off the clear need to boost those capabilities, Sabre’s new purpose and value proposition came into focus. Ultimately, it was about deepening the commitment to customers’ success, Mr. Jones says. “Our customers are very good at what they do, but our role as a business-to-business partner is to help them be more successful.”

THE ART OF CHANGE-MAKINGWith the course forward charted, the real challenge for Travel Network was now at hand: Sabre’s recent rosy performance contributed to a good-enough mentality, at least among some employees, Mr. Jones says. “When you’re actually outperforming prior expectations, there can be a mindset of, ‘Well, why do we have to do better?’”

But from his perspective, the stakes could not be higher. “If people are predicting your demise, that should be a motivator to make sure you are innovating and driving value,” he says, referring to critics saying Sabre’s market-maker business model needed to be disrupted. “You have to expand your value from just core services so that you protect the future of the business model.”

While support for the transformation of Travel Network from the CEO and the rest of the executive team was indispensable, it alone could not bring adequate buy-in for change. “Any time you’re trying to drive change, you have some people who aren’t on board with it, some who are on the sidelines with a wait-and-see mindset and some who are totally on board,” Mr. Jones explains. To drive more people into the latter category, Travel Network executives looked to get some early wins. “That can make the highly engaged people almost like disciples for the

“They now have to work across the three parts of the value chain,” he says. Whereas before a product team would hand off requirements for a new feature to the technology team, those teams now work closely together. “Everybody should feel like they have skin in the game on behalf of our customers,” Mr. Jones says.

To further break down divisions within the company, Travel Network handed decision-making powers around product capability and marketing to regional offices. Mr. Jones admits, “I don’t believe in the ivory-tower thinking that innovation comes only from headquarters or the product team.”

“One of Sabre’s key assets is its relationship with its customers and its awareness of the realities happening in the markets of its customers,” Mr. Beckett adds. “Sabre’s challenge was to leverage scalability without forsaking the necessary customization appropriate to its customers and their markets.”

Breaking down silos set the stage for the third piece of Mr. Menke’s and Mr. Jones’ transformational playbook: refining Sabre Travel Network’s purpose, strategy and vision for the future. In the past, the organization had primarily focused on making sure its platform’s offerings kept up with competitors and pleased all customers. The downside to that approach was that “when you make everybody a little bit happy, no one’s happy,” Mr. Jones says. The solution: Rather than trying to provide everything to everyone, Sabre needed to be more selective and strategic, with a laser focus on features that drive value to customers.

To learn what was most important to customers, Sabre conducted interviews with hundreds of them around the world over 12 months. This process revealed that both travel agents and suppliers wanted greater personalization of merchandise—that is, the ability to get the right travel product to the

INSIGHT

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SPRING 2017


new approach,” he says. Employees quickly saw the value, for instance, of more fine-tuned data and analytics and more disciplined product governance.

Travel Network further secured buy-in from employees by not taking on too much too soon. Mr. Jones focused his strategy rollout plan around the three defined areas rather than trying to optimize every corner of the company. “That way, rather than overwhelm ourselves,” he says, “we built organizational muscle memory we could then use on the next set of building blocks.”

CRAFTING THE TEAM Throughout the process, Mr. Jones has not shied away from ensuring the right people are on board to meet new demands. Empowered by Mr. Menke to build a world-class team, Mr. Jones knew he needed to make changes if employees did not have the necessary skill set to help move the organization forward. While letting some employees go and hiring others, Mr. Jones made a point of assuring his steadfast workers they were doing well. “It’s really important to make sure that those who remain don’t feel rattled or uncertain,” he says. “You want to give them as much clarity as you can so they’re motivated.”

By shaking up his own group first, Mr. Jones intended to set an example for his peers, including the heads of finance and technology. “I made a lot of changes within my own area that were influenced by the feedback I got from people in other areas,”

he says. “People saw that I wasn’t taking an arrogant point of view—that making change was everybody else’s problem.”

“Wade’s leadership in first focusing on his team demonstrated his awareness that Sabre needed to change everywhere, and he was not going to ask others to do what he would not do himself,” Mr. Beckett says.

Reward and recognition have been a big part of driving change—the “fastest way to change any organization,” Mr. Jones says. “I’m a big believer in rewarding your best people disproportionately. That motivates the ones doing well to do even better and spurs the ones not yet at that level of performance by letting them know exactly what they need to do—and what they have to gain by doing it.”

Two years into the three-year journey, Mr. Jones remains clear-eyed about the transformation Travel Network is undergoing. Recently, Mr. Menke was promoted to lead the whole of Sabre Corp., leaving the team in Travel Network to go forward vigorously, as planned. “Transformations never go as fast as you want them to,” says Mr. Jones. “I’m always amazed when people say all they need is a clear strategy. You can have a great strategy, but if you don’t have a plan and you don’t execute it, strategy doesn’t matter.” IQ

Postscript: As of January 1, Sean Menke now serves as president and CEO of Sabre Corp. Wade Jones has been named the interim president of Sabre Travel Network.

“I don’t believe in the ivory-tower thinking that innovation comes only from

headquarters or the product team.”—Wade Jones

“People saw that I wasn’t taking an arrogant point of view—that making change was everybody else’s problem.”—Wade Jones

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INSIGHT

FROM THE BOARDROOM

hen a boardroom is little more than an echo chamber for the will of a single voice or an unwavering mission, complacency—and failure—often follow.

Take the rise-and-fall saga of blood-testing startup Theranos. Led by

CEO Elizabeth Holmes, the Silicon Valley company—once valued at $9 billion—had a meteoric rise on the biotech scene, garnering an abundance of buzz and money alike. Ms. Holmes landed Theranos a high-profile partnership with Walgreens and became a darling of the business world, gracing

SAY GOODBYE TO GROUPTHINKDiverse and outspoken boards prevent passivity—and prime companies for better decision-making.By Sarah Fister Gale

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magazine covers and landing a slot on Time’s Most Influential People list.

But the kingdom came crashing down when The Wall Street Journal published a 2015 report discrediting the validity of Theranos’ technology. More than 32,000 of the company’s blood tests were declared void, Walgreens filed a suit and the company’s valuation bottomed out.

What went wrong? One big factor was the company’s lack of transparency—its technology was never peer-reviewed or fully verified by the U.S. Food and Drug Administration. But fault has also been placed with the company’s board, which was packed with big names like Henry Kissinger yet lacked expert representation from the life sciences or health care community. Without that, the board failed to fulfill key functions of its role, including pushing back on strategy and scrutinizing data.

“There are no sitting chief executives [from] other companies—a basic tenet of board best practices,” wrote Fortune senior editor Jennifer Reingold about the company’s board at the time. “There is but one still-licensed medical expert, Bill Frist ([William] Foege, age 79,

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is retired). And while it’s probably useful to have a retired government official or two to teach and offer good leadership skills, when there are six with no medical or technology experience—with an average age, get this, of 80—one wonders just how plugged in they are to Theranos’ day-to-day activities. Nor is there anyone with formal accounting or auditing expertise or legal expertise, which may now become an issue, based on the questions raised in the [The Wall Street Journal] article.”

Since the scandal erupted, the board has undergone a major restructuring, but the original incarnation seemed to largely follow Ms. Holmes’ lead. It succumbed to groupthink, not an uncommon board affliction. Enron, Olympus, Volkswagen and Toshiba all suffered major scandals, and in each instance their respective boards were criticized for unquestioning conformity. One powerful bulwark against groupthink: a culture that embraces cognitive diversity.

WANTED: SPRING CHICKENSDiversity of thought starts with diversity of people. An overly homogeneous board, made up of like-minded people of a similar

age, experience and ideology, is insulated from the wider world and lacks objective viewpoints, according to Fause Ersheid, an economist and senior corporate governance analyst and researcher at the Abu Dhabi Center for Corporate Governance in the United Arab Emirates.

And with such uniformity comes great peril.“Homogeneous groups run the risk of

narrow-mindedness and groupthink (i.e., premature consensus) through misplaced comfort and overconfidence,” lead author Adam Galinsky and colleagues wrote in a 2015 report published by the Association for Psychological Science. “Diverse groups, in contrast, are often more innovative and make better decisions, in both cooperative and competitive contexts.”

Much has been made about the business value of gender and racial diversity. A report from nonprofit Catalyst, for example, found that Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation. But age diversity also matters in dismantling groupthink.

The average age of all S&P 500 independent directors rose to 63 between 2010 and 2015. This does not bode well for the many companies trying to appeal to young customers in a rapidly evolving, technology-driven business environment, Mr. Ersheid says.

ROCK THE BOATSimply establishing a diverse board guarantees nothing unless members are empowered to point out flaws and missteps. And that culture must be defined from the top.

When Jane Chwick joined the board of directors at Voya Financial, an $11 billion investment and retirement firm, in 2014, she was asked to join the finance committee. It made sense: Ms. Chwick spent 30 years at

“As a board member, it’s your responsibility to take action, even if it’s difficult.”—Jane Chwick, board of directors, Voya Financial



SPRING 2017


Goldman Sachs before retiring four years ago. But the majority of her experience was based in technology, not finance. Yet she soon discovered she had among the strongest financial backgrounds of anyone on the committee. “I knew enough to ask the right questions, but I also knew we needed to add depth,” she says.

So she brought her concern to Voya CEO Rodney O. Martin Jr. “He was incredibly receptive to that input,” Ms. Chwick says. He immediately added two new members with deep financial experience to the board. Mr. Martin’s willingness to acknowledge shortcomings not only helped plug potential holes, but also nurtured an environment where criticism is not just heard, but valued and acted on.

A board that cannot communicate dissent has a real problem, says Beth Stewart, a former board director for CarMax, General Growth Properties and AV Homes Inc. “The main thing boards need are people confident enough to be willing to speak up when it really matters,” says Ms. Stewart, CEO of New York-based Trewstar Corporate Board Services, a search firm that focuses on placing qualified women on Fortune 500, mid-cap and private equity boards.

Creating an environment that encourages everyone to express opinions—which describes Voya’s board—is critical. This becomes more complicated, however, when the board has a dominant leader accustomed to being in charge, Ms. Chwick says. But such pressures are not an excuse for board members to be complacent. “If the CEO won’t listen to the board’s advice, it’s the board’s job to fix the situation,” she says. “If you can’t make people pay attention when you see a problem, then maybe you should question your value on that board.”

A critical examination of strategy and

INSIGHT

FROM THE BOARDROOM

“If you can’t make people pay attention when you see a problem, then maybe you should question your value on that board.”—Jane Chwick



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C-suite decisions should not be limited to times of obvious trouble. Board members must be willing to question the status quo even when things seem great. “During the global financial crisis, everyone in the financial services industry knew bundled subprime mortgages were very risky, but no one raised a flag,” Mr. Ersheid says. “Because of groupthink, board members closed their eyes. No one wanted to rock the boat when everyone was making a profit.”

No doubt, board members must walk a fine line.

“If a company is doing well, you don’t want the board to be constantly raising alternative ideas just because they think it is part of the job description,” Ms. Stewart says. “However, there needs to be a balance. Board members must be knowledgeable and willing to engage when companies are faced with critical decisions—for instance, about things like executive hiring and compensation, mergers and acquisitions or strategic operational issues.”

THE LIMITS OF LIMITSSome organizations are introducing term limits to ensure boards avoid the same old, same old syndrome. “New board members bring a fresh perspective that can break the groupthink mentality,” Mr. Ersheid says.

Term limits can also help independent directors stay that way—and continue to battle groupthink by taking a more objective stance, he says.

In France, for example, directors are no longer considered independent if they have served on a company’s board for more than 12 years. And in the United Kingdom, publicly traded companies must either terminate a director after nine years of service or make an argument as to why the long tenure has not compromised his or her independence. This practice is less common in the United

States. Only 13 S&P 500 companies have imposed term limits for non-executive directors, according to the 2015 Spencer Stuart Board Index. However, 69 percent say they have a strategy to encourage regular board refreshment.

Companies opposed to term limits often argue that changing the board every few years means they lose the benefits a tenured board brings to decision-making. A 2015 study from Sydney, Australia-based University of New South Wales found companies with a higher proportion of experienced directors were:n More likely to change CEOs when

performance falteredn Less likely to misreport earnings

intentionallyn Less likely to make acquisitions, which

often expand a CEO’s power while diminishing shareholder valueMs. Chwick, however, argues term limits

for boards are often simply “an easy way out of having tough conversations.” Boards need to create an environment where everyone is comfortable calling out members not performing effectively—whether that person has been on the board for two years or 10. “As a board member,” she says, “it’s your responsibility to take action, even if it’s difficult.” IQ

“The main thing boards need are people confident enough to be

willing to speak up when it really matters.” —Beth Stewart, former board director, CarMax, General Growth Properties and AV Homes Inc.; CEO, Trewstar Corporate Board Services



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Stay the CourseFor Pitney Bowes president and CEO Marc Lautenbach, making a decision means sticking with it for the long haul.BY JOSEPH GUINTOPORTRAITS BY CHRISTOPHER BEAUCHAMP



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itney Bowes could have easily been wiped out by the digital revolution. But when Marc Lautenbach was brought on board as president and CEO, he made a commitment to accelerate the transformation of the multibillion-dollar organization into what is now billed as a “global technology provider.” It is the stuff of leadership legend, and yet Mr. Lautenbach says the true test of his—and any executive’s—big decision comes in the follow-through.

“Many large organizations tend to employ the same strategies when they pursue change or have change thrust on them by market forces,” he says. “Success is not so much a question of decisions on strategic choice as it is a question of your capability and fortitude to stay on the new course you’ve chosen.”

For more than 90 years, Pitney Bowes has been synonymous with postage meters, sup-plying its more than 1 million customers (in-cluding 90 percent of global Fortune 500 com-panies) with mailing services. But as customers transitioned many of their communications efforts from paper to online, the company needed to make its own transition. That evolu-tion began in full force shortly after Mr. Laut-enbach arrived at the company’s headquarters in Stamford, Connecticut, in December 2012.

The transformation process can be chal-lenging, however, with revenues falling in four of the last five years. Even as net income spiked from $143 million in 2013 to $408 mil-lion in 2015, revenues fell from $3.9 billion to $3.6 billion during the same period.

Many executives might start doubting their decisions. But Mr. Lautenbach remains stead-fast in his mission to make Pitney Bowes a ma-jor player in e-commerce.

“We have continually decided to choose the alternative that creates the most long-term val-ue, even if it creates short-term disruptions,” he says. “And in today’s world of the equity mar-kets, that’s something that’s challenging. I think most companies bow to that pressure, and that’s why most companies don’t end up transform-ing themselves. They make decisions thinking something is the right long-term bet and then, when things start going the wrong way, they don’t have the fortitude to stick with it.”

New DirectionsTransformation does not always require whole-sale reinvention. As he looked to make Pitney Bowes a relevant digital player, Mr. Lauten-bach aimed to build on its core strengths and identity, redefining it for a new context.

The process began by examining the com-pany’s true north—the vision, values and ser-



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vices that define the organization and make it tick. The decisions Mr. Lautenbach made from then on built upon that foundation.

“As you’re thinking about transforming a company, or at least as I thought about trans-forming Pitney Bowes, you try to realize those cores, those gems that you have that you can pivot off of to create that next chapter,” he told Fortune. “We have been and continue to be a mail company, but there’s other germs of that business that we can begin to create our new future.”

Under Mr. Lautenbach, for example, Pit-ney Bowes added an entirely new but related business unit focused on digital tools and ser-vices, including mobile apps, that now delivers more than $1 billion of annual e-commerce business. Online marketplace eBay, for one, uses Pitney Bowes software to automatically determine where any given package can be shipped internationally and how much the duty on that item will cost. Another piece of Pitney Bowes software pinpoints the locations of 1.2 billion users of social media for the likes of Twitter, Zillow and other social platforms.

Such high-profile customers have helped bring digital services up to 10 percent of over-all revenue at Pitney Bowes, with digital sales jumping 29 percent in 2015. As Mr. Lautenbach told The Wall Street Journal in 2016: “Very few things are quite as profitable as a mail meter. But software is one of those businesses that ac-tually has very attractive margins, and it makes this equation a lot easier to close.”

To create a new future for a company, however, leaders cannot simply consid-er what it could be—they must also know what it will never be. Mr. Lautenbach, for example, is quick to point out that Pitney Bowes is not a logistics company. He does not see Pitney Bowes as a competitor to the likes of UPS or FedEx. Instead he sees them

“Success is not so much a question of decisions on strategic choice as it is a

question of your capability and fortitude to stay on the new course you’ve chosen.”

—Marc Lautenbach, president and CEO, Pitney Bowes

Marc Lautenbach introducing the Pitney Bowes Commerce Cloud in

April 2016 in New York City

as partners, with Pitney Bowes enabling their efforts.

“We solve a problem that starts with the cart and the cart management and consumers buying online, all the way through the ship-ping,” he told Fortune. “So, there’s a bunch of complicated stuff in the middle of those transactions—customs, duties, who the right shipper is—and Pitney Bowes solves all that. If you think about the core of that solution, where we started, it was online postage. We’ve just moved left and right. And that to us is the recipe for how you transform a company. You take something that you’re really good at, you move left and right and you create something that is very differentiated.”

But the transformation wasn’t all about moving in new directions. To regain its footing, Pit-ney Bowes also needed to breathe new life into its leg-acy business. So Mr. Laut-enbach worked to break down business as usual. That included cutting ex-penses by changing the

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way the units spent money to make money. Did the company really need dozens of dif-ferent billing systems? No. Did it really need weeks to turn over its leased inventory? No. Did salespeople need to make all of their sales calls the old-fashioned way—in person? Defi-nitely not. “I rode around with a salesman in London who had 500 clients and was doing it all face to face,” Mr. Lautenbach said in an in-terview with Barron’s. To boost efficiency, the sales team has pulled back on some of that face time, bringing online interactions and phone calls into the client interaction mix.

Tell a Good StoryMr. Lautenbach’s decisions for both revamp-ing the legacy business and building up new business have been met with trepidation by some in the organization who could not see past the upheaval these developments caused. And that ties back to his point about executive decision-making: Making the right call is just the start. Executives must follow through to overcome any opposition and make the new future seem like the only one.

“To a degree, decision-making and strat-egies are the easiest part of the process,” he says. “How you communicate the decisions, how you manage the change, how you drive those decisions, is the difficult part.”

Mr. Lautenbach says his secret to success is storytelling. “We remind people over and over again why we’ve made this decision and why we are making these changes, because they will forget and will just focus on the dis-ruption,” he says.

At the executive level, these conversations are a regularly occurring part of the process. Every 90 days, Mr. Lautenbach meets with his executive team to share what has happened during that period and make a plan for what the next 90 days should look like. At first, he

“If you can be structured in how you make decisions and

transparent about why you made the decision you did, that allows

people to follow the logic.” —Marc Lautenbach



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1. How do you stay on top of industry trends?I read a tremendous amount. I put aside about a half day each week just to read. I wander out to Silicon Valley and visit with venture capital compa-nies and small startups to see where the industry is going. Just try to open yourself up to as many different apertures as you possibly can.

2. What is the best piece of advice you have ever received?Stay true to yourself. That has worked out for me.

I’ve read a lot of books on leader-ship and authenticity by Bill George, the former CEO of Medtronic [includ-ing 7 Lessons for Leading in Crisis, True North, Finding Your True North and Authentic Leadership]. I think Bill’s got it right. If people believe you’re authentic, they may or may not subscribe to your particular form of authenticity, but inevitably you’ll get people that do. It’s the method actors who have problems.

3. How do you take your mind off work?I’ve got two dogs and a great family, so I’ve got a lot outside the office. I also play golf.

3 Questions With Marc Lautenbach



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says, attendees tempered their comments. Eventually, however, after Mr. Lautenbach showed that these meetings were a safe space to share the good and the bad, the team start-ed opening up. And not just to him. “All of a sudden, they’re telling the stories to one an-other,” he says.

Mr. Lautenbach, however, is not naive enough to believe that storytelling will bring everyone on board in every instance. “You also have to resign yourself that not everyone is going to buy into the changes that you are making,” he says.

But in the face of that sharp disagreement, it is still possible to garner respect by showing a decision was not impulsive, but rather the result of real thought.

“Even if you think you’re making the right decision, putting down on a piece of paper all the alternatives at a very simple level, with the pros and cons, is a healthy thing to do to make sure you don’t overlook a particular option,” he says.

That kind of process helps executives com-municate the rationale behind their decisions, Mr. Lautenbach says. The reply from employ-ees may be, “Wow, that makes sense.” Or it may be, “No, you missed an alternative or you

didn’t judge the pros and cons correctly.” Ei-ther way, talking people through a sound ex-planation helps builds trust and buy-in.

“That’s a problem with people who are in-stinctive about making decisions,” Mr. Laut-enbach says. “It’s hard for them to get people to follow because they can’t really explain how they arrived at their decisions. If you can be structured in how you make decisions and transparent about why you made the decision you did, that allows people to follow the logic.”

Gut CheckPitney Bowes’ transformation has not hap-pened as quickly as executives would hope. In addition to a slight drop in revenue in re-cent years, the company’s stock has also lost value from more than $22 per share early in Mr. Lautenbach’s tenure to around $13 a share more recently.

And yet, Mr. Lautenbach does not plan to change course.

“When you make a change, there are cer-tain underlying assumptions you make—how clients want to buy, the capabilities of an organization to execute the change, the economics of the change, etc.,” he says. “You should stay with the change as long as you

The Pitney Bowes stand at drupa 2016, the international trade show held in Düsseldorf, Germany, every four years



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“To a degree, decision-making and strategies are the easiest part of the process. How you communicate the decisions, how you manage the change, how you drive those decisions, is the difficult part.” —Marc Lautenbach

still believe the underlying assumptions are correct. But when making transformative change, you need to continually check and recheck your assumptions.”

And in instances when your decision was ultimately the wrong call, the best mea culpa is complete transparency.

When he was at IBM, for instance, Mr. Lautenbach failed to communicate why cer-tain decisions made as part of a sales force re-engineering were hurting performance in his global small- and medium-business divi-sions. “I was operating for the first time on a closer proximity to senior executives, and it took me a while to get my footing in that environment,” he says. “That almost cost me my job. I quickly went from being one of the youngest officers at IBM to almost being one of the youngest officers to get fired.”

Eventually, though, Mr. Lautenbach found his way. “Once you can clearly articulate prob-lems in a nondefensive way, and if you are au-thentic about those problems, people will rally around you,” he says.

But communication is not one-size-fits-all. That is especially true at a large global enter-prise such as Pitney Bowes, with a board of directors overseeing top executives and share-holders conscientiously tracking results. “You have to understand how the stakeholders look at any key decision, because they don’t all look at it the same way,” Mr. Lautenbach says. “So in communicating any decision, you have to start with the frame of reference of whom you’re trying to communicate to.”

At the same time, Mr. Lautenbach says ex-ecutives cannot run around terrified that ev-ery decision they make is going to cost them their job. “When you get to the point in a job or a career where you realize that the worst they can do is fire you, it is liberating to a de-gree,” he says. “Life will go on. You’ll likely

find another job. Your dogs will still like you.”This fortitude, perhaps the most import-

ant characteristic of Mr. Lautenbach’s deci-sion-making style, was honed during his 27-year tenure at IBM. “The major transforma-tions we’re making at Pitney Bowes are chang-es I’ve got firsthand experience with,” he says. “It’s one thing to say, ‘Here’s how to hit a golf shot.’ It’s another thing to say, ‘I’ve hit this shot before and I know how to make it.’”

In 2005, Mr. Lautenbach received a pro-motion that had him working under current IBM CEO Ginni Rometty as general manager of IBM North America. It was a big advance-ment—and one fraught with risk.

“My predecessor, for all the right reasons, had done a fairly substantial re-engineering of the sales processes,” Mr. Lautenbach says. “I in-herited that new sales model midflight. It end-ed up being the right thing to do, but it was in-credibly disruptive for about 12 to 18 months.”

The model—which had the sales team shifting to a setup where specific client rela-tionships were assigned to salespeople based on geographic territories instead of sales chan-nel—was so disruptive, in fact, that many at IBM wanted to abandon the changes under-way. Mr. Lautenbach disagreed, and did not budge. “I decided that I was going to stick to my guns,” he says. “Organizations don’t adapt that quickly to new ideas. That’s why resolve is important after you’ve made key decisions.”

And it is that resolve that continues to push him forward at Pitney Bowes. “This is a diffi-cult period for the company because we’re going through these changes,” Mr. Lauten-bach says. “But I talk with team members and they all say the same thing: ‘Stick with it, we’re doing the right things.’ We’re not necessarily achieving everything we want tactically this year, but people love that we’re doing the right things for our future.” IQ

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On a flying trapeze, the success—and survival—of the troupe relies on per-formers meticulously car-rying out their respective parts in a complex chore-ography of coordinated ac-tions. As one person soar-ing through the air releases the bar, another must time his or her actions to catch that person. If poorly co-ordinated, the act will not just fail; it could prove fatal.

It is not that different for a business. The “performers” are the members of the exec-utive leadership team. As with the trapeze troupe, success or failure hinges on the group’s execution of coordinated action, with each person playing his or her role while committed to a common goal.

All Together Now To drive powerful alignment across

executive teams, start by crafting a leadership charter.BY SHIDEH SEDGH BINAILLUSTRATION BY NEIL WEBB



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That kind of coordinated action does not happen on its own, however. Instead, you can instill, inspire and empower the right actions by defining roles, expectations, behaviors, account-abilities and parameters for the team in a formal leadership charter. Done correctly, a charter will become one of the most powerful weapons in your arsenal for driving alignment, communica-tion and collaboration—exponentially increasing the enterprise’s ability to execute breakthrough results and unlock competitive advantage.

At the same time, by putting the leadership team fully in sync, a charter can unleash a powerful force across the organizational stra-ta: agility. When executive teams are coordi-nated in the actions they take, they are better positioned to pivot in the face of disruption and capitalize on new opportunities.

Defining Your PurposeWhen an executive team initially gathers to dis-cuss developing a leadership charter, I like to reference the parable of the three stonecutters:

A traveler came across three stonecutters and asked each what they were doing. The first re-plied that he had the worst job in the world: moving huge stones to make a living. The trav-eler gave him a coin. The second stonecutter did not complain, stating he was earning a living by doing the best job of stonecutting in the entire county. Again, the traveler gave a coin. When the traveler met the third stonecutter, he looked happy and was singing a cheerful song. The traveler was astonished and asked, “What are you doing?” The stonecutter looked up with a visionary gleam in his eye and said, “Can’t you see? I am building a cathedral.”As the parable illustrates, people will take

pride in their work when they understand the greater purpose to which it contributes. John-son & Johnson is a great example of what re-sults can flow out of this broader vision. The

multibillion-dollar company has a credo deep-ly rooted in a sense of purpose, containing such statements as: “We are responsible to the communities in which we live and work and to the world community as well.”

That is not to say the company does not have obligations and commitments to employ-ees and shareholders (both are listed in the cre-do as well). But its mission transcends revenue and stock price. The payoff ? Johnson & John-son is considered one of the most innovative companies in the world and ranked among “The 25 Happiest Companies to Work For in 2017” by CareerBliss.

As with Johnson & Johnson’s credo, consider a greater purpose as the inspiration when char-tering leadership teams as well. Start the discus-sion with your leadership team by asking: n What cathedral is the team building?n Why will it exist? n Whom does it serve?

Once the purpose is clear, more tactical questions can be defined, including: n What actions am I counted on to provide? n What are the most critical accountabilities

relevant to my role? n What are the metrics that gauge my perfor-

mance? It is also helpful to outline such details as

meeting frequency, duration, protocols and other topics related to the operations and in-frastructure of the group within the charter.

The Big QuestionMake no mistake, the true opportunity of a leadership charter—and for you personally, as a leader—is determined by how you are perceived by those around you. You might be the most congenial person in the world, but if others perceive you to be inconsistent or inef-fective, their actions—and interactions with you—will follow accordingly. PH

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You can instill, inspire and empower the right actions by defining roles, expectations, behaviors, accountabilities and parameters for the team in a formal leadership charter.



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Therefore, as part of the charter, it is best that leadership team members answer a fun-damental question: “Who do we promise to be?”

Consider committing to a series of be-haviors and recording them in the leadership charter. These are behaviors that you would want others to mention when describing you. From that point forward, members of the group can be held accountable by their coun-terparts to act in full accordance with these written behaviors. Otherwise, the credibility of the individual and the charter can quickly become compromised.

The “R” WordNo leadership charter will be meaningful until each member truly commits to being reliable. Resist the temptation to dismiss this as inconse-quential. When reliability, which we at Insigniam refer to as “working as your word,” is established, agreed upon and upheld it can catalyze break-through results and agility across the enterprise.

In its most basic form, this means doing what you say you are going to do, when you say you are going to do it—and then commu-nicating when it is completed. Inversely, in situations where you will be unable to honor your commitments, it is important to openly and immediately communicate this, as well as any associated risks that may result, to those who are counting on you.

It is also important to accept that you are responsible for the repercussions of failing to deliver on promises. If you are not going to be there to catch the trapeze artist reaching out for your hand, make sure they understand how the situation has changed, long before they let go of the bar. And there needs to be a safety net in place to catch them.

From Conversation to NegotiationLeadership charters become actionable through the alignment and execution of deci-sion rights. Once a leadership charter has been

The true opportunity of a lea dership charter—and for you personally, as a leade r—is determined by how

you are percei ved by those around you.

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drafted and agreed upon, the CEO will often reconvene with the executive leadership team to outline which mission-critical decisions he or she will retain and which each member of the team will own. This is the time when the conversation becomes a negotiation with the ultimate intent of establishing alignment across the group. This does not mean agree-ment, but rather coalescing around a set of be-haviors to which leaders commit themselves to acting in, consistently.

This is where things get interesting. I have seen some of the most fascinating conversa-tions take place at this stage, especially in the midst of large-scale mergers and acquisitions.

It is helpful to center any dialogue around the four actions of decision rights:1. What are the critical decisions I must be em-

powered to make?2. Whom do I consult?3. Whom will I inform? Whom will I need

to enroll?4. Who can veto this decision?

While making the decision is important, we often overlook that there are other actions that have to take place, including consulting and enrolling. For example, it is critical to con-sult the executive leading R&D when deciding on a new product-development strategy in marketing. Or, while CFOs have myriad deci-sions to make, if they fail to enroll the manag-ers and executives who have to execute those decisions, there is a low probability of success. Being consulted and enrolled are as much rights in decision-making as being the person who makes the ultimate decision.

But, just as enrollment will make or break the power of your decision-making in an en-terprise, so will the lack of appreciation or bal-ance for the role with the veto power.

There are certain critical decisions where someone in the organization may have veto

The true opportunity of a lea dership charter—and for you personally, as a leade r—is determined by how

you are percei ved by those around you.


power. Think of the head of regulatory affairs in a pharmaceutical company when a new drug is being developed, or the chief market-ing officer who owns “the brand.” In either case, there are situations in which a decision may be unacceptable because it threatens the boundaries for which these roles are account-able. If your organization has too many deci-sions with veto roles, you only have a pretense of decision rights. Have too few, and you risk compromising structural soundness.

As you are working through these ques-tions, do not confuse a decision rights matrix with a responsibility assignment or RACI ma-trix. Whereas RACI is focused on accountability, decision rights are wholly focused on who is entitled to participate in making a decision.

When handled in a facilitative setting, estab-lishing decision rights can afford an organization tremendous clarity. Decision rights can lead to profound and meaningful growth, increased ef-fectiveness and heightened morale. Conversely, if an individual’s decision rights are not honored, the leadership charter becomes meaningless.

Now or NeverA leadership charter can quickly become the manifesto that guides the actions of an executive team or committee in their pur-suit of results and agility. Yet many enter-prises underestimate just how critically im-portant it is to formulate an actual, tangible leadership charter.

Do not make that mistake. The ROI is clear. Those organizations willing to invest the time and effort to establish a charter can dramatically slash the time it takes for leader-ship teams to be effective and unlock powerful agility across the enterprise. IQ

Shideh Sedgh Bina is a founding partner with Insigniam and editor in chief of Insigniam Quarterly.



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Today’s executives are awash in data.

Some have successfully navigated the deluge, le-veraging new insights to streamline operations and outpace the competition. But many are left treading water, struggling to trans-form information into ac-

tion, says Michael Schrage, research fellow at the MIT Center for Digital Business and visit-ing fellow at Imperial College London. More data—or even better data—“don’t necessarily translate into business value.”

The data surge will only continue: The amount of big data out there is expected to reach 247 exabytes (EB) by 2020, a near ten-fold increase from the 25 EB in 2015, accord-ing to Cisco’s Global Cloud Index 2016. The study also reported that big data alone will represent 27 percent of the data stored in data centers by 2020, up from 15 percent in 2015.

To ensure all this data drives the deci-sion-making process rather than paralyzes it, executives need more than sophisticated data management and analytics tools. They have to ask the right questions, homing in on factors

that will inform strategic assessments, says Janet George, chief data scientist at San Fran-cisco-based Western Digital.

“It’s about having extra intelligence to run the business, create new areas of growth and achieve data insights that streamline operational efficiency,” she says. “It’s about becoming smarter, faster and more agile.”

The Right QuestionsDeriving strategic value begins with gathering high-quality, relevant data. Companies that do not identify, access and analyze the right data end up wasting time and money. IBM, for ex-ample, estimates poor data quality costs the U.S. economy $3.1 trillion each year.

The best big data initiatives are engineered around desired outcomes, Mr. Schrage says. They should not be an excuse to produce automated algorithms that allow executives to abdicate or subordinate managerial de-cisions. Instead, the initiatives should drive better decision-making by generating infor-mation that is measurably more relevant, ac-curate and customized.

“We have to be very clear about what value we want to derive from the data,” Ms. George says.

To facilitate strategic data analysis and de-liver business insights at Western Digital, Ms. George asks big-picture questions, such as:n Do the data have clear signals, predictive val-

ue or variables with high impact? n Are the data fundamentally free so they can

be modeled and used by multiple applica-tions and tools?

Executives can avoid analysis paralysis by knowing how to

look for the right insights.BY SAMUEL GREENGARD

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“It’s about having extra intelligence to run the business, create new

areas of growth and achieve data insights that

streamline operational efficiency.”

—Janet George, chief data scientist, Western Digital



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n Is it possible to tap into any or all aspects of the data? Taking a more holistic approach to data

management can help executives avoid getting tunnel vision and ensure the organization has access to the right data at the right time.

“Different dimensions of the data, when reviewed independently, can provide a rather skewed outcome,” Ms. George says. “Focusing on the insights and value data provide—and tapping into these insights as intelligence for the business—is what creates the difference.”

Insights in SightEase of access also makes a difference. The ability to rapidly distill valuable insights from an ocean of information can give companies the competitive edge. Yet 73 percent of execu-tives feel their companies need better real-time data analysis to reach their full potential, ac-cording to CompTIA’s 2015 Big Data Insights and Opportunities report.

To quickly act on hot market insights, many organizations are turning to more flexible data management tools, Ms. George says. Using ap-plications that pull relevant information from multiple sources gives executives a more de-tailed picture with which to work. The goal is to achieve a “360-degree view of the data to derive valuable insights,” Ms. George says.

At consumer products firm RB, business strategy is deeply rooted in data-driven insights, says Sharon James, Ph.D., the U.K. company’s global head of R&D. Collecting in-depth, mul-tifaceted information about product perfor-mance during development and in the market-place helps the company decode consumer de-mands and uncover opportunities to innovate.

“Big data offer an opportunity to go be-yond traditional consumer research methods and use wider data insights to develop more targeted, value-added solutions for our con-

If organizations focus on seven key practices, they can take big strides through big data, says Michael Schrage, research fellow at the MIT Center for Digital Business.

1. Recognize that all data are not created equal. Create a strategy that puts only the right data to work in order to avoid analysis paralysis.

2. Determine whether the data can be trans-formed into value or monetized.

3. Know whether data fit a synchronous or asyn-chronous model. The former requires constant connectivity while the latter involves syncing or updating data periodically.

4. Create a governance framework that dictates how data are collected, managed, retained, reported and discarded.

5. Address security and privacy issues.

6. Build an IT framework that supports big data and deploy systems that allow data to flow to decision-makers.

7. Tap the expertise of data scientists and ana-lysts who can think through results and frame business opportunities.

“Big data offer an opportunity to go beyond traditional consumer research methods and use

wider data insights to develop more targeted, value-added solutions for our consumers.”

—Sharon James, Ph.D., global head of R&D, RB

Big Data Best Practices



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sumers,” Dr. James says. RB, which owns brands such as Lysol, Scholl and Air Wick, sorts through various patterns that emerge in sales or usage data, social listening data and historical records. This might translate into engineering new or better products, adding features to products or identifying emerging areas of opportunity for the company.

RB also integrates data insights into a plat-form that interacts with users. Armed with information about consumer preferences and product use, the company can engage in more targeted relationships and promotions. The goal is to use data so that both the consumer and the company benefit. Thus, RB incorpo-rates feedback from customers to transform “insights into action,” Dr. James says.

The Internet of Things (IoT) and small, low-cost sensors are game changers, she adds. “They enable us to collect whole health and lifestyle data.” This in turn allows RB to achieve a holis-tic view of consumer activity and monitor life trends that span science, medicine and technolo-gy. For instance, how do people behave and deal with different issues throughout the day? What common problems do they encounter? What products aid them? “With this information, we are able to discover and create safe, high-quality products that really work,” Dr. James says.

But executives must also consider securi-ty and privacy issues, because collecting and holding highly personal information can put both systems and customer sentiment at risk. Even in instances when it is legal to collect data, it is not always wise to use it, Mr. Schrage points out. Data mining can become invasive and reflect poorly on an organization.

One infamous example was when Target used purchasing data to predict which of its

customers were pregnant. Coupons tailored to expectant mothers were sent to one young woman’s home and intercepted by her father, who was not aware of his daughter’s situation. Target’s data unintentionally revealed a secret her family did not know.

Brave New WorldAlthough organizations are already harnessing and monetizing big data, the data revolution has only just begun. Soon, machine learning and artificial intelligence (AI) will disrupt to-day’s data processes, Ms. George says.

“Over the next few years, the old methods of collecting, storing and processing data are going to be completely overhauled,” she says. “Today, we collect the existing data or unite different sources of data, then figure out how to label it all and train machine-learning algo-rithms for pattern recognition and predictions. However, it’s imaginable the data could be labeled and directly used for training using AI and neural networks.”

Smarter computing systems will lead to further advances in big data and predictive an-alytics. This could include the ability to predict behavior, have situational awareness, adapt to changes and serve up information—from mar-keting promotions and financial data to health care and industrial information.

These data streams, fueled by IoT sen-sors, social sentiment, crowdsourced data and more, will lead to greater insights, customiza-tion and personalization, Mr. Schrage says.

“We are moving into an era where big data will deliver results even if we don’t understand the causal mechanisms,” he says. “This technol-ogy is already disrupting almost every industry and business.” IQ

“We are moving into an era where big data will deliver results even if we don’t understand the causal mechanisms. The

technology will revolutionize almost every industry and business.”

—Michael Schrage, research fellow, MIT Center for Digital Business and visiting fellow at Imperial College London



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B A L A N C E O F

GAME CHANGERS



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As deputy CEO of BC Hydro, Chris O’Riley knows how to build support for big decisions—even when they are not popular.

BY SARAH FISTER GALE

Downtown Vancouver, British Columbia, Canada

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As deputy CEO of BC Hydro, which sup-plies 95 percent of British Columbia’s power, Mr. O’Riley notes dryly that he is “the person responsible for keeping the lights on” in the province. And he is not that far off: Mr. O’Riley is responsible for BC Hydro’s annual CAD2.3 billion portfolio of projects, determining how the company will invest to update current in-frastructure and develop new sources of ener-gy.

His choices must meet the region’s growing demand for power—by 2035 BC Hydro esti-mates its customer base will have increased by over 1 million people—and align with the gov-ernment’s goal of delivering 100 percent of its new energy from renewable sources.

Navigating the internal decision-making process to meet these strategic challenges is complicated by BC Hydro’s operating context. It is a government-owned company, which means Mr. O’Riley is ultimately answerable to a crucial stakeholder: the public. He must ad-here to a capital budget based on a long-term plan that caps annual rate increases at 3 to 4 percent to give customers confidence in their future energy costs. And he must be open to pushback from citizens concerned about how development will affect their life, their land and the broader environment.

Mr. O’Riley does not see any of this as a straitjacket, however.

“Both public- and private-sector companies today need to consider a broad array of out-comes beyond just the bottom line, including environmental and social impacts,” he says. “As a government-owned entity, we can take a longer-term view of both the benefits and costs of our infrastructure investments. We’re not driven by short-term earnings.”

Since being appointed deputy CEO in 2015, Mr. O’Riley has come to terms with the fact that he cannot please every stakeholder with every decision. Garnering needed support is a delicate balancing act. To get it right, he relies less on

his gut and more on a formal process. “Leaders must have a structured decision-making process to avoid making arbitrary choices based on one person’s opinions,” he says.

Beyond BiasThe bulk of projects Mr. O’Riley currently oversees aims to address British Columbia’s aging infrastructure. In fact, the whole coun-try is facing up to this challenge: Canada is home to many 100-year-old hydroelectric in-stallations in need of maintenance to reduce the risk of outages and increase efficiency on the grid, according to The Conference Board of Canada. The group estimates that through 2030, $350 billion will have been invested in the country’s entire system to get it up to par.

BC Hydro began ramping up its infra-structure update efforts several years ago. But choosing which of 31 hydroelectric facilities, three natural gas-powered thermal power plants and more than 77,000 kilometers of transmission and distribution lines deserves the next investment is a complicated process. Mr. O’Riley’s team begins by reviewing the benefit/risk scenarios for each proposed proj-ect and for the portfolio as a whole before set-tling on a course of action. Proposals are also reviewed by subject-matter experts to deter-mine quality and urgency.

“Effective listening and gathering of infor-mation before making a decision is absolutely critical to ensuring we’re basing the decision on the complete set of facts,” Mr. O’Riley says. “I rely on my management team and key func-tional leaders to ensure we understand the risks and avoid groupthink in decision-making.”

When proposed projects do not go through this entire process, it calls into question the legit-imacy of the decision that is ultimately made, at least in the eyes of Mr. O’Riley. “You prejudice an outcome by making a decision based on only some information or a single perspective on the right course of action,” he says. “By going

An aging energy infrastructure, the needs of a growing population, government mandates and the whims of public opinion… Chris O’Riley has a lot on his mind.

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“Both public- and private-sector companies today need to consider a broad array of outcomes beyond just the bottom line, including environmental and social impacts.” —Chris O’Riley, deputy CEO, BC Hydro



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through the whole process, you ensure that you are considering the decision from all angles, to make the most informed choice,” he says.

Against the GrainSometimes the decision-making process leads him to conclusions that make his own team un-happy. Take the nearly CAD1.1 billion project to replace the 125-megawatt John Hart Generating Station, a hydroelectric power station in Camp-bell River, British Columbia. The 70-year-old sta-tion was in poor condition and electricity output was declining. Assessments found that the facil-ity was unlikely to withstand even a moderate earthquake.

The site was prioritized for upgrades and work began in 2014. However, instead of utiliz-ing the traditional model to replace the station, in which the internal team designs the new fa-cility and then bids out the build, Mr. O’Riley pushed BC Hydro to go with a design-build public-private partnership (PPP) model for the project. One reason for this move was the constraints on the site based on its location in a high-use public park. He also felt his team’s designs did not adequately address the need to protect a salmon habitat downstream from the station in the event of a shutdown.

“We were looking for a more innovative ap-proach, which we ultimately found through the PPP,” he says. The external designers came up with a design that would be less disruptive to the environment of the park, while still meet-ing safety and sustainability goals. According to Mr. O’Riley, the PPP was a cost-effective way to transfer project design and construction risk to an external organization.

But the decision caused consternation for many internal team members, especially with in-house engineers eager to design the new facility. “As a leader you have to be willing to make big declara-tions and then follow through with action.”

To address the internal conflict, Mr. O’Riley created a dedicated team to write the specifica-tions for the project and ensure the necessary outcomes would be achieved while communi-cating the benefits of the procurement model to the rest of the company. “We needed people to be aligned. So I spent a lot of time explaining the rationale for this decision to give people the confidence that it was the right move,” he says.

He also brought in outside consultants to review the lead contractor’s specs and draw-ings throughout the project to give everyone ongoing confidence that things were going in the right direction. “You have to focus on the people side of these decisions,” he says. “If you can get everyone going in the same direction, you can overcome a lot of barriers to change.”

The project, which is expected to finish in 2019, has been a success thus far in the compa-ny, opening people’s eyes to the need to bring an external perspective to decision-making when choosing and planning projects.

“It’s an important lesson about bias and the need to look beyond our own internal strengths and weaknesses,” Mr. O’Riley says.

Error RecoveryEven with the most in-depth vetting process, some decisions are still a risk, and they do not al-ways pay off. Mr. O’Riley points to one decision he recently supported to defer capital upgrades on BC Hydro’s Bridge River hydroelectric complex. The facility ended up deteriorating faster than ex-pected, forcing BC Hydro to operate it at less than capacity in order to prolong its life. This created water-flow management challenges in the local reservoir that will take years to rectify.

“We made the decision based on the infor-mation we had at the time,” Mr. O’Riley says. “It was a bad outcome that reminded us that if you operate with little margin, you have fewer options to manage your risks.”

“You have to focus on the people side of these decisions. If you can get everyone going in the same direction, you can overcome a lot of barriers to change.” —Chris O’Riley

“As a leader you have to be wil l in g to make big

declara t ions and then f ol low thr o ugh wi th ac t ion.” —Chris O’Riley



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Infrastructure decisions are made in the context of considerable uncertainty, he em-phasizes. “It is therefore critical to under-stand the assumptions underlying a decision and how those could be affected by changing conditions. And to recognize that sometimes conditions change and the assumptions don’t hold. Again, it’s about openness and transpar-ency—companies and executives need to be

open about what has changed and the implica-tions for the decision. That may mean rework-ing the plan.”

Ultimately, there is no way to guarantee per-fection in every decision. “As a leader, the key is making the most informed decision possible,” Mr. O’Riley says. “Then do whatever you can to build support and drive the right outcomes for those decisions you have made.” IQ

Perhaps the biggest source of pushback on any decision Chris O’Riley makes is the public.

“It is getting increasingly difficult to site projects anywhere in the province,” says Mr. O’Riley, deputy CEO of BC Hydro.

The company’s CAD9 billion effort to build a third dam and hydroelectric generating station on the Peace River in northeast British Columbia, called the Site C Clean Energy Project, is the most prominent example of this challenge. One of the largest resource development efforts in Canada, the project will produce 5,100 gigawatt hours of clean, cost-effective energy per year for more than 100 years. During the first 50 years of the project life, ratepayers will save an average of $650 million to $900 million each year, compared to alternatives.

There has been much public outcry against this project, including from several of the First Nations people, who make up a significant portion of Canada’s aboriginal population. They have been opposed to Site C since it was first proposed in the 1970s, arguing the project would drive them off the land, drown their farmland and destroy fishing and game habitats. To date, however, five judicial reviews of environmental approvals and Site C permits have been dismissed.

In the end, the decision to move

forward on Site C was left up to the government, with British Columbia’s premier, Christy Clark, saying in a statement, “It was not an easy decision to come to. In order for our economy to grow, we need to ensure there is power.”

The decision has not stemmed negative public opinion, so it has become Mr. O’Riley’s job to move for-ward in a way that curbs tension by being as transparent as possible and working toward amicable compro-mises. “Openness and transparency are just good business, and when you are government-owned and a monopoly provider, it becomes really important,” he says.

“Our society seems to be exhibiting a growing level of distrust toward large institutions, at a time when we need those institutions to combat big challenges such as aging infrastructure and global warming. Greater openness and transparency helps us oppose this trend and build confidence in decisions.”

To build that confidence with citizens, Mr. O’Riley’s team holds regular commu-nity meetings and distributes information via news articles and social media. “Community involvement is so important to this process,” he says. “People want to understand what you are doing and they want to be a part of the process.”

The team also uses social media and news outlets to combat misinforma-

tion. They spend a lot of time clarifying the facts and reiterating the benefits of clean, reliable energy to the communi-ty—while remaining respectful to the people fighting the project.

“BC Hydro is building the Site C dam to meet the long-term need for electricity in our province,” Mr. O’Riley says. “It will provide clean, low-cost, reliable power with a fraction of the reservoir footprint of the upstream W.A.C. Bennett Dam. BC Hydro has been consulting with First Nations about the project for almost 10 years. We have reached agreements and terms with a number of First Nations impacted by the project and significant financial, procurement and employ-ment benefits are flowing as a result of the project. Two First Nations have continued to oppose the project in court; to date, all these court actions have been dismissed.”

And while they will continue to face resistance from these groups, Mr. O’Riley is confident that extensive environmental reviews and broad community support will help ensure the project is a success.

“As a leader you have to be wil l in g to make big

declara t ions and then f ol low thr o ugh wi th ac t ion.” —Chris O’Riley

Fighting for Site C

“Companies and executives need to be open about what has changed and the implications for the decision. That may mean reworking the plan.”—Chris O’Riley

Rendering of the Site C Clean Energy Project in northeast British Columbia

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The Futurist Is Here She may not have a crystal ball, but as the futurist for Ford Motor Co., Sheryl Connelly helps executives take the long view. BY KATE ROCKWOODPORTRAITS BY NICK HAGEN



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Sheryl Connelly has spent the better part of the last 10 years as Ford Motor Company’s in-house futurist, tracking global consumer trends to help refine long-term planning and strategy across the entire company. Her job is to be, in her words, a “polite contrarian” in conversations that span from design and product development to corporate strategy and marketing.

IQ recently spoke to Ms. Connelly about how executives can better future-proof their decision-making and why slowing down strat-egy planning can often be the fastest way to get ahead.

IQ: How does a deeper understanding of what the future might hold change or im-prove how executives make decisions?Sheryl Connelly: My job isn’t to predict the fu-ture—it’s to challenge the status quo and tease out underlying assumptions that are built into our strategy. Highlighting how and why the con-text is changing and why attitudes are changing can inform executive decisions. For instance, 10 years ago millennials weren’t buying cars and there was a pervasive attitude at Ford and else-where that it was because they couldn’t afford them. The thinking went: Everyone wants a car, because everyone’s always wanted a car.

ocial scientists call it the status quo bias: our tendency to want things to stay the same. We expect the future will offer more continuity than change—but for executives this can be a fatal trap. Imagining the future only through the lens of its products or market position leaves an organization vulnerable to disruption. To avoid myopia, more companies are turning to the emerging academic and professional discipline of futurism.

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My job is to say, “But what if that’s not the case?” For millennials, there have been very mixed reports about their feelings toward car ownership. It’s clear they don’t hold cars in the same regard as previous generations, especial-ly baby boomers who saw cars as the ultimate status symbols. So in meetings with execu-tives, it’s my job to ask: What if millennials never buy cars? What then?

IQ: Do all companies need futurists, or should executives develop the ability to think the way you do?SC: It doesn’t have to be either/or. Every or-ganization—big or small, for-profit or not-for-profit—would benefit from having a futurist on staff. I spend a good chunk of my time looking at patterns that suggest consumer behaviors are going to change, then modeling future scenarios through an Armageddon or rose-colored view. An aging population is a global phenomenon—what might that mean for autonomous driving vehicles? The emerg-ing middle class in India and China is explod-ing—what might that mean for mobility there? Each story comes with a set of leading indicators, or what would have to happen for this scenario to come into play.

But I also think all executives can benefit from this type of thinking. Everyone recog-nizes that the pace and scale of change is in-creasing, so companies have to think out of the box more often. When people ask, “How do you think like a futurist?”, I tell them it’s really about being a polite contrarian. The next time you’re in a meeting and someone says, “That will never happen” or “not in my lifetime,” that’s an easy place to start. Pretend

that it were to happen—how would the com-pany fare?

Americans are enamored with the open road, but if you lived in Beijing or Mumbai you’d be hard-pressed to find an open road. The average daily commute in Beijing is five hours. Bill Ford, who’s the great-grandson of Henry Ford and our executive chairman, has said that he spent a good portion of his life thinking about how to sell more cars tomor-row than he sold yester-day. But then he asked, “What happens if that continues?” The answer: global gridlock.

We need to rethink mobility. How do you play in this space when people don’t want to own cars or it’s not the optimal solution for them? So now Ford is looking at car-sharing and ride-sharing and bike rentals, and all the ways we make people’s lives better by making mobility options richer. We still believe in those people who love the thrill of the drive. But let’s think about how to also serve people who aren’t interested in driving.

IQ: Do you get any special satisfaction when one of your future scenarios plays out? SC: My job is not to predict the future and have it come out right. It is to help others see things coming and make sure the company is never blindsided. In many ways, it’s a numbers

“When people ask, ‘How do you think like a futurist?’, I tell them it’s really about being a polite contrarian.”—Sheryl Connelly, futurist, Ford Motor Company

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game. If you do this with vigor and frequency, you’re going to run into things that do play out—and people seem to remember the things you get right.

In 2004, for instance, I led 100 peo-ple from around the world in a proj-ect to imagine four scenarios of what the world would look like in 2015. Oil was $30 a barrel at the time. We imag-ined: What if it spiked to $100? New car sales would slow down, and we’d have to slow down plant production or idle some plants, scale back our orders. If it went on long enough, many auto companies would be on a slippery slope to bankruptcy. That was just one scenario out of four, but with each story we developed a set of leading indicators. And then oil spiked and that story played out in 2007, 2008 and 2009. And I do believe having an eye on those indicators ear-ly is one of many reasons we were able to make swifter adjustments and ultimately avoid bankruptcy.

IQ: Ford has been around since 1903. What is it like to be the futur-ist at America’s oldest car company?SC: I grew up in metro Detroit and have always had a deep respect and admiration for the brand. I work with people who call themselves to-

tal gearheads. That’s not me, but my job is spe-cifically not to look at cars and trucks.

When I was brand-new in this role, for the first year or two, I had to knock on a lot of doors to get invited to meetings. I used to say, “Here are the trends, and here’s what you should do.” I might be talking to engineers about how they could use insights about some

“Everyone recognizes that the pace and scale of change is

increasing, so companies have to think out of the box more often.”

—Sheryl Connelly

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Brian David Johnson has helped everyone from cor-porate executives to gov-ernment officials face the future with a bit less anxi-

ety. Formerly Intel’s futurist for more than a dozen years, Mr. Johnson is now “futurist in residence” at Arizona State University’s Center for Science and Imagination.

IQ: In your experience, what is the biggest challenge executives face when thinking about the future and how it relates to their company?Brian David Johnson: Especially at larger organizations, the CFO will usually approach me at some point and say, “Brian, I hate what you do.” Because he or she has one goal: to maximize shareholder profit on a quar-ter-by-quarter basis. The futurist’s goal is to pre-pare the company on a 10-year basis. We want executives to make investments that might not pay off for a decade. There’s an inherent ten-sion between those perspectives. But executives who want the company to be around in 10 years don’t run from the discomfort.

IQ: Beyond shareholder pressure, why else are we so biased toward the present?BDJ: People are busy. I say that as a joke, but it’s also true. Half the time, people don’t even know what they’re going to have for dinner that day. We don’t have the time or the head-space to think about future scenarios. But the other reason is that we’re not really given the tools or taught how to think about the future and change and long-term strategic foresight. If you’re not trained, people naturally fall into incremental thinking. It’s a disease that plagues the world of long-term strategy.

“If you can summarize your organization’s long-term strategic plan in

one presentation, there’s something wrong with it.”—Brian David Johnson, former futurist, Intel

Uncertainty Ahead

IQ: How can futurists help executives “fu-ture-proof” their decisions?BDJ: I always say a passionate idea paired with a PowerPoint presentation is danger-ous. You’ll often see in boardrooms and meeting rooms someone who really, really believes something, and so they’ll put to-gether a PowerPoint. It may be a good idea, but it’s not long-term strategic planning.

The first step is getting people to understand that if you can summarize your organization’s long-term strategic plan in one presentation, there’s some-thing wrong with it. Executives should be encouraging new tool sets and ways of thinking to be brought into their or-ganization and spread throughout the planning process. There are now more and more futurists in the field, and this diversity is healthy. With the rapid ad-vancement of technology and the need to develop products or services and get to market quickly, having a person or a plan-ning office that’s truly thinking long term isn’t a luxury—it’s necessary.

trend to engineer a better car. They’d look at me like I didn’t really know what I was talking about—and they were right.

Over time, I realized that delivering the best value means leaving out the automotive standpoint. So now, if I’m going to talk about an aging population, I might talk about what

impact that’s having on cellphones or travel or hospitals, and how other corporations are ad-dressing the issue. I can bring insights, but they don’t mean anything unless the subject-mat-ter experts within Ford translate them into opportunities. It has to be a very collaborative relationship. IQ



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SPECIAL REPRINT

Integrity? Integrity is a matter of a person’s word—nothing more and nothing

less. Harvard Business School Professor Michael Jensen explains.INTERVIEW BY KAREN CHRISTENSEN

Do You Lead With

This article originally appeared in the Fall 2009 issue of Rotman Management, published by the University of Toronto’s Rotman School of Management (www.rotmanmagazine.ca).



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right and wrong behavior for individuals and groups within that society, while ethics refers to the normative set of values that apply to all members of a group or organization. Thus, both morality and ethics relate to desirable vs. undesirable behavior.

You define integrity as “what it takes for a person to be whole and complete.” What does this look like in daily life?MJ: An individual is whole and complete when their word is whole and complete, and their word is whole and complete when they honor their word. We can honor our word in one of two ways: first, by keeping our word, and on time; or second, as soon as we know that we won’t keep our word, we inform all parties counting on us to keep our word and clean up any mess that we’ve caused in their lives. When we do this, we are honoring our word despite having not kept it, and we have maintained our integrity.

If you are serious about being a person of integrity, you will think very carefully before giving your word to anyone or anything, and you will never give your word to two or more things that are mutually inconsistent. As they should, many people focus on the importance of keeping their word; however, if one does not consider how to maintain integrity when one cannot or will not keep one’s word, this is sure to lead to out-of-integrity behavior at some point. If you’re up to anything important in life, you will not always be able to keep your word, and that’s all right, but if you are a person of integrity, you will always honor your word.

Integrity is important to individuals, groups, organizations and society because it creates workability. Without integrity, the workability of any object, system, person, group or orga-nization declines; and as workability declines, the opportunity for performance declines.

here is some confusion between the terms integrity, morality and ethics. How do you differentiate them?Michael Jensen: These three phenomena are widely understood to provide standards of “correct” behavior, but people generally get them mixed up. The primary differentiation I make between them is to distinguish integrity from morality and ethics. Integrity is a purely positive proposition. It has nothing to do with good vs. bad. Think for a moment about the Law of Gravity: There is no such thing as “good” or “bad” gravity; like integrity, it just “is.”

Morality and ethics, on the other hand, are normative concepts in that they deal with matters of good or bad, right versus wrong. Morality refers to a society’s standards of

Integrity, Morality and Ethics, DefinedIntegrity: A state or condition of being whole, complete, unbroken, unimpaired, sound, in perfect condition.

Morality: In a given society, in a given era of that society, morality is the generally accepted standards of what is desirable and undesirable; of right and wrong conduct, and what is considered by that society as good or bad behavior of a person, group or entity.

Ethics: In a given group, ethics is the agreed upon stan-dards of what is desirable and undesirable; of right and wrong conduct; of what is considered by that group as good and bad behavior of a person, group or entity that is a member of the group, and may include defined bases for discipline, including exclusion.



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Your Ontological Law of Integrity says that integrity has a critical effect on business: increased performance. How does integrity translate into performance? MJ: As I’ve said, integrity is a necessary condition for maximum performance. That is, if something is in integrity—is whole, complete, unbroken—it has maximum workability. But

Therefore, integrity is a necessary condition for maximum performance. As an added benefit, honoring one’s word is also an actionable path-way to being trusted by others.

You believe that a key aspect of integrity in-volves the relationship one has with oneself. Please explain the importance of this.MJ: One’s word to one’s self is a critical part of integrity. The foundation for being a person of integrity is giving your word to yourself (or declaring to yourself ) the following. First, “Who I am is my word,” and second, “I give my word to myself that I am a person of integrity.” Without this foundation you will never be a person of integrity.

By not being serious when we give our word to ourselves, we forfeit the opportunity to maintain our integrity by honoring our word to ourselves. For example, think of occasions when the issue of self-discipline comes up, and the ease with which we often dismiss it. It may be something trivial like, “I’m going to work out tomorrow at nine o’clock,” or something serious like, “I will never cheat on my wife.” By failing to honor our word to ourselves, not only do we undermine ourselves as persons of integrity, but we diminish who we are as a person—we are less than whole and complete as a person. If we aren’t serious about this aspect of integrity, it will create “unworkability” in our life: We will appear to others as inconsistent, unreliable and unpredictable. You simply cannot be a whole and complete person if you do not honor your word to yourself.

Unfortunately, people almost universally justify or rationalize the mess in their lives resulting from their personal out-of-integrity behavior. They point to external causes of the mess in their lives and never acknowledge that the mess arises from their own personal out-of-integrity behavior.

‘One’s Word,’ DefinedA person’s word consists of each of the following:

1. What you said: Whatever you have said you will do or will not do, and in the case of do, doing it on time.

2. What you know: Whatever you know to do or know not to do, and in the case of do, doing it as you know it is meant to be done and doing it on time, unless you have explicitly said to the contrary.

3. What is expected: Whatever you are expected to do or not do (even when not explicitly expressed), and in the case of do, doing it on time, unless you have explicitly said to the contrary.

4. What you say is so: Whenever you have given your word to others as to the existence of some thing or some state of the world, your word includes being willing to be held accountable that the others would find your evidence for what you have asserted also makes what you have asserted valid for themselves.

5. What you say you stand for: What you stand for, whether expressed in the form of a declaration made to one or more people, or even to yourself, as well as what you hold yourself out to others as standing for (formally declared or not), is a part of your word.

6. The social moral standards, the group ethical standards and the governmental legal standards of right and wrong, good and bad behavior in the society, groups and state in which one enjoys the benefits of membership are also part of one’s word unless a) one has explicitly and publicly expressed an intention to not keep one or more of these standards, and b) one is willing to bear the costs of refusing to conform to these standards.

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because it takes more than workability (a product of integrity) alone to realize maximum performance, integrity is not a sufficient condition for maximum performance.

The proposition is that if you violate the Law of Integrity, the opportunity set for your performance will shrink and therefore your actual performance is likely to suffer. As with the gravity analogy, this is just a plain fact: If you attempt to violate the Law of Gravity without a parachute, you will suffer severe consequences. We argue that if you respect the Law of Integrity you will experience enormous increases in performance, both in your organization and in your life.

You believe that the effects of out-of-integrity behavior are significantly more damaging than most people believe. Please discuss.MJ: People tend to view integrity as a virtue that is “nice to have,” but not as something that is directly related to performance. They fail to link the difficulties in their lives or in their organizations to out-of-integrity behavior. But the increases in performance

that are possible by focusing on integrity are huge: I’m not talking about a 10 percent increase in output or productivity—it’s more like 100 to 500 percent.

At my organization [the Social Science Research Network (SSRN)] after three years of implementing these notions, our CEO Gregg Gordon will tell you that we’ve seen in excess of a 300 percent increase in output, with essentially no increase in inputs. And our people are happier.

Objects and systems can also have integrity. Please explain.MJ: Integrity for objects and systems is a matter of the components that make up the object or system and the relationship between those components. Three critical aspects are their design, the implementation of the design and the use to which the object or system is put. If an object or system is to have maximum opportunity for performance, it must have integrity in each of these aspects. The design must be capable of fulfilling the purpose for which it was designed—

Integrity of an Organization, DefinedAn organization (or any human system) is in integrity when:

It is whole and complete with respect to its word. This includes that nothing is hidden, no deception, no untruths, no violation of contracts or property rights, etc.

That is to say, an organization honors its word:

n Internally, between members of the organization, and

n Externally, between the organization and those it deals with. This includes what is said by or on behalf of the organization to its members as well as outsiders.1 2



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for example, to provide transportation or flotation.

In addition, to have integrity the implementation of the design must be whole and complete; and finally the use of the object or system must have integrity. If any of these three aspects is not present, the object or system will be “out-of-integrity,” its workability will be compromised and its opportunity for performance will be reduced.

For example, if a 300-pound man attempts to use a life preserver designed for a 50-pound child, he is in big trouble. This distinction—between the integrity of design, the integrity of implementation and the integrity of use—has proven to be of enormous value to me and my colleagues

in running SSRN. Of course, any large computer system is going to have issues, and thinking about the source of problems as due to potential failures of integrity of design, integrity of implementation or integrity of use has resulted in enormous insights for us.

What are the costs of dealing with an object, person or entity that is out-of-integrity?MJ: Consider the experience of dealing with an object that lacks integrity, such as a car. When one or more of its components is missing or malfunctioning, it becomes unreliable and unpredictable, and it creates

“If you are serious about being a person of integrity, you will think very carefully before giving your word to anyone or anything, and you will never give your word to two or more things that are mutually inconsistent.”—Michael Jensen, Jesse Isidor Straus professor of business administration, emeritus, Harvard Business School

Continued on page 62

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1 Not seeing that who you are as a person is your word

That is, thinking that who you are as a person is anything other than your word. For example, thinking that who you are is your body, or what is going on with you internally (your mental/emotional state, your thoughts/thought pro-cesses and your bodily sensations), or anything else you identify with such as your title or position in life, or your possessions, etc., leaves you unable to see that when your word is less than whole and com-plete you are diminished as a person.

A person is constitut-ed in language. As such, when a person’s word is less than whole and com-plete they are diminished as a person.

2 “Living as if my word is only What I Said (Word 1) and

What I Assert Is True (Word 4)”Even if we are clear that in the matter of integrity our word exists in six distinct ways, most of us actually function as if our word consists only of what I said or what I

assert is true. This guar-antees that we cannot be men or women of integrity. For us, Words 2, 3, 5 and 6 are invisible as our word:n Word 2: What You

Know to do or not to do

n Word 3: What Is Ex-pected of you by those with whom you wish to have a workable re-lationship (unless you have explicitly declined those unexpressed requests)

n Word 5: What You Stand For

n Word 6: Moral, Ethical and Legal Standards of each society, group and governmental entity of which I am a member

When we live (function in life) as though our word is limited to Word 1: What I Said and Word 4: What I Say Is So, we are virtually certain to be out-of-integrity with regard to our word as constituted in Words 2, 3, 5 and 6. In such cases, all the instances of our word (be it the word of an individual or organiza-tion) that are not spoken or otherwise commu-nicated explicitly are simply invisible as our word to such individuals

or organizations. In our lives, all the instances of our Words 2, 3, 5 and 6 simply do not show up (occur) for us as our having given our word.

3 “Integrity is a virtue”For most people and

organizations, integrity exists as a virtue rather than as a necessary con-dition for performance. When held as a virtue rather than as a factor of production, integrity is easily sacrificed when it appears that a person or organization must do so to succeed. For many people, virtue is valued only to the degree that it engenders the admira-tion of others, and as such it is easily sacrificed especially when it would not be noticed or can be rationalized. Sacrificing integrity as a virtue seems no different than sacrificing courteous-ness, or new sinks in the men’s room.

4 Self deception about being out-of-integrity

People are mostly unaware that they have not kept their word. All they see is the “reason,” rationalization or excuse

for not keeping their word. In fact, people systematically deceive (lie to) themselves about who they have been and what they have done. As [theorist] Chris Argyris concludes: “Put simply, people consistently act inconsistently, unaware of the contradiction between their espoused theory and their theo-ry-in-use, between the way they think they are acting and the way they really act.”

And if you think this is not you, you are fooling yourself about fooling yourself.

Because people cannot see their out-of- integrity behavior, it is impossible for them to see the cause of the un-workability in their lives and organizations—the direct result of their own attempts to violate the Law of Integrity.

5 Integrity is keeping one’s wordThe belief that

integrity is keeping one’s word—period—leaves no way to maintain integrity when this is not possible, or when it is inappropri-ate, or when one simply chooses not to keep one’s word. This leads to con-

The 11 Factors of the ‘Veil of

Invisibility’ that conceals

the source of the actual costs of out-

of-integrity behavior:




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cealing not keeping one’s word, which adds to the veil of invisibility about the impact of violations of the Law of Integrity.

6 Fear of acknowl-edging you are not going to keep

your wordWhen maintaining your integrity (i.e., acknowl-edging that you are not going to keep your word and cleaning up the mess that results) appears to you as a threat to be avoided (like it was when you were a child) rather than simply a challenge to be dealt with, you will find it difficult to maintain your integrity. When not keeping their word, most people choose the apparent short-term gain of hiding that they will not keep their word. Thus out of fear we are blinded to (and there-fore mistakenly forfeit) the power and respect that accrues from acknowledging that one will not keep one’s word or that one has not kept one’s word.

7 Integrity is not seen as a factor of production

This leads people to

make up false causes and unfounded rationaliza-tions as the source(s) of failure, which in turn conceals the violations of the Law of Integrity as the source of the reduc-tion of the opportunity for performance that results in failure.

8 Not doing a cost/benefit analysis on giving one’s word

When giving their word, most people do not consider fully what it will take to keep that word. That is, people do not do a cost/benefit analysis on giving their word. In effect, when giving their word, most people are merely sincere (well-meaning) or placating someone, and don’t even think about what it will take to keep their word. Simply put, this failure to do a cost/benefit analysis on giving one’s word is irresponsi-ble. Irresponsible giving of one’s word is a major source of the mess left in the lives of people and organizations. People generally do not see the giving of their word as: “I am going to make this happen,” but if you are not doing this you will be out-of-integrity. General-

ly people give their word intending to keep it. That is, they are merely sin-cere. If anything makes it difficult to deliver, then they provide reasons instead of results.

9 Doing a cost/benefit analysis on honoring one’s word

People almost univer-sally apply cost/benefit analysis to honoring their word. Treating integrity as a matter of cost/benefit analysis guarantees you will not be a trustworthy person, or with a small exception, a person of integrity.

If I apply cost/benefit analysis to honoring my word, I am either out-of-integrity to start with because I have not stated the cost/benefit contingency that is in fact part of my word (I lied), or to have integrity when I give my word, I must say something like the following:

“I will honor my word when it comes time for me to honor my word if the costs of doing so are less than the benefits.”

Such a statement, while leaving me with in-tegrity, will not engender trust. In fact, it says that my word is meaningless.

10 Integrity is a mountain with no top

People systematically believe that they are in integrity, or if by chance they are at the moment aware of being out-of-in-tegrity, they believe that they will soon get back into integrity.

In fact, integrity is a mountain with no top. However, the combi-nation of 1) generally not seeing our own out-of-integrity behav-ior, 2) believing that we are persons of integrity and 3) even when we get a glimpse of our own out-of-integrity behav-ior, assuaging ourselves with the notion that we will soon restore our-selves to being a person of integrity, keeps us from seeing that in fact integrity is a mountain with no top. To be a person of integrity re-quires that we recognize this and “learn to enjoy climbing.”

11 Not having your word in existence when

it comes time to keep your wordPeople say “talk is cheap” because most people do not honor

their word when it comes time to keep their word. A major source of people not honoring their word is that when it comes time for them to do so, their word does not exist for them in a way that gives them a reliable opportunity to honor their word.

Most people have never given any thought to keeping their word in existence so that when it comes time for them to keep their word there is a reliable opportunity for them to honor their word. This is a major source of out-of-in-tegrity behavior for individuals, groups and organizations.

In order to honor your word, you will need an extraordinarily powerful answer to the question, “Where Is My Word When It Comes Time For Me To Keep My Word?” If you don’t have a way for your word to be powerfully present for you in the moment or moments that it is time for you to take action to honor your word, then you can forget about being a person of integrity, much less a leader.




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students the importance of conducting a cost/benefit analysis in everything they do. In most cases, this is useful—but not when it comes to behaving with integrity. In fact, treating integrity (i.e., honoring your word) as a matter of cost/benefit analysis virtually guarantees that you will not be a person of integrity.

When not keeping my word, if I apply a cost/benefit analysis to honoring my word, I am either out-of-integrity to start with—because I have not stated the cost/benefit contingency that is in fact part of my word when I give it, or to have integrity I must say something like the following: “I will honor my word when it comes time to do so if the costs of doing so are less than the benefits.” Such a statement, while technically leaving me with integrity, is

unlikely to engender trust. Indeed, I have just told you that my word means nothing.

If I had one recommendation for improvement to the curriculum of every business school, it would be to make it very clear to students that cost/benefit analysis is very important almost everywhere in life—but not with respect to honoring one’s word. In my view, this is a major root cause of the current economic crisis.

Trust in the business community has plummeted in recent months. What has to happen for it to be restored?MJ: Out-of-integrity behavior has been pervasive, both on an organizational and an individual basis. Recall that the integrity of an object or system depends on the integrity of the design of that object or system, the integrity of

those same characteristics in our lives: the car fails in traffic, we inadvertently create a traffic jam, we are late for our appointment and we disappoint our colleagues. In effect, the out-of-integrity car has created a lack of integrity in our life, with all sorts of fallout and repercussions that reduce workability. The same thing is true of our associations with persons, groups or organizations that are out-of-integrity. These effects generally go unrecognized, but they are significant.

How does “cost-benefit analysis” affect integrity?MJ: This is a great failure of the curriculum of every business school I know: We teach our

“The increases in performance that are possible by focusing on integrity are huge: I’m not talking about a 10 percent increase in output or productivity—it’s more like 100 to 500 percent.” —Michael Jensen

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There are great examples of service failures that have turned out positive. Bitner, Booms and Tetrault in their study The Service Encounter: Diagnosing Favorable and Unfavorable Incidents, (Journal of Marketing, 1990, pp. 80-81) found that: 23.3 percent of the “ . . . ‘memorable satisfactory encounters’ involve difficulties attributable to failures in core service delivery. . . From a management perspective, this finding is striking. It suggests that even service delivery system failures can be remembered as highly satisfactory encounters if they are handled properly. . . One might expect that dissatisfaction could be mitigated in failure situations if employees are trained to respond, but the fact that such incidents can be remembered as very satisfactory is somewhat surprising.” (Italics in original.)

They give the following example: A husband and wife had a reservation for a hotel room. They arrived at the hotel, it was completely filled through no fault of the hotel—people just hadn’t checked out as planned. Unfortunately, the front desk staff wasn’t able to find the couple another room in the city, so they failed to keep their word. But they did honor it: They took a small dining room in the hotel, put in some cots and pillows and bedding, and made a bedroom out of it. In the end, the family rated this as one of their outstanding service experiences.

Honoring one’s word is truly an amazing phenomenon, and my colleagues and I are eager for people to implement it in their lives and in their organizations. As with the Law of Gravity, the end result is guaranteed. IQ

the implementation of that design and the integrity of the use of that object or system.

Looking at the subprime mortgage crisis, each element of the system evolved in a way that left it out-of-integrity: The system ended up such that people were rewarded for creating and selling mortgages and mortgage-backed securities, but not mortgages and mortgage-backed securities that would be paid. Obviously such a system lacked integrity, and we are paying a very steep price. Moreover, the politics of the situation is now encouraging homeowners (who gave their word to paying back the money they borrowed to purchase their homes) that it is OK to quit paying one’s mortgage in the case where the homeowner is “under water”—that is, where the value of the home is now less than the mortgage on the home.

Putting the system back in order is decep-tively simple: People have to start honoring their word. If they do, trust will materialize almost instantly. The interesting thing about it is that you actually create trust more rapidly if you fail to keep your word but you honor it, because this is always so surprising to people. If you’re straight with people—“I told you that I’d have this report done a month from now, but I know now that I’m not going to be able to and I apologize, but I’ll get it to you in a month and a half. Let’s have a talk about what I can do to clean up the mess I have caused for you.” If I then get the report to you in a month and a half, our relationship will be strengthened; but if I simply don’t keep my original word, trust will be lost.

Michael Jensen is the Jesse Isidor Straus Professor of Business Administration, Emeritus, at Harvard Business School. He is the founder and chairman of the Social Science Research Network, which brings “Tomorrow’s Research Today” to people worldwide. This interview is based on his paper, Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics and Legality, co-written with Werner Erhard and Steve Zaffron. The paper can be downloaded at http://ssrn.com/abstract=920625.




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orward-thinking leaders across a wide swath of industries have long leveraged their positions, knowledge and networks to drive social change. Bill and Melinda Gates, for example, launched their foundation to attack problems in global health care, devel-opment and education. And in 2016, Reed Hastings, CEO and founder of Netflix, created a $100 million educa-

tion fund that has already provided money to the United Negro College Fund and the His-panic Foundation of Silicon Valley.

Yet, there is a growing sentiment that busi-ness must do more.

One powerful voice in this cri du coeur is Pope Francis, who has called upon the “noble vocation” of business to serve as a catalyst for driving broader prosperity. “It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs,” he said in a 2014 speech. “Or that the few derive immense wealth from financial speculation while the many are deeply burdened by the consequences.”

The pope said that business can do more in three critical areas:• Elevating the economic condition of the

very poorest;

A 21ST CENTURY

MORAL MANIFESTOBusiness, media and NGO leaders,

inspired by Pope Francis, search for solid initiatives to improve the global

economy—and humanity.By Kelley Hunsberger

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“It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs. Or that the few derive immense wealth from financial speculation while the many are deeply burdened by the consequences.” —Pope Francis

• Providing meaningful work; and• Being good stewards of the environment.

The pope’s message of the moral impera-tive of modern leadership, served as inspiration for the Fortune and Time Global Forum held in December in Rome and Vatican City. Attend-ees included many of the world’s most influen-tial business, nongovernment, media and civic leaders, including Virgin’s Sir Richard Branson, IBM’s Ginni Rometty, Siemens’ Joe Kaeser and Lenovo’s Yang Yuanqing. The objective was to identify concrete, near-term initiatives the private sector could commit to and execute to serve the well-being of humankind and pro-mote economic growth, spreading its benefits more broadly.

Due in part to Insigniam’s commitment to achieving breakthroughs and inciting new thinking, several representatives from the com-pany were invited to participate in the event.

“The forum was an atypical opportunity for executives from some of the best com-panies in the world, as well as religious and government leaders, to come together and look at how business can make more of a contribution,” says Nathan Owen Rosenberg Sr., a founding partner of Insigniam. “Busi-ness has done more than any social program to elevate people out of poverty, but that PH

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is rarely acknowledged and is something worth noting. From the widest view you can take, business is by people and for people. As Cardinal Peter Turkson told us, ‘The human person needs to be the center of business.’ Its impact on the world is huge, and it can be for the good or for the not-so-good. This gather-ing was a chance for business leaders to look at how we could do something very good.”

COMMITTING TO CHANGEForum attendees spent much of their time in working groups where they sought to develop solutions to major world problems. Out of those discussions came The 21st Century Challenge: Forging a New Social Compact, an in-depth report presented to the pope that outlined more than 20 specific commitments companies can use to jump-start transformation, including:n Protect local savings/wealth. Companies

will actively engage with governments to discourage the illicit outflow of capital, especially from developing countries, and promote technology that reduces corrup-tion and broadens access to banking sys-tems. The private sector will also encour-age the development of innovative forms of insurance aimed at smaller enterprises to reduce risk and build local wealth.

n Ensure equitable energy access. Com-panies pledge to help create pathways in all the nations in which they operate that will provide plentiful access to affordable, lower-carbon energy.

n Develop a corps of 750,000 community health workers. The private sector will commit the resources required to provide 100 million children with modern front-line health care, especially in underserved rural regions in sub-Saharan Africa.

n Promote learning for the “new-collar”

economy. Companies will help eliminate the hierarchy of work that relegates hour-ly versus salaried and professional versus technical, and promote learning outside the traditional school environment. To help build a more inclusive workforce, they will work with schools to create a skills-based curricula, offer training and skills certification transferable from one com-pany to another, and focus on re-skilling workers as demand or technology evolves.

Scott Beckett, a partner at Insigniam, re-ports true engagement among participants in the working groups centered on financial and educational inclusion.

“What I saw in that room are people who are interested in how we can take commerce, business and free markets and create more and more opportunities for people to thrive,” he says. “There was no single person leading that conversation. It was an opportunity for everyone who wanted to be in it.”

One key point of discussion among all par-ticipants: the pressure on executives—CEOs in particular—to prioritize immediate returns on performance over the good of people. “The commitment to work against ‘short-ter-mism’ was one of the most important things that came out of it,” says Mr. Rosenberg, whose working groups focused on job cre-ation. “What I said in my working group is that it takes a CEO willing to go to his or her board and shareholders and say, ‘We’re going to run the company for the long-term benefit of our customers, shareholders, employees and communities. If that’s not the kind of company you want to be part of, then you should probably put your money somewhere else.’ I am not naïve and know there is a risk to saying that, but it is one of the answers, being honest about the purposes of the com-

“It takes a CEO willing to go to his or her board and shareholders and say, ‘We’re going to run the company for the long-term benefit of our customers, shareholders, employees and communities.’” —Nathan Owen Rosenberg Sr., founding partner, Insigniam

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pany, which includes more than simply a fair return to the shareholders.”

MAKING A DIFFERENCEThe commitments made during the forum are designed to be only the start of a conver-sation. Instead of leaving attendees with a singular next step, participants were encour-aged to forge their own path for progress.

Pope Francis ended the sessions with a rous-ing call to action: “I encourage you to continue the work you have begun at this forum, and to seek even more creative ways to transform our institutions and economic structures so that they may be able to respond to the needs of our day and be in service of the human person, especially those marginalized and discarded.”

While forum attendees all have different company stakeholders, concerns and com-mitments, Mr. Beckett believes “if you can point them toward a unified goal, they will all find their own ways to create and inspire change in the conversations they lead, the speeches they give, the policies they create and the business decisions they make.”

The forum was also intended to inspire business leaders not in attendance to take

similar actions. Insigniam partner Katerin Le Folcalvez, for one, is working to make the con-versation bigger by sharing the commitments made during the forum with clients and col-leagues. “People shouldn’t feel alone in their own willingness to impact things,” she says. “Business leaders have to acknowledge, and be responsible for, the power they actually have. If they are committed to impacting an area of society, they can do it.”

And Ms. Le Folcalvez says she challeng-es fellow attendees who have seats in the boardroom to spread the gospel as well. “It has to come to the agenda of people who actually make the decision of where invest-ment goes.”

Business leaders must be willing to share the commitments from the event and continue to follow up and follow through. “Otherwise it’s just going to have been a nice thing and not really make a difference. And I think that would be a missed opportunity,” Mr. Rosenberg says. He says he would also like to see more workshops to create a sense of community around this new social compact. “It’s important for people to work together on this.” IQ

Pope Francis during his audience with executives attending the

Fortune and Time Global Forum in Vatican City, December 2016



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IQBOOST

A less effective leader will attempt to fabricate inspiration by simply explaining what needs to be done and waiting for others to fall in line.

Truly inspiring leaders do not rely on force or persuasion. Instead, they enroll. By Jennifer Zimmer

nterprise-wide transformational initiatives cannot be forced from the top down. They can only occur when people throughout an organization are inspired to make change together, not because they have to but because they want to. A less effective leader will attempt to fabricate inspiration by simply explaining what needs to be done

and waiting for others to fall in line. But commitment to a cause cannot be demanded.

True leaders take a more effective approach: They enroll others in the transformational process. They motivate others to participate and collaborate, and help them feel ownership over a strategy or vision.

But exactly how can such enrollment take place? The answer lies in a series of conversations leaders must have. No single conversation is more important than the rest; none can be skipped. Leaders must work through them all, sometimes more than once.

1. Build the relationship: Ensure you have an authentic relationship and have built sufficient trust with the person you seek to enroll. This does not mean he or she has to like you. It simply means you have a mutual respect and understanding of commitments. 2. Create the possibility: The possibility is what is in it for the other person, not for you. Focus on what will inspire them to take action consistent with that possibility. With enrollment, you are in the other person’s world, so you must design the conversation around their bull’s-eye.

THE 5 CONVERSATIONS THAT CREATE AN ENROLLED TEAM

3. Describe the opportunity: People need to see clear pathways for accomplishing a goal. They need the process—the who, what, when, where and how—laid out for him or her. They need to see that it is feasible.

4. Generate the action: This conversation is all about extending the invitation. It should be direct. Tell the person you are trying to enroll how you would like him or her to participate or support your effort and offer them something—such as more data on the project—in return. Always set a deadline around the request.

5. Uncover possible breakdowns: There will always be facets of a project that do not go as planned. These possibilities should be addressed during an enrollment effort.

Ultimately, these conversations are what power transformations—not the raw expression of that power. IQ

Jennifer Zimmer is a partner with Insigniam.


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CHANGING THE GAME OF BUSINESS

How often have you heard, “It’s not personal; it’s just business”?

Business is intensely personal for our clients and customers, employees and their families, shareholders, and the people in communities and societies that we impact.

Business is a human enterprise—by and for people. People are not a means to an end; they are the end!

Business is an amazing human invention—the best game in town, or so we think. Let’s partner to transform the context of business to one of service, integrity, and creating value. Let’s be GameChangers and change the game of business.

A GameChanger fundamentally and sustainably transforms how we think, act, and approach business in the marketplace. GameChangers are audacious, are wide or deep in scope, have impact, pioneer new value, generate an appetite for the change, and alter the landscape.SM

© Insigniam Holdings LLC.



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