Books We Trust: Interviews with Influential Authors shares our recommendations for books within the field, and takes a closer look through conversations with their authors.

Books We Trust: Interviews with Influential Authors is a project of Charles H. Green’s Trust Matters blog.

Books We Trust: Interview with Frank Cespedes, author of Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling (Harvard Business Review Press)

Aligning Strategies & SalesThis week sees the publication of a new book I want to bring to your attention. It’s by Frank Cespedes, a professor at Harvard Business School, and an old friend from our mutual consulting days. The book is called Aligning Strategy and Sales, and it might have been called “The Massive Business Gap Sitting Right Before Your Eyes.” To use an overly simple athletic metaphor, the handoff from strategy to sales is the source of a great deal of lost value.

I hesitate to call it a revolutionary book – but you haven’t seen anything like it. It’s very important. Especially for those of you in sales, I recommend it.

Meanwhile, here’s Frank.

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CG: What brought you to this topic of aligning strategy and sales?

FC: My academic research always focused on go-to-market elements, including channels and sales management. Then, when I left academia and ran a business for 12 years, I had to meet payroll and sell. Then, after getting lucky in business and returning to academia, I taught Strategy for a few years. Despite decades of attention to planning, there is remarkably little research about how to link strategy with the nitty-gritty of field execution, especially sales efforts. If the gods of strategy even mention sales, it’s typically advice from a fortune cookie: get incentives right, or work as a team, or re-organize. In other words, do good and avoid evil.

CG: That sounds about par for the course.

FC: Conversely, there’s a vast literature about selling. Much is anecdotal, but some—Neil Rackham’s work is still the best, in my opinion—is grounded in good research. However, this advice is misleading in a different way: the consultants and trainers who make their living this way tend to promote the universal applicability of a particular selling methodology (again, Neil is an exception), and they treat sales in isolation from strategy. The result is that much sales training has a perverse effect: people work harder but not necessarily smarter. Selling, no matter how clever and creative, can’t generate sustained returns if it’s not linked to good strategy. That may sound obvious, but it’s not been discussed actionably.

CG: Let me get this straight: you’re saying there’s a big fat chasm of under-performance in business because strategy and sales don’t align? Just how big a deal are we talking about?

FC: None of this would matter much if de facto alignment were the norm. But it’s not. The research results are cited in my book and, as they say, they speak volumes. Studies find that few strategies—some research indicates less than 10%–are executed successfully and that, on average, firms deliver only 50-60% of the financial performance that their strategies and sales forecasts promise. That’s a lot of wasted money and effort. Ever wonder why I-Bankers and other capital-market analysts tend to be a cynical bunch? Companies regularly over-promise and under-deliver in their espoused strategic goals and sales forecasts.

CG: So, why does this happen?

One reason is that the strategic planning process in firms generates a disconnect with the requirements of sales decision making. About two-thirds of companies treat strategic planning as a periodic event, typically as part of the annual capital-budgeting process. Companies tend to do plans by business unit or P&L unit, even when sales sells across those units. The average corporate planning process takes an estimated 4-5 months per year. While this is going on, the market does what the market will do, and sales must respond issue by issue and account by account. In other words, even if the output of planning is a great strategy (clearly, a big if), the process itself often makes it irrelevant to sales executives.

CG: OK, I get the time disconnect. Give us a simple real world example of how all this can go wrong?

FC: Here’s an example I discuss in more detail in the book. It’s unfortunately representative. For many years, a company I’ll call Document Security Management (DSM) had a great business in retrieving, shredding and/or securely storing organizations’ documents. Executives and their assistants loved its one-stop-shop value proposition, and DSM’s sales force cultivated good relationships with them. DSM provided a complete service and their customers could then dedicate their high-paid lawyers and other professionals to better uses. By the early 2000s, however, cheaper digital storage technology, especially the cloud, changed the market. DSM’s CEO was determined not to be fatally “disrupted” by an emerging technology, and DSM introduced its own cloud-based storage and directed the sales force to bundle it with traditional services.

The results were awful. Many of the salespeople lacked the technical knowledge to work with clients’ IT departments. Pricing was a problem, because the physical and digital services had very different cost structures. And in spite of repeated training efforts, reps often sold only the lower-priced digital service, not the bundle. Contract renewals for traditional services fell sharply, as did profits. So DSM modified its sales compensation plan, but then digital sales declined and emerging competitors established strong footholds with multiyear contracts, effectively locking DSM out of accounts as storage increasingly migrated to the cloud. Ultimately, DSM spun off its digital unit and remains a much smaller company.

What’s the problem here? Surely, you can’t disagree with the basic strategic intent. Anyone who has absorbed the lessons of Clay Christensen’s work on disruptive innovation would find it hard to argue that DSM should not have responded to emerging market reality. That’s a recipe for becoming yet another case study about market myopia. The ultimate problem was senior leaders embarking on a strategy without considering the field realities facing the people key to executing that strategy at customers. And this occurs, very often, in many situations: M&A situations where the investment thesis rests on cross-selling or packaged solution bundles, entering a new segment with different buying processes, introducing a new product, scaling a business beyond early adopters, or dealing with new entrants.

Many senior executives, years removed from actual customer contact, are often blithely unaware of the embedded strategic commitments that sales activities daily represent. For example, executives can worry prudently and diligently all they want about disruptive innovators; you need a sales force aligned with strategy to do something about it. Otherwise, all you’re doing is worrying in a currently respectable manner.

CG: Wow. So, where do these disconnects happen? The subtitle of your book is “The Choices, Systems, and Behaviors that Drive Effective Selling.” What are they?

FC: The basic idea is this: In any business, value is created or destroyed in the marketplace with customers, not in planning meetings or training seminars. The market includes the industry you compete in, the customer segments where you choose to play, and the buying processes at customers that you sell and service. Those factors should inform strategy and required sales tasks—what salespeople must be good at to deliver and extract value and so implement your strategy effectively.

Then, the issue is aligning selling behaviors with those tasks. Managers basically have three levers to do that. People: who your salespeople are, what they know, how you hire and develop their skills so they can execute your strategy’s tasks, not those of a generic selling methodology or what they learned at another firm with a different strategy. Control Systems: performance management practices, including sales compensation and the metrics used to measure effectiveness. Sales Environment: the company context in which sales initiatives get developed and executed, how communication works (or not) across organizational boundaries, and how sales managers (not just reps) are selected and developed.

Ultimately, selling effectiveness is an outcome of these factors, not only the result of heroic efforts in the field. And this has very practical implications. If you’re a sales manager, this way of thinking may change how you select and use available selling resources, how you develop your people, and how you look at your own career and development needs. And if you’re a CEO, strategist, or Board member evaluating sales numbers, it can help you to avoid being a sucker for glib generalizations about selling–and, believe me, as someone who works with PE firms and has served on Boards, it happens.

CG: Can you say more about that? It seems that we hear daily about how social media and online technologies are “disintermediating” sales forces and transforming how companies sell.

FC: Yes, based on the business press, you could easily assume that proficiency with social media or digital marketing now determines business success. But consider the basics: US companies spend, annually, more than 3X on sales forces than they spend on all media advertising, 20X more than the total spent on digital marketing, and more than 100X what they currently spend on social media ads. Whenever I see those numbers, I always think about Mark Twain’s comment: “If you’re gonna’ put a lot of eggs in one basket, then keep your eye on that basket!”

CG: But what about all the claims of the Death of the Salesman? Just four years ago this was a big headline in the sales industry.

FC: It’s simply not true that sales forces are being replaced by ecommerce, social media, or other elements of the internet. According to US Bureau of Labor Statistics, the number of people in sales occupations in 2012 was virtually the same as in 1992—before the rise of the internet. And this almost certainly understates the real numbers: as you know, business developers in many firms, especially professional services firms, are called Associates, Partners, Vice Presidents or Managing Directors, not placed in a “sales” category for reporting purposes.

In fact, if you peek behind the server farms of online firms themselves, you find face-to-face and inside sales organizations as the engine of profitable growth. At Groupon, over 45% of employees are in sales; at Google, it’s about 50%; and at Facebook, the sales force’s ability to translate “likes” into advertisers will make or break that company’s valuation going forward.

The internet is realigning sales tasks. For example, relatively few cars are actually bought online. But about 90% of Americans research the purchase via Edmunds.com or other online source before going to a dealer. The average car shopper now spends more than 11 hours online and only 3.5 hours in trips to dealerships. But this makes selling more important, not less, because it puts more pressure on the sales person’s value-added during the shorter sales experience. Smartphones, online reviews, social media blogs—all these tools are having a similar effect across many buying/selling situations.

But, perhaps focused on technology or the media buzz, many execs ignore the implications for sales tasks and the links between Sales and other parts of their companies that deal with customers before and after actual selling takes place. Don’t believe the hype: salespeople, and the customer trust they do or don’t generate, are not becoming obsolete. With Paul Nunes of Accenture, I wrote an HBR article over a decade ago—at the height of another hype cycle when most commentary was predicting (in fact, assuming) disintermediation of sales forces. The article attracted a lot of attention, most of it very negative. We were labeled as reactionaries, oblivious to ‘disruptive innovation,’ and so on. But look at empirical reality years later: they were wrong, and we were right.

CG: What’s the biggest, over-arching problem or issue you see in the field of selling?

FC: Selling is probably the most contextually-determined set of skills in a company: what works there does not necessarily work here. There’s now a century of research about salespeople. Sales talent comes in all shapes and sizes, because selling jobs vary hugely in the kind of product or service sold, price points, the customers a rep is responsible for, the numbers and types of people contacted during sales calls, the relative importance of technical knowledge, and so on—in other words, selling effectiveness depends on the particular sales task. You wrote an excellent piece about this last year (“Half of What You’ve Learned about Sales is Wrong,” TrustMatters, April 15, 2013), and I agree with you: one size doesn’t fit all.

Yet, sweeping generalizations and outright stereotypes about “sales personalities” and the alleged core “traits” of effective salespeople still dominate the field. Why? The novelist Saul Bellow liked to explain the difference between ignorance and indifference this way: “I don’t know and I don’t care.” Many executives and sales managers don’t know about this research. In fact, as others have pointed out, many sales managers have a classic cloning bias: they hire in their own image. And many trainers and consultants just don’t care: they have a hammer, and everything looks like a nail.

In my experience, these generalizations are destructive and not just abstractions. They encourage quick-fix approaches that substitute for more fundamental sales and strategy issues confronting firms. Those approaches may be quick but rarely a fix. The stereotypes also blind managers to the interactions between strategy, sales tasks, and selling requirements that they are, presumably, paid to manage.

CG: OK, time for some key takeaways about aligning strategy and sales. Let’s focus first on the Strategy side.

FC: I don’t think I’m saying anything truly original about effective strategy formulation. But I don’t apologize for emphasizing the fundamentals because, for various reasons, executives and sales people tend to forget them. Many companies confuse strategy with things like purpose, vision, or values. That’s bad news for your firm and your career. It’s the responsibility of those crafting strategy to insist on those distinctions. Any organization’s strategy, purpose or vision cannot be independent of how the world changes. If you simply cling to those abstractions, you’re just stubborn, not principled, or you may believe your aspiration is just too big to fail; it’s not.

Then, you must communicate what your strategy means for market priorities, who are and are not your customers, and the implications for sales tasks. Most firms don’t do this—either because leaders are not clear about strategy or they worry this information will get to competitors. If the issue is the former, then clarify strategy: it’s hard for people to execute what they don’t understand. And if the issue is the latter, you have bigger problems to worry about than competitors reading your strategy documents if your salespeople don’t understand them.

CG: And the key takeaways for those carrying a bag or managing a sales effort?

FC: First, as always, People: You need disciplined hiring that’s linked to your strategy, focused and customized training initiatives, and on-going attention to broadening salespeople’s skills as markets and sales tasks change. Sorry, but almost all serious research about people in business underscores these fundamentals and debunks glib prescriptions about talent acquisition.

Second, Performance Reviews are still grossly underutilized levers for influencing behavior in many sales organizations. Busy managers treat them as drive-by conversations that are really about compensation, not review, evaluation, and development. But so much of strategy – sales alignment is only visible and manageable through on-going account and performance reviews. This is a trainable skill and there’s lots of room for improvement in most sales forces when it comes to conducting performance reviews.

Third, Perspective: Strategy is about confronting external market facts, and customers ultimately determine what are relevant selling behaviors today, not yesterday. It’s not the responsibility of the market to be kind to your strategy or current sales model. It’s your responsibility to understand the evolving market and its sales tasks. And you can’t do that from headquarters, the branch office, or solely through data analytics. A character in a John le Carre novel says something that every sales leader and C-suite executive should engrave on their desk or tattoo on some prominent body part: “A desk is a dangerous place from which to watch the world,” especially the sales world.

CG: Frank, this has been great. I’m still kind of amazed that there is such an enormous opportunity that’s been relatively overlooked; but there it is, and you’ve laid it out very clearly.

FC: Charlie, it’s truly been my pleasure. You’ve made TrustMatters a wonderful, straight-shooting medium for people to engage about sales. I thank you for the chance to add to that dialogue.

Books we Trust: Jacob Morgan’s The Future of Work

Future of WorkJacob Morgan is the author of the newly released, The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization (Wiley). He is also the principal and co-founder of the future of work consulting firm Chess Media Group and the FOW Community, an invite only membership community dedicated to the future of work and collaboration.

I first met Jacob a few years ago before he started working on his book The Collaborative Organization, previously reviewed on this blog. Jacob has a new book coming out called, The Future of Work which promises to get readers to think differently about how they work, lead, and build their organizations. Most of us get that the world of work is changing but many of us still don’t realize why it’s changing, how exactly it’s changing, and what we need to do about it.

The book is very well-researched (I read it in manuscript) and has some great corporate stories. Its release date is today, September 2.

Charlie Green: Jacob, your previous book was endorsed and supported mainly by CIOs, CMOs, and folks that one could say lean more towards the IT or technical side of things. That’s quite a stark contrast to this book, where you’ve lined up impressive testimonials from CEOs and respected business leaders. How did you get these guys involved and why did you up the ante?

Jacob Morgan: Getting CEOs was challenging. I started the process quite early on, but the CEOs that endorsed this book (from companies like KPMG, SAP, Intuit, Whirlpool, and others) are all strong believers in changing how work gets done. They all their own initiatives along these lines. My previous book was also more geared towards a specific audience; mainly those who were running collaboration efforts or were interested in collaboration. It wasn’t a broad book that someone might see at the book store and say, “Ah, I need to read that.”

The Future of Work is much more appealing to a broader audience, I wanted to write something that was relevant to employees and managers alike. We all have or need jobs which means that we all need to be thinking about the future of work!

CG: I’ve heard you say numerous times that “work as we know it is dead.” What exactly are you referring to? Clearly we still need to work.

JM: What I mean is that the common notions that employees are cogs, managers are slave-drivers, and that work is drudgery, are all dead. By the way, these are actual synonyms that you will find if you look up the words in a dictionary. We spend more time working than doing anything else in our lives so it’s about time that we start thinking differently about work.

CG: Well then, just what does the future of work actually look like?

JM: I get asked this question a lot. It obviously includes a LOT of different things. But broadly speaking on the employee side we will see things like flexible work, freelancing, decreased employee tenure, and a shift towards focusing more on projects and tasks vs career paths. For managers we will see greater use of collective intelligence, an acceptance of vulnerability in the workplace, and mindset change from “employees should serve managers” to “managers should serve employees.” Organizations will become more distributed, they will shift to the cloud, and will have to measure success by more than just profit.

CG: I’m sure some companies out there are thinking, “things are going fine for us, we’re making a ton of money, no need to do anything differently.” What would you say to do those companies?

JM: I don’t think those companies realize what they are talking about. What’s going on today is unique. It’s not just the fact that change is happening that’s important, it’s the fact that the rate of change is increasing. That means that being a late adopter is tantamount to being out of business.

There are five trends driving the changes we are seeing today: globalization, millennials, new behaviors, technology, and mobility. We’re also seeing a complete shift in who guides and dictates how work gets done. This used to be very top down but now employees are starting to drive the conversation. I always tell companies, “if your organization doesn’t think about and plan for the future of work, then your organization has no future.”

CG: Jacob thanks for sharing with us. The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization is available on Amazon and wherever books are sold.

JM: My pleasure!

 

Relationships or Metrics? I Haven’t Got Time for Both

I heard it again today. I hear it in almost every workshop I do, and in every – bar none – big company sales organization I work with.  It sounds like this:

I believe in trust and relationships, but it’s a luxury problem. Here in the real world, the pressure’s on. I don’t have time to do all that nicey-nice stuff, I’ve got to hit my numbers. And even if I did have that kind of time, my clients don’t. The days of easy-going ‘what’s keeping you up at night’ conversations are over – they’ve got as much pressure as I do, and maybe more.

I just don’t have time to build trust-based relationships. Hopefully, someday I will.

But with that attitude, that day will never come. Because trust-based relationships don’t come when you’ve got plenty of time – they’re forged when you don’t have time, and have to trust someone. The whole relationships-vs.-metrics debate is based on four false beliefs. When will you get rid of them?

Myth Number One: You Don’t Have the Time

Maybe you’re old enough to remember an old ad for Fram Oil Filters: “You can pay me now – or you can pay me later.” It stuck because it rang very true – if you refused to pay for a cheap oil filter, you’d end up paying for much more expensive engine repairs later.

It’s the same here. Every phone call, conversation and meeting that you cut short to “save time” puts a label on your head. The label says, “I’m a transactional sales guy; I will never invest in my customer, and I’ll blame you for being the busy one.”

As Aristotle said, you become what you practice. If you never take time for relationships, if all you do is transact, then you become a transactor. And nobody suddenly decides one day out of the blue that they really want to have a trust-based relationship with someone who’s been transacting with them since forever.

The truth is, a little time taken now, up front, results in far more efficient use of time down the road – even just next month. Trust-based relationships aren’t just more effective, they’re more timely and less costly.

You do have the time; you’re just constantly refusing to invest it for returns in future time.

Myth Number Two: Your Client Doesn’t Have the Time

How do you know? Because they told you so? Get real. What client is about to tell you they’re not busy? They want to control their time with you, not give control over to you.

And the same logic applies: our customers are as short-sighted as we are, constantly failing to invest a bit of time up front for future gains of time. So they tell you they don’t have the time, and you believe it, and the two of you race off so as to cut the elapsed time of your transaction. And then do it all over again the next time you meet.

They have as much time or as little time as you do; and if neither of you breaks the vicious cycle, the cycle will stay unbroken.

Who should break it? That’s easy – you should.

Myth Number Three: Trusted Relationships Take Time to Create

The truth is, people form strong impressions of trust and relationship very, very quickly. Initial impressions get formed in much less than a second.

Think about someone you trust. If asked why, your first thought is not, “our trust has grown over the last 6 years.” It’s far more likely something like, “One day we were talking about XYZ and he said an amazing thing…ever since…”

Because trusted relationships are step functions, not continuous curves. They are based on events, moments, instances. Trust gets created in those moments. If you never let yourself be open to those moments, it will never happen.

Trust doesn’t take time. The only sense in which it does is the creation of a track record. All qualitative aspects of trust take virtually no time at all.

Myth Number Four: Relationships are Built on Quantity of Time

Wrong. Relationships are built on quality, not quantity. It’s true with your dog.  It’s true with your five-year old child. And it’s equally true with your client.

The quality of your time matters far more than the quantity. An hour on the golf course or hoisting a beer doesn’t hold a candle to sincerely asking a difficult question, and conveying to your client that you care about the answer, and that you’re a safe haven in discussing it.

A lot of the “I don’t have time for relationships” line is frankly a cover-up for fear of customer intimacy. Invariably, the workshop participants who tell me they haven’t got time are the same workshop participants who tell me that customer intimacy is too risky, and potentially unprofessional. Meanwhile, their compatriots who understand the qualitative basis for relationships are selling circles around them.

Haven’t got time to form relationships and still meet your metrics? If that’s what you’re saying, you don’t understand how to meet your metrics. In any medium timeframe, the person with the relationships will outperform on all business metrics the person without the relationships.

And being busy’s got little to do with it.

Agile Selling: Q&A With Jill Konrath

Agile SellingJill Konrath has made a name for herself as one of today’s top thought-leaders in sales. A well-known author & speaker, Jill seems to be just about everywhere these days, and with good reason.

I’ve known Jill for years. A smart, driven and straightforward woman, Jill epitomizes the best of the Midwest – she lets you have the truth between the eyes, with good intent and a generous spirit. She also knows just about all there is to know when it comes to selling. Her most recent book, Agile Selling, represents a further evolution of her thinking. As I note in the interview, it reminds me in some ways of The Trusted Advisor.

We sat down recently to discuss her new book on how when it comes to sales, you can never stop learning.

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CG: How did you come up with the idea for Agile Selling?

JK: Shortly after SNAP Selling came out, tons of salespeople said to me, “This is great info on selling to today’s crazy-busy prospects. But I’m frazzled too. Just like them. How can you help me?”

Initially, I thought it was a time management problem. But, after pondering it awhile, I realized it was an information management problem. Too much was changing: customers, products, buying cycles, the economy, competitors. It was literally impossible to keep up.

When I thought about it, I realized that rapid learning was one of my core competencies. And, I’d never even talked about it before. It was just who I was.

Then, when I thought deeper about it, I realized I’d developed innumerable strategies over the years to address the fears and challenges you face when you’re trying something new. In researching the book, it was fun to discover that the approaches I’d stumbled on were now verified by neuroscience research.

CG: This book struck me as very similar to Trusted Advisor – a ‘wisdom’ book that can only be written after subject-matter and process mastery. It’s fundamentally about consulting. Comments?

JK: Personally, I’m amazed that it took me so long to “see” some of these things that are now blatantly obvious to me. They are truly the meta-skills that enable subject-matter and process mastery. Yet no one really talks about them. That’s why so many people don’t reach their potential.

And, you are so right that selling is really about consulting. Nothing more, nothing less. It’s about maintaining a singular focus on your client. Where are they trying to go? How can you help them get there? What value will they get from working with you?

Unless you do that today, you won’t get clients. Selling is truly about service.

CG: How far can you get in sales without coming to grips with some of these agility issues? I assume the answer is getting ‘less and less’ as the pace of change accelerates – is that true?

JK: Learning agility issues start from Day One of any new position. At that moment in time, you’re thrown into massive overwhelm, trying to learn all sorts of new things.  And, unless you have a process for doing that, it will take you longer than necessary to become proficient.

Most people don’t realize there are rapid learning practices they can use to quickly master new information or pick up skills. I’m talking about strategies like dumping, chunking, connecting and more.

Plus, when you take a new sales position, you need to take an immediate 30-day deep dive in order to develop situational credibility. Unfortunately, most people don’t know how to maximize that time frame. Instead, they muddle around, hoping to absorb everything by osmosis.

In reality there are certain things that need to be learned first – which I outline very clearly in Agile Selling.  And, if the company doesn’t have the info you need (which many don’t), there are fast strike ways to get it.

CG: What about dealing with all the changes? Does that cause more agility issues?

JK: Absolutely. In a world of lookalike products and services, our expertise is primary differentiator. Essentially that means we can never stop learning.

And, those who learn faster than others will have a serious competitive advantage.

CG: On the face of it, this book is an “advanced” book on selling.  Does that mean a newbie can’t read it? What advice would you give a relatively new salesperson on reading this?

JK: Funny you should ask that. Too me, it’s a foundational book that all sellers should read. Here’s what I’d say to a new person:

“These are the underlying skills of all top sellers. They’re not visible on the surface, when you observe or talk to them.

“But this is what’s at their core.  It’s about how they learn, deal with challenges and transform themselves into an invaluable resource.

“If you focus on becoming an agile seller at the onset of your career, you will be in high demand – regardless of the direction you choose to take in your life.”

I think Agile Selling will help anyone who wants to shorten his/her path to proficiency.

CG: This book strikes me as out of sync with what’s usually written in sales books these days – and beautifully so. It’s about the art and craft of sales, not about the mechanics and plumbing. Is that how you see it?

JK: It’s totally out of sync with other sales books. Nobody is writing about this critical meta-skill of agile learning.  And thanks for your kind words too.

To me, Agile Selling is about “being” a top performer. It’s about the mindset that enables people to thrive when they’re in the midst of change. It’s a skill set about being able to quickly assimilate lots of information or to pick up new skill. It’s also a discipline about creating an environment for success.

The more you embrace agile selling strategies, the higher your likelihood of short-term success and long-term mastery.

Insight Selling: A Q&A with Author Mike Schultz

Insight SellingIt’s no secret that I’ve been a contributing author at RainToday for many years. In that time, I’ve had the opportunity to collaborate and connect with many thought-provoking professionals.

Last year, I had the privilege to sit down with Mike Schultz, the founder and publisher of Rain Group, and talk about their 2013 report, “What Sales Winners Do Differently.”

Recently, Mike and I sat down again and discussed his new book, Insight Selling: What Sales Winners Do Differently, that delves into this same topic in further depth. After reading the book cover to cover in a matter of hours, I was thrilled to get further insight and chat about his findings.

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CG: The sales world has changed dramatically over the past several years. There’s a lot of conflicting advice out there on what works and what doesn’t. In doing research for Insight Selling, what strategies or tactics did you uncover that work today?

MS: Since articles like “The End of Solution Sales” and “Selling is Not About Relationships” were published in by the Harvard Business Review, there’s been a lot of disagreement in the sales world about what’s working and what’s not. We decided to study what was actually happening.

We wanted to find out what the winners of sales opportunities do differently than sellers who came close but ultimately came in second place. So we studied over 700 B2B purchases made by buyers who represent $3.1 billion in annual purchasing power. We found that winners sell radically differently than second-place finishers and that winners exhibit a specific combination of behaviors to achieve better outcomes than second-place finishers. We found that sales winners:

1. Connect with buyers personally and connect buyer needs with their solutions.
2. Convince buyers they are the best choice, that the risks are worth taking, and that they can achieve strong ROI.
3. Collaborate with buyers by bringing new ideas to the table, delivering new insights, and working with buyers as a team.

And we found that solution sales is not dead and that relationships are still important. Sorry, HBR. Solution sales and relationships need to evolve and they are just a piece of the whole, but they’re far from dead and sellers who dismiss these concepts outright put their sales results in grave danger.

CG: What surprised you most about your research findings?

MS: We studied 42 factors that were common pieces of advice given to sellers in order to determine what sales winners do differently.

In our training programs, we poll our audiences asking them to guess what they think sales winners do most differently than second-place finishers. They usually pick things like, ‘was trustworthy,’ or ‘listened to me,’ or ‘understood my needs,’ and so on.

They rarely pick ‘educated me with new ideas or perspectives,’ which, according to buyers, was the number one factor separating winners from the rest. And they rarely pick ‘collaborated with me,’ which was the number two factor most separating winners from second-place finishers.

With this last point, there’s been a lot of buzz that the new trend in selling is to challenge buyers. Our training participants often say to us, “Isn’t the word ‘collaborate’ more of an antonym than a synonym of the word ‘challenging’?” Perhaps. So it’s not only surprising to our training participants but also to us, because these two factors are not what we would have guessed to be what most separates the winners from the rest.

Now, this doesn’t mean sellers who win don’t say what they need to say in order to help the buyer. But they don’t do it standoffishly. So, what sellers think buyers want and what buyers actually want are two surprisingly different things.

CG: In the book, you introduce a three level model that I love – Connect, Convince, Collaborate. How does this change the way people need to sell?

MS: With connect, even though prevailing thinking in sales has been focused on uncovering needs and crafting compelling solutions to solve those needs, sellers still fall into the pattern of not listening, not investigating, and not tailoring what they sell to the needs of the buyer.

With convince, it’s been drilled into the minds of so many sellers not to pitch or sell anything too strongly that they are unwilling to take a point-of-view or advocate for a particular idea or strategy.

With collaborate, too many sellers have been trained to think of sales as me-versus-them. Or to just try to find ways of selling what they offer. Or simply don’t engage deeply enough. What’s important is that these are the things that buyers value, so they’re the things sellers need to do.

CG: You break down insight selling into two applications – interaction insight and opportunity insight. Can you explain the differences between the two?

MS: When sellers introduce buyers to ideas they need to know about we call it opportunity insight. This is when the seller knows a buyer should be doing something and the buyer has little or no idea about it until the seller brings it up.

Now, I’m not saying go straight to the pitch—there’s a rhythm to getting there—but fundamentally, sellers need to get the passionate beliefs they have in their heads about certain ideas into the buyers’ heads.

The second application is interaction insight. This is when sellers ask disruptive questions, push buyers out of their comfort zones and encourage them to think differently. In this case, buyers often come to new insights by working collaboratively with the seller guiding them.

Sellers bring ideas (opportunity insight), and spark ideas through how they lead their conversations (interaction insight).

CG: But the buyer has to trust you if they’re going to accept your insight. Don’t you agree? They can get information anywhere, but when they trust the person it’s coming from it makes a big difference.

MS: Absolutely. You can’t succeed with insight selling without trust. When buyers trust sellers they:

1. Depend on them
2. Listen to them
3. Give them access
4. Spend time with them

The more a buyer trusts you the more willing they are to listen to your ideas and to implement them. Without trust, insight selling is very difficult to do.

CG: Increasingly we hear how buyers don’t trust information from corporations and sellers – that they trust information from third parties, their peers, or even strangers. How can a salesperson get around this?

MS: Well, Charlie, I’d say they should all listen to you.

There’s not much an individual seller can do to restore someone’s faith in corporations, but they can certainly build faith in them as people and can influence strongly whether a buyer perceives their company to be trustworthy.

When a buyer meets a seller, on the one hand they bring with them a modicum of skepticism about the seller’s competence and motives. On the other hand, when a buyer meets a seller for the first time, that seller has a blank trust slate.

It’s up to the seller to bring their “A” game and demonstrate competence and behave overall in ways that the buyer forms the impression that the seller is trustworthy. Every seller is essentially playing on the same playing field of trust. It’s what they do on that playing field that matters.

CG: What’s the biggest misconception sellers have about trust and where do sellers often fall short when it comes to establishing and maintaining trust with buyers?

MS: Everyone thinks they, themselves, are competent. Amazing, even. But they’re not. The concept is called, in academic circles, “Illusory Superiority.”

What does it mean for trust? Sellers overestimate their competence and buyers don’t. Proving they are competent and have integrity – that they are worthy of trust – is a steeper hill than many sellers think.

Insight selling plays in here. You need to get people to trust your ideas, your advice, and your ability to get things done for and with them. Until they have experience with you, the well of trust you build won’t be very deep. This is why collaboration is so powerful, because it creates shared experience where buyers can be exposed deeply to your competence while spending time with you. At the same time, spending time builds intimacy. All of it leads to trust.

If you want to learn how to sell like winners do, pick up your copy of Insight Selling today. If you order by May 10, RAIN Group has some great bonuses for you. You’ll receive the exclusive expert interview series What it Takes to Succeed in Sales Today with myself, John Jantsch, Jill Konrath, Andrew Sobel, and more along with 5 lessons from Insight Selling and RAIN Selling Online training programs. You’ll also be invited to join Insight Selling author, John Doerr for an exclusive webinar, What It Takes to Become an Insight Seller. Plus, RAIN Group is donating their portion of book sales during the launch to the American Heart Association to support congenital heart defect research (learn why here). So go order your copy today. Mike and John are the real deal.

The Impact Equation: New Book by Julien Smith and Chris Brogan

Yesterday was the official publication date of Chris Brogan and Julien Smith’s new book, The Impact Equation: Are You Making Things Happen, or Just Making Noise?

They are doing some cool promotion for the book; check it out on Julien’s site.  Meanwhile, I wanted to get out the word and give readers an early quick review, since I pre-ordered it and downloaded it to read yesterday.

It’s a very good book, first of all.  I have always had a lot of admiration for Julien and Chris, ever since meeting them at the Trust Summit in New York three years ago, shortly after their best-seller Trust Agents had come out.

This book reminds me why I like them so much, and why I get so much out of them every time I interact with them.

The Structure

Chris and Julien have an obvious flair for being cutting-edge social media communicators; so much so that it’s easy to overlook that they are serious subject matter masters. The subject they bite off here is pretty aggressive – how an individual can have an impact in today’s emerging business world.

This is a non-trivial book; it’s way beyond how-to, and will provoke your thinking on many dimensions, if you let it.

The book has a big picture structure:  think of two axes with “impact” on one dimension, and “plan” or “organization” on the other.

The “Impact” part of it I think of as coming mainly from Julien: they’ve got a very clever 5-part acronym (CREATE) which deconstructs the components of Impact. They are: Contrast, Articulation, Reach, Exposure, Trust, and Echo (echo).

Expressed as an equation, it is: I = C x (R + E + A + T + E).

Using an equation is a nifty idea (think the Trust Equation); it gets you thinking about relationships, magnitudes, and interactions. Very useful stuff.

The other dimension I think of as coming more from Chris: Goals, Ideas, Platform, and Network. Chris has a knack for organizing the world in Big-Picture, but very practical and provocative ways.

Making It Work For You

Just like Chris and Julien, these axes form a powerful combination. The book shows you how to think about your Impact in each of those critical areas (Goals, Ideas, Platform, Network).  And it’s  loaded with practical advice.

But that’s jacks for openers. What I really love about Julien and Chris (and I’m hardly alone in this) is that both are about as genuine, real, and sincere as you can get. Their whole approach to doing business reflects this. Their business strategy is a human business strategy.  The point of social media is to serve people, not vice versa.

And it works.  They are prime examples of it themselves, which is yet another reason the book is a delight.

I hope they sell a ton of books, they deserve it.

 

 

 

 

 

Books We Trust: Fixing the Game, Roger Martin

This is the ninth in a series called Books We Trust.

A devastatingly important book was published last year, one that I think got lost in all the hue and cry of the market crash. I want to do my bit to fix that.

The book is Fixing the Game, by Roger Martin. Roger is Dean of the Rotman School of Management at the University of Toronto. Named the 6th top management thinker in the world by Thinkers 50 in 2011, his ideas are as clearly articulated as they are broadly based. Fixing the Game is his 6th book.

Capitalism and Major League Sports: Fixing the Game

Charlie Green: Roger, this strikes me as a huge book in management theory, and it reads beautifully. But it has not sold as well as it deserves. Do you agree?

Roger Martin: That is hard to say. It is a policy book more than a self-help or methodology book, so that has a somewhat smaller audience I think. I was disappointed that the sports press didn’t take notice! I gave them a lovely bouquet and they largely ignored it. But policy makers and in potential pension fund managers have taken lots of note.

Charlie: That’s good to hear. About the sports press, you start out with a great metaphor. The NFL has outperformed Major League Baseball on every dimension. That’s because football has been run for the fans, while MLB was run for the owners and players. In the long run, everyone wins if you manage for the fans.

The analogy in business would be to serve the customer. But rather than do that, as Peter Drucker suggested, we have bought into the shareholder value view of the world. We run companies for the owners and players, not the fans. And you show with real data – real companies like Google and Cisco, decades of shareholder performance across all industries – how this approach has failed.

We have fundamentally, basically, gotten it wrong. And we need fundamental, basic fixes.  Is that right? And where did we first go off the rails?

Roger: We started off the rails with an innocent-sounding theory by way of a paper by Mike Jensen and Bill Meckling in 1976.  It argued that we should align the interests of managers and shareholders by giving managers stock-based compensation. The simple and compelling idea was that with stock-based compensation if shareholders do well, so will managers and if shareholders do badly, so will managers.

That produced perfect alignment – or so we thought. Unfortunately, it had an unintended consequence of focusing management on the firm’s stock price rather than its real operations.

There are two important markets in the life of a firm – one is the real market in which it produces real products/services which they sell to real customers who pay them real money and they earn a real profit or loss. The other is the expectations market in which investors imagine what will happen in the real market in the future and on the basis of that make a decision to buy or not buy the firms stock – which results in a stock price.

Before stock-based compensation, the real market and the expectations markets were largely separate; with stock-based compensation, they became tightly linked.

There is a parallel in the world of sports. In the NFL, teams play a real game with real passes and runs, field-goals and touchdowns.  There is a real score with a real winner and a real loser.  There is also a linked expectations market – betting on football. In this game, the betters form expectations about what will happen on the field on the coming Sunday and bet accordingly. To balance the betting on either side of the game, the book-makers create a point spread which gives points to the underdog.

The point spread is the exact analog of a stock price. It is the level that results in equal money being wagered above and below the stock price/spread.

Charlie: The sports metaphor continues. Bettors on a game bet the spread; but we’re horrified if players play for the spread, not the game. In business, however, we’ve gotten to the point where management is incentivized by the spread – not the real game. Is business really a casino in that sense?

Roger: It has become one – and not for the better of the world, that is for certain.

In football, we know that teams can’t keep beating the spread forever. As they do well against the spread, the spread widens until the team will no longer beat the spread – as happened to the 16-0 New England Patriots. They beat the spread the first 8 games of the season and then went 2-6 against the spread while they won the remaining 8 games of the season on the field.

Stock-based compensated executives figured this out. They could only drive expectations and with them the stock price up for a relatively short period; then expectations would come crashing back down. So their personal profit-maximizing route was to drive up expectations until the breaking point and then get out before the expectations come crashing down – and then do it again and again.

That has made the market a casino and the CEOs are the house: they always win.

Charlie: Haven’t there been some warning signs along the way?

Roger: There were many – all ignored. The first was subtle. It had to do with beating analyst earnings expectations.

During the late 1980s and into the beginning of the 1990s, large American public companies met or beat earnings expectations 50% of the time – which is what would be expected. But by the mid-1990s, they were beating expectations 70% of the time, which was only possible only if CEOs and CFOs were manipulating expectations and earnings.

Then we had the dot.com bubble and bust, driven by option compensation. Then we had massive accounting fraud (Enron, WorldCom, Adelphia) that was designed to drive expectations. Then we had massive options backdating fraud, that was designed to help executives cash in on expectations.

We ignored all of this at our peril and the consequence of ignoring it was the subprime meltdown of 2008 – yet another expectations-based meltdown.

Why the Game of Capitalism is Broken

Charlie: This is larger than just individual greed, isn’t it?  What are the aspects of business today that keep us locked in this casino mentality?

Roger: The focus on shareholder value maximization has sapped the authenticity of executives. They have become more focused on Wall Street analysts than on their customers. And they have become willing to sacrifice the welfare of their employees to attempt to meet the expectations of Wall Street.

This has resulted in increasingly cynical and distant customers; all who know they come after the shareholders in the pecking order. And the worst thing is that all of this manipulation of expectations has facilitated massive growth of the hedge fund business and hedge funds simply contribute to the casino mentality.

Charlie: Is this casino mentality of betting on the spread rather than the game partly responsible for the horrendous global economic situation we face now?

Roger: Indeed it is. The banks at the center of the subprime crisis all had senior leaders who knew very well the game that they were playing; as Chuck Prince put it, they all “danced until the music stopped.” And dancing meant taking ever-greater risks to meet expectations that were already so high that they couldn’t be met with normal business.

In the face of this situation, the banks created the world’s first infinitely-sized market: synthetic financial derivatives. Unlike all other markets, there is a limit to their size.  There is only so much that can be produced and only so much demand because the product in question is real.

But synthetic CDOs can be created out of thin air – almost forever. That is how the banks forestalled the failure to meet expectations by several precious years – precious for their personal compensation. The problem was that in doing do, they created the worst bubble the world has ever seen – and we have been living with the consequences ever since.

Charlie: George Soros recently gave a speech that got a lot of play. He said we’ve failed partly because we thought we could think our way into success; we need to recognize that humans are fallible and design our world accordingly. Do you see a parallel with our obsession with shareholder value?

Roger: This is standard Soros stuff. He is a falsificationist who closely follows the work of Karl Popper and Imre Lakatos. So he doesn’t believe there is any absolute truth out there, just the best theory that has yet to be found wanting. And when the flaws of the best theory are found, they will provide the seeds for a still better theory – which will automatically be found wanting in due course.

As a consequence, whenever George sees everyone thinking the same thing, he thinks that it is probably, if not certainly, wrong. I assume that he is applying that thinking to the world of the quants at the banks who think their models are perfect but really aren’t.

I think he would argue that once everyone thinks that shareholder maximization is the ‘right’ approach, it almost certainly is wrong – and I certainly agree!

Charlie: Your insights are huge. Do you see them as supported by or integrated with other major thinking going on nowadays? Realignment of strategy? Global integrated reporting? Other thinking you find grounds for optimism?

Roger: Old theories die hard. I liken it to the story of peptic ulcers. For decades, the theory was that they were caused by excess stomach acid and patients were prescribed bland diets and anti-acids; and if that didn’t work, peptic ulcer surgery.

Two Australian researchers, Marshall and Warren, came to the conclusion that the reason that the treatments rarely worked was that peptic ulcers were caused by a bacterial infection – h pylori. Their views were wildly dismissed for the better part of a decade while patients continued to have their stomachs carved apart.

Only when Marshall ingested h pylori, grew a peptic ulcer and cured himself with antibiotics did the world decide to stop ruining patients’ stomachs with needless and damaging surgery. And twenty years after ingesting h pylori, Marshall (and his colleague Warren) won the Nobel Prize in Medicine.

Shareholder value maximization combined with stock-based compensation is an old and beloved theory that will probably take a decade to die because its proponents will continue to argue as they do today that the theory is sound; there are just problems with implementation. That is always the refuge of theory scoundrels!

Charlie: I wonder what is the financial equivalent of h pylori…Roger, many thanks for taking time with us, I do appreciate it.

Roger: And thanks to you as well.

 

Books We Trust: The Collaborative Organization by Jacob Morgan

This is number 11 in a series called Books We Trust.

I first met Jacob Morgan a little over a year ago in New York. Appropriately, we had first met on Twitter, then agreed to a coffee on an East Coast trip of his that coincided with a free midday on my end. Lucky for me!

What’s unique about Jacob is the extent to which he intuitively grasps how new digital tools and strategies can be used to create Collaborative Organizations where employees share, connect and engage with each other and with information.  This in turn helps build trust, fosters collaboration and positively impact the lives of employees both at and outside of work.

Most of us “get” that collaboration – whatever that means – is a powerful force in today’s networked business world. Unlike most of us, Jacob “gets” just what that does mean. That’s what his book is about.

Charlie Green: Jacob, you’re so modest. I honestly did not know, until I saw the draft the number of interesting people you connected with in writing this book: Don Tapscott, Gil Yehuda, Craig Newmark, Darren Entwistle – and I’m just scratching the surface. How did you gain entrée to all these interesting folks?

Jacob Morgan: I’ve been very fortunate to get such amazing people involved. The former CIO of the USA (Vivek Kundra) was the closest I could get to the President himself endorsing the book!  As soon as I had something I could share with people I immediately began reaching out to leaders who I thought would make great supporters of the book.

These leaders themselves believe in the concept of a Collaborative Organization so the book really resonated with them.  I had relationships at many of the companies who were able to help make this happen; without them, none of this would have been possible.

Charlie: You spent a month traveling throughout China, including rural areas, and were amazed at how easy it was to stay digitally connected. Easier, in fact, than inside some major US corporations. The corporate use of technologies lags the social uses that are developing outside the walls. What’s up with that?

Jacob: The barrier for individual use of social media is non-existent. All you need is an internet connection.  For corporate-led collaboration initiatives to take place, all sorts of things need to be considered: cost, security, risks, employee adoption issues, vendor selection, integrations and customizations and more. Realistically many companies are still trying to figure out what it all means and how it can be applied to their business. There is also a high degree of fear.

Charlie: We often hear people – let’s say mainly from my generation – who bemoan the lack of depth in relationships that comes about from the “shallowness” of social media connections. In contrast, you point out that in 1977, an MIT researcher found that people working 30 yards apart from each other interacted as well as people half a world away.

The problem this raises is not what came to be called strong ties, but rather one of weak ties.  The power of weak ties to extend functional work relationships, you point out, is revolutionary and massive.  Say a bit more about that please?

Jacob: The study showed that if you’re more than 30 meters away from someone, you might as well be in another city.  Beyond 30 meters, collaboration and communication drop off significantly.

Weak ties act like bridges between groups or areas. Think of Oakland and San Francisco.  Each can be considered a strong community with a lot of strong ties. But the Bay Bridge, which connects the two, allows people from San Francisco to go to a new area, Oakland, and vice versa.

The same is true within companies. People with strong ties typically know the same group of people; it’s an overlap, it can lead to staleness, which is why we need to extend beyond our networks. This we do through weak ties.

How often were you able to get a job interview, access to a party, a discount on something, or an introduction to someone based on a weak tie?  LinkedIn is a great example of a platform that allows you to build weak ties in the business world that you can potentially call on later.

Charlie: It’s my sense that many people in business think of collaborative tools with the paradigm of sharing databases, as a problem of knowledge management, powerful queries and the like. But you caught my attention with three items right out of my own books: thinking out loud, listening and remote team trust-building.

These are core skills for human-to-human trust creation; how in the world can bloodless abstract digital tools help us to connect in these powerfully human ways?

Jacob: Keep in mind that technologies are simply the enablers; it’s still people that are using these tools and engaging with each other. These tools allow us to share information in new ways; the same is true for listening. 

We can have a pulse on the company by checking out a corporate activity feed, or sharing an idea or a challenge that we’re trying to figure out.  This happens often in the consumer space with Facebook and Twitter – again, it’s the corporate world that lags.

As far as trust goes, we tend to trust people with whom we have something in common.  These new collaborative tools allow us to form communities of interest, passion and expertise that help employees build relationships, and hence trust with one another.

Charlie: One of the several rich case studies you describe was for a 1500-employee group at Penn State that created an intranet. What struck me was that the plan for implementation and adoption was to take 3-5 years. In fact, it was done in 1.5 to 2 years. And – wait for it – you say there was never an in-depth strategy for doing this.

What was the secret sauce that pulled that one off?

Jacob: No two companies go down the same path. Penn State planned quite conservatively for their initiative but even they were surprised by the faster adoption.

I can’t say there was a secret sauce per se, but I do know that they really cared about this initiative and they made it front and center. Though they didn’t have an in-depth strategy, they did have some foundation laid out for what they wanted to do.

It’s a bit like trying to become a great swimmer by studying YouTube videos, reading books, and interviewing the greatest swimmers.  Sure, it’ll you give you some tips and ideas, but at the end of the day you need to jump in the water to learn and adapt.

Is this the best approach for every company out there?  Probably not, but it can certainly work for some, as Penn State has shown.

Charlie: You talk about the risks of implementing new collaborative technologies, but also about the risks of not implementing them.  What are the biggest of those latter risks, the risks of not taking a risk?

Jacob: I’d say some of the top risks are:

  • Having a disengaged workforce that doesn’t care much about the work they do or the company they work for
  • Inability of the company to stay competitive
  • Having an inefficient workforce

Charlie: Jacob, I’m totally sold that an organization using these technologies fluently could become enormously successful. If you had to narrow down the top two or three barriers to acceptance of them, what would you say they are?

Jacob: There are three types of resistance: they come from employees, managers, and IT. Respectively:

The top employee barriers are not wanting to learn a new technology, and saying they don’t have enough time.

The leading managerial barriers are not seeing it as a priority (which I believe is a fear and a lack of understanding problem), and uncertainty about the overall business value and ROI.

For IT, the top barriers are low prioritization (again, often due to fear and understanding), security issues, and lack of budget.

Charlie: The full title of the book is The Collaborative Organization: A Strategic Guide to Using Emerging Social and Collaborative Tools, and it just formally came out on July 9th. I hope you sell a boatload of books. Thank you for sharing your thoughts with us here.

Jacob: My pleasure, thanks Charlie!

 

 

Books We Trust: The 3 Power Values by David Gebler

This is the tenth in a series called Books We Trust.

The 3 Power Values is, simply, an excellent book. Author David Gebler’s unique talent is to combine a Big Idea, such as the need to remove roadblocks as the key to performance, with precisely defined linkages between values, culture and behavior. He brings needed commonsense to the often vague, un-actionable, and fog-sculpting enterprise known as organizational effectiveness.

David is a consultant and educator, with 20 years experience helping leaders understand how to use their organization’s culture to improve performance and to stay out of trouble.

The Interview

Charlie Green: David, we spoke a couple of years ago about why companies have so much trouble getting a handle on ethics issues and it seems like things are getting even worse.

David Gebler: I agree. Ethics scandals fill the papers every day. We don’t see change because we’re not dealing with the real issues that lead people to do bad things. We think that regulations will define outer boundaries to actions and that morals will guide us inside those boundaries. And that just isn’t the case.

Charlie: Why not? You would think that following the rules and knowing right from wrong would be enough.

David: What doesn’t get factored in is the environment we work in. Whether we follow the rules, even what we think is proper, is heavily influenced by the culture. Social norms tell us whether it’s OK to flout the rules. The norms also tell us whether to feel entitled or remorseful when we cheat or do something wrong.

Charlie: When is it OK to violate rules?

David: Charlie, even you have driven over the speed limit. But you wouldn’t call it morally reprehensible, I suspect. We have normalized that speeding, up to a certain point, is something we all do. So even if it’s illegal, we don’t see it as a moral issue.

Charlie: Did you say that moral issues are also subjective? What do you say to those who say morals are morals, right is right, and wrong is wrong?

David: The truth is, even our definition of what is right is subjective. Leaders in behavioral economics, such as Dan Ariely, point out that everybody has the propensity to be dishonest, and almost everybody cheats—just by a little. The behavior of almost everyone is driven by two opposing motivations.  On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people.

What determines whether we feel good about ourselves is the environment we’re in. If we’re in a culture where cheating is frowned upon, people will cheat less, because cheating impacts their sense of self. But if the culture is to take advantage and win at all costs, then cheating and cutting corners becomes just the way we do business.

Charlie: So if the key factor is culture, why do so few leaders tackle this issue head on?

David: Culture is so intangible that leaders hesitate to dive in – not even just to understand it, much less to tweak it. Many leaders haven’t focused on measuring and managing culture, not realizing that they can. Most don’t understand whether their culture hinders or supports performance, much less the implementation of strategies. And finally, many leaders don’t even know whether their culture encourages unethical or illegal conduct.

Charlie: In the book you explain that three “Power Values” are essential to get a handle. What do you mean by that and what are those values?

David: Twenty years of work with companies showed me that three values – integrity, commitment and transparency – stand out in fostering identification and community. I call these the power values because they can influence specific behaviors that in turn positively influence an organization’s culture. The chain is: values > behaviors > culture. It is the behaviors that nudge the organization’s cultural components (goals, principles, and standards) into alignment.

By focusing on the specific behaviors that make up integrity, commitment and transparency, you can transform negative behaviors impeding performance into positive behaviors supporting performance. This is how you measure and manage culture as a way to rev up performance and reduce risk.

Charlie: What if employees in the organization don’t understand these values?

David: Most employees already hold these three power values personally. When the power values are highly visible in an organization, they clarify the organization’s intentions and give employees a unifying sense of purpose and direction.

Employees who share their principles, goals, and outlook – the essence of the power values – can let their guard down a bit. They can trust that they will be understood, that there will be fewer booby traps, and that their leaders and coworkers will generally act in a predictable way, consistent with their shared values.

Charlie: What’s the connection between these power values and the kinds dysfunctional cultures we were just talking about?

David: In a positive corporate culture, employees feel good about themselves and their work (commitment).  They raise issues and freely ask questions (transparency).  They don’t feel challenged by unfair or inconsistent work processes, because people take personal responsibility for their actions and live up to their commitments (integrity).

When the elements of culture are out of alignment, frustrations arise. If principles are unaligned with goals, employees disengage and don’t feel a vested interest in their work (lack of commitment). When goals are out of sync with standards, unfairness arises as managers and employees “do what they have to do” rather than what they have said they would do (lack of integrity). And when standards are aligned with values, employees see that the organization’s actions are inconsistent with its principles, and it becomes hard to ask uncomfortable but important questions and ensure that the truth is heard (lack of transparency).

Charlie: How can you foster a positive corporate culture right from the start?

David: Organizational culture isn’t something that can be faked – or “implemented” – by leadership. The culture is simply the way the organization and its people conduct themselves. Organizations have cultures from their outset, though few start-ups spend time defining their culture when they’re small and everyone knows everyone.

When a culture goes bad, it’s not a sudden event; it’s a case of of slow erosion over time. Things begin to change. At the beginning it’s little things, e.g. a business decision made in the heat of the moment when the decision-maker didn’t feel the urgency to deal with the long-term impact at the time of the decision.

Leaders who understand the role organizational culture has in shaping behavior and performance, however, will be mindful of the early warning signs of trouble. Successful culture management means that leaders recognize the first steps down the proverbial slippery slope, and take actions to address them when they’re still small.

To do that, leadership must have a clear sense of a) what kind of culture is needed to achieve the organization’s goals, and b) what behaviors are needed to ensure that the desired culture is sustained. Successful leaders know that the small things matter greatly, and that veering off course is not to be done lightly or without serious plans to right the ship.

Charlie: Thanks, David, for sharing your insights. Until reading this, I also didn’t have a good idea of how one could actually manage culture.  You have managed to educate me greatly!

David: A pleasure, Charlie .

Books We Trust: The Decision to Trust by Bob Hurley

This is the eighth in a series called Books We Trust.

The Decision to Trust is one of the best books written in recent years on trust; it is a major contribution to the subject.

Author Bob Hurley teaches at Fordham and Columbia, so it’s no surprise that the book is solidly rooted in the extensive academic work on trust. Perhaps more surprising is that the book is also intensely practical, based on his years of consulting and research work with significant companies.

I sat down recently with Bob at his decidedly un-Lincoln Center-ish Fordham offices near Lincoln Center.

Capitalism: Back to the Future

Charlie Green: Let’s get one thing clear: you’re not doing double-duty as Basketball Hall of Fame high school coach Bob Hurley over in Jersey City – are you?

Bob Hurley: No, but I’m a fan, so I’m flattered by the confusion.

Charlie: OK, that’s out of the way. This is a wonderful book, Bob, clearly the result of years of research.

Bob: Decades, actually. I started as an accountant, then got an MBA and did consumer marketing. Eventually I realized I really wanted to be a teacher. I ended up at Columbia, where I studied under Morton Deutsch, the founder of the field of conflict resolution and a brilliant psychologist.

Today, I teach various courses in leadership and management at Fordham, and I teach executive education at Columbia

Charlie: Let’s jump right to the book. The heart of it, and I think the genius of it, is your idea of approaching trust from the point of view of a decision. A decision to trust is a largely psychological decision by the trustor, which is affected by the trustor’s own propensity to trust, and by the trustor’s view of the trustworthiness of the trustee in the particular situation.

Tell us the power of approaching things that way?

Bob: Well most people especially business people understand decision-making. When we frame the issue of trust as a decision we can help people not only understand about trust but also understand how to help others make a choice to trust vs. be suspicious. We do this by helping trustees understand how to be trustworthy in the eyes of others. This not only makes the model grounded in research in psychology, but also very practical.

It turns out that this approach also it allows you to make sense of trust from an interpersonal, group and organizational perspective. It may have a psychological locus at the heart of it, but it also allows for intelligent discussion about social environments and institutional behaviors.

Charlie: Would you list the ten factors please, as a teaser to get readers to click through and buy your book?

Bob: Sure. The first three factors are trustor-related: the level of risk tolerance, the trustor’s level of psychological adjustment, and the power position of the trustor all affect their likelihood to put themselves at knowing risk of another, which is how I think of the decision to trust.

The other seven factors are situational: They are security, similarity, alignment of interests, the level of perceived benevolent concern, capability, predictability and integrity, and communication. Some of those are about the trustee’s character as perceived by the trustor – some are about the trustor’s perception of the situation.

Charlie: You can then use this model to test, rate, rank, diagnose, consult and so forth, right? It’s a powerful tool for consultation and management.

Bob: Exactly, and it’s been widely tested over the years in thousands of situations. I started out testing it in exec ed programs; I wrote up a version of it in an HBR article, which led to more consulting and more testing.  It’s extremely workable, in addition to being well-grounded in the trust research literature.

Charlie: What are some of the problems to which you’ve applied the model?

Bob: There’s quite a range, from making better individual decisions, to leadership, to more effective team organization, even to culture change and trust repair. The model describes the failures of organizations like the Catholic Church’s problems with priestly sexual abuse, and the DaimlerChrysler debacle.

Charlie: You’re quite clear about the need to address trust issues systemically, aren’t you?

Bob: I think so. Personal trust is critical, but culture trumps personality. If we don’t get leaders to start to high trust create cultures and systems, we won’t get there. You can’t just change individuals and stop there.

For trust to get better in the trust-challenged world we live in, we have to get better at all three dimensions; trustors have to get better at making better trust decisions, trustees have to become more trustworthy, and we have to make our organizational cultures, systems and processes more trustworthy .

Charlie: David Gebler, in the field of ethics, makes much the same point: most ethical lapses are not due to moral failure on the part of individuals, but to an environment that is insufficiently supportive of ethical behavior.

Bob: Makes sense to me, and I would add that we need to go well beyond ethics to understand what makes people and companies trustworthy. Just because a person is ethical does not mean people will or should trust them!

Charlie: Let’s talk about one particular application of the Decision to Trust Model (DTM), that of leadership and management. First of all, what’s your take on how our ideas of “leadership” have evolved over the years?

Bob: I would say that the science behind leadership has evolved from trait theory to focus more on relationship, the need for flexibility and agility, EQ and the importance of self awareness and authenticity. When I teach leadership I tell people that the generic version of leadership is not terribly helpful to you.

The real challenge is finding out given who you are, what form of leadership can you manifest. We do not need to all become Winston Churchill! Trust fits into this notion of leader-follower relationship and authenticity. Bill George at Harvard has done a great job adding to this notion.

Charlie: Interesting.  And how does the DTM play out here? How can a leader use it practically?

Bob: Given that we know what makes people decide to trust, we can start by manifesting these “signals” of trustworthiness. Behaviors like aligning stakeholders interests, demonstrating benevolence and not opportunism, articulating values and ensuring value congruence and perhaps most importantly communicating with openness, transparency; and don’t forget listening with empathy and being approachable. These things can be taught but we have not focused on them enough!

Charlie: What’s your take on how our capitalist system has turned into such a low-trust system. It clearly wasn’t always this way; what has happened?

Bob: We need to re-define capitalism. It has been a great creator of wealth but it needs to evolve. As the global financial crisis showed us in spades, many business leaders have become opportunists focused on short-term greed. We need to grow a generation of integrative stewards who bring stakeholders together in moving the enterprise forward and focus on the long term. We need more incentive for capital to take a long-term view. Managing our businesses for the next quarter and our country for the next election is a prescription for disaster when we are competing with companies and nations that have 10, 20 and100 year plans!

Charlie: I think your model has another virtue, which is it’s useful even in application to our political system – no small feat in a polarized world. Is that right?

Bob: Political marketing is essential about getting people to doubt your opponent and trust you. Since Bush Senior’s win against Dukakis, this has been done using the same tricks used in marketing soda or soap. There is an emphasis on appearing trustworthy, while not actually being trustworthy.

We are mostly to blame because we take short cuts in assessing trustworthiness and at some level we do not want to hear the truth. We need systemic reform in politics; we need to “get the money out” as a first step (create alignment of interests). After that, term limits, and strict rules limiting lobbying.

We need to stop talking about big or small government, and starting talking about effective or ineffective government. I talk about this in the book. The major reason people do not trust government in the US is that they see the system as incompetent and wasteful. 

Charlie: Bob, thanks so much for spending time with me, and congratulations again on the book. It truly is a milestone in the literature on trust, in my humble opinion, and I hope it gets all the attention it deserves, which is a ton.

Bob: You’re welcome, it’s been a pleasure.