As our editorial team read through the past year’s worth of Harvard Business Review to select the articles for this volume, perhaps the most interesting part of the proceeding was seeing how a group of seemingly disparate articles actually overlapped and wove together. Of course some themes were the result of deliberate effort; but accidental commonalities and contrasts perhaps even better represent the interests of our authors and our readers. This year we saw organizations focused on their physical spaces, and we’ve included two articles from our issue on workplaces. But one of them, tellingly, also addresses the issue of privacy in the virtual world, which dovetails with questions raised by the growing internet of things and its attendant business models. That interplay of digital and physical worlds (not to mention innovative business models) is also embodied in the rise of 3-D printing. Among the other themes that emerged were better collaboration through the breaking down of physical walls and organizational silos (But how much of this openness is too much?); the balance between intuition and rationality; and the (im)balance between corporate profit and human prosperity.
This volume begins by focusing on the critical (if more prosaic) process of assessing performance. In “Reinventing Performance Management,” Marcus Buckingham and Ashley Goodall describe how Deloitte overhauled its performance management system. In a public survey the company conducted, more than half the executive participants indicated that their current method of evaluating employees’ work neither drove employee engagement nor encouraged high performance: It depended too much on past results and offered no practical look into the future. In the new model, rather than asking for their impressions of a particular individual, the performance system asks managers what they would do with the employee to recognize, capture, and fuel performance—bringing agility and constant learning into the center of the organization’s culture.
In “The Transparency Trap,” the Harvard Business School professor Ethan Bernstein takes up the question of performance as well, examining how openness—both in a physical context and through the use of technology and social platforms—can affect a team’s creativity and productivity. Companies are increasingly using open environments to encourage idea sharing and accountability. But Bernstein’s research shows that too much transparency can stifle experimental behaviors that might benefit the enterprise. Privacy, he finds, is just as essential as transparency for high performance. Bernstein goes on to suggest four types of boundaries to establish zones for private work within transparent organizations.
Shifting away from the individual worker, our next piece focuses on the corporation and how its performance affects the U.S. economy. In his McKinsey Award–winning call to action, “Profits Without Prosperity,” William Lazonick, an economics professor at the University of Massachusetts Lowell and a codirector of its Center for Industrial Competitiveness, studies the reasons behind the increasing underpayment—and unemployment—of American workers, despite a booming stock market. Lazonick corrals remarkable research to suggest that executives are using massive stock buybacks to manipulate share prices and boost their own allocation of corporate profits. Rather than contribute further to executive compensation, he argues, companies should reinvest profits in their people for future growth.
On the level of individual managerial skills, “Outsmart Your Own Biases” describes some of the toughest traps leaders fall into as they make hard choices—tunnel vision about future scenarios, about objectives, and about options—and encourages them to broaden their perspective. A variety of methods, from premortems to joint evaluations, can help us overcome the habits that prevent good decision making and move beyond gut instinct to deliberate reasoning.
Another prominent theme this year was how technological advances are changing the way businesses compete. One such advance is 3-D printing. Many have already discussed the changes this technology could potentially bring to the manufacturing sector. But as the Dartmouth strategy professor Richard D’Aveni asserts in “The 3-D Printing Revolution,” industrial 3-D printing is no longer just about prototyping or creating trinkets and toys. This transformative technology is gaining momentum, and any companies that sell products will be affected—from their internal processes to the competitors they face. D’Aveni’s forward-looking piece considers the changing landscape and explains how to adjust your company’s strategy to redesign customer offerings, optimize operations, and evolve your business model to fit this new context.
But even when the strategy is right, who’s to say it will be implemented properly? The next piece in our volume views that perennial struggle through a practical lens. In “Why Strategy Execution Unravels—and What to Do About It,” Donald Sull, Rebecca Homkes, and Charles Sull bust five myths about strategy execution—including what it looks like, who drives it, and why it often fails. (Hint: Silos are part of the problem.) By understanding what’s behind successful execution, leaders can seize opportunities that align with their strategy, pinpoint where efforts are stalling, and translate their ideas into results.
We turn again to individual development with “The Authenticity Paradox.” Authenticity is quickly becoming a key leadership trait, says the INSEAD professor Herminia Ibarra. But for many, remaining “authentic” is an excuse for sticking with what’s comfortable—which means leaders don’t take the risks necessary for growth and development. Instead they should experiment: By trying out a new role or temporarily feeling “fake,” they can develop a personal style that feels right to them and suits the organization’s changing needs as well.
Experimentation isn’t just for leaders; it’s a core component of the innovation process for organizations. But many companies skip rigorous experimentation in favor of intuition, leading (again) to bad decisions. In “The Discipline of Business Experimentation,” the authors use examples from Kohl’s, Wawa, and Petco to show how companies can effectively test-drive innovation efforts to improve their operations and products. What makes this article important is not the specific questions it asks (although those are valuable) but that it draws from the authors’ extensive research and experience to give readers a full understanding of how to try out ideas in the market while minimizing risk.
Innovation, experimentation—they often rely on diverse perspectives and areas of expertise. But what can you do when your best people from various groups and disciplines won’t collaborate? Professional services firms often find themselves in just that situation: Partners are so accustomed to competing with one another that they don’t work together even for the benefit of a shared client—or of their company. In “When Senior Managers Won’t Collaborate,” Heidi K. Gardner, who studies legal organizations and other professional services firms, explains how one organization recognized this issue and helped partners with diverse specialties work together to provide a higher-value combined offering for clients, thus growing revenue for the whole firm. Though the piece focuses on professional services, its lessons are applicable to any organization looking to create a more collaborative culture.
A culture of collaboration is also the focus of “Workspaces That Move People.” Here the authors urge leaders to create physical workplaces that encourage face-to-face communication and chance encounters among employees. On the surface, this may seem to contradict the zones of privacy suggested in “The Transparency Trap.” But the authors focus less on visibility and more on spontaneity. They suggest making changes to your physical space that promote informal cross-silo conversation to generate ideas and expand learning. With small tweaks, such as reducing the number of coffee machines, and larger changes, such as increasing the size of break rooms or establishing easily reconfigurable spaces, leaders can orchestrate the unplanned interactions that lead employees to mingle and share knowledge—all for greater creativity and productivity.
It’s striking to see how much discussion this year was focused on in-person interaction and collaboration, since so much of work and life is now mediated by digital devices. In “Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business,” the Harvard Business School professors Marco Iansiti and Karim R. Lakhani discuss the competitive landscape created by the internet of things as it connects previously distinct products and services. Using GE as a central example, they show how companies can proactively evolve their business models to stay ahead—and take advantage—of this digital revolution.
From disruptive technological advances to new ways of working together, business is transforming. Some articles we publish in HBR help leaders prepare for the future by describing the here and now—by showing how innovative practices can work in real organizations, for example, or by presenting research that can help them hone their management skills. Others point more explicitly to what’s coming. We hope that this volume, in combining both, helps leaders meet the changing competitive landscape head-on.
—The Editors