What Motivates Employees Better Than Cash? A Break.

Rewards work, yes, but perhaps not the kind you’d expect.

You know that employees perform best when they are rewarded not only with a suitable paycheck and benefits package but also with additional incentives. Performance and profit-sharing bonuses are common (even to the point of being taken for granted). Although employees rarely give back a check, when it comes to getting them to really lean in, there may be a better way to go.

Recent studies show that employees respond better to noncash rewards and other incentives than they do to an extra injection of moolah. It is, however, a fine line. According to the Journal of Economic Psychology, employees do choose cash over noncash rewards when given the choice in the abstract. But they change their minds when presented with a specific noncash reward. More important, other research suggests that noncash incentives produce a greater measurable boost in productivity than cash does.

Effective Environmental, a Texas-based environmental services company, subscribes to this theory. Every year, Effective Environmental doles out an all-inclusive family vacation to five employees. Managers in each of the company’s divisions submit nominees, and the senior leadership team chooses the winners based primarily on who is deemed to have given maximum effort day in and day out.

Why vacations? Travel, it turns out, may be the most effective incentive of all. According to a study by Site International Foundation and the Incentive Travel Council, 96 percent of employees say they are motivated by travel incentives, and 72 percent who earn the reward say they feel increased loyalty to the company.

Offering travel incentives may also be good for your bottom line -; even before accounting for its effects on productivity. The U.S. Travel Association notes that “in order to achieve the same effect of incentive travel, an employee’s total base compensation would need to be increased by 8.5 percent.”

Effective Environmental also treats its employees to a generous benefits package, which includes higher-education tuition assistance for employees’ dependents. The company also covers 100 percent of workers’ health care costs. Studies have shown that health insurance not only motivates employees but also plays the single biggest role in attracting new talent.

Related articles
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Small Business Capital Bill Seeks Less Regulation for VC Investment

House of Representatives 2Edit

There’s plenty of lip service in Washington about creating a better climate for startups and small businesses. So it’s disappointing to hear that a law designed to do just that is stalled indefinitely thanks to political posturing.

But that’s exactly what seems to be happening with the Small Business Capital Access and Job Preservation Act H.R. 1105.

The bill was introduced by Congressman Robert Hurt (R-Virginia) earlier this year. It was an attempt to loosen up some of the regulation on private equity companies like venture capital and growth capital firms.

Why Startup Investors Need Less Regulation

Simply put, these firms invest in startups like Facebook and Twitter when they are small and grow them into huge companies. These companies in turn create jobs and opportunities for smaller contractors and other small businesses.

Up until recently, private equity firms were assumed to manage the money of more sophisticated investors less in need of protection by the federal government.

So federal regulators who monitor publicly traded stock on Wall Street didn’t bother with these groups much if at all.

But all that changed with the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010. Now many private equity firms need to register with federal regulators meaning greater costs and greater regulatory hurtles.

In an official release supporting Hurt’s bill, House Committee on Small Business chairman Sam Graves (R-MO) explains:

The Dodd-Frank Act creates excessive red tape that inhibits growth, and the costly new requirements on smaller private equity funds is a clear example. H.R. 1105 helps reduce that regulatory burden on private equity funds in a common sense way, so that private sector capital isn’t unnecessarily restricted and these funds can remain focused on investments that help grow the economy.”

In short, critics of Dodd-Frank think the new regulations on private equity may be slowing the flow of capital to startups.

Small Business Capital Bill May Not Move Forward

Earlier this month, supporters of Hurt’s bill from both parties helped pass it in the House 254-159.

But opponents of the new bill like Rep. Maxine Waters (D-Calif.) say relaxing regulation, even on private equity firms, is a bad idea. And the White House has threatened to veto the bill meaning the Senate is unlikely to even consider it anytime soon, reports The Washington Post.

Certainly, there is need for some regulation where risk to investors or the public is concerned. But creating regulations that potentially hurt business and investment is a step in the wrong direction.

Image: U.S. House of Representatives

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The 3 Insurance Policies You and Your Employees Should Not Ignore

insurance policies

Despite all the emphasis recently on major-medical health coverage, let’s not forget three other types of insurance policies that can provide valuable protection for you, your employees and respective families in the event of injury or illness.

1. Disability Insurance

Only 31 percent of Americans are protected by disability insurance and half of those believe they need more coverage, a 2012 LIMRA and LIFE Foundation Insurance Barometer Study found. Disability insurance helps protect employees’ most valuable asset: their income and ability to earn a living.

Without steady paychecks, many would find it difficult — or even impossible — to pay the monthly mortgage or rent, car and credit card payments, utility and food bills, education costs, etc. In fact, half of all U.S. households examined would struggle to come up with $2,000 within a month, a study 2013 from the National Bureau of Economic Research determined (PDF).

Disability insurance could help alleviate some of the financial stress when disabling accidents lead to tightened purse strings.

2. Cancer or Specified Disease Insurance

An estimated 1.6 million Americans were expected to be diagnosed with cancer by the end of 2013. Cancer or specified-disease insurance can go a long way toward helping families focus on recovery, rather than on financial concerns.

A supplemental policy can help protect a patient’s savings from expenses that aren’t covered by major medical insurance. These include deductibles, out-of-network specialists, experimental cancer treatment, travel and lodging when treatment is far from home, child care and household help, and normal living expenses.

3. Life Insurance

Finally, life insurance isn’t fun to think about, but is crucial to a family’s well being should a household suddenly lose an income to death. Without it, a family’s entire standard of living could change drastically.

Life insurance policies that pay cash benefits can be used to pay remaining medical costs, cover funeral expenses, or pay monthly household bills. They can even be used to ensure a child can do something as simple as continue dance lessons or as momentous as attend college.

Women, Too, Need to Pay Attention

When providing benefit plans and making benefit choices, it should be self-evident that female employees and female business owners today have concerns just as do males when it comes to continuing the family lifestyle or caring for dependent children in the case of an emergency.

Consider these points when it comes to women business owners and women employees:

  • The number of women ages 25 to 64 currently in the labor force with a college degree roughly tripled from 1970 to 2011, according (PDF) to the U.S. Bureau of Labor Statistics.
  • The earnings of these women have also increased in proportion to men’s over the years, the Pew Research Center finds, and
  • Mothers are the sole or primary providers for children in four out of 10 homes, the U.S. Department of Labor has determined.

So don’t forget to assess the needs of the female segment of the workforce.

Insurance policies photo via Shutterstock

The post The 3 Insurance Policies You and Your Employees Should Not Ignore appeared first on Small Business Trends.

Be Aware: 4 Hiring Practices Set to Increase in 2014

(Image: Thinkstock)

With the new year just hours away, companies have already set into motion hiring strategies that will help their bottom line, especially in post-recessionary times.

According to Careerbuilder’s annual job forecast, these are the top hiring practices that are on the rise for 2014:

Part-time hiring on the rise: Seventeen percent of employers expect to recruit part-time workers over the next 12 months, up three percentage points over last year. While various factors will influence this trend, 12 percent of all employers stated that they will likely hire more part-time workers in 2014 due to the Affordable Care Act.

More companies “onshoring” jobs: One of the most popular imports of the New Year just may be previously lost jobs. Twenty-three percent of companies who offshore jobs said they brought some of those jobs back to the U.S. in 2013; 26 percent plan to do so in 2014.

Skills gap widening: Looking at a subset of human resource managers, half (51 percent) said they currently have positions for which they can’t find qualified candidates. Forty-six percent said these positions go unfilled for three months or longer.

Companies building the perfect employee instead of waiting for one: In light of the skills gap, nearly half (49 percent) of employers plan to train people who don’t have experience in their industry or field and hire them in 2014, up 10 percentage points over last year. Twenty-six percent of employers are sending current employees back to school to get an advanced degree – and picking up all or part of the cost.

5) Companies looking for recruits in high schools – More companies are connecting with future generations of workers to establish a constant pipeline of job candidates. Twenty-seven percent of hiring managers have promoted careers at their firms to high school students or, in some cases, even younger; 25 percent plan to do so in 2014.

Switching the Sides – From Microsoft Bizspark to Startup Life





Journey

MY JOURNEY WITH MICROSOFT BIZSPARK

Hi my name is Mark Voermans and for the last 5 years I enjoyed the journey being responsible to setup the Microsoft Bizspark Program in the Netherlands. Microsoft BizSpark is a global program that helps entrepreneurs to progress and become more successfully by connecting them with key industry players, including investors, and providing marketing visibility for their business.

I really enjoyed my 13 years at Microsoft but at some stage I decided to leave the company for a specific reason. Progressing with the Microsoft Bizspark program gave me the chance to meet thousands of entrepreneurs and its community, participate in all kind of startup competitions and meet a lot of industry experts. By being involved in the startup ecosystem, sooner or later everybody develops an entrepreneurial attitude. This is also what happened to me: at some stage I got bitten by the startup bug and decided to change the frontiers.

CHANGING THE PERSPECTIVE

Due to my previous experience I knew the main pre-requisites and success factors to build a startup, such as the uniqueness of the idea, scalability, the market etc. For me there were three main aspects that are essential when it comes to joining a startup:

1.     As with everything in life the company you want to join should always be aligned with your personal values. This is something that doesn´t seem obvious until you experienced working with the people together.

2.   Would I bet my money on this company? Always ask yourself whether you are convinced about the concept, do you really believe that it can grow and become a market leader in itself?

3.     Is the concept a new, unique and disruptive idea? The company should have a clear vision that is different from everyone else and by being part of this organization you should be able to make a difference in the industry that you are participating in.

THE PERFECT FIT

By occasion I discovered a startup that fit perfectly with all of these aspects: iReckon (http://www.ireckon.nl/). iReckon is a software development company, which creates innovative and creative applications in addition to customized solutions for our clients. The company is existing for only 1,5 years and is self funded. The goal is always to build disruptive products that go beyond the initial customer expectations. I had quite a good relationship with the company since they were supported by the Bizspark program. One day the founder of iReckon asked me whether I knew someone who could do the business development part for the company. Immediately I realized that this was the perfect fit, I was convinced by the team, company values, approach and strategy of the company. In addition most of the founders and team were technically oriented and searched for someone with a business background.

WHAT´S SPECIAL ABOUT THE COMPANY

What makes me excited about the company is the team and their approach to do things. For every project we get involved in we want make sure we get to the root cause of the customers need. We do that by listening carefully to our customers, their is a very good reason why humans have two ears and one mouth. Once we understand the problem and the underlying data we start developing new software and technology for our clients. As one example we got the project from the City of Breda with the goal to visualize data for their water filtering system. After we got familiar with the ask and environment we also analyzed the data and figured out that the pumps were not working in an effective way. Having said that we went beyond the original task and helped our client not only to visualize the water system but also to reduce costs for the government.

LESSONS LEARNED

So what did I learn from my previous experience at Microsoft Bizspark and by joining an innovative startup? The biggest insight and advice to new founders: you shouldn’t start a new venture just for the sake of making money. You should always focus on a problem that you want to solve, some new and innovative concept that will disrupt your competitors and the market. Don’t try to solve customer problems which don’t exist by developing the products which don’t solve a real need.

Mark Voermans, Chief Business Development at iReckon

Image Credit: Shutterstock.com





The post Switching the Sides – From Microsoft Bizspark to Startup Life appeared first on Under30CEO.

17 Top Small Business News Stories of 2013

What is Google Glass?

A lot happened during 2013 that affects small businesses.  Let’s take a look at the top small business news stories for 2013, as tracked by the Small Business Trends Editorial team:

Wearable Technology Gets Attention

Wearable technology ranges from Google Glass (the eyeglasses-like computer you wear on your head – image above) to the smartwatch.  Pebble raised a cool $10 million on Kickstarter and started shipping its smartwatch.  Not to be outdone, Samsung unveiled the Gear smartwatch as a companion to the Note 3 phone.   And 2013 saw the concept of the Smarty Ring , which raised almost $300,000 on IndiegoGo.

Maybe one day Google Glass will be perched on every head, but that day will be a while coming, if it ever arrives.   Part of the reason is due to privacy concerns people have about being filmed without their realizing it.  Already there are businesses where Google Glass is not welcome.

Sage One small business accounting booth at Sage Summit

Accounting Software Market Changes

Competitors from offshore and with cloud products, challenge the big players in this market. And we are seeing the market stratify, with accounting and financial products designed for various sizes of small businesses:

  • Xero, out of New Zealand and Australia, still has a small footprint in the United States, but raised $150 million in funding in October, to go after the U.S. market.
  • Entrepreneurs and micro businesses are catching on that they don’t necessarily need double-entry accounting software. Freshbooks, out of Canada, is mainly an invoicing and expense tracking software, but calls itself “cloud accounting” now, and has 5 million people using it.  And there are dozens of other invoicing apps that when paired up with downloaded bank and credit card records, provide sufficient recordkeeping to meet the needs of very small businesses.
  • Sage went the other direction. It continued developing and adding features to its Sage One product — combining accounting, invoicing, time tracking, productivity and collaboration features into an all-in-one suite for businesses with under 10 employees.
  • Intuit, the largest player in the U.S. with millions of small businesses using it, went off on yet a different direction, by announcing plans to acquire document aggregator DocStoc.
  • GoDaddy acquired the Ronin invoicing app, pairing it with previously acquired Outright, to create the GoDaddy Bookkeeping software.

Facebook starred reviews

Online Business Reviews Provoke Frustration, Legal Action

Online reviews and local listings that display them continue to be a sore point.  Some of the sites where reviews appear have come across as cavalier and uncaring toward small businesses through poorly implemented review systems and uneven efforts to deal with rampant fake reviews:

  • A sting operation by the New York state attorney general resulted in fines against a number of marketing firms and small businesses for faking online reviews.
  • Yelp sued a business that it alleges was faking its own reviews – after that same business won a small claims case against Yelp.  There’s a lot of “underground” grumbling by small business owners who feel the system is too easily gamed — a common complaint remains that Yelp’s algorithms hide too many legitimate positive reviews, and highlight fake ones by competitors that know how to manipulate the system.
  • Facebook rolled out starred reviews.  The system was promptly given a poor review by some small businesses due to its clumsy implementation.
  • Google managed to confuse small businesses with its  Google Local (Places) Plus and Google+ for Business.  By the end of the year, things started to look better.  In late November, an upgrade was rolled out that allows business owners to manage and respond to reviews left on their business listings. 
  • The Better Business Bureau expanded its pilot program for verified local business reviews. The BBB review system, which is separate from its rating system of A+ through F, seemed to provoke less frustration than some of the other review sites.

twitter discontinues direct messages

Twitter Goes Public; Focuses on Revenue and Spam

  • The company went public in November, trading on the NASDAQ under the symbol TWTR.  The stock has gone up and down in the past two months, but currently is up over 40% and the company has a market cap of $35 billion.  That’s more than 16 times the size of the New York Times’ market cap of $2.3 billion.
  • In anticipation of its IPO, Twitter continued rolling out advertising products and improved its business resources.  It announced plans to acquire MoPub, a mobile ad platform.  We expect the focus on advertising and sponsored offerings to only increase, given the need to meet quarterly earnings expectations.
  • Perhaps anticipating closer scrutiny, Twitter changed its spam algorithms, cracking down on DM spammers and other abusers.  We saw a spate of legitimate small business users having their Twitter accounts banned in error – apparently it is now trickier to follow a lot of accounts without tripping a spam filter.

Matt Cutts Google spam team

Scrutiny Increases on Content Marketing

Content marketing continued to grow in 2013.  We published not one, but two lists of content marketing books during 2013, so that ought to tell you how much interest there is.  Native advertising also grew — native advertising comes in many forms, but newspapers have long published a form called advertorials.

Guest blogging and advertorials became so popular that they were over-used and abused by some.  It seemed like an epidemic of plagiarism and “spun” articles.  Fake writers and rings of “made-for-links” sites proliferated.  What was the goal?  Build links.

In May of 2013 Google’s head of Web spam, Matt Cutts (pictured above), spoke out and explained how advertorials need to be handled under Google’s guidelines.   Then later Cutts cautioned against “low quality” guest blogging.  The U. S. Federal Trade Commission also updated its advertising guidelines to address disclosures needed in social media.

There will always be value in high quality content in marketing.  But 2013 was the year that saw abuses of content explode, and a resulting crackdown start.

Jack Ma, head of Alibaba

Counterfeits and Mass-Produced Goods Irk Entrepreneur Artisans

Etsy was originally set up as a marketplace for handmade items — and supposedly a refuge from mass-produced stuff.  But shop owners, who number nearly one million on Etsy and are mostly entrepreneur-artisans and small businesses, have been vocal about mass produced goods being allowed.  Even Etsy’s “be honest” rule is not enough, some say.

Some hand-crafted items from Etsy also are copied. Fakes end up on wholesale sites such as Alibaba. Alibaba, through founder Jack Ma (above), announced an anti-counterfeiting campaign in advance of its rumored 2014 IPO.  While counterfeiting is often thought of as a “big brand” type of plague, it also affects small businesses like artisans.

Self employed and Obamacare

Obamacare Confusion Reigns

The year 2013 has been one of confusion.  With many media reports being politically motivated either left or right, millions of small businesses had a tough time getting good information about healthcare options. Here are some key facts:

  • An estimated 5 million people had their health insurance policies cancelled or costs increased for individual policies, due to the Affordable Care Act requirements.  The cancellations and higher premiums hit self-employed freelancers and small business owners as a group hard, because they tend to have individual policies.
  • The Federal healthcare.gov website rollout was almost universally regarded as a disaster.  On a positive note, some website improvements have been made since October and it seems to be getting better.
  • Many government workers and other select groups have been exempted from the new healthcare law.  Larger employers (including small businesses with 50+ employees) got a one-year delay in their employer requirements, until 2015.  But that delay does not benefit the estimated 5 to 7 million self-employed and small business owners who rely on individual policies.
  • The online SHOP exchanges, which are supposed to enable small businesses with fewer than 50 employees to shop for affordable coverage (and in some cases get tax credits), were delayed until November 2014.  Small businesses can still use the SHOP exchanges — they just have to apply through brokers or by mail.

The words of Professor Scott Shane take on added meaning: “Despite (or because of) our policy makers’ efforts, employee health insurance remains a burden for small business owners. ***  Only time will tell whether our policy makers’ efforts to help have alleviated or exacerbated the problems.”

hashtag example

Social Media & Mobile Valuations Hit Records

Are we living through another tech bubble, like the Dot Com bubble of 2000?  Judging from some of the valuations, possibly.

Remember Instagram, the company with no revenue that was valued at $1 billion back in 2012 when Facebook acquired it?  The year 2013 saw a redux of sorts, when Snapchat’s 23-year-old founder turned down an offer of $3 billion from Facebook.  Meanwhile, at least 16 million small businesses had Facebook pages, and Facebook was placed on the S&P 500.  Despite all that success, a report by Oklahoma Senator Coburn suggests Facebook will for the second year in a row pay zero taxes.

Yahoo, trying to reinvent itself, acquired Tumblr, a blog platform known for its porn, for $1 billion.  Shortly thereafter, Tumblr jumped on the sponsored posts bandwagon. And Yahoo is currently a Wall Street darling, with its stock price at a five-year high.

If you want to create a high-valuation startup, mobile and social are hot spaces to be.  At least for now.

new dell venue tablets

Traditional Tech Companies Retrench, Reinvent

Remember those traditional technology companies so many of us run our businesses on?  Here’s what happened with a few of them:

  • Dell went private again after a battle by Michael Dell to retain ownership of the company he founded in his dorm room in 1984.  Dell expanded its traditional laptop and desktop computers to include tablets and tablet hybrids. It is aggressively investing in innovative startups, acquiring other companies, and entering into partnerships to reinvent itself into a combined hardware, cloud software and services company.
  • Microsoft announced the retirement of CEO Steve Ballmer as it began its own reinvention with strong moves toward mobile.  Along with aggressive marketing campaigns for its Windows Surface and RT tablets, Microsoft made a bid to acquire Nokia to gain a bigger footprint in the mobile space.
  • BlackBerry – well, pundits have been predicting its demise for the past two years.  After the disappointing launch of BlackBerry 10, the company changed CEOs in November.  For awhile it planned to go private, then scrapped that.  Right now the focus seems to be on serving businesses in regulated industries and government.

Netting it out: the changes at Microsoft and Dell are good news for small businesses. BlackBerry is becoming less of a player in the small business market with each passing month.

samsung galaxy S4 Black Mist

Phones Get Bigger, Tablets Smaller, Voice Minutes Go Away

  • Mobile devices become big then get cheaper. We saw plenty of data about the increased popularity of mobile devices with consumers this year. And manufacturers responded with more phones and tablets. There were also hybrids like the phablet. And then the devices started getting cheaper too.
  • The responsive Web design approach gained steam.  Instead of creating a separate .mobi site, today a responsive design can make sure all visitors experience your site in the best possible way – whether they are using a smartphone, tablet or computer.
  • Voice minutes are becoming almost a thing of the past in the United States. The reason is that mobile carriers have realized charging for data transfer is the more lucrative approach. Carriers are beginning to do away with hardware subsidies, too.
  • Apple, meanwhile, announced that its app store had generated $10 billion in revenue for the third-party developers. The demand for mobile apps on other sites like Google Play also is strong.

Grumpy cat meme

Grumpy Cat and Gangnam Style Memes Cool Off

Two of the hottest viral memes  in recent memory became big news this year and later faded. Though the Gangnam Style video was posted in 2012, by 2013 it had became the most watched online video in history. Grumpy Cat still has her fans, but the adorable cat (pictured above) is not quite as hot.

Independent Worker Marketplaces Grow, Merge

oDesk and Elance announce a merger. The two online freelance marketplaces decided to pool resources. That fact, along with 30+ other freelancer sites, shows how the labor market is changing, with more hiring of independent workers being done online.

AngelList online angel capital

Crowdfunding Sites Grow

Sites like Kickstarter and Indiegogo became instrumental in funding startup projects. And sites like CrowdBrewed are springing up to represent niche markets like brewing. Meanwhile, the SEC issued “no action letters” that made it a bit easier to do online venture and angel crowdfunding.

Internet Sales Tax Heats Up, Stalls

The issue continues to divide small business owners, depending on their business interests.  An effort to pass national legislation — the so-called Marketplace Fairness Act — appears stalled in Congress.  Meanwhile, various states tried attacking related issues from another angle, by taxing affiliate marketing.

3D printing for small business

Printing Evolves From Laserjet to 3D

Traditional printing remained in demand, despite our move to electronic data. The HP laserjet turned 30 years old and HP shipped its 200 millionth printer. But 2013 also was the year that saw 3D printing start to hit the mainstream (image above). Some UPS Stores now offer 3D printing to customers.

Bitcoin: Sound and Fury, Signifying Nothing?

Bitcoin, the alternative virtual currency, was much discussed throughout 2013.  Some Web entrepreneurs use it because it makes it harder to track their money.  However, Bitcoin has a long way to go to catch on with mainstream small businesses.

Privacy and Security Woes Increase

By now you’ve read about the NSA reading emails and listening to phone calls.  But it’s not only the government digging into your privacy.  News came out that Facebook knows more about you than you might think.  And hackers found small businesses to be easy targets.

The post 17 Top Small Business News Stories of 2013 appeared first on Small Business Trends.

6 Questions That Healthy Organizations Ask

Building trickle down focus from the top.

Patrick Lencioni’s new book, The Advantage: Why Organizational Health Trumps Everything Else in Business, is a kind of field manual for company leaders. Although it is persuasive on the competitive merits of organizational health (how a business’s employees, especially its managers, work together), its lasting contribution will be its power as a playbook.

In The Advantage, Lencioni explains exactly how leaders can cultivate a healthy organization. He spells out four disciplines, one of which is to “create clarity.” Lencioni says this is “all about achieving alignment”: Leadership team members must all commit to the same answers to six key questions.

“Within the context of making an organization healthy, alignment is about creating so much clarity that there is as little room as possible for confusion, disorder, and infighting to set in. The responsibility for creating that clarity lies squarely with the leadership team.

“Unfortunately, most of the leaders I’ve worked with who complain about a lack of alignment mistakenly see it primarily as a behavioral or attitudinal problem. In their minds, it’s a function of employees below them not wanting to work together. What those executives don’t realize is that there cannot be alignment deeper in the organization, even when employees want to cooperate, if the leaders at the top aren’t in lockstep with their colleagues around a few very specific things.

“Thinking they’re being mature, leaders often ‘agree to disagree’ with one another around seemingly minor issues, thereby avoiding unnecessary contentiousness and conflict. What they don’t understand is that by failing to eliminate even those small [misalignments], they are leaving employees below them to fight bloody, unwinnable battles with their peers in other departments.

“What leaders must do to give employees the clarity they need is agree on the answers to six simple but critical questions, and thereby eliminate even small discrepancies in their thinking.”

According to Lencioni, these crucial six questions are:

Why do we exist?
How do we behave?
What do we do?
How will we succeed?
What is most important–right now?
Who must do what?

“If members of a leadership team can rally around clear answers to these fundamental questions–without using jargon–they will drastically increase the likelihood of creating a healthy organization,” he says. “This may well be the most important step of all in achieving the advantage of organizational health.”

Related articles
Silence Is Deadly
Attention Spans Dictate Meeting Agendas?


    



6 Questions That Healthy Organizations Ask

Building trickle down focus from the top.

Patrick Lencioni’s new book, The Advantage: Why Organizational Health Trumps Everything Else in Business, is a kind of field manual for company leaders. Although it is persuasive on the competitive merits of organizational health (how a business’s employees, especially its managers, work together), its lasting contribution will be its power as a playbook.

In The Advantage, Lencioni explains exactly how leaders can cultivate a healthy organization. He spells out four disciplines, one of which is to “create clarity.” Lencioni says this is “all about achieving alignment”: Leadership team members must all commit to the same answers to six key questions.

“Within the context of making an organization healthy, alignment is about creating so much clarity that there is as little room as possible for confusion, disorder, and infighting to set in. The responsibility for creating that clarity lies squarely with the leadership team.

“Unfortunately, most of the leaders I’ve worked with who complain about a lack of alignment mistakenly see it primarily as a behavioral or attitudinal problem. In their minds, it’s a function of employees below them not wanting to work together. What those executives don’t realize is that there cannot be alignment deeper in the organization, even when employees want to cooperate, if the leaders at the top aren’t in lockstep with their colleagues around a few very specific things.

“Thinking they’re being mature, leaders often ‘agree to disagree’ with one another around seemingly minor issues, thereby avoiding unnecessary contentiousness and conflict. What they don’t understand is that by failing to eliminate even those small [misalignments], they are leaving employees below them to fight bloody, unwinnable battles with their peers in other departments.

“What leaders must do to give employees the clarity they need is agree on the answers to six simple but critical questions, and thereby eliminate even small discrepancies in their thinking.”

According to Lencioni, these crucial six questions are:

Why do we exist?
How do we behave?
What do we do?
How will we succeed?
What is most important–right now?
Who must do what?

“If members of a leadership team can rally around clear answers to these fundamental questions–without using jargon–they will drastically increase the likelihood of creating a healthy organization,” he says. “This may well be the most important step of all in achieving the advantage of organizational health.”

Related articles
Silence Is Deadly
Attention Spans Dictate Meeting Agendas?


    



The New Moneyball–and Why It Matters for Business

More than 10 years after the Oakland A’s baseball team discovered the initial principles of Moneyball, the team’s brilliant management has discovered–and capitalized on–yet another market inefficiency.

The baseball team that made Moneyball metrics famous is now quietly using a new strategy that could be just as groundbreaking. And whether or not you’re a baseball fan, this is one strategy story you shouldn’t miss.

The Back Story

In Moneyball, Michael Lewis’s 2003 book about the Oakland A’s 2002 baseball season, the author sought to answer an essential question: How did the A’s, with their paltry payroll ($41 million), manage to compete with the big-market New York Yankees ($125 million)? A 2011 movie based on the book dramatized the same question, with Brad Pitt playing the part of A’s general manager Billy Beane.

The answer, oversimplified, had to do with the A’s precocious grasp of advanced baseball metrics. While many teams still used traditional statistics to gauge the ability of players, Beane and the A’s began using a more advanced set of numbers, called “sabermetrics.” The A’s realized that players with strong sabermetrics correlated just as much (if not more) to winning games than did players who were strong in traditional stats.

Better still, the players with strong sabermetrics cost far less to employ than did the players with strong traditional stats. The reason? Most teams still gauged player value by traditional stats. The A’s, in using sabermetrics to gauge player value, found cheaper talent that could still get the job done.

In the process, the A’s template for affordable team-building became one of the most envied (and copied) business models in the sports world.

How the Landscape Has Changed

That was then. More than 10 years later, the baseball landscape has changed, in no small part because of the A’s success and the massive publicity their methods occasioned. Today, every team employs advanced sabermetrics. And so, in a funny way, the A’s are back at square one: They still need to compete with big-market teams like the Yankees. But now the Yankees (and everyone else) are hip to the A’s long-held advantage. How, then, do the A’s still manage to compete, in an enlightened day and age?

In a brilliant post on Deadspin and Baseball Prospectus, Andrew Koo posits a plausible answer to this question. Koo’s theory is that the A’s have found yet another undervalued statistic that correlates strongly to performance. That statistic, in a nutshell, is the fly-ball rate of hitters. Koo argues that a key to the A’s fantastic 2012 and 2013 seasons has been their acquisition and deployment of fly-ball hitters (as opposed to ground-ball hitters). Of course, there’s more to it than that, and Koo’s fantastic writeup has all the details.

For business leaders, there are two key takeaways:

1. Finding market inefficiencies is an ongoing concern. Baseball is a copycat sport. Whenever a team has a winning season with an affordable payroll, other teams are bound to copy the template and poach key staff. Advantages are short-lived. Which means that teams like the A’s must constantly search for new ways that they can affordably compete with larger-budget entities like the Yankees. It’s a form of business-model innovation, in the sense that your business model–which should address how you keep costs like payroll in check–is not fixed but, rather, continually modified to stay profitable. The key to successful business model innovation is a larger subject. But as this article on Harvard Business Review points out, it requires three things: The ongoing attention of the top team, a willingness to experiment, and the bravery to “pivot” the business model in a new direction, when the time is right.

2. Remember why you’re hiring people in the first place. It’s to get a job done, rather than fill a position. For the A’s, that job is winning games. As simple as that sounds, it still differentiates the A’s from the superstar-recruitment model that drives many personnel decisions in baseball. The relevant quote in Moneyball is, “Your goal shouldn’t be to buy players, your goal should be to buy wins.” In a blog on LinkedIn, HubSpot founder and CTO Dharmesh Shah shows how this applies in a business context. He paraphrases a chat he once had with an entrepreneur:

Shah: What do you need?

Them: We need to build a management team.

Shah: No, what do you actually need right now?

Them: Well, right now we need a VP of Engineering.

Shah: What for?

Them: Well, we need someone to head up our product development effort.

Shah: No, you actually need to write code and release a product. You need to respond to customer issues. You need to iterate quickly so you can learn quickly. You don’t need a VP of anything, you need a doer of stuff that needs to get done. Don’t think about buying titles–think about buying outcomes.

For the A’s, those “outcomes” are wins. And thanks to their continued success in finding market inefficiencies, the wins keep coming.


    



The New Moneyball–and Why It Matters for Business

More than 10 years after the Oakland A’s baseball team discovered the initial principles of Moneyball, the team’s brilliant management has discovered–and capitalized on–yet another market inefficiency.

The baseball team that made Moneyball metrics famous is now quietly using a new strategy that could be just as groundbreaking. And whether or not you’re a baseball fan, this is one strategy story you shouldn’t miss.

The Back Story

In Moneyball, Michael Lewis’s 2003 book about the Oakland A’s 2002 baseball season, the author sought to answer an essential question: How did the A’s, with their paltry payroll ($41 million), manage to compete with the big-market New York Yankees ($125 million)? A 2011 movie based on the book dramatized the same question, with Brad Pitt playing the part of A’s general manager Billy Beane.

The answer, oversimplified, had to do with the A’s precocious grasp of advanced baseball metrics. While many teams still used traditional statistics to gauge the ability of players, Beane and the A’s began using a more advanced set of numbers, called “sabermetrics.” The A’s realized that players with strong sabermetrics correlated just as much (if not more) to winning games than did players who were strong in traditional stats.

Better still, the players with strong sabermetrics cost far less to employ than did the players with strong traditional stats. The reason? Most teams still gauged player value by traditional stats. The A’s, in using sabermetrics to gauge player value, found cheaper talent that could still get the job done.

In the process, the A’s template for affordable team-building became one of the most envied (and copied) business models in the sports world.

How the Landscape Has Changed

That was then. More than 10 years later, the baseball landscape has changed, in no small part because of the A’s success and the massive publicity their methods occasioned. Today, every team employs advanced sabermetrics. And so, in a funny way, the A’s are back at square one: They still need to compete with big-market teams like the Yankees. But now the Yankees (and everyone else) are hip to the A’s long-held advantage. How, then, do the A’s still manage to compete, in an enlightened day and age?

In a brilliant post on Deadspin and Baseball Prospectus, Andrew Koo posits a plausible answer to this question. Koo’s theory is that the A’s have found yet another undervalued statistic that correlates strongly to performance. That statistic, in a nutshell, is the fly-ball rate of hitters. Koo argues that a key to the A’s fantastic 2012 and 2013 seasons has been their acquisition and deployment of fly-ball hitters (as opposed to ground-ball hitters). Of course, there’s more to it than that, and Koo’s fantastic writeup has all the details.

For business leaders, there are two key takeaways:

1. Finding market inefficiencies is an ongoing concern. Baseball is a copycat sport. Whenever a team has a winning season with an affordable payroll, other teams are bound to copy the template and poach key staff. Advantages are short-lived. Which means that teams like the A’s must constantly search for new ways that they can affordably compete with larger-budget entities like the Yankees. It’s a form of business-model innovation, in the sense that your business model–which should address how you keep costs like payroll in check–is not fixed but, rather, continually modified to stay profitable. The key to successful business model innovation is a larger subject. But as this article on Harvard Business Review points out, it requires three things: The ongoing attention of the top team, a willingness to experiment, and the bravery to “pivot” the business model in a new direction, when the time is right.

2. Remember why you’re hiring people in the first place. It’s to get a job done, rather than fill a position. For the A’s, that job is winning games. As simple as that sounds, it still differentiates the A’s from the superstar-recruitment model that drives many personnel decisions in baseball. The relevant quote in Moneyball is, “Your goal shouldn’t be to buy players, your goal should be to buy wins.” In a blog on LinkedIn, HubSpot founder and CTO Dharmesh Shah shows how this applies in a business context. He paraphrases a chat he once had with an entrepreneur:

Shah: What do you need?

Them: We need to build a management team.

Shah: No, what do you actually need right now?

Them: Well, right now we need a VP of Engineering.

Shah: What for?

Them: Well, we need someone to head up our product development effort.

Shah: No, you actually need to write code and release a product. You need to respond to customer issues. You need to iterate quickly so you can learn quickly. You don’t need a VP of anything, you need a doer of stuff that needs to get done. Don’t think about buying titles–think about buying outcomes.

For the A’s, those “outcomes” are wins. And thanks to their continued success in finding market inefficiencies, the wins keep coming.