Daily Archives: January 24, 2013

What Capitalism Can’t Fix

by Phil Buchanan

Increasingly, I see people looking starry-eyed to business and markets to solve social problems. In so doing, they run the risk of dismissing the impact of nonprofits — and diminishing the value of organizations that seek to make a difference without creating the potential conflicts that come with the profit motive. My view is that pretending companies and markets hold all the answers actually puts at risk our ability to deal with our most pressing societal problems — and to help our most vulnerable citizens.

The rhetoric is everywhere — from the trade press to the mainstream media to business school faculty to corporate titans to Silicon Valley entrepreneurs. Former GE CEO Jack Welch, writing in Business Week, characterized the nonprofit sector as a “foreign land” in which performance is not a priority and employees are guaranteed “lifetime employment.” Alexis Ohanian, co-founder of Reddit, wrote last year on the Wired web site, “Let’s be real: The nonprofit model is broken. The 20th-century way of “guilting” people into giving to an opaque, inefficient organization with massive overhead is no longer a viable model.” In a recent blog post here on HBR.org, Dan Pallotta suggests that nonprofits should use the tools of capitalism such as high pay and providing returns to investors to increase charitable giving.

The rush to disparage nonprofits and the stampede to embrace the idea that for-profits — or for-profit models — can more easily combat our toughest social problems deny reality. Many crucial objectives simply cannot be accomplished while generating a financial return. Other objectives can but there is a price to be paid. In health care, for example, research indicates a decline in quality when non-profit hospitals switched to become profit making, as Eduardo Porter explained this month in the New York Times.

The laudable push for companies to commit more energy to dealing with social problems should not obscure the need for strong independent nonprofits that focus on mission not profit. And while nonprofits can learn from companies and companies can learn from nonprofits, it is a mistake to deny differences.

After all, there is a crucial distinction between an institution that reinvests surpluses in its mission and one that faces unrelenting pressure to distribute profit to shareholders. Consider higher education in the United States. Nonprofit universities frequently offer an education that costs more than actual tuition — the difference made up through charitable gifts and endowment returns — while for-profit institutions must cover their costs with tuition and create a profit margin. The results — and the evidence from lawsuits, media reports, and congressional and GAO investigations of for-profit universities — speak for themselves.

Despite this and many other cautionary tales, an increasing number of people both inside and outside the nonprofit world seem drunk on the Kool-Aid of business superiority. Too often people equate “business thinking” with effectiveness. Even those inside the world of nonprofits and philanthropy have internalized the idea that operating “like a business” means operating effectively (never asking which business: Countrywide Financial? BP? Enron?).

The stereotypes of nonprofits are just that: stereotypes. There are, of course, numerous examples of nonprofit influence and impact — from work on environmental issues to citizens’ rights to reductions in tobacco use to reductions in worldwide child mortality — but also lesser known examples. Take the work of the Institute for Healthcare Improvement, a nonprofit whose 18-month campaign to reduce hospital mortality rates has saved an estimated 122,300 lives by inspiring and guiding hospital executives, physicians, and nurses to adopt six basic patient-safety practices. As Peter Fader, a University of Pennsylvania professor and director of the Wharton Customer Analytics Initiative, has observed: Nonprofits often excel at using “their data to better understand their ‘customer base.’ In this area, big companies with lots of resources really can learn from their cash-strapped nonprofit cousins.”

The point is this: No type of organization — government, business, or nonprofit — has a monopoly on effectiveness. And nonprofits are typically tackling the most complex problems of all. If those problems could have easily been solved by government or business, they wouldn’t exist at all.

I’m a huge believer in free-market capitalism. I have an M.B.A. and have worked as a corporate consultant. But I think we’re better off being sober about what markets can and cannot accomplish.

I’d suggest three practical questions to ask in sorting through how to achieve important social goals.

  • Does the pursuit of profit conflict with or facilitate the achievement of your goal? How likely are profit and social impact to be in tension? How will that tension be managed or resolved?
  • What kind of choices and information do people have? Markets work best when people have choices and when there is good information, so ask, do those conditions apply? Are you looking at an opportunity — like creating products or technologies that will help poor people in some aspect of their lives — that lends itself to a free-market solution? Or are you looking at something, like the management of a prison or nursing home system for a state, where a provider is likely to have a virtual monopoly — meaning management is free to prioritize profit over the social mission without paying any kind of price?
  • Finally, are you addressing an issue that actually results from market failure, such as, environmental degradation? If you don’t understand capitalism’s role in contributing to a problem, you probably won’t be able to rely on capitalism to chart a path to the solution.

Then decide what makes most sense, and don’t assume that a pure nonprofit isn’t the way to go.

Source : HBR

It’s Time to Cut Back on Social Media

by Dorie Clark

I recently got back from the New Media Expo in Las Vegas. Scheduled before the massive annual CES gathering, it’s a powwow for bloggers and other social media enthusiasts, early adopters who are quick to jump on board the next great thing. So imagine my surprise when I realized one of the undercurrents of the event, burbling repeatedly to the surface, was a desire to cut back on social media efforts.

That doesn’t mean doing less overall or abandoning new media. But it does speak to a desire to prune and focus on the platforms that have the most impact. It’s hard to say no to the crush of social media demands. During a panel I moderated with well-known blogger and tech expert Robert Scoble, he said there was no alternative to constant, ubiquitous engagement and held up a spare battery he carried for his smartphone, so he’d never run out of juice. No time to respond to tweets? Do it while you’re walking down the hallway, he said. Plenty of people agree with him. One consultant friend recently chided me for not being on Pinterest or Instagram — and like her, many worry they’ll fall behind if they’re not hard-core super users, or if they don’t get in on the ground floor. Clearly there is a first mover advantage in some cases: Chris Brogan developed a passionate following as an early blogger, and Guy Kawasaki jumped onboard Twitter and became a powerhouse there.

But as I advise my clients to do, I believe everyone needs to think about which platforms best speak to your strengths. At the New Media Expo, I also interviewed Nick Harris, head of digital marketing for Benjamin Moore. For such a visual product, literally differentiated by its color, Pinterest is a terrific platform. But for a consultant like me who traffics in ideas, blogging and tweeting make a lot more sense as investments.

In fact, we’re now reaching a point where having a scattered focus could truly be deleterious to your goals, because you’re only able to half-engage or create mediocre content. Marcy Massura of Weber Shandwick, who was on another panel with me, commented that “presence means nothing.” Indeed, if you have a Twitter profile with 35 followers, or a MySpace page that hasn’t been touched since 2007, it often looks worse than having nothing at all. (Personally, I just KO’d my Foursquare account.)

It’s become increasingly clear that with the proliferation of new platforms, no person or company can become the master of them all. Nor should they. The harder decision is figuring out which ones you should prioritize — or jettison. Establishing ROI has always been the holy grail of social media. We may still have a ways to go before we can quantify its objective, dollars-and-cents impact (if you read about something on Facebook, and then saw a tweet, and then went to the mall to buy it, does it count?). But even anecdotally, you probably have some good operating theories. For instance, if you target women, Pinterest is a great bet; if it’s males, Google+ is currently their stomping ground. And as I’ve written about here on HBR.org, blogging is the best way to demonstrate true content mastery and thought leadership.

The “best” platforms will be different for every person or brand. But in 2013, think hard about how you can cut back, so you can focus on what matters.

Source : HBR

Why HR Still Isn’t a Strategic Partner?

For two decades we have been hearing that HR must become a strategic partner to the business. And the fact that we’re still hearing it suggests that in many organizations it hasn’t happened.

The need to align HR with the business has become more urgent than ever. Financial markets exert relentless pressure for growth, especially in emerging markets. Customers demand more and better service at lower cost. And cost-efficiency, resource conservation and regulatory compliance have become issues for almost every organization. Turnover among top talent is expected to increase in 2012; globalization is requiring stronger regional HR capabilities; and demographic shifts across the world are dramatically affecting availability of qualified people.

Yet, all too often, business leaders still wonder aloud why their organizations even have HR departments. For their part, many HR leaders are willing to partner with the business, but given the unique situation of each individual company, they have little in the way of concrete guidance about how to fulfill that role.

Let me suggest a way to start. Of every action you take as an HR leader, ask this simple question: does it cause friction in the business or does it create flow? Friction is anything that makes it more difficult for people in critical roles to win with the customer. Flow, on the other hand, is doing everything possible to remove barriers and promote better performance. The question applies to virtually any company in any business and it will take you farther down the road faster than the hazy, abstract injunction to become a strategic partner. Even in what appear to be routine HR responsibilities, you can inject the business perspective simply by asking whether what you are doing is going to enhance the flow of the business or impede it with friction.

Why is it so difficult to inject that business perspective? Because as HR leaders we feel ourselves to be near the pinnacle of the organization. The organization reports to us. It must meet our demands for information, documents, numbers.

In fact, that’s backwards. We are far removed from the points and people that make a difference with customers and a difference to the business. Our perspective should be that of seeing to it that the people at those points can perform as smoothly, productively, and frictionlessly as possible.

Think, for example, of your talent strategy. Do you simply manage talent, or do you provide talent solutions that reduce friction and enhance the flow of the business? Often we pride ourselves on trying to recruit the best talent we can find and consistently and fairly spending our resources and focusing our attention equally on everyone. But does that really enhance the flow of the business?

To truly be partners to the business we must identify those critical points of the business where the strategy succeeds or fails, and provide relevant talent solutions. In other words, we must think in terms of what Brian E. Becker, Mark A. Huselid, and Richard W. Beatty call “the differentiated workforce,” in their book of the same name. That means managing talent as a portfolio of investments, some of which will pay a much higher return than others. Instead of spending an equal amount of time, attention and resources on everyone equally, you make disproportionate investments in the most critical roles and critical people — not just in terms of compensation, but in terms of development, opportunities, retention, engagement, and human capital planning. All jobs in a business unit are important, but not all are strategic and have maximum impact on the economic value of the business.

Many business units spend time each year identifying talent and competency needs, but few get real about it by developing plans around winning in their critical talent spaces. Let’s say you have, in your opinion, spent the appropriate amount of time identifying your strategic talent needs — the difference-making roles. Then ask yourself how much time you and your HR team and line leaders spend focusing on solutions for acquiring, developing, engaging and retaining the talent to fill those needs? Or do you have the “equality” mentality — devoting the same amount of attention to everyone? It’s shocking how many HR leaders say that their business has a strategic priority such as accelerating growth in emerging markets, but they and their teams spend little time in emerging markets. Does your investment of time and resources match your business strategy? If not, you are creating friction in the business that diminishes strategic impact.

 

by J. Craig Mundy
Source : HBR