Business, Leadership and Consciousness. Part 2.

 

The Path to Conscious Leadership in Modern Business

Introduction

Leadership in today’s complex and fast-paced business environment demands more than mere technical expertise or managerial skills. It requires a higher level of awareness, adaptability, and emotional intelligence—all crucial elements embodied in the concept of conscious leadership. Conscious leaders are not only self-aware but also acutely attuned to the energies, emotions, and intentions of those they lead. By blending mindfulness with actionable strategies, they create thriving organisations that empower individuals and foster innovation.

This whitepaper explores the principles and practices of conscious leadership in depth. It examines how mindfulness and emotional intelligence can enhance decision-making, strengthen team connections, and effectively navigate organisational challenges. We will discuss practical frameworks, including managing transitions between meetings, setting intentions, tracking personal and group energy, and maintaining a “Dynamic Diary.” Additionally, we will provide evidence-based techniques and actionable tips that business professionals can implement to elevate their leadership performance and break the stress cycle that often pervades corporate environments.

 What is Conscious Leadership?

 Definition and Characteristics

Conscious leadership is a leadership style fundamentally rooted in self-awareness, intentionality, and presence. It focuses on developing the awareness necessary to lead purposefully and empathetically while maintaining a balance between achieving goals and prioritising employee well-being. Conscious leaders move beyond reactive management styles to lead with precision and integrity, thus unlocking the full potential of their teams.

Key Characteristics of Conscious Leadership:

1. Mindfulness: This involves being fully present and aware in the moment, enabling leaders to manage stress and enhance clarity in decision-making.

2. Self-Awareness: The ability to recognise and understand one’s thoughts, emotions, and behaviours is crucial for guiding interactions with others.

3. Empathy: The capacity to attune to and appreciate the perspectives, energies, and emotions of others fosters deeper connections and collaboration.

4. Intentionality: A commitment to approaching challenges with a clear focus and strong purpose ensures that actions align with both values and team objectives.

5. Adaptability: The ability to pivot and adjust strategies in response to changing circumstances and the needs of the team and organisation is essential for effective leadership.

 The Business Case for Conscious Leadership

The business landscape has evolved, and the focus on conscious leadership reflects this shift. Numerous studies have demonstrated that organisations led by conscious leaders perform better across multiple metrics:

– Improved Employee Engagement: Engaged employees tend to be more productive and loyal, resulting in lower turnover rates and an enhanced organisational culture.

– Increased Innovation and Creativity: By fostering an environment that encourages open communication and psychological safety, conscious leaders enhance innovation and creative problem-solving.

– Reduction in Workplace Stress and Burnout: Leaders who cultivate supportive work environments are crucial in building resilience within their teams, thereby reducing burnout rates.

Enhanced Organisational Resilience: Conscious leadership enables organisations to adapt quickly to challenges and changes, facilitating sustainable growth even in fluctuating markets.

Research conducted by Harvard Business School found that leaders who practise mindfulness and enhance their emotional intelligence are better equipped to manage organisational uncertainty while building trust within their teams (Shivakumar, 2013). The modern workplace increasingly recognises that effective leadership extends beyond achieving key performance indicators (KPIs) and centres instead on fostering long-term engagement, well-being, and resilience among team members.

Moreover, a study by Microsoft has highlighted the cognitive impacts of consecutive meetings, particularly within virtual formats such as Microsoft Teams. The research suggests that attending too many consecutive meetings can overwhelm the brain’s capacity for focus and decision-making, leading to cognitive fatigue. Specifically, these micro-studies reveal that continuous video calls increase mental exhaustion, impairing productivity and creativity due to excessive cognitive load (Microsoft, 2021). This underscores the importance of conscious leadership in structuring meetings and workdays to prevent burnout and promote a healthier work environment.

 The Role of Conscious Leadership in Breaking the Stress Cycle

Stress is a pervasive issue in modern workplaces that often leads to a vicious cycle negatively impacting individual well-being and organisational effectiveness. High levels of stress can render individuals more prone to rigidity in thinking, leading to a tendency towards transactional interactions and even obsessive-compulsive disorder (OCD)-like behaviours in decision-making (Goleman, 1995). When stress levels rise, the brain’s prefrontal cortex—responsible for complex decision-making and emotional regulation—becomes less effective, while the amygdala, associated with fear and anxiety, becomes more active, resulting in reactive behaviours and reduced flexibility (McEwen, 2004).

Conscious leadership offers a pathway to break this cycle by fostering an environment of psychological safety and emotional intelligence. By practising mindfulness, leaders can model healthy behaviours that mitigate stress and promote a culture prioritising well-being while balancing performance demands with personal health.

 Research on Stress and Its Impact on Decision-Making

Research on stress illustrates its profound effects on behaviour and cognitive function. Under stress, individuals often revert to fixed patterns of thinking and behaviour, leading to inflexible responses. Studies have shown that stress can:

– Impair Cognitive Flexibility: Elevated stress significantly diminishes an individual’s ability to think creatively or consider multiple solutions to a problem (Henry & Wang, 2015). Consequently, this can lead to an increased reliance on established routines or transactional interactions, which stifle innovation and adaptability.

– Increase Reactionary Behaviours: High levels of stress can exacerbate tendencies toward reactive rather than proactive measures, resulting in decisions influenced more by fear or anxiety than by informed analysis and collaboration (Kabat-Zinn, 2003).

– Heighten Control Issues: Stress can trigger OCD-like behaviours, including compulsive checking and micromanagement, as individuals strive to regain control over their environments, further hindering collaboration and trust.

By cultivating conscious leadership, organisations can create environments where stress is managed effectively, thereby reducing its adverse impacts on decision-making and interpersonal relationships.

 Key Practices of Conscious Leadership

 1. Mindfulness as a Cornerstone

At the core of conscious leadership lies mindfulness—the practice of focusing one’s attention on the present moment without judgment. This ability enhances emotional regulation, self-awareness, and the capacity to respond thoughtfully rather than impulsively.

Scientific Insights on Mindfulness:

Neuroscientific research indicates that mindfulness practices lead to significant changes in brain structure. For instance, studies have demonstrated increased grey matter density in areas related to emotional regulation and self-referential processing (Davidson et al., 2003). Furthermore, experience with mindfulness meditation enhances executive functioning, particularly in managing attention and emotions (Zeidan et al., 2010).

 Actionable Tips for Leaders:

– Mindful Breathing Exercises: Initiate your day or each significant meeting with a two-minute mindful breathing exercise. This practice fosters mental clarity and reduces anxiety.

– Mindful Listening in Meetings: During discussions, commit to practising active listening by providing your full attention to speakers without formulating responses while they are talking. This establishes respect and demonstrates a commitment to your team’s insights.

Integrating mindfulness practices into daily routines equips leaders to cultivate a presence that inspires confidence and encourages open dialogue.

 2. Managing Transitions Between Meetings

The ability to transition seamlessly between meetings and engagements is paramount for effective leaders. Conscious leaders prioritise mental resets between commitments, ensuring that each new interaction receives their full attention and energy.

 The Science of Mental Reset:

Research has illustrated the cognitive costs of multitasking and the adverse effects of task switching on productivity. According to studies conducted by Baumeister and Tierney (2011), transitioning without a proper pause can lead to cognitive overload, which increases stress and impairs decision-making abilities. By consciously managing transitions, leaders can maintain clarity and focus throughout their workday.

 Practical Techniques for Managing Transitions:

– Pause Between Transitions: Take 2-3 minutes following each meeting to reflect on the previous discussion. Consider asking yourself questions like, “What went well? What can I improve?” This practice helps consolidate learning and prepares you for the next engagement.

– Reset with Physical Movement: Engage your body by taking a brief walk or performing gentle stretches between meetings. Physical movement stimulates creativity and mental agility, enhancing overall productivity.

Conscious leaders recognise that how they manage transitions has a significant impact on team dynamics and overall performance.

 3. Setting Intentions

Effective leaders understand that entering situations with clear intentions provides a robust framework for success. Intentions serve as a guiding star, aligning actions with values and strategic objectives. Conscious leaders utilise intention-setting to enhance clarity and commitment within their teams.

The Power of Intention Setting:

Research by Locke and Latham (2002) emphasizes the significance of intentional goal-setting in enhancing performance and motivation. When leaders articulate their intentions, they create a focused environment that can align the team towards shared goals.

 Actionable Tips for Setting Intentions:

– Start Meetings with Intentions: At the beginning of each meeting, clearly articulate your intention (e.g., “Today’s focus is on fostering collaboration on this initiative”). This aligns the team’s efforts towards achieving a collective vision.

– Incorporate Daily Intention-Setting Ritual: Establish a routine where you write down three personal or professional goals at the start of each day, reflecting on how to align your actions with these objectives.

Setting intentions ensures that leaders remain grounded in their values and focused on their purpose, resulting in more meaningful interactions.

 4. Registering Energy and Emotions

Conscious leaders recognise that energy—both their own and that of their team—is critical to collaborative efforts and overall productivity. By modelling awareness of their energy and emotions, leaders can better understand team dynamics and provide meaningful support.

 Research Supporting Emotional Awareness:

Studies on emotional intelligence reveal that leaders who recognise and manage their emotions create more trustful and effective teams (Goleman, 1996). Additionally, leaders who are aware of their team’s energy can identify shifts in morale, enabling them to address issues before they escalate.

 Practical Steps to Register Energy and Emotions:

– Self-Awareness Practices: Begin your day by journaling about your emotional state and energy levels. Documenting your feelings helps you track your emotional landscape and gain a deeper understanding of how it influences your interactions.

– Observe Others’ Energy Levels: During meetings, be attentive to non-verbal cues such as body language, tone, and engagement levels. Acknowledge changes in energy that may signal a need for support or intervention.

By attuning themselves to their own and their team’s energies, conscious leaders can cultivate a supportive atmosphere conducive to high performance.

 5. Managing Impulse Control and Negative Thinking Patterns

Conscious leadership activities are instrumental in managing impulse control and combatting negative thinking patterns. High-stress levels can lead to impulsive behaviours and detrimental thought cycles that negatively impact decision-making and interpersonal relations in the workplace.

 The Importance of Managing Impulse Control:

By incorporating mindfulness into their daily practices, leaders can enhance their impulse control, resulting in more thoughtful and deliberate decision-making. Mindfulness practices cultivate an awareness of immediate reactions, allowing individuals to pause and respond rather than react impulsively.

 Combating Negative Thinking Patterns:

Stress often fosters negative thinking patterns, which can exacerbate anxiety and reduce productivity. Conscious leadership fosters a growth mindset, promoting resilience and a positive outlook. Techniques such as cognitive restructuring, commonly used in Mindfulness-Based Stress Reduction (MBSR), help leaders and team members identify and challenge unhelpful thought patterns.

 Actionable Strategies for Leaders:

– Mindfulness Meditation: Incorporate mindfulness meditation practices to enhance awareness of thoughts and impulses, thereby fostering a space for reflection before taking action.

– Cognitive Restructuring: Encourage team members to actively identify negative thoughts during stress and reframe them into more positive and constructive perspectives. This practice helps shift mindsets away from rigidity and towards adaptability.

– Encourage Open Dialogue: Create an environment where team members feel comfortable discussing their thoughts and feelings openly. This not only reduces stress but also fosters a culture of support and collaboration.

By integrating activities that enhance impulse control and challenge negative thinking patterns, conscious leaders foster a healthier and more productive work environment that is conducive to both individual and team success.

 6. Multi-Tasking and Its Impact on Brain Function

In today’s workplace, multi-tasking is often regarded as a necessary skill. However, research suggests that attempting to juggle multiple tasks can have detrimental effects on mental performance and well-being. One critical area impacted by multi-tasking is Brodmann Area 10, which is associated with higher cognitive functions, including decision-making, problem-solving, and social interactions.

 The Science Behind Brodmann Area 10 and Multi-Tasking:

Brodmann Area 10 is located in the prefrontal cortex of the brain and plays a significant role in executive functions such as planning, reasoning, and decision-making (Owen et al., 2005). When individuals attempt to multi-task, they frequently experience increased cognitive load, leading to diminished performance and faster mental fatigue. Research indicates that overloading this area can hinder one’s ability to focus and process information effectively (Bowman et al., 2010). Specifically, multi-tasking disrupts the brain’s balance between attentional capacities and working memory, ultimately compromising cognitive functions.

 Actionable Strategies to Minimise Multi-Tasking:

– Prioritise Single-Tasking: Encourage team members to focus on one task at a time. For instance, incorporate “focus blocks” during which employees dedicate a specific amount of uninterrupted time to tasks before switching to another activity.

– Set Clear Boundaries Between Tasks: Define distinct periods for specific activities or responsibilities to help reduce the temptation to multi-task—Utilise tools like time blocking to structure the workday effectively.

– Limit Distractions: Create environments that minimise interruptions, such as designated quiet areas for focused work, thereby facilitating deeper concentration and optimising the efforts of Brodmann Area 10.

By addressing the pitfalls of multitasking, conscious leaders can enhance cognitive performance within their teams and cultivate an environment that fosters focused, high-quality work.

 7. The Dynamic Diary: Optimising Time with Energy Awareness

A “Dynamic Diary” is a flexible planning tool that incorporates non-negotiables while allowing for adaptations based on changing energy levels. Unlike rigid scheduling, the Dynamic Diary enables leaders to allocate their efforts effectively, enhancing productivity without leading to overwhelm.

 How to Use a Dynamic Diary:

1. Create Non-Negotiables: Identify key activities essential to your role, such as regular team check-ins or strategic planning sessions, and ring-fence these in your diary to ensure they are prioritised.

2. Adapt for Energy Levels: Determine your peak energy hours (such as mornings or afternoons) and schedule high-focus tasks during these times. Reserve less demanding activities for periods when you have lower energy.

3. Incorporate Recovery Periods: Allow time for restorative activities, such as brief breaks or reflective practices, to recharge and sustain focus throughout the day.

By utilising the Dynamic Diary approach, leaders can ensure they balance their workloads effectively and align tasks with their energy levels, ultimately maintaining a sustainable work pattern.

 Why Conscious Leadership Matters for Business Professionals

 Improved Employee Engagement

Leaders who embody mindfulness and awareness foster environments where employees feel valued and heard. Research consistently indicates that engaged employees report greater job satisfaction, increased productivity, and lower turnover rates (Gallup, 2020). By embracing conscious leadership practices, organisations can cultivate a more motivated and committed workforce.

 Enhanced Decision-Making

Conscious leaders possess a deeper understanding of their emotions and team dynamics, enabling them to make more informed and rational decisions. By practising mindfulness and emotional awareness, they can mitigate stress responses, evaluate various perspectives, and engage in thoughtful deliberation.

 Greater Work-Life Balance

Implementing strategies such as the Dynamic Diary and intentional goal-setting enables conscious leaders to achieve their professional objectives while modelling healthy work-life integration. This balance reduces the risk of burnout and encourages team members to adopt similar practices, benefiting the organisation’s overall health.

 Fostering a Culture of Trust and Innovation

Conscious leaders foster a culture where vulnerability is openly embraced, enabling team members to share ideas without fear of judgment. This culture of psychological safety encourages innovation and collaboration, leading to improved problem-solving and enhanced creative thinking. When employees feel secure in expressing their thoughts, organisations can access a broader range of insights and solutions.

 Conclusion

Conscious leadership is not merely an aspirational goal; it is a practical approach essential for thriving in today’s dynamic business environment. By integrating mindfulness into their routines, managing transitions, registering energy and emotions, and leveraging frameworks such as the Dynamic Diary, leaders can inspire their teams to achieve new levels of productivity, innovation, and resilience while effectively breaking the stress cycle that hinders organisational success.

Incorporating these practices is vital for business professionals seeking to lead with purpose and cultivate environments where team members are empowered to perform at their best. Conscious leadership represents the future of effective leadership in a world where human connection and emotional intelligence are paramount to sustained success.

 References

1. Baumeister, R. F., & Tierney, J. (2011). Willpower: Rediscovering the Greatest Human Strength. Penguin Press. 

2. Bowman, L. L., Levine, A. J., Waite, B. M., & Gendron, M. (2010). “The Impact of Communication Technology on the Social Skills of College Students.” Sage Open, 1(3), 1-10. 

3. Davidson, R. J., Sheridan, J. F., & Williams, W. J. (2003). The Amygdala and Emotion. Annals of the New York Academy of Sciences, 985(1), 1-24. 

4. Gallup. (2020). State of the Global Workplace 2020 Report. Gallup. 

5. Goleman, D. (1995). Emotional Intelligence. Bantam Books. 

6. Goleman, D. (1996). Emotional Intelligence: Why It Can Matter More Than IQ. Bantam Books. 

7. Goleman, D., Boyatzis, R. E., & McKee, A. (2013). Primal Leadership: Unleashing the Power of Emotional Intelligence. Harvard Business Review Press. 

8. Henry, J. S., & Wang, A. C. (2015). “Stress Effects on Cognitive Flexibility: A Review of the Neurobiological Mechanisms.” Biological Psychology, 108, 175-182. 

9. Hülsheger, U. R., Alberts, H. J. E. M., Feinholdt, A., & Lang, J. W. B. (2013). “Benefits of Mindfulness at Work: The Role of Mindfulness in Emotional Exhaustion and Job Satisfaction.” Journal of Applied Psychology, 98(2), 310–325. 

10. Kabat-Zinn, J. (2003). Mindfulness-Based Interventions in Context: Past, Present, and Future. Clinical Psychology: Science and Practice, 10(2), 144-156. 

11. Locke, E. A., & Latham, G. P. (2002). “Building a Practically Useful Theory of Goal Setting and Task Motivation.” American Psychologist, 57(9), 705–717. 

12. McEwen, B. S. (2004). “On a Common Principle of Stress and Adaptation.” Brain, Behavior, and Immunity, 18(3), 203-220. 

13. Microsoft. (2021). “The Future of Work: What Happens to Your Brain When You Have Too Many Meetings?” Microsoft Research Publications. 

14. Owen, A. M., Morris, R. G., & Sahakian, B. J. (2005). “The Role of the Prefrontal Cortex in Working Memory.” Journal of Cognitive Neuroscience, 17(5), 1028-1042. 

15. Shivakumar, M. (2013). “The Science of Leadership: A Perspective on Conscious Leadership.” Harvard Business School Publishing. 

16. Zeidan, F., Johnson, S. K., Diamond, B. J., David, Z. A., & Goolkasian, P. (2010). “Mindfulness Meditation Improves Cognition: Evidence of Brief Mental Training.” Consciousness and Cognition, 19(2), 597-605. 

 Action Plan for Business Professionals

1. Start Your Leadership Journey: Establish a daily mindfulness practice (5-10 minutes).

2. Create a Dynamic Diary: Implement a flexible scheduling approach to align your tasks with your energy levels.

3. Set Clear Intentions: Begin meetings and daily routines with defined intentions to enhance focus and team alignment.

4. Reflect on Energy: Use a journal to document your emotional and energy patterns weekly to identify trends and areas for improvement.

5. Invest in Resources: Explore mindfulness and leadership coaching to further embed conscious leadership practices into your daily routines.

By following these actionable strategies, business professionals can cultivate a leadership style rooted in consciousness, paving the way for transformative changes within their organisations.

https://tinyurl.com/2ffjck9p

Transcendent Leadership: How Understanding Consciousness Elevates Business

getty

ByCarlo Tortora Brayda,

Forbes Councils Member.

Business leaders face challenges, including the frantic need for speedy decision-making, unexpected market shifts, geopolitical volatility, internal mutinies, power plays and harrowing decisions that can hurt the livelihood of their teams by cutting jobs.

The common thread throughout my experiences has been their sheer intensity. While the highs of leadership are undeniable, you can be assured that you will also face fear, betrayal and dishonesty. Accepting these as human nature was not easy, but it was essential.

I realized that framing reality's ontological nature was the way to transcend challenges. I needed a paradigm shift to change my way of seeing the world. Challenges felt external but reflected my internal state, and my response shaped their impact.

It wasn't an immediate realization; over some time, I was introspecting, wanting to understand reality from first principles.

So, I followed the path of reductionism, looking at the frontier of the "small," where the standard model gives way to the only possible foundational reality of quantum fields. This, in turn, becomes logically reliant on the idealist paradigm of Consciousness as the fundamental lowest common denominator of reality.

Federico Faggin’s book Irreducible confirms this. His thesis centers on philosophical idealism, proposing that Consciousness is a fundamental quantum phenomenon. At the same time, the physical world serves as a symbolic representation of a deeper, conscious reality.

Bernardo Kastrup, a double Ph.D. in Computer Engineering and Philosophy and former CERN scientist, has propounded this thinking and collaborated with leaders like Dr. Faggin. A prolific scholar, his ideas modernize German philosophy. His interviews with the Institute of Arts and Ideas have been highly inspirational to me.

Because my entrepreneurial journey was punishing, this realization changed everything for me; it gave me a reset. I no longer feel overwhelmed or anxious about leadership.

The Importance Of 'Knowing Thyself'

Since the dawn of civilization, one concept has been at the heart of any world philosophy—what the Greeks coined as "Know thyself." The depth of this statement is nearly unfathomable.

Generally, we define ourselves through labels: our profession, our ethnicity, our species, our position in society or our family. That is what you do, but what are you, really?

We know the world through our senses, which provide us with an interpretation of the reality outside of our mind, but they are a selective interpretation. It is "interpretation" because the senses detect it, and your mind forms an architecture of the meaning of what the perceptions want to convey. It is "selective" because, as we all know, our senses have narrow ranges of functionality within the electromagnetic spectrum. According to Professor of Cognitive Science at the University of California, Irvine, Donald Hoffman, your understanding of the world is a construct, an indirect representation of reality.

Behind that is your true self—the experiencer. Your essence emerges beyond sensory inputs.

My work has changed because I see all relationships within my business ecosystem through this lens of everyone having the same common denominator.

I shifted from being the protagonist to witnessing my interpersonal relationships. This paradigm shift has been transformational in my business. It has been the most potent means of attaining clarity of vision under stress, enabling me to keep a level head when taking any action or business decision.

I started engaging with all my stakeholders from a perspective of oneness. This perspective has benefited my business and helped me co-create societal movements in AI and cybersecurity.

The Business Impact

Across cultures, we see people aiming for the same. Ubuntu is the Central and Southern African Bantu philosophy crystallized by the words: "I am because we are," which has an ongoing role in the concept of AI inclusion and beyond. In India, the phrase Vasudhaiva Kutumbakam, meaning we are one family, also resonates with the idea of recognition of oneness, of sharing the same inner common denominator of awareness with other people: employees, suppliers, shareholders and competitors. During India's presidency of the G20 in 2023, that theme was central.

Leaders who have adopted this philosophy have demonstrated their ability to generate deeply transformational movements. Research has shown that ego-based leadership leads to weak and ineffective decision-making.

How To Practice Self-Inquiry

Here are some tips for migrating to an awareness-driven mindset.

• When confronting any situation, ranging from negotiation to colleague relationships, think, "Where are you reacting from?" You are on the right path if you engage as the Consciousness behind your mundane ego.

• Transcend fear and insecurity, and avoid grudges and regrets. From my experience, you will quickly find your professional life growing in efficiency and happiness.

• When you negotiate, look for an outcome that benefits everyone. Avoid negotiating in your favor at someone else's expense, as this can backfire.

Satya Nadella, Microsoft's CEO, is deeply influenced by empathy, self-awareness and a monistic mindset. He has transformed Microsoft into a growth-based meritocracy. His book, Hit Refresh, discusses self-inquiry and mindfulness, highlighting how a leader's self-awareness can transform corporate culture.

Leaders who have gone through introspection and self-inquiry are unaffected by emotional turbulence. They cannot be hurt, as they know their core sense of self is inviolable. They deal with challenges as they arise effectively, decisively and resolutely. All stakeholders in the business ecosystem feel the authenticity and purpose and will rally in support of the leader, giving the organization unstoppable strength.

After embracing this approach, I saw tangible acceleration and unprecedented entrepreneurial innovation in my work. Specifically, I led a think tank task force focused on cyber protection of critical infrastructure. In under two years, we brought together a top-tier team to create the Cyber Eagle Project Inc., a public-private partnership designed to transform cybersecurity with agentic AI.

Self-inquiry is beneficial for personal well-being and has profound implications for your company. Aligning with your true sense of self will yield a more enlightened leadership style, which in turn will aid resiliency, innovation and shareholder value. Awareness and mindfulness are profoundly liberating and offer a competitive advantage.

Knowing yourself will uplift your entire organization into a sphere of authenticity and wisdom and will ripple through your ecosystem. Start by describing yourself as "I am …" and stop there.

https://tinyurl.com/5dts98fd

Turnaround in business. Part 6

 

Why Do Firms Fail in Emerging Markets?

It is well accepted that emerging markets like BRIC countries represent a huge present and future opportunity for growing the business. Thus, many companies are entering into those markets. Unfortunately, not all organizations are able to show off that they are growing as it was planned. So let us review why do firms fail in emerging markets like Brazil:

Focus on what we need (increase sales) rather than in which customers need

Our financial goal can be to increase sales, but we must maintain customer focus. We should not assume that because our products fulfill global needs and are selling properly in some developed countries, those are going to work properly in emerging countries. We should ask ourselves: What are customers’ needs? And what is customers’ behavior (in emerging markets)? So, we will likely realize that customers in those countries buy with a different mindset. E.g. In Europe, it is much more likely to find customers that buy products according to “Product Life Time Value” than in Brazil that prefer list price to make purchasing decisions.

Market research focuses on the size of the opportunity and “neglect” product and price market constraints

There are still companies in B2B markets that pay much attention to sales and much less on marketing. So, some firms wrongly leave product introduction project on the hand of not very experienced marketing people. Having a deep study of how our products and prices fit the market is so important.

Decision-makers and influencers with lack of understanding of emerging markets

We can find that decision-makers have been historically located in Europe or North America headquarters. Some of them have never lived or even been in any of those markets, and they use their own country mindset.

“Global product strategy” rather than “fit to market strategy”

We have listened many times: “be global, act local.” However, there are still many companies that executing their global strategy (for instance reduce complexity,) they kill the necessary “fit to market strategy.” E.g. In the automotive industry in Brazil, customers prefer mechanical engines, so offering just electronic engines in order to have a global product strategy means give up a huge potential customer base.

Not understanding the “good enough segment”

Important growth in emerging markets comes from that segment. Good enough segment expects reliable enough products at low enough prices. I mean enough quality at affordable prices that still generate profits. Moreover, this segment is important to achieve economies of scale that will allow us to access to competitive price levels. E.g. In the automotive industry environmental regulation for emerging countries have a few years of delays. Trying to reduce product complexity having the same product for Europe and Brazil means increase features and prices that push us out of the “good enough segment.”

Not understanding “growth strategy” implications

In order to grow, firms need to invest. Some companies get in dead-circuit because they want to grow and get short-term profitability, and both strategies used to be incompatible in the short-term. Indeed, growing means investing (facilities, stock, days of sales outstanding, sales force, and so on,) and just a few industries allow firms to materialize profits in the short-term. Many of the successful firms that entry in emerging countries have invested strongly during years before getting the expected return. Other companies think that the important is just to fulfill their global footprint, and they invest shyly (probably one salesman by-product or vertical industry). In this last case because the investment is not enough, it will take very long time to get the return on investment, and firms could lose the patient and enthusiasm for those markets.

“Problems are OUT (of the firm) approach” rather than “problems are INSIDE (of the firm) approach”

The arrogance of some people/companies does not allow them to realize that they have many improvement opportunities inside. Those companies blame to market, customers, and so on. Many times, those people are bad listeners, and therefore people with low customer orientation. Moreover those people with a limited view of the problem cannot take advantage of the “power of AND” when trying to solve problems. So, they think in terms of OR. For instance, rather than improve the firm processes to be more competitive AND solve the market price issues, they think that the solution is lost money OR to increase even more the list price.

Measure success perceptually (%) rather than in euros/dollars ($)

Controllers can kill growth initiatives because those initiatives do no reach a percentage of net margin. Indeed, those initiatives can have a positive net margin, an important contribution margin, and support market share growth during the market penetration stage.

Not pursue costs saving aggressively

There are huge global corporations that are losing market share because they created in the past huge facilities (with several thousands of employees) difficult to manage properly. Those plants have very limited flexibility, diseconomies of scale, and massive overheads. Again, we have the risk of controllers assuming wrongly that current cost structure is correct, and suggesting “rationalizing” products, customers or markets.

Assuming that managing more value activities means creating more customer value and profitability

Some organizations decide to enter emerging markets and be focused on sales development. So, they use resources to grow quickly, and they take advantage of local partners and outsourcing activities. Other firms decide to invest at the same time in sales and building other capabilities. For instance, there are companies that have a distributor business model, but those firms try to add assembling/manufacturing capabilities to the distributor business model to generate more customer value and be more profitable. Nevertheless, they deviate resources from sales development to assembling/manufacturing, and because at the beginning there are not enough sales, the assembling facilities do not get economies of scale to compete. So, they face two problems at the same time: low sales and lack of economies of scale in production.

It is important to highlight that many of those causes are interrelated. So, companies failing in emerging markets are quite often affected by several of those causes, which increases even more the probability of failure in the emerging markets.

Is Profitable and Justified Strategically Maintaining Our Current Network Of Facilities?

Products, customers and offices unprofitable must be identified and make profitably or we should take the decision to remove them. Many times it is assumed that facilities network are a strategic long-term decision, so it is not reviewed the strategic convenience of those investments approved for top management any time ago. Thus, we are going to review some of the commonest strategic and financial reasons argued to open/maintain subsidiaries opened.

We must be aware that in the last few years many things relating communications have changed a lot. For instance, traveling costs are cheaper because we have low-cost airlines, communication costs are cheaper because there are communications base on Internet, companies have adopted widely conference-calls as a cheap and reliable communication way, virtual offices with sharing meeting rooms and other services are in place, teleworking can avoid investing in an office, and so on. Moreover, dot com firms have showed us that is possible to compete in many industries with a much less footprint those traditional companies.

So let’s go to analyze those often strategic reasons for opening/maintaining facilities:

“Being close to customers was going to facilitate customer acquisition and/or retention.”

• If we analyze our value proposition, we used to ask ourselves: What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? Why do customers turn to one company over another? (Alexander Osterwalder & Yves Pigneur 2010) But having a new office is not a likely question.
• If we analyze our customer relationship approaches: Personal assistance; Dedicated Personal Assistance; self-Service; Automated Services; Communities; Co-creation (Alexander Osterwalder & Yves Pigneur 2010). Even the personal assistance relationships not necessary must be built from the same location. In personal assistant is more important the person than the location.

“Being close to customer means offering better services.”

Nowadays, we have access to motorways, higher fly frequency, service logistics operators that deliver in 24 hours or fewer from central distribution centers, etc. This means that today we could offer a similar service level from a central location than from a local one.

Many times is hard to recognize that managing subsidiaries is a very tough task for our organization. So outsourcing that distribution center or for instance using a dealer could be more profitable at the same time that we could be able to improve service levels. Although that means having the humility to recognize that someone can do a better job than us.

“Cost of doing business is reduced because traveling costs are reduced.”

We must analyze the traveling cost avoided versus cost to have a facility:

• Obvious office related costs: Costs for rent, electricity, water, communications, insurance, cleaning, security, taxes, and so on.
• Office staff related costs: Salaries, office furniture, telephones, computers, software licenses, company cars, petrol, traveling costs to headquarter meetings, etc.
• Office/Warehouse improving costs: Human being used to try to improve things. So because we have a new facility, we can take advantage of that and we could think that we could build some stock. So because we have some stock, we need racks. So because we have some stock, we need a forklift. So because we have a forklift, we need a warehouse man, etc. I mean once that we have a new facility we open the door to many initial unexpected costs.
• Control costs: ERP customization to control that office, traveling to audit and support the office staff, etc.
• Productivity costs: Many small offices have less access to resources, training, control, etc.
• Complexity costs: Sometimes subsidiaries argue that local suppliers are better than corporate ones. That practice reduces cost saving of using corporate suppliers.

I am not suggesting that having more than one facility is wrong. What I am trying to suggest is that in turnaround is very important to review the real need of current offices or even the appropriate decision to open a new one. Subsidiaries can affect massively in company profitability.

When Should We Outsource Activities?

“Whenever a company produces a service internally that others buy or produce more efficiently or effectively externally, it sacrifices competitive advantage” (Quinn, James Brian, Thomas I. Doorley, Penny C. Paquette “Technology in services: rethinking strategic focus” Sloan Management Review, Winter 1990). Thus, any activity not considered a core competency has the potential to be outsourced, but what are the advantages of outsourcing?

Outsourcing Advantages

The big disadvantage of outsourcing that used to be mentioned is the “loss of control”. Although with the information systems that today are in place, and managing properly the relationship with the outsourced firm by having regular meeting and conference calls, we should be able to overcome that “disadvantage.” In reality one of the biggest handicaps for outsourcing could be “the loss of power” for some managers. For instance, we could have a Supply Chain Director managing more than 1,000 workers and after outsourcing the distribution centers network he could be managing just 20 people. So that strategic focus could be seen for some managers as “loss of power and control.”

Activities like transportation, warehousing, co-packing, publicity, payrolls, or legal support have been outsourced during many years in order to materialize the outsourcing advantages. However, the outsourcing process continues its evolution and its getting further. In the last years some companies have implemented outsourcing AND offshoring strategies in order to enhance the outsourcing benefits. For example, DHL is outsourcing globally some IT activities in India, or Telefonica is outsourcing call centers in Colombia.

The long tail concept introduced for Chris Anderson in 2004 is supporting the access to outsource for very small firms or low volume activities. For instance, Legalitas in Spain offers outsourcing legal advice for just 15 €/month, or outsourcing the marketing creation of a PC wallpaper can be sold in Internet for just $ 50.

Once that we have identified a potential outsourced activity, the next step would be answering the following question: How can we “guarantee” that we should outsource that particular activity? We should outsource it, if we are able to answer affirmative to the following three questions:

1. Are we reducing complexity or increasing flexibility? If managing the outsourced firm is being easier than managing that activity internally. From the change management perspective, this is an important issue because outsourcing important activities are probably creating some internal conflicts with trade unions. Moreover, those processes could affect staff morale (thinking that their jobs are in danger in the current or in the future coming from outsourcing processes.)
2. Is the service being improved? If the outsourced firm has more expertise or specialized resources to perform those activities, the outsourced firm is likely improving the current service.
3. Are we improving our cost structure or reducing our assets? Companies with higher expertise and more specialized resources should have better processes (reducing the cost of “poor” quality) and higher productivity. Moreover, better processes and resources allow companies to use less experienced and cheaper workers to perform activities. For example, warehouse men using well design processes supported by radio frequency just would need a very short training about products, their location, picking strategy, etc. The location and type of business that the outsourced firm performed can create a competitive advantage from the labor cost point of view what it is so important in intensive manpower industries like services. Cost reductions is going to support turnaround projects, but assess reductions offer one of the best opportunity in turnaround projects to improve cash (selling warehouses/buildings, machines, etc.)

How Does Top Management Make Decisions?

Many CEOs assume that making and publishing an organizational chart is enough in order to answer the structure and some relates matters like company style. However, there are some key questions like the style question “How does top management makes decisions?” that are not answers with an organizational chart.

According to Bain & Company there are mainly four decision styles (directive, participative, democratic, and consensus). Nowadays that we live in the democratic and team work age, we could think that the most collaborative styles (consensus or democratic) bring out the best results for firms. Nevertheless, research and experience of Bain & Company have found that participative style uses to perform better than the other styles. Be aware that even having primarily a participative style, it does not mean that all decision fall into this specific style.

Decision Styles: Adapted from Marcia W. Blenko, Paul Rogers and Patrick Litre

Bain & Company explains that participative styles improves decision quality because takes advantage from collaborative styles that at the same time get employees engagement via participation. Additionally the decision-making process is accelerated because just one person takes responsibility for each decision avoiding bureaucracy. It having one person in charge of every decision brings single-point accountability as well.

We would like to stress that there is another important advantage not mentioned for Bain & Company from having one single-person taking the responsibility for each decision; we get a consistent and coherent decisions direction because the same person is in charge of decisions. We mean we get decisions alignment.

From the turnaround perspective we cannot sacrifice the speed of decision, neither the quality. So we could say that we are almost forced to use the participative decision style.

Finally, we have to mention that it is essential that the CEO decides and communicates the primary decision style for the company. This can avoid internal conflicts. For instance, if the firm decides to use a participative style and there are people who feel most comfortable with other more collaborative decision styles (democratic or consensus) communicating formally the participative style decision will help that staff to embrace the decision style and avoid unnecessary internal conflicts. We must be aware that people from primary activities of the company can feel most comfortable with the participative style, while people from support activities can prefer consensus style. So again we have to highlight the importance of defining and communicate the decision style to avoid conflicts and get people much better aligned.

Business Alignment: When Board Is

Misaligned with Management

It is pretty obvious that business alignment is a prerequisite for firms to success. This alignment is even more important in the two top layers of the firm, the board of directors and the management team. Thus, we can find companies underperforming which main cause is poor management, and the effect is the misalignment between the board and management.

What is board and management alignment?

Peter Drucker defined this alignment very clear and showed us that a clear responsibility definition is one of the main business Key Success Factors: “The board must not act at the level of tactical planning, or it interferes with management’s vital ability to be flexible in how goals are achieved… the board is accountable for mission, goals, and the allocation of resources to results, and appraising progress and achievement. Management is accountable for objectives, for action steps, for the supporting budget, as well as for demonstrating effective performance.”

Adapted from Peter Drucker: "Defining the board and management responsabiities"

How board and management misalignment used to happen?

Most of the time a board member does not understand his role. In this situation that member used to implement what we could call “micro-management.” That is entering in the tactical planning and interfering with management.

What are the consequences of this misalignment?

The consequences could be disastrous for the following reasons:

• The board member wastes his time with tasks that he should not perform.
• The management team waste their time and energy internally rather than externally making loyal customers and fighting with competitors for market share.
• The board used to overrule the management members. This is a common human being practice to demonstrate “they are adding value”. This attitude used to unmotivated the management team, and in the mid-term could provoke desertion of good managers who will prefer moving to others firm with less interference in their job.
• For seniority, respect and status quo the suggestions of the board used to be followed. However, those suggestions could be “wrong” because the board members used not to have the daily contact with customers and other regular issues to “properly understand” the importance,  urgency, and consequences of those tactical decisions. The other reason why board members used to fail in tactics’ decisions is that most of them use what I call the “fishbowl approach.” I mean they prefer isolating themselves in their offices to improve their own productivity but that approach used to work uncorrelated with the capacity to solve tactic issues that required to be very much in touch with the staff, customers, suppliers, and so on.

There is one case in which could be understandable the practice of micro-management for a board member. It is the case in which the management team is not good enough. Nevertheless, the top management team have been hired for the board. So it is again the responsibility of the board to select a good management team and to replace underperforming managers, but no interfere with managers’ tactics. We should not forget that another Key Success Factor for board members should be their ability to hire the right people for the right position.

Before continuing, we must answer the question is micro-management always a bad practice? The answer is no. I mean micro-management could be needed it for managing young and inexperienced staff, or to manage inexperienced middle management in underdeveloped countries and/or organizations. However, board should not use micro-management under any circumstance with management.

Other way to identify poor management practices in the board is analyzing their tasks. Poor board members do what they do not have to do, and they do not do what is expected from their positions. It is easier to perform micro-management because those tasks used to be easier than board activities but this is not the expected work for board members.

How is business alignment and misalignment affecting turnaround initiatives?

In turnaround projects, we should wonder us:

• Do we have a poor management issue?
• Is there a misalignment between the board and management?
• Who is the responsible of this misalignment?
• Can we perform a success turnaround, if the people underperforming are still in the firm?

This misalignment issue probably is quite uncommon on large corporations. But it is quite common in small businesses that have grown fast, and the same people who used to be managers are now low experienced board members.

The Sales Area Is Underperforming: Have

 You Promoted Your Best Salesperson to

 Sales Manager?

It sounds strange hearing that it could be something wrong promoting the best performer. For instance, do you know any good mechanics or engineers who were promoted to a managerial position, and the company lost a good technician and got a not too good manager? Please, don’t misunderstand me. There are many mechanics or engineers with the right managerial skills but having technical skills, does not guarantee good managerial skills.

From the Kindergarten, we have been taught that people with better score are the best. Therefore, we can find many Small and Medium Business (SMB) that follow the assumption that the best salesperson should be promoted to the position of sales manager. Even in the  subsidiaries of global corporations are in place the same assumption because the hiring responsibility of the sales manager position depend on the country manager in order to have full accountability.

We have been taught that all of us we should be leaders and the proof of our success will be achieving a managerial positions. However, this is not exactly true. No everybody is or will be prepared to be an effective leader or manager. However, that does not mean that the person failed. It just means that those people are more suitable for other positions that can be of high value for the firm and very well-paid too. Anyway, I prevent you that this article could be very challenging for the current mindset of many salespeople and sales manager.

Why the best salesperson wouldn’t probably be  the best suitable person for the sales management responsibility?

First, as Mike Weinberg point out “the successful individual sales producer wins by being as selfish as possible with her time… The seller who best blocks out the rest of the world, who maintains obsessive control of her calendar, who masters focusing solely on her own highest-value revenue-producing activities, who isn’t known for being a team player, and who is not interested in playing good corporate citizen or helping everyone around her, is typically a highly effective seller… The successful sales manager doesn´t win on her own; she wins thorough her people by helping them succeed.” It is relevant to stress the difference between selling on her own and selling thorough her people. An evidence of the misunderstanding of selling through other is that with almost the exception of IT industry, no other industry is using Partner Channel Management as a powerful sales channel that could provide around 60% of total company sales. Anyway, you could find a top salesperson who is suitable to be a sales manager but is quite improbable. I am explaining why in the next paragraph.

What is the profile of Top Salespeople and Sales Managers

Second, the skills and responsibilities of a salesperson and a sales manager are different. Let list some of the skills of a sales manager: building a sales culture; leading a team; team motivation; hiring; retaining top performers; conflict management; coaching; feedback delivery; challenging data, false assumptions, wrong attitude, and self-complacency; create the area budget and forecasts; etc. Are those the skills of sellers? The answer is NO!

Third, as Mark Roberge highlight sales top performers used to base their success in a specific selling skill (relationship building, or consultative selling, etc.) Nevertheless, the sales managers need “a well-rounded grasp of the entire sales methodology. Sales leaders with balanced abilities would be able to diagnose a specific issue and be qualified to customize a coaching plan to address the issue.” So, sales top performers with unbalanced skills are not likely able to coach a team on any skills that they have poorly developed. Now, we must clarify that a sales manager must have a good performance selling in order to know the process of selling well but he is not usually a top sales performer.

Fourth, we should remember that “what distinguishes great leaders from merely good ones? It isn’t IQ or technical skills, says Daniel Goleman. It’s emotional intelligence.” Many people with high technical skills are promoted without some training on management and leadership. Other times, firms think that managers could be built with just a few days of leadership training (for instance the “famous company talent programs.”) The good performance of top sales producers does not guarantee that they will be great leaders for sales teams, and a few days of training on leadership neither. In fact, as Mark Roberge says: “Sometimes really good salespeople are selfish, egotistical, and competitive by nature. Those traits do not translate well into management.”

I would like to say that the rule should be “don’t promote your best salespeople to sales management.” Nevertheless, as any rule there are exceptions but remember that exceptions are very few cases.

Be careful if you are using a multitasking approach: Part-time salesperson and part-time sales manager

This used to be a very seductive approach for small business and even large corporation subsidiaries. Getting two roles for the price of one. I have to say “good try but this shortcut is not working at all.”

As we have mentioned before it is quite improbable that you find the right person for both different positions. However, if you are lucky to find someone who fits with booth positions, you will have some important challenges mixing those responsibilities:

• This salesperson will probably pick the best leads for himself with the excuse that the top performer must manage those important leads in order to increase the probability of win the customer. This could create mistrust on the sales team.
• How much time will he commit to each person if part-time means 2.5 working days per week? He could spend just very few hours on each salesperson what could be not enough to develop the sales team.

How can you motivate and retain your top sales performer without promoting her to sales manager?

The answer is building a Career Growth Plan with a few sales titles that link performance with the sales compensation model. Thus, higher sales performance means higher position and total salary.

So, what should be your first recruit priority? A top salesperson or a sales manager?

For a new sales organization with no more than a couple of people on sales, hiring a top salesperson could be a good first step. Indeed, I know some success examples of this approach. Although there are three considerations regarding hiring a top salesperson:

1. Industry experience used to be overrated: I remember the best salesperson that I have ever met that told me once: “Today, I am selling logistics but the important thing is that I master the selling technique. So, I could sell to any B2B almost any product or service.” This is true but there are still some fear for hiring people from other industries.

2. Industry connections used to be overrated: We must highlight that “customers belong to companies not to salespeople.” Salespeople could bring small accounts that have very low risk trying a new supplier. However, for large B2B sales account the reality is different:

• for large purchasing amounts used to have medium or long-term contracts in place that prevent to move the account;
• the relationship between buyer and seller used to be built around many people in different levels of the organization, not just the salesperson;
• the buyer justified internally the decision to work with the current supplier, trying to move to another supplier would mean that the decision was wrong which could be put in danger the job of the decision maker;
• move from one supplier to another just because the salesperson moved to other firm does not have any sense from the risk associated with large contracts
• Etc.

So, do you really think that a salesperson would be bring her last sales accounts to your firm? I don’t think so. If this is happen, it will take at least 2-3 years to move large complex accounts.

3. Is this person able to success in an unstructured environment? My experience is that top sales performers used to be hired from larger and better organized corporations with more sophisticated sales and ops process, customer based, marketing support and lead generation capabilities. Small firms used to have the temptation to solve their sales problems hiring a top sales performer from one of the largest competitor. This used to be “a big mistake.” First, as we have explained before is quite unlikely that the salespeople are moving their last sales to your firm. Second, small unstructured firms require of “evangelistic sales” in order to communicate their “not well-structured value proposition” and building the company brand. That necessary education skill is quite unusual on top sales performers from large firms because large firms are well-known and customers do not question their capabilities. Salespeople working for large firms no need to educate the customer regarding their company rather than developing a different skill, quickly building customer solutions. So, what is the probability that she replicates her past success selling with your small unstructured firm? Honestly speaking, very low!

If we are thinking not just in one or two salespeople rather than building a sales organization, it should be more suitable to hire a sales manager before thinking about recruiting a top sales producer. Be aware that a sales manager should increase the chance to hire the right top salesperson. Additionally, the sales manager would implement a sales leadership and culture that could be exponentially deployed around salespeople and branches.

For new sales organizations, Mark Roberge suggests hiring a quite uncommon profile rather than a sales manager or a top salesperson, the entrepreneur. He pointed out “the entrepreneur is most likely to accelerate the company toward the right product/market fit…She will dig in with prospective customers to learn about their challenges, opportunities, perspectives, and priorities.” I am personally think that he is right. Recruiting a sales manager for a consolidated and organized firm has sense, but for a new company or sales organization the first thing is to learn about customers in orders to build the “customized sales weapons” (communication plan, firm positioning, etc.) that will guarantee the success foundation for a fast growing sales organization.

Self-questions

If you are a…

• Sales manager: Are you in the right position or should you go back to be a top sales performer?
• Salesperson: What do you think that is more suitable for you career path to remain as a salesperson or to move on sales manager?
• CEO and your sales area is underperforming: Do you have the right person to growth your company revenue?

Creative Destruction in Human Resources: Creating High Performance Teams with the 20–70–10 Rule

Jack Welch is a leader with followers and detractors. So we are going to analyze the 20-70-10 Rule that some people could say that is a worthy management tool that creates high performance teams, and others say that is a cruel tool because it fosters to fire 10% approximately of the less performer.

The 20-70-10 Rule can be categorized inside the concept of creative destruction (Joseph Schumpeter work). We mean the idea is not firing 10% of the staff to reduce cost rather than change poor performers for other people with the expectation that the new staff could be better. Thus, increasing the number of high performance people and raising the company results.

20-70-10 Rule: Defining good and poor performers

We should ask ourselves a few key questions in order to know if the tool is adding value or not to our organization:

• Can our companies allow itself to maintain poor performers? Nowadays markets globalization, weaker economic drivers, intense competition, product commoditization, etc., make difficult to justified maintaining poor performers.
• What is the internal message maintaining poor performers? The culture of the company would get “paternalistic” or permissive. Then people working close of poor performers would realize that they could reduce their productivity and the firm is not taking any action. So what is it going to happen to the company productivity?
• What is the consequences to maintain a poor performance in the long term? The company would lose competitiveness day a day while other firms are rising their competitive advantage. Thus probably one day the firm would take the decision to close down the facility and move it to other location even outside the country. Thus, the consequence could be fired 100% of the staff rather than 10%. Some people could argue that the battle competing with emerging economies is already lost. Indeed, we have countries like Germany that they are demonstrating that the battle is not lost at all, if firms focus on raising productivity.
• Is it fair to maintain 10% of poor performers having people looking for an employment? Probably it is not. Moreover, it is not fair for the staff that are performing well, because maintaining underperforming people can put in danger the company and their jobs in the future.
• What about good performers? Poor performers are easy to retain, but good performers are a different issue. Good performers are demanded by the market, and they are more confidents in their abilities in order to move to other company. Moreover, good performers expect to work in high performance environment, and be paid according to the value that they create. Although with poor performers into the company is difficult to fulfill those expectations. So there is a real risk that good staff would get out of the firm, and mediocre staff would grow even higher than 10%.
• Why do we maintain under performers? In order to answer properly this question we should ask ourselves another question before: do we maintain under performers because it is an unpleasant task to fire people?

In turnaround projects where poor management is an issue, one of the most important causes of the company decline is because we do not have the right people. It is not unusual to find in those firms 10% of poor performance staff. So in those cases “getting out the bus” that staff allow us to increase firm results, and accelerate the change management process bringing new people with new mindset and abilities to the organization.

We have to highlight that organizations have the responsibility preventing poor performers, and we can suggest to prevent poor performers: First, having good performers in key positions, because good performers do not use to tolerate the poor performance. Second, selection process should be excellent. Third, making a periodic follow up of the team and specially the new staff, because two or three months is enough to realize if new employees should continue or not. It is better to “get out the bus” people in the second or third month that allow continuing in the company.

Finally, while poor performers by definition are people who damage the organization, and “getting out the bus” those people would not be an issue for the company. What it is not clear for me is the following: as Jack Welch suggests continually changing 10% of the staff that worst performs (being categorized like poor performers although they are not necessary underperforming, just they are on the bottom of the list) is getting any return. I mean there is low risk changing the staff that underperforms, despite changing people that are not “really” underperforming is increasing the risk to get the worse staff. Additionally we are losing the investment done in our current staff, and we have to invest in finding and training new workers. Moreover, we are creating an unhealthy stress in the organization. So I would not personally recommend continually changing 10% of the staff just because they are the worst performers.

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