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hitchcock_amt: A new CEO heralds a new era. A new era heralds change, and change induces fear. So what can a new CEO do to break this cycle and avoid joining a company paralysed by the prospect of their arrival?

Alfred Hitchcock understood the mechanics of fear better than most and an appreciation of the techniques he used to terrify his audiences may provide clues for a new CEO keen to avoid doing the same to theirs.

Hitchcock famously observed that 'There is no terror in a bang, only in the anticipation of it'. As he explained, if you have three men in a room with a ticking bomb that neither they nor the audience know is there until it goes off, then the unsuspecting audience gets a surprise. 'One surprise! That's all.' Contrast this with a scene in which the audience knows about the bomb but the men do not. The men still talk inanely but now even the most banal things they say are charged with an underlying tension. Such is the power of suspense.

Literature is not in short supply on the subject of a new boss 'on-boarding', but almost without exception it advocates restraint, warning against hasty decision-making and impulsive action. Todd Stitzer, CEO of Cadbury Schweppes, says a new boss should 'announce their plan only after a period of intense reflection and analysis'. At first glance, this advice seems beyond contention - surely to do anything else would be foolhardy? But as Hitchcock would attest, delay does not dampen fear but increases it. And instilling a sense of mounting anxiety is clearly bad for staff morale. Try instead adding a dash of Churchill to your Hitchcock - his exhortation 'Action this day!' offers new leaders the best chance of getting off to a flying start.

- Jenny Harris is director of JRBH Strategy & Management

Call me (erroneously) risk-averse if you like, but that's ridiculous:

The Upside of Falling Flat
Stefan Michel, Harvard Business Review, Apr 2007, Vol. 85, Issue 4

lachnummer01In the end, the decision by McDonald's to build a couple of four-star European hotels, with arch-shaped headboards for the beds and fast-food restaurants onsite, wasn't as bizarre as it seemed.

The Golden Arch venture in Switzerland ended in 2003 after two and a half years, when the pair of McDonald's hotels closed. But as I tell my MBA students and executive-education participants, the foray can be thought of as an inexpensive "real option" that provided the innovation-hungry company with an opportunity to learn valuable lessons from a controlled failure.

Relatively few travelers ever stayed in – or heard of – the hotels, which opened within a few weeks of each other in the spring of 2001, one near the Zurich airport, the other in Lully near the A-1 interstate. They were the brainchild of Urs Hammer, chairman of McDonald's Switzerland, who was responding to the parent company's push for diversification and new ideas.

The Zurich Golden Arch hotel opened first, and it was unlike any other hotel around. The McDonald's restaurant just off the lobby was open 24 hours (a rarity in Switzerland). The guest accommodations, for $120 to $160 a night, featured a patented curved wall and a cylindrical, see-through shower stall that protruded into the bedroom. The decor was spare and brightly colored. A colleague of mine who stayed there in 2001 recalled frankly that "the entire feeling was one of oddity and discomfort." The second hotel was similar.

The hotels clearly didn't deliver the expected results. The worldwide economic contraction – and the appreciation of the Swiss franc – that followed the attacks of September 11, 2001, contributed to their demise, but there were other factors, both minor and major. The showers, for one thing: Families and business travelers rooming together complained about the lack of privacy (the glass was later frosted as a result). Another issue was that the English phrase "golden arches" isn't associated with McDonald's in German-speaking countries. Even worse, as the owner of a hospitality consulting firm pointed out, was that the word "arch," when pronounced by German speakers, sounds a lot like a vulgar word for a person's posterior.

lachnummer02Beyond all that, the strategy itself was questionable. Although the venture related to the company's food business and relied on many of its core competencies, such as franchising and real estate management, the McDonald's brand doesn't square with the image of a four-star hotel. A financial analyst quoted in the Wall Street Journal noted, "I've just come back from lunch at McDonald's. But I can't imagine staying at a McDonald's hotel on a business trip." Indeed, the company shifted focus in 2003 away from such brand extensions and toward an ultimately better strategy of trying to get more customers into existing restaurants.

But the McDonald's board knew what it was doing when it green-lighted Hammer's project in 1999. Its decision was a real option: a fixed investment for an uncertain but potentially high return. Diversifying into the hotel business gave the company a shot at entering a billion-dollar industry. Because diversifications are generally more likely to fail than succeed, companies need to constrain the costs of moving forward with them. McDonald's did just that. It made a relatively small investment and limited its risk.

By publicizing the venture mainly inside Switzerland and using the name Golden Arch rather than McDonald's, the company avoided damage to the corporate brand. Moreover, the real estate investment did not result in a significant loss: The two hotels are now managed by Rezidor SAS Hospitality, which runs them under its Park Inn brand. While a P&L statement was never made public, the estimated operational losses were insignificant to the McDonald's portfolio. The decision to exit the hotel business after less than three years represents a further limitation of the company's risk.

The venture also offered insights – or at least reminders – about diversification and globalization. First, even for a company with deep pockets and billion-dollar brand equity, it is extremely difficult to take a name that is well established in one category (McDonald's is fast food) and achieve success with it in a different, if related, category. Second, for companies going global, the more complex the service offerings, the more important the cultural context (unlike a fast-food restaurant, a four-star hotel is full of individualized customer interactions, for which guests have diverse and high expectations).

But there's another point that's perhaps even more important. Hammer was one of the company's most successful franchisees, an entrepreneurial manager with a long history of fruitful business venturing. By supporting him, McDonald's was reinforcing and nurturing its bottom-up innovation culture. In the words of a McDonald's manager who participated in one of our executive education programs, "We try hundreds of things every year, and only a few turn out to be successful. But those initiatives make our business grow and keep our spirit alive. Not trying is not an option."

related items:
McDonald's uses graffiti to woo the US Latino market , guest blogger Adam Crouch

Harvard Business Review (print edition): Mentors, say those who study the development of great executives, managers, and entrepreneurs, are crucial to a successful business career. But below the celebrated top rungs, and apart from certain obvious high-skill specialties, how important is mentoring really? Judging from how rarely seasoned employees are paired with those from the rank and file, you’d think the verdict was in—there’s little to be gained in mentoring the masses.

Carlo Morselli and Pierre Tremblay of the Université de Montréal and Bill McCarthy of the University of California at Davis attack the question in a novel way in their recent study “Mentors and Criminal Achievement,” published in the journal Criminology.

“Our analysis,” they write, “focuses on the effects of mentors on two aspects of criminal achievement: illegal earnings and incarceration experiences....Protégés with lower self-control attract the attention of some criminal mentors, who provide the structure and restraint that lead to a more prudent approach to crime. This approach involves fewer and more profitable offenses that lower the risks of apprehension and, perhaps, promote long-term horizons in crime.” The data, Morselli and Tremblay say, do show that earnings are higher for criminals who had mentors. “Our findings,” they conclude, “suggest that strong foundations in crime offer an advantageous position for continuous achievement, and the presence of a criminal mentor is pivotal for achievement over one’s criminal career.”

When deciding who in your organization would benefit from a mentor, consider looking beyond the usual suspects. Who among middle management, or even on the shop floor, might blossom with a little “structure and restraint” administered by a colleague who knows the ropes? You might be profitably surprised.

MARC ABRAHAMS is the editor and cofounder of the scientific humor magazine Annals of Improbable Research. In his regular Forethought column, he unearths studies that shed the oblique light of multidisciplinary research on the science of management.

eurotimechangeCelent :: European financial services firms will drastically increase their use of offshore resources, with up to 450,000 continental European financial services jobs moving offshore by 2010.

Europe is the fastest growing region for most Indian outsourcing firms, and will continue to burgeon as European firms bring their cost structures in line with global competitors, according to a new Celent report, Offshoring in the European Banking and Securities Industries.
"As European financial markets continue to liberalize, converge, and grow, banks that are not leveraging the cost savings and experience of offshoring will find themselves unable to compete with lower-priced firms that are. For the moment prices in markets such as France and Germany are elevated enough that banks can make an attractive margin even without offshoring; however, this situation is unlikely to hold over time," says Lauren Bender, manager of the Retail Securities & Investments group at Celent and author of the report. "Over the next couple of years we will see firms that have not yet started to offshore in an important way continue to experiment with offshoring. Eventually most will come to the point where offshoring has become a standard part of doing business."

As the use of outsourcing and offshoring continues to mature, Celent expects to see more and more firms developing a pool of strategic partners and internal resources across the globe that will work together to deliver a firm’s products and services in a way that maximizes cost effectiveness and performance and minimizes overall risks. This trend toward "global sourcing" goes hand-in-hand with the move toward long-term strategic partnerships between financial services firms and offshore/outsource vendors.

Eurekalert: Beautiful young models are used to sell everything from computer processors to motor oil. But is it really effective to use a pretty face to market something that has nothing to do with physical attractiveness? New research from the June issue of the Journal of Consumer Research argues that an attractive model can actually negatively influence product perception if the model is irrelevant to the quality of the product and the consumer had a very high interest in the product to being with. Click here to read the whole story.

My take: Huh?

Economist: Anyone who thinks it is worth paying extra for a CEO with charisma should think again. A new study[1] by three academics from the University of Pittsburgh and one (Mr Sonnenfeld) from Yale argues that boards of directors “need to be cautious when considering the potential benefits of charismatic leaders”. The study suggests that the relationship between a boss’s charisma and his company’s performance may be influenced by the so-called “halo effect”. The better a company’s performance, the more inclined its stakeholders are to perceive its boss as charismatic. The report finds that CEO charisma bears little or no relationship to a company’s future performance.

But what is charisma, you may ask. Surely one man’s charismatic leader may be another’s buffoon? The authors say such a leader must be: dynamic; a good example; show concern and respect for others; have high expectations; and be willing to take personal risks. Some may think charisma implies more than that—a little indefinable extra perhaps, a personal chemistry that persuades people to follow, through thick and thin. [Source]

[1] “Does CEO Charisma Matter? An Empirical Analysis of the Relationships Among Organisational Performance, Environmental Uncertainty and Top Management Team Perception of CEO Charisma”, Agle et al., Academy of Management Journal

smilesquadWSJ: Science is exploring the roots of joy – and companies are putting the findings to work. Here (sub.req.) is the story. Click on the image to see some of the leading happiness researchers and their findings.

related items:
Measurement Without Measurement, Arnold Kling
Honest Measurement, Bryan Caplan

humreglobeandmail.com: Piers Steel, a business professor at the University of Calgary, says he has come up with a mathematical formula for hiring the perfect worker, a complex three-step mix of coefficients and matrices that can do a better job of filling jobs than the most seasoned interviewer.

The result, Mr. Steel claims, is a hiring decision based on science -- superior to the alchemy-like approach of today's HR world. "They're little better than a Magic 8-Ball," he said, referring to the venerable toy that, when shaken, displays a random answer to a questioner.

The latest claim of a scientific method to hiring and job design has a long, and mostly inglorious history, stretching back to the dawn of the Industrial Revolution. Adam Smith, with his theory of specialization among pin makers, was one of the first. Henry Ford, with his innovations in industrial assembly lines, was another. And the entire school of scientific management, with its emphasis on time-and-motion studies and proper procedures, is part of the story as well. Mr. Steel doesn't shy away from those comparisons [Source]. Click here to to read the whole story.

related items:
International Journal of Selection and Assessment

WSJ Europe (print edition): Which employee is most likely to wig out in the long run: the police officer or the investment banker? Turns out Wall Streeters experience more types of stress than many other professions, including those where employees might confront a weapon. In a paper, Noushi Rahman and Irem Aktas of New York's Pace University compared results from a few dozen studies of thousands of employees in 21 occupations and found that business and finance types exhibit more "stressors" than just about ony others. Worries include poor job fit, problems with management and work/home trade-offs. Police, on the other hand, expect and often crave thrills, the authors conclude.

roofads1_tClick on the aerial view of a cityscape on Google Earth or Microsoft's Live Local [or Flash Earth], and most of us don't discern much more than a cluttered expanse of buildings and car-lined streets. But where others see a sprawl of empty rooftops, Colin Fitz-Gerald sees a cornucopia of unused advertising space.

Fitz-Gerald, who runs a roofing business in Cape Cod, Massachusetts, wants to make a business out of posting promotional messages on top of buildings. He's started a company, RoofShout.com, and is looking for roof owners and advertisers to bring his vision to fruition. Click here to read the whole story.

via GeekPress