Archive for the 'Management & Leadership' Category

Negotiation

Two ways to negotiate a bigger and better slice of the pie…

Understand your opponent

It’s long been said that understanding one’s opponent is key to effective negotiations. Getting to know your adversary helps identify what they want, but also what they are willing to give.

Recent research supports this assertion, but argues that successfully understanding your opponent means getting to know the head, and not the heart.

The research, led by psychologist Adam Galinsky of US-based Kellogg School of Management, draws its findings from three case studies examining the relationship between successful negotiations and a negotiator’s approach to understanding his opponent. In its findings, the study makes a clear distinction between two approaches: perspective taking and empathising. The former approach fosters more effective outcomes for both parties, while the latter tends to hinder mutually beneficial negotiations, the study argues.

The research defines perspective takers as “able to step outside the constraints of their own immediate, biased frames of reference”. Perspective taking focusses on unbiased, objective and rational judgements about an opponents interests, thoughts and likely behaviours. Showing empathy “leads individuals to violate norms of equity and equality and to provide preferential treatments”. Empathising permits greater sympathy and compassion, and creates an overbearing desire to make an opponent happy.

The study’s author, Adam Galinsky, concludes: “Negotiators give themselves an advantage by thinking about what is motivating the other party, by getting inside their head… Perspective-taking gives you insights into how to structure a deal that can benefit both parties. But unfortunately in negotiations, empathising makes you more concerned about making the other party happy, which can sometimes come at your own expense.”

The difference between both approaches is subtle, but crucial. In essence, it’s about distinguishing between what an opponent is thinking and feeling. Wandering too far towards an opponent’s emotional needs serves only to weaken your position in negotiations, resulting in a one-sided outcome. Perspective taking is more objective, and helps deliver more mutually beneficial outcomes.

Size up the pie

In a negotiation, each participant has a “bottom line”. This represents, for example, the most a party is willing to pay for something or the least they are willing to sell something for. The space between the bottom line of each opponent in negotiations is often referred to as the “bargaining zone” or “pie”. It represents the range of value available to negotiate over.

Knowing your opponent’s bottom line lets you size up the pie. Your negotiations can then focus on finding a optimum negotiating point which gives you a good or fair slice of that pie. The challenge: your opponent won’t reveal their bottom line, so sizing up the pie is a matter of judgement or guesswork.

Herein lies the danger, so says recent research by professor George Wu (University of Chicago School of Business) and Richard P. Larrick (Duke University). Wu and Larrick argue that costly mistakes can be made when sizing up the pie; mistakes which are hard to detect, and therefore hard to learn from.

Misjudging an opponent’s bottom line poses varying degrees of danger depending on how far off your guess is. Modestly ambitious expectations are likely to be naturally corrected during the negotiation process, but wildly ambitious demands may be aggressively opposed and could irreparably damage negotiations. As a consequence, Wu and Karrick argue, we tend to make less ambitious demands in the first place - reducing the size of the pie to begin with. To avoid being perceived as greedy or unreasonably demanding, we make modest assumptions about an opponent’s bottom line, and thus the size of the pie available.

This approach helps avoid the dangers of overestimating an opponent’s bottom line, but as a consequence you end up negotiating over a smaller pie. Your opponent may concede a larger slice of that smaller pie, but that slice may ultimately be less than you could have negotiated, had you judged the pie to be bigger.

Sizing up the pie is a complex challenge for negotiators, and it’s not an exact science. Experience and learning from previous mistakes counts for a lot. But ultimately it’s down to sound judgement, which cannot easily be taught. Of course, judgement can easily be strengthened with adequate, well-reasoned preparation. As discussed earlier: getting inside your opponent’s head (and not their heart) helps identify their key motivations and wants, which could allow you to better judge their bottom line, and thus the size of the pie available.

More info - Developing a negotiating strategy

Measure your Carbon Footprint… Today

Research from the Carbon Trust, published this Spring, indicates that 46 per cent of FTSE companies have measured their carbon footprints, compared to 15 percent of large companies and 12 per cent of medium sized companies. Overall, only 1 per cent of the general business community knows their carbon footprint. The research concludes that whilst overall carbon awareness is increasing, there is “an enormous gap between the ways in which larger and smaller companies are responding to the issues”.

Measuring and reducing carbon emissions are gradually becoming strategic objectives for large and medium-sized business, motivated not just by environmental concerns, but by the significant cost-savings associated with minimising carbon usage. Meanwhile, the majority of smaller businesses are lagging behind.

The Carbon Trust explains that smaller businesses struggle with “a lack of time and expertise” to measure and reduce carbon emissions. In addition, they claim that many SMEs underestimate their “collective role” in cutting carbon emissions; according to their research, over a third of SMEs underestimate their contribution to carbon emissions by 50 per cent.

Unfortunately, these two dynamics don’t play nicely together. After all, it’s easier to dismiss the task as time consuming and difficult if you believe the net result of your efforts won’t make much of a difference.

It’s true that the process of reducing carbon emissions can demand time and expertise. But that doesn’t explain why so many businesses haven’t yet measured their carbon footprint. Working out a rough estimate of your carbon usage takes ten seconds using the Carbon Trust’s online indicator. And with a bit more information to hand - such as fuel, electricity and travel usage data - you can immediately build a more accurate picture of your carbon footprint using the Carbon Trust’s online calculator. These tools are a quick and easy, and crucially - they are designed to guide you towards making your next steps and finding the expertise you may need.

Only when you know your carbon footprint can you objectively determine how much time and expertise is needed to reduce it. So finding out is a good start.

It’s also important to remember that measuring and reducing your carbon footprint is not simply a philanthropic pastime. There are very real opportunities to save money by saving energy. These cost-savings could more than offset the initial cost and effort of reducing your carbon footprint. And again: you won’t know where those potential cost saving are until you make a start.

Now to the question: how is cutting the carbon emissions of one small business going to make a difference to a global issue?

July ‘08 figures from The Department for Business, Enterprise and Regulatory Reform indicate that small and medium-sized enterprises (SMEs) together accounted for 99.9 per cent of all enterprises. That equates to over four and a half million businesses.

And as we’ve already learnt, it’s this group that are the least responsive to measuring or reducing their carbon footprint. In addition, it’s this group that tends to underestimate the level of its contribution to carbon emissions. In other words, the large majority of UK businesses are doing little to act on carbon emissions, and many are producing more carbon emissions then they realise.

All of these businesses can take steps to reduce their carbon footprint. And the sum total of those individually small reductions does - collectively - add up to a significant difference.

At the moment, there’s a distinct lack of action amongst SMEs in the fight to reduce carbon emissions. Many see the process as important, but challenging. And many underestimate the extent of their “collective role” in reducing emissions. The good news: these many, the four million or so, can make start on the task… Today.

Start today by measuring your carbon footprint on the Carbon Trust Website

Interactive tool - Identify where you can save money by going green

More resources - Improving your environmental performance

Discussion: What makes a business agile?

Uncertain times tend to get business owners thinking; arguably the one constructive outcome of economic downturn. But beyond the usual musings over cash-flow and profit forecasts, what steps can business owners take to guard against uncertainty? What makes a business adaptable and ever-ready to face change? The answer: businesses must become more agile.

The word ‘agile’ is easy to define: adjective; 1. able to move quickly and easily. 2. quick-witted or shrewd. In contrast, ‘business agility’ is a frustrating fuzzy notion. We know that an agile business has quick and sharp powers of judgement. We know that an agile business is able to respond quickly and effectively to change. But what factors contribute to such an adaptable nature?

Arguably, being small is one way of being agile. Small businesses are often much closer to their marketplace and customers, which means they can identify changes, threats and opportunities more rapidly. Reaction times are also quicker, with fewer obstacles hindering quick adaptation. Business agility is a product of closeness and intimacy - both with the outside world, and within its four walls.

Business agility may also be determined by an organisation’s management. Leaders direct a business’s fate, so decision makers who are firmly ‘on the pulse’ are more likely to identify change and adapt quickly. Again, a closeness to markets and customers, sound judgement and decisive action are key characteristics contributing to business agility. A bottom-up consciousness - where workers have influence over the strategic direction of a business - is also likely to facilitate a more adaptable and flexible business.

In these uncertain times, you may be forgiven for thinking that business agility is about responding to threats. But remember: it’s about seizing on opportunities too. Reacting quickly and easily to both threats and opportunities - with equal precision and confidence - is really what it’s all about.

Join the discussion

There is no easily definable recipe for business agility (the thoughts above are just a few ideas to get the conversation started). The best way to understand what makes businesses agile is to learn from agile businesses. Which is why we are asking for your opinions. Comment on this article and let us know your thoughts on:

  • what makes a business agile?
  • how a business can become more agile?
  • how your business has quickly and effectively responded to threats and opportunities?
  • Or more generally - share your experiences of how your business has adapted quickly and easily to change.

Thank you. We appreciate your views.

Top-down vs bottom-up

Top-down and bottom-up are management approaches much discussed by business strategists. The latter is usually cited as a criticism of the former: top-down is bad because all power and decision-making is held centrally with managers, and bottom-up is good because an inclusive approach - where workers influence and control the strategic direction of a business - provides deeper customer insight, more informed decision-making and a happier workforce.

Bottom-up is indeed the popular choice. Its democratic and inclusive outlook is more aligned with modern ideals and the logic is sound. It makes sense that workers on the ground hold unique insights into customers and business processes, and thus could help their managers improve business performance. And of course, employees who feel part of the destiny of a business are more likely to be motivated, hard-working and loyal.

It does sound like an enlightened way to run a business and manage people. Even so, there are potential dangers hiding under the surface.

Business historian James Hoopes, author of ‘False Prophets’ - a book discussing the  perils of modern management ideas, explains the pitfalls in an interview with Management Consulting News. Hoopes argues that some of the attractiveness of modern management styles such as bottom-up had “been purchased at the expense of realism about the way managers have to operate”. Hoopes continues:

“The sad fact is that in business organisations where profit, not freedom, is the primary goal, it’s top-down power that often gets the job done best. We all need to recognise that corporations are not little models of democracy. If we cover up this reality, we can create serious problems for ourselves.”

The problem, Hoopes argues, is that bottom-up management offers a vision of democracy which is destined not to be realised. Saying no, making unpopular decisions and simply ‘being the boss’ are inevitable aspects of managerial duty. If managers set themselves up as ‘the people’s champion’ they may find themselves in trouble when tough decisions must be made. Hoopes adds:

“If you can create an environment in which people feel free, obviously that’s a wonderful thing. The trouble is, if you oversell the idea that everyone is free and that the workplace is nirvana, eventually there will be a hard landing for some disillusioned people. That can come back and hit a manager in the face.”

Crucially, none of this suggests that the bottom-up approach is inherently flawed or that an authoritarian top-down style is superior. Over-promising the ideals of bottom-up management seems to be the most glaring pitfall, which holds the potential to create long-term management problems. Conversely, a wholly authoritarian approach cuts out the many benefits of bottom-up thinking. There seems to be a happy middle-ground between the two opposing approaches.

You may not be a fan of newfangled management methodologies. Many find their teachings steeped with ideals and lacking enough consideration for practical business realities. One sure reality is that the arguments for and against either approach are, simply, matters of opinion.

The debate about whether top-down or bottom-up is ‘best’ is therefore irrelevant. Every business is different, with different leaders and managers. Strategic management approaches are not to be followed blindly. They are to be thought about, considered within the unique context of your own business, and applied with confidence and precision. That is the job of good leaders.

Interactive tool - Assess your leadership styles and strengths

New business worksheets

Business Link has designed a new range of practical guides and worksheets that can be used to capture your ideas, explore aspects of your business and help you think about the questions you should be asking to take your business to the next stage.

Starting your business - a plan for success

Starting a business is exciting but daunting - you need all the assistance that you can get. This worksheet highlights the key areas that you need to focus on.

Read our guide: Starting your business - a plan for success.

Running your business - a guide to being more efficient and competitive

Well structured food for thought exploring the areas you should be looking at and raising questions you should be asking to capitalise on the full potential of your business.

Read our guide: Running your business - a guide to being more efficient and competitive

Growing your business - a guide to turning ambitions into reality

Businesses cannot stand still - they must constantly find ways to move forward and grow. This worksheet has been designed to help you take your business to the next level.

Read our guide: Growing your business - a guide to turning ambitions into reality

Video interviews - see how we work with businesses

See how our service could work with your business by watching our series of short video clips: http://www.thinkbusinesslink.com/interviews/

Brainstorming - help or hindrance?

Brainstorming was first popularised in the 1930s as a creative technique for generating ideas and solving problems. Since then, mixed attitudes have emerged regarding its effectiveness above other methods for sharing and collecting ideas. Nevertheless, it is widely recognised as an enjoyable group experience that can aid team building.

There is no doubting the assertion that employees do have good ideas. In fact, a recent global study by IBM found that the top source of innovative ideas is a company’s employees. Brainstorming is specifically designed to assist the collection of ideas, focussing on quantity over quality, and encouraging more unusual or unorthodox suggestions or approaches. In this sense brainstorming is about ideas - not necessarily ‘good’ ideas.

And herein lies the strength and weakness of brainstorming. It is argued that ideas should be positively considered and developed during a brainstorming session, but criticism or evaluation should not occur - in order to maintain a supportive atmosphere. The more ideas are criticised, the less individuals feel they can openly suggest them.

The strength therefore, is in creating an open and inclusive team environment where ideas are received with equal merit and without prejudice. The weakness is that not only might time be wasted developing bad ideas, these ideas need to be subsequently criticised and evaluated - adding a laborious next step with no guarantee that good ideas will result. Another potential risk is that ideas received positively during a brainstorming session but later dismissed may result in dissatisfaction as individuals feel their ideas have been ignored (it is therefore important to manage expectations throughout the process).

Of course, good ideas may result from brainstorming. Indeed, that one crucial, business changing idea that may never have surfaced without the act of brainstorming, may pop up from nowhere. The point is - brainstorming is not a hugely efficient ideas generation process - but it is a positive and engaging team building exercise.

So what should we learn? They key message is to take brainstorming for what it is: an engaging experience that helps teams feel equal and involved in the ideas generation and problem solving process. But at the same time, it should not be relied upon to generate that next big idea or solve your toughest problems. Even though potentially, it may well do.

Read the guide Lead and motivate your staff which includes advice on team building.

Women, men, and non-linear career paths

To get more women into senior level positions, firms must engage with what Sylvia Hewlett, of the Centre for Work-Life Policy in New York, calls women’s “non-linear career paths”.

The vision is simple: a workplace where women are not penalised for opting for a non-conventional career path.

This is something that many women choose to do during their careers. According to Hewlett’s research - over a third of professional women leave work at some point, to look after children or family members, and a further third to go part-time for a while. Hewlett argues that when re-entering work, women are penalised - in terms of both salary and career progression - by a system that naturally favours a record of ‘unbroken service’.

They key to making the workplace work for women, according to Hewlett, “is to make flexibility totally universal, and to make it very real.” That means making flexibility available to everyone, not just women: The decision to work flexibly “hits men even harder than women. Men get really clobbered if they take some of this [flexibility] stuff. But it’s very important to figure out how to get men centrally involved because then you can really change the culture of the workplace, and it becomes kind of normal”.

So, if you listen to Hewlett, the key to creating an inclusive and fair workplace is flexibility for everyone, regardless of gender. But what’s in it for businesses? According to a Chartered Institute of Personal Development report - quite a lot.

In their survey, which questioned over 500 organisations in the UK, 47 per cent believe flexible working has had a positive effect on staff retention, 70 per cent perceive employee motivation as having benefited, and over half have seen positive effects on recruitment.

Though these finding are not directly linked to the assertion that flexible working can help women pursue what Hewlett brands the ‘non-liner career path’, they do provide evidence that flexible working - on its own - has measurable positive effects for businesses. If these business-related benefits also serve to create more women (and men) friendly workplaces, then really, everybody wins.

Read guide - Benefits of flexible working

Read guide - Women in business - support for businesses in the South West

What makes a great leader?

The leadership handbook lists many skills and approaches for good leadership, and defines what characteristics good leaders must exhibit. But even then, experts and the rest of us alike cannot definitively outline what makes a great leader.

This is in part because great leaders show different traits. One great leader is distant and commanding, when another is hands-on and nurturing. One is best in crises, when another is adept at avoiding them. And yet, both leaders are great. It could also be argued that what makes a leader great - more than a prescribed set of features for good leadership - is an ability to lead differently depending on the context, situation or environment.

John Sculley, president of PepsiCo during the 70s and early 80s, was responsible for turning a $16 million loss making Food Operations division into a $40 million profit making business within three years. Much of his success was attributed to recruiting new managers from rival food firms to improve product quality. Later, while at Apple Inc, the same approach backfired when a series of management reshuffles resulted in several high-level resignations and turbulent times for the firm.

It is difficult to define why Sculley’s approach failed the second time around. Did he hire and fire the wrong people? Was his approach incompatible with the company’s culture? Was a focus on shuffling heads diverting his attention away from leading the business? It seems attributing failure in leadership is just as difficult as prescribing success.

It is, of course, pertinent for any would-be leader to understand what makes a good leader good. There are many resources - including our own Top tips - that can help you build the foundations for effective leadership. But learning is only half the story. Great leaders are often great because they re-define the rules. And because there is no magic formula, you need to create your own.

More info - Top tips for Leadership