Strategies to Overcome Competitive Pressures: “Making” vs. “Milking”

A fresh take on the classic theme of generic business strategies.

Business strategy is fundamentally about allocating scarce resources to create the greatest impact on organisational performance. As a strategist, you will often be confronted with two broad innovation strategies: “making” and “milking”.

The making strategy involves enhancing value creation through an organisation’s products and services by better meeting customers’ needs. This value to customers, as measured by their willingness-to-pay minus the costs incurred by the firm to serve them, is critical for profitability as it enables the firm’s offering to better compete with that of rivals. The milking strategy involves positioning an organisation to better capture the value it is already creating for customers by bargaining more effectively with them. In doing so, the organisation is able to more easily overcome competitive pressures from its customers.

The strategies of making and milking can be illustrated with the case of an online distribution platform for a media company, for which an important and scarce resource would be its team of software engineers and data scientists. In this context, the making strategy would have the team prioritise tasks such as developing new user experience features and algorithms to remove abusive or disturbing posts. By enhancing its value proposition through improved user experience, the platform could deepen engagement with existing customers to deter switching and potentially attract new customers from competing platforms.

In contrast, the milking strategy would see the technical team focusing on projects to drive monetisation such as pricing algorithms, which could bring each customer’s subscription fee closer to their willingness-to-pay. Similarly, the tech team could also develop an automated call centre support tool to help upsell existing customers to capture more of their wallet.

The question then boils down to: Which innovation strategy do you choose? And under which circumstances?

How the strategies work

Our study on value-based strategies, published in Strategic Management Journal, explores the dynamics behind these choices. To identify key drivers for choosing the milking and making strategies, we analysed a setting where two rival firms compete across two customer segments. For example, these could be B2B firms selling IT or professional services to customers from distinct industry segments like finance and healthcare.

A firm’s ability to capture value, in the form of profits, is impacted by two dimensions of competitive pressures. First, the firm faces competition, and with it the need to meet and beat the value created by its rival in a specific segment by creating more value. Second, the firm then faces buyer power (one of Michael Porter’s five forces) as customers look to further reduce prices through aggressive counteroffers, threats to cancel services and other negotiation tactics. Direct competition with a rival limits the firm’s potential value capture to its added value relative to the rival’s offering, from which customers will try to shift more value from the firm to themselves.

By increasing a firm’s value creation capabilities, the making strategy neutralises competition in two ways. First, for an existing customer segment, the firm has more added value relative to its rival and hence there is more value to negotiate over with its customers. Second, a sufficient increase in value creation enables the firm to neutralise an initial value creation disadvantage in a new segment, allowing it to win over customers from its rival and thereby opening new possibilities for value capture. On the other hand, by increasing a firm’s bargaining capabilities, the milking strategy allows the firm to capture more of its existing added value for customers.

Interestingly, our findings show that the innovation strategy that you choose not only has direct impact on your organisation’s performance, but also has wider implications for the competitive dynamics in your market.

Addressing your weaknesses may be your best bet

One of the oldest rules of thumb in strategy is to “build on your strengths”. For example, in diversification strategy, firms often look for market opportunities that allow them to leverage core competencies (i.e. strengths). Does this intuitive approach also apply to the choice between milking and making? For instance, should a firm with a greater value creation capability double down on creating more value?

Our analysis shows that when choosing between these innovation strategies, there are clear benefits to addressing your weaknesses rather than just building on your strengths. The stronger a firm is in value creation, the more it can benefit from increasing its milking capabilities in order to capture more of its existing added value.

Conversely, the stronger a firm is in bargaining, the greater its returns from enhancing its value creation through a making strategy as the firm will capture a larger share of the value created. An important implication is that without sufficient bargaining capabilities to capture value, firms may experience a dearth of value-creating innovations, since those innovations will not generate sufficient returns to make a strong business case for investing in them.

For instance, a pharmaceutical firm with a strong portfolio of patented drugs might prioritise its pricing, lobbying and sales capabilities to enhance its ability to capture more of the value created by that portfolio. In contrast, a pharmaceutical firm with a weaker drug portfolio – perhaps hit by the expiry of patent protections – might focus more on building up its drug pipeline to ensure future value creation.

Follow your competitors?

Our analysis shows that firms tend to imitate each other’s strategy choices. Why? This arises from the different impact of the two strategies on competitive dynamics.

When your rival focuses on making, it increases the threat of competition, as your added value to your existing customers is at risk of being eroded. This reduction in your added value reduces the returns from the milking strategy, pushing you to focus on value creation through making as well. Conversely, when your rival focuses on milking, your market position is more secure, which increases the attractiveness of enhancing your bargaining power by focusing on milking as well.

This mutually reinforcing nature of firms’ strategy choices can lead to two very different competitive outcomes in a market. One possibility is a making-making outcome where the two rivals get locked into a value creation race where they seek to drive growth at the other’s expense. Equally possible would be a milking-milking outcome where both firms focus on capturing value from their own segments (a classic coordination game for those familiar with game theory). What are the implications of these competitive dynamics for firm performance?

When the two rival firms coordinate on the milking strategy, their profits are higher due to the reduction in the competitive pressures they impose on each other. Since firms are not mutually eroding each other’s value created, there is both less rivalry and more scope to reduce the buyer power of customers. This is a form of tacit industry collusion. In contrast, customers are better off when firms focus on making. This happens not only because more value is being created, but also because the increased competition pushes a higher share of that created value to the customers when firms are not enhancing their bargaining power.

While there is a tendency for firms to align their strategy choices, other forces can lead to divergence. For example, if firms have wildly different customer segment sizes, the firm with the larger segment will choose to focus on milking its customer base, while the firm with a smaller segment will be drawn to making to grow its customer base. Similarly, if firms start with very different levels of value creation or bargaining capabilities, the pressure for each to address its weaknesses can also lead to diverging strategy choices.

Disrupting the market with radical innovations

In this golden age of entrepreneurship, where advancements in digital technologies have enabled ground-breaking innovations, what can our model tell us?

For making strategies, there is a crisp distinction between radical and incremental innovations. Incremental innovations correspond to enhancements to a firm’s value creation – such as small improvements in user interface or delivery times – that increase willingness-to-pay for its home-segment buyers but are not large enough to allow the firm to break into new market segments.

In contrast, successful radical innovations deliver a significant leap in value creation that allows a firm to displace its rivals and break into new market segments. Prominent examples of such market disruptions include Apple’s extension of the iOS from the iPhone to the iPad to win over the tablet computer segment, and Salesforce enhancing its CRM platform to include marketing automation and e-commerce capabilities. How does the increased importance of radical innovations influence risk-taking among rivals?

In our model, we allow firms to choose the risk profile of their value-creating innovations based on the classic risk-return trade-off principle – a lower probability of innovation success is compensated with a greater increase in value created. We see more risk-seeking behaviour when firms have access to radical innovations, due to the fixed cost of entering new market segments. A firm is better off going for a risky strategy that has a bigger upside when successful but incurs a fixed cost of entry less often, which translates to lower expected entry costs.

Interestingly, the pull towards riskier strategies can be good not just for an individual firm’s performance but also for overall industry profitability. We have seen that the making strategy, when successful, results in a negative externality on the rival by eroding its added value. The riskier the making strategy, the less likely this negative externality is to occur. Hence, as long as one firm focuses on making, a shift to riskier value-creating innovations raises the profitability of both. Our results reinforce the importance of culture change in organisations to increase their risk tolerance.

An updated approach to generic strategies

In his classic strategy texts from the 1980s, Michael Porter promoted the idea of generic strategies that apply across industry settings. He highlighted a choice between a “differentiation” strategy, whereby firms focus primarily on enhancing the willingness-to-pay of customers, and a “cost leadership” strategy, whereby firms focus primarily on reducing costs. However, this once popular approach to generic strategies is arguably losing some of its appeal. Today, with the advent of modern value-based analysis, the focus of competitive strategy is on increasing the gap between willingness-to-pay and costs of a firm’s offering, which contrasts with the Porterian emphasis on either dimension.

Our research highlights a novel and robust approach to generic strategies. Strategy choices should be shaped by an assessment of the competitive pressures that pose the greatest threat to firm performance. If the answer is rivalry, the making strategy of enhanced value creation takes centre stage. Once a firm has sufficient value creation to secure its customer base, then buyer power looms large as the key threat to a firm’s value capture, and hence the milking strategy comes to the fore.

In the domain of innovation strategy, there is a tendency for strategists to focus almost exclusively on value creation. Such a narrow focus may be detrimental to firm returns, as it may lock rival firms into a needless lose-lose race for value creation. Our research suggests that a greater consideration of the potential of milking strategies – both in terms of their direct impact on value capture and of their implications for competitive dynamics between rivals – can pave the way for enhanced firm performance and overall industry profitability.


Talent development: Definition, importance, and strategies

Talent development is a unique business process that benefits both employees and organizations. By fueling employee growth and organizational success, it’s a true win-win proposition. Exceptional talent development programs don’t develop overnight, but with a focus on defined goals and strong two-way communication, they’re within the reach of every company.

What is talent development?
Talent development encompasses all of your company’s activities and initiatives that support employee learning and growth. Successful talent development involves processes and programs that are tailored to match organizational needs together with team members’ goals and interests. It goes beyond setting up a training program or two. Talent development means that every employee at your company has a clear pathway to expanding their skillset, advancing within the organization, and achieving their professional ambitions.

Talent development also requires leaders and HR professionals with the soft skills necessary for recognizing and developing the potential of each employee. It’s a key part of a modern employee value proposition, demonstrating that your company views each team member as an individual and is truly invested in their success.

Why talent development matters
Talent development should be a big part of every company’s business strategy. Here are four ways you can transform your organization by developing in-house talent.

Increasing employee retention
With the Great Resignation making competition for talent fiercer than ever before, improving employee retention is top of mind for organizations across industries. Thankfully, prioritizing talent development can help. Job seekers said that identifying opportunities for promotion and growth was the top reason they planned to job hunt in 2022. A talent development program can provide those opportunities and entice team members to stay.

Boosting employee and business performance
It’s a simple proposition: empower employees with everything they need to succeed, and reap the rewards. Employees can’t perform well if they don’t have the skills and knowledge required to succeed in their role. When training resources and opportunities for further growth are available, team members are more likely to accomplish or even exceed organizational objectives.

Improving your succession planning
Your company’s most experienced team members have compiled specialized, invaluable knowledge that’s a critical part of organizational success. When these roles are vacated, succession planning offers a formal structure for transferring this knowledge. Everyone sees retirements and other forms of leader turnover, but only 35% of organizations have a formalized succession planning process.

Don’t risk losing the know-how that keeps your business running. A talent development program tackles succession planning issues by collecting and analyzing data to identify employees that are ready to take on advanced roles and ensuring knowledge makes its way from one set of team members to the next.

Recognizing the relationship between feedback and performance
All team members want feedback, but few organizations provide it in ways employees find meaningful. Only around one-quarter of workers say the feedback they’re given improves their work. A strong talent development program with a focus on coaching is part of the transition to effective, dynamic performance management, where open, continuous feedback flows between managers and employees. This gives all parties the information they need to improve on their weaknesses and further develop their strengths.

Talent development challenges
Investing in talent development is a worthwhile endeavor, but it’s not without its challenges. Here are a few potential issues that organizations may encounter when creating a talent development program and how your company can address them.

Does your talent development program align with your organizational needs?
If your company’s talent development plans fail to meet its needs, you’ll be left scrambling to fill the gaps. Is your business providing sales training courses when it really needs more field repair technicians? Or is it prioritizing enhanced customer service without anticipating the need to keep upskilling its software development team? A talent development program must develop the talent required for organizational success today and in the coming years.

Is your program personalized?
All employees are different, from the skills they bring to your company to their preferred learning styles. A talent development program that treats employees as identical, interchangeable assets is doomed to fail. Personalize your talent development offerings to match team members’ needs, goals, and abilities. If you’re not sure where to start, reach out to employees with an easy-to-answer pulse survey.

Is your program easy to access and administer?
Hybrid and remote work is becoming the new norm at many organizations, bringing with it new ways to achieve organizational priorities across the board, from engaging employees to developing talent. If employees can’t access your company’s talent development resources whenever and wherever they choose, they’re less likely to take advantage of them.

Look for a digital learning solution that makes both completing and managing your training materials simple and stress free. That means guiding users along each step of the learning path, streamlining administration, and a mobile-first design philosophy. Pair this learning platform with remote-friendly, centralized solutions for recognizing and taking the pulse of learners, and your organization will be well on its way to building an impactful talent development program.

The role of a talent development manager
A talent development manager is the HR professional who oversees your company’s talent development program. Their goal is to help team members grow in ways that improve your organizational culture, contribute to both personal and organizational success, and boost employee retention. Specific responsibilities include assessing and prioritizing your company’s needs, determining the ability of current team members to meet them, and developing training programs that can help to fill any gaps. Talent development managers partner with leaders in HR and throughout the organization on projects ranging from recruitment to performance improvement.

Qualifications for this position include education or experience related to human resources, organizational development, or business. Strong skills in communication, problem solving, and data analysis are also useful. And talent development managers should feel comfortable completing leadership tasks like developing learning activities, instructing team members, and providing encouragement and motivation.

6 actionable talent development strategies
Ready to improve talent development at your organization? Take a look at these six strategies for building a results-driven program that fits your business and its employees.

  1. Identify existing skill gaps and how to fill them
    Consider your company’s immediate needs and long-term objectives. What roles and skills does it need to achieve them? Does it currently have enough team members for those roles, and do they have the right experience? If not, you’ve just identified a skills gap. When it comes to filling skill gaps, recruitment is an obvious choice, but it’s also important to look within your own team. With additional education, they can meet the challenge while bringing institutional knowledge and engagement that external candidates may lack.

Upskilling, reskilling, and cross-skilling are three great strategies for addressing skill gaps:

Upskilling involves providing an employee with more advanced skills within their role or area through additional education and training.
Reskilling instead helps an employee learn the new skills needed to be successful in an entirely different role.
Cross-skilling gives employees the training they need to perform multiple job functions at your company.
Using these and other training methods in tandem will help your organization build a stronger workforce that can meet the challenge of an evolving business environment.

  1. Recognize employees who grow and meet their talent development goals
    When you’re lucky enough to have team members that are excited about learning new skills and growing at your company, make sure they receive plenty of recognition. Recognizing positive actions like these makes it more likely that employees will repeat them. While big milestones like receiving a new certification or completing a lengthy training program should be rewarded, don’t stop there. Showing appreciation frequently is a key part of boosting the impact of recognition. People recognized weekly are over 5 times as likely as those never recognized to say they rarely think about looking for a job elsewhere — and almost twice as likely as the average among all respondents.
  2. Solicit and implement feedback on your talent development program
    Your leadership and HR teams have created talent development initiatives they’re proud of — and that’s great! But what do the team members actually participating in the program think? Communication between team members and leadership is critical, and how your organization facilitates that communication is just as important. Employees are more likely to be honest when they can provide feedback anonymously in surveys than when discussing things directly with a leader. If you don’t get honest feedback, you won’t know what the consensus is on your talent development program. Look for an employee engagement platform that provides anonymous, always-on feedback channels team members can use from anywhere.

After receiving and analyzing team members’ input, act on it quickly to show your employees that their voices matter. Adjusting your company’s talent development program as a result of feedback is essential if you want to reap its benefits. Ninety percent of employees say they are more likely to stay at a company that requests and acts on feedback. Prioritize any issues identified by their potential impact on your team and organization. Team members appreciate even incremental changes when they’re deployed in tangible ways that demonstrate your company truly values employees’ perspectives.

  1. Train managers to coach rather than micromanage
    Micromanagers supervise their team excessively, watching and often criticizing them as they perform routine tasks. They don’t teach team members to work independently, leading to feelings of stress, a lack of confidence, and low morale. Micromanagers may be able to deliver short-term results, but over time this approach limits productivity for both employees and managers.

On the other hand, leaders who see themselves as coaches help team members achieve their personal goals through collaboration and mutual trust. Coaching helps both team members and their leaders develop the skills they need to improve their performance. It leads to a better culture, stress reduction, and stronger relationships. Leaders who coach have a deep understanding of their team members’ individual experience, skills, and goals, and these insights can help inform your talent development plan in both large and small ways.

  1. Adopt a learning management system
    Tying all your talent development efforts together is much easier with a centralized solution like a learning management system. These platforms offer HR and leaders the ability to easily administer personalized programs and see at a glance how team members are progressing. An LMS makes things equally easy for learners, giving them the flexibility to engage with materials when and where they prefer. They’re also compatible with a wide array of online courses, saving your organization the time and money of hiring external instructors or crafting training programs from scratch.
  2. Build development into every part of the employee lifecycle
    The employee life cycle reflects the stages that individuals move through during their time with your company. Its six steps — attraction, recruitment, onboarding, retention, development, and separation — map out the employee journey. HR professionals, managers, and other leaders at your company can use this framework as a guide to engaging employees and maximizing their performance during their entire career.

Development is a key component of the employee lifecycle, taking both employees and organizations to new, exciting places. But it should be a part of every step employees take at your organization. A reputation for talent development is a great aid when attempting to attract and retain the best talent, and developing new employees should be a primary goal of the onboarding process. And if a team member chooses to eventually move on from your company, they’ll be much more likely to act as an advocate for your organization if it was a place of growth for them.

Give talent development a boost with Achievers
If you understand the far-reaching value of a strong talent development program and are ready to put one into action, it’s time to consider the tools that can help make it happen. The Achievers Experience Platform, in the form of Achievers Recognize and Achievers Listen, makes it easy to gather, analyze, and act on feedback while recognizing and rewarding employees as they grow with your company.


A philosopher’s guide to messy transformations

In my research and advisory work, I stress the importance of listening to the questions that people ask to understand not only what motivates them but also what they don’t get. I had a great opportunity recently to do this when I hosted a panel with 500 attendees discussing the challenges of digital transformation. These were people tasked with implementing change in large companies, but it was clear from their questions that they had very different understandings of what needed to be done. It occurred to me that Aristotle’s ideas about knowledge domains would help leaders translate these ways of thinking and talking about transformation into a shared language that would make the transformation more successful.

In Metaphysics (Book 1) and Nicomachean Ethics (Book 6), Aristotle made a distinction between expertise, science, wisdom, and prudence. That distinction can provide a simple framework for understanding what I call the messy middle of transformation. The messy middle is the unknown, uncertain space between past and future, between theory and practice, that characterizes organizations in the process of becoming something new. To navigate the messy middle of transformation, leaders must understand how the different knowledge domains contribute to the transformation—and help their employees find a way to be part of the same conversation.

A quadrant showing Aristotle’s four domains of knowledge: science, wisdom, expertise, and prudence.

Typically, when presented with four quadrants, the one you want to be in, or arrive at, is the upper right (so you’re indexing positively on both attributes). But, in this Aristotelian approach, you must resist the temptation to favor one quadrant over the others. Instead, you must engage and motivate those who are going to carry out the transformation by starting in the bottom left—the domain of expertise—and use this as a starting point to draw on knowledge from the other quadrants to drive the transformation forward.

In the domain of expertise, people base their understanding of transformation on practical insight into the history and culture of the company. A question from an attendee on the panel I conducted illustrated this nicely: “How do you get an organization with a legacy of being extremely risk averse to embrace agility, which can be perceived as a more risky, trial-and-error approach?”

The question acknowledges and accepts that the company needs to embrace agility but demonstrates neither insight nor interest as to why it needs to do so. Whether the questioner trusts senior management’s decision to embrace agility, or she has other reasons for ignoring the “why,” it is obvious that she wants to know about the “how.” Too often leaders forget about the how. And that can be a costly mistake. If leaders assume they know what questions their employees need answered to drive the transformation forward rather than listen to what they actually ask, their initiatives will have little or no impact.

More PwC insights
A photograph of colleagues in a meeting.
Meet the four forces shaping your workforce strategy
According to Eik Thyrsted Brandsgård, who was on the panel that day, culture is emergent, and it almost has a life of its own. Brandsgård leads the Group Business Agility at the LEGO Group, the toymaker that was founded in Billund, Denmark, in 1932 and now has 17,000 employees. “When you have an organization that has been organically growing over 90 years, then the culture is embedded in the language and the behaviors of the people working in the organization,” he said. The strength of legacy companies is that their culture is defined by conversations and behaviors that have been evolving for decades. “But the flip side is that the culture doesn’t always do what you want it to. It can resist an idea or just reject it,” he said.

It goes back to the why and how questions. If people are not interested in the why and lack information on the how, they will be resistant. Unless the message is aligned with how employees already think and talk about the transformation, they will ignore it or even try to undermine it.

The important thing is that people agree on what problems to solve, not on how to talk about them. This is a reminder not to get too caught up in the theoretical frameworks leadership advisors and consultants use when they teach how to drive agile transformation.

In the domain of science, people ask questions that seek to elicit an understanding of why companies approach transformation the way they do. An example of such a question from the panel discussion was: “Agile methodologies were formed in the software development world and have eventually become a standard that companies and teams in almost any industry are driving towards. Why do you think it has had this proliferation, and do you think it makes sense?”

The person answering the question started out by saying, “I understand agile as a looser policy, while scrum and other specific methods may be more sector-specific.” There is an assumption here that the person asking the question has a theoretical knowledge of universal frameworks and methods and knows what terms like scrum, SAFe, and ART mean. However, the answer doesn’t show any insight into the practical circumstances in which transformation happens. Leaders who use consulting lingo when answering their employees’ questions risk sending a signal that they are more interested in discussing theoretical problems than they are in finding practical solutions.

To help people co-create a shared language, leaders must bridge the gap between the employees who know the theoretical frameworks and those who don’t. One way for leaders to do that is to adjust their communication to the people they are talking to. Another is to use words that everyone understands. For example, instead of referring to concepts like agile, leaders can talk about the importance of understanding and adjusting to customers’ changing needs.

The domain of wisdom is different from the other knowledge domains in that it draws on a completely different vocabulary. To find wisdom in something that is new to everyone, like digital transformation, leaders sometimes look for inspiration among thought leaders who are discovering new ways of thinking and talking about transformation rather than teaching existing theories. Typically, people representing the domain of wisdom use and combine terms from professional areas that are foreign to the organization. Consider, for example, regenerative leadership, an expression developed by sustainability expert Laura Storm. In her 2019 TEDx Talk, she described it this way: “I see the dawn of a new leadership logic, a new paradigm, a new generation of leaders. And their secret is that they apply the logic of life itself to how they run organizations.” The term was born in the world of environmentalism but has since gained currency well beyond it.

Leaders who use consulting lingo when answering employees’ questions risk sending a signal that they are more interested in theoretical problems than they are in practical solutions.

When I shared other examples of thought leaders using esoteric terms—like cynefin, teal organizations, and holacracy—in an early draft of this article, the editor suggested the words were too abstract. And that is exactly the point. People representing the domain of wisdom shed light on the basic principles of leadership and transformation, but the terms they use to describe them can be foreign to employees and are thus hard to translate into everyday actions.

This does not mean that leaders should not be inspired by abstract thinkers—if I believed that, I wouldn’t have introduced Aristotle. It just means they should be careful not to assume that it is as inspiring to their employees as it is to them.

In the domain of prudence (good judgment), people depend on neither theoretical frameworks nor translation of basic principles to make sense of complexity. Instead, they use the inspiration they get from everyday practice, consultants, and thought leaders to talk about the transformation in a language everyone understands.

An example of this from the panel was an attendee observing, “In my experience the greatest threat against change is being busy. There is such a resistance against slack in our schedules and plans. Downtime is still considered ineffective. We invest so heavily in change, but we don’t allow for time to learn. What is your take on this?” The question demonstrated insight into the basic principles of effective transformation without mentioning either theoretical concepts such as agile and scrum or foreign concepts such as cynefin and teal.

The question shows how insights from the domain of science and wisdom can shed light on a problem in the practical domain. This person asking the question is, in essence, a catalyst for change. The question provides a solution in itself. And leaders who are listening carefully will respond by giving people the time to learn and adjust. While internal and external catalysts play a vital role in translating between the different domains, the leader is responsible for driving the transformation forward by giving people what they need to change.

Transformations often fail because leaders don’t acknowledge the importance of inviting people with different ways of thinking and talking about transformation to join a common conversation. None of the four knowledge domains can exist without the others, and leaders depend on all of them to navigate the messy middle of transformation. As Aristotle would say, “All learning comes about from already existing knowledge.” Which is why leaders shouldn’t introduce and promote new frameworks when driving transformation. Instead, they must help their employees share their already existing knowledge and collaborate on turning it into new ways of working.


HR Headaches: My Employees Are Talking About Unionizing — Should I Encourage This?

Unions allow employees to bargain collectively to protect their rights in the workplace
Your workplace is rumored to become unionized. You’ve heard the buzz in the coffee room and in the corridors. No official union activity has started yet, but employees’ demands for workplace changes and calls for a union to make them happen are getting louder.

All this union talk puzzles you. You created what you thought was a fair, safe and pro-employee work environment. Why and how is this happening?

The short answer is that unions allow employees to bargain collectively with their employers to protect their rights in the workplace. A bargaining unit can do what employees are less able to do as individuals, namely, negotiate improvements in working conditions.

Small businesses as union targets
If you thought your small or medium-sized business (SMB) wasn’t big or bad enough to be unionized — especially with unionization reportedly on the decline — you’d be wrong. Under the National Labor Relations Act (NLRA), a bargaining unit can be just 2 people who share a work-related interest, mission or goal.

The chances of your workplace becoming unionized depend on various legal factors, Chief among them is:

Who can form a bargaining unit
Who’s eligible for union membership
What employers, workers and unions can and can’t do
What an election win or defeat means
The chances of your organization becoming unionized may be less if you operate in one of 27 states with “right to work” laws, According to the National Conference of State Legislatures (NCSL), these states can decide whether employees in an organized workplace must join a labor union to get or keep a job and pay union dues as nonunion members.

So, before you decide whether to support or avert unionization in your workplace, it pays to know whether labor laws cover your business, why people unionize, and what the law allows in the unionization process.

The laws covering unionization
The NLRA covers most private-sector employers, including retailers, healthcare organizations, manufacturers, and private colleges, and universities.

The act doesn’t cover federal, state, or local governments. Nor does it apply to employers who are covered by the Railway Labor Act or those who hire only agricultural workers.

If your business is exempt from the act, your employees’ rights aren’t protected by the NLRA.

Why workers join unions
Hugh F. Murray, III, chair of McCarter & English’s Labor & Employment practice, told Workest in an email interview that with union membership in the private sector at record lows and organizers finding new ways to attract employees, any workplace is a target for unionization.

Murray noted that if a company or an industry is in the middle of a transformation of some kind, the employees may be nervous about the future and think they may need a union’s help if, say, the company is sold.

Employees’ top reasons for unionization
In a 2009 report by Fisher Phillips, a labor and employment firm, the top 5 reasons employees cited for joining a union were:

The report recognized that favoritism applies in multiple circumstances. But it generally refers to unfair treatment.
Inadequate pay and benefits. According to the report, employees typically equate union membership with better wages and benefits, but in reality, unionization can but doesn’t always guarantee workers higher compensation.
Overlooking workplace safety. Employers must provide employees with a healthful, hazard-free work environment or risk violating Occupational Safety and Health Administration (OSHA) rules. The report noted that unions often make health and safety the center of their organizing campaigns.
Employees who feel humiliated, embarrassed, belittled or overlooked by their employer may look to unions to rectify the situation.
Ignoring grievances and complaints. Disregarding employees’ claims of mistreatment or wrongdoing tips the balance” in favor of unions, who, as the report indicated, give workers a say in performing their job.
What unionization says about your company
Is your employees’ desire to unionize a reflection of your workplace?

“It is always a reflection of something in the company’s culture, although not uniformly a reflection of something bad in the company’s culture,” Murray noted. “The fact that employees feel that a [union] would be helpful indicates that there is something missing from the status quo.”


Who can and can’t form a union
Most employees in industries covered by the NLRA have the right to form or join a union.

Temporary workers who staffing firms hire to work for 3rd-party companies can form or join a union without either employer’s consent. In 2016, the NLRB overturned a 2000 ruling that restricted unionization for temporary workers.

If you hire seasonal workers for summers or holidays, they, too, have organizing rights.

However, the National Labor Relations Board (NLRB) restricts the ability of workers who meet the legal definition of an independent contractor (as opposed to an employee) under the Fair Labor Standards Act (FLSA) from unionizing.

Any independent contractors you hire aren’t protected by the NLRA and therefore have no legal right to form a union.

Keep in mind that these rulings could change as political parties gain or lose power in the four branches of government. For example, the party representing the Administration holds the majority seats on the NLRB, with the votes to reverse current rulings.

Who’s not eligible to join a union
The NLRB doesn’t protect employees whose involvement in union activity presents a conflict of interest. Employees who fall into this category typically are managers, supervisors, and executives. Their role in unionization is about bargaining on behalf of the employer, not the employee.

Employees fit in this unprotected category if they:

Hire, fire, promote or make equally powerful decisions about other employees.
Oversee employees, including reassigning their work or altering the workflow.
Other employees who are unprotected by the NLRA include:

Those who help with confidential union-related matters.
The parents or spouses of union eligible employees.
Domestic workers.
Workers outside the U.S.
Employers’ rights and restrictions
The NLRA prohibits employers from denying employees their right to unionize.

Unlawful tactics that interfere with organizing include:

Restraining or coercing employees into not organizing.
Threatening to fire employees or take away their benefits for joining a union.
Promising benefits to employees for not unionizing.
Threatening a business closure if employees organize.
Undermining organizing efforts by questioning employees about their union allegiances or activities.
Punishing employees for organizing, filing an NLRB complaint or participating in an NLRB investigation by firing, laying off, transferring or assigning more difficult tasks to them.
Although you have a right to expect your employees to perform their jobs during scheduled work hours, you can’t stop them from engaging in union activity, such as group assembly or handing out union materials, before or after work hours or during breaks.

Unions’ obligations
The NLRA protects employees’ rights to organize by also keeping unions in check. The law prohibits unions from:

Threatening employees with losing their jobs if they don’t support the union.
Trying to suspend, discharge, or otherwise punish employees for not being union members, even if they paid or offered to pay a lawful initiation fee and periodic fees thereafter.
Refusing to process employees’ grievances because they criticized union officials, aren’t union members, or aren’t union members in states where union security clauses are not allowed.
Fining employees who officially resigned from the union for engaging in union activity after resigning or for crossing an unlawful picket line.
Engaging in misconduct on the picket line, such as assaulting or threatening non-strikers or barring them from the employer’s site.
Striking over issues unrelated to employment terms and conditions or coercing neutral parties into engaging in labor disputes.
Unions also must follow rules on union/employee relations and dues.

The path to union representation
Employees have 2 paths toward unionization:

If at least 30% of employees sign cards or a petition in favor of forming a union, the NLRB will hold an election. If the majority of those voters choose the union, the NLRB will certify the union as the employees’ collective bargaining representative; or
You, as the employer, may voluntarily recognize the union, usually based on signed union-authorization cards, as your employees’ representation.
While the 2nd path to unionization doesn’t let you “encourage” your employees to organize, it may signal your willingness to work and negotiate employment issues with them.

Once the NLRB certifies a union, you’re required to bargain in good faith over your employment terms and conditions with the employees’ union representative. (See special rules for the construction industry.)

When unions are good for employers
As long as employers, employees and unions follow NLRA rules, unionization should work for all 3 parties. But are unions ever good for a business?

Murray cited examples of unions that fit in well with an employer’s business plan. “Professional sports leagues enjoy an antitrust exemption that is based largely on the presence of the players’ unions,” he said. “Most states that are licensing cannabis require ‘labor peace agreements’ in order to obtain a license.”

In other ways unions benefit employers, Murray noted that:

Construction unions are a reliable source of skilled employees.
Customers may see an employer’s business brand as ‘union friendly.’
Certain employers with large government contracts may have a union to help them lobby for better funding.
Instead of having a negative automatic reaction to unionization, Murray advised employers to be prepared well in advance of a union organizing campaign, if possible, and try to understand what unionization would mean from a business perspective.

Preparing for unionization
So, how should you prepare for an organizing campaign? Murray recommended that you:

Evaluate employees’ compensation levels against equivalent market rates.
Recognize other issues that concern employees (e.g., safety, diversity, fairness, etc.).
Take note of union activity locally and in your industry.
Identify and retain an attorney who’s well-versed in labor law (if, for example, a union files an election petition, you’ll need to respond to important legal issues in as little as seven days).
Think about how you would respond to a hypothetical union organizing campaign.
Make sure your supervisors know the company’s position on unionization.
And finally, take steps to ensure that line-level supervisors are treating employees fairly.


How Digital Currencies Can Help Small Businesses

Over the last few years, the development of blockchain technology brought us new types of digital assets such as stablecoins and cryptocurrencies. These innovations offer the foundations for building new payment rails that can move value across the globe not only in real-time but also at a much lower cost. Unlike cryptocurrencies such as Bitcoin or Ethereum, stablecoins are significantly less volatile as they are typically pegged to a fiat currency such as the U.S. dollar. Stablecoins also pushed governments to accelerate their exploration of central bank digital currencies (CBDCs). While cryptocurrencies rely on decentralized networks for their operations, CBDCs would run on public sector infrastructure and represent a direct liability of the central bank — essentially “digital cash.”

There’s major potential here: digital assets and cryptocurrencies can support new services and create more competition in financial services. For one, they promise lower-cost payments for both domestic and cross-border transfers. They can also facilitate real-time payments, overcoming a significant shortcoming of the U.S. payment system. Moreover, these new assets support programmability, which can be used for conditional payments and more complex applications such as escrow.

At the same time, these technologies — and how they threaten traditional financial intermediaries — has ignited a heated debate. For example, a recent, widely anticipated paper by the Federal Reserve Board acknowledges the significant benefits of digital currencies, but also raises concerns around privacy, operational, cybersecurity, and financial stability risks. Similarly, Gary Gensler, Chair of the U.S. Securities and Exchange Commission, recently nearly doubled his crypto enforcement staff to crack down on what he calls the “wrongdoing in the crypto markets.” The recent collapse of UST, Terra’s Stablecoin — one of the largest stablecoins — illustrates how a failure in one of these systems can cascade throughout the crypto ecosystem. While many stablecoins derive their value from being fully backed by reserves, that was not the case for UST, which instead relied on an algorithm and a second currency, Luna, for stability.

While recent events underscore that the risks cryptocurrencies entail cannot be ignored, it is also clear that the status quo does not provide a satisfactory answer. The question is who carries the burden of an expensive, outdated, and slow payment system. This article surfaces the potential impact on small and medium businesses, which embed significant consequences for economic growth and stability.

Small businesses — including restaurants, plumbers, and dry cleaners — play a critical role in our economy. They employ roughly half of all working Americans, amounting to more than 60 million jobs. They created 65% of net new jobs from 2000 through 2019, represent 97.5% of all exporting firms in the U.S., and account for 32% of known exported value. Moreover, small businesses are also an essential vehicle for intergenerational mobility and social inclusion, offering upward mobility and economic opportunity, particularly for underrepresented groups such as minorities and immigrants.

Small businesses are also finding new ways to reach consumers outside their local communities through digital platforms such as Shopify and Amazon, a distribution channel that was vital for them during the pandemic to counter the decline in retail sales.

Nevertheless, they have largely been ignored during the debate over digital currencies. While policymakers, economists, and government officials highlight the importance of ensuring the resilience and growth of small businesses, the way they could benefit from better and more competitive payments infrastructure is almost entirely overlooked.

The Financial Fragility of Small Businesses
Most small businesses operate with razor-thin cash buffers. The typical small business only holds enough cash to last less than a month. This leads to significant vulnerability to economic fluctuations, as illustrated by their collapse during the 2008 financial crisis and, more recently, the Covid-19 crisis. The latter carried devastating consequences for small businesses, forcing the government to issue an emergency Paycheck Protection Program (PPP) to ensure they could stay afloat.

There are many reasons for this, including their limited access to credit and the fewer financial options they have relative to larger firms. Small businesses are often considered riskier for lenders because they struggle to deliver the types of quantifiable metrics large banks expect when evaluating creditworthiness. While small businesses have relied more on community banks, bank consolidations have further limited this source of funding.

One of the most pressing issues for small businesses is payment delays. Large buyers, such as Walmart and Procter & Gamble, commonly use “buy now pay later” practices with their suppliers, with payment delays between 30 and 120 days. When applying such practices, large buyers are essentially borrowing from small businesses, significantly increasing their working capital needs and lowering their available cash buffers. Indeed, survey evidence suggests that almost 70% of small businesses that rely on invoices report cash flow problems linked to these payment delays.

The challenges in accessing credit, combined with delayed payments make it hard for small businesses to maintain healthy cash buffers, increase their exposure to economic shocks, and limit their ability to ​​make investments. Increased competition and innovation in payments could improve their long-lasting resiliency and opportunity for growth.

How Slow and Expensive Payments Hurt Small Businesses
Today, most U.S. consumer payments are made via credit cards, a trend that accelerated during the Covid-19 pandemic. While entirely invisible to customers, merchants pay fees — to card-issuing banks, card-network assessment, and payment processors — that can reach above 3% of the transaction value, and are likely to increase in the near future. Online transactions, mainly through marketplace platforms such as Amazon or Shopify, can be even more expensive. Additionally, it can take several days to actually receive the funds, which increases the working capital needs for small businesses.

This puts small businesses at a clear disadvantage, particularly given their thin margins, limited cash buffers, and expensive financing costs. While large businesses, such as Costco, can negotiate significantly lower fees when accepting digital payments, small businesses do not have much negotiating power. Right now, there are few alternatives to the major card networks, meaning that small businesses operating on small margins do not have a choice but to attempt to pass part of the fees to customers through higher prices, which lowers their ability to compete with deeper pocket rivals.

These problems are magnified when dealing with cross-border transfers, where fees and delays are incredibly high. As of the second quarter of 2021, the average cost of sending a cross-border payment from the United States was 5.41 percent, and SWIFT payments can take between one to five business days. Moreover, fees are unpredictable, and businesses may incur additional costs depending on the number of correspondent banks involved in the transaction. The complexity of the payment chain makes international payments also a lucrative target for scams and fraud, further increasing its costs.

How Blockchain Technology Can Help
To change this, we need a more open and competitive payments infrastructure. To achieve that, critically important public-sector efforts such as FedNow and CDBCs need to be combined with private sector innovation — including permissionless cryptocurrency networks. Public-sector efforts inevitably move at a glacial pace, and there is a real risk that they will be severely outpaced by innovation happening elsewhere, often within “walled gardens” that lock consumers and businesses into non-interoperable services.

But this does not have to be the case. The public sector can take advantage of the technical progress happening within the blockchain and cryptocurrency space to accelerate its journey towards real-time, low-cost payments.

An open payments system will drive competition, lower transaction fees, and unbundle the services that are currently part of all digital transactions — including those related to reversibility and chargebacks, intermediation, transaction risk assessment, and more — helping businesses pay only for what they actually need. Ideally, thanks to new forms of interoperability between digital wallets, banks, and legacy payment and card rails, small businesses would be able to do so without compromising which customers they can accept payments from. Moreover, transferring funds directly through a blockchain would benefit domestic and cross-border payments by reducing the number of intermediaries in the picture.

If this evolution of payments is successful, small businesses would experience not only lower costs but also faster access to funds. This would drastically improve their liquidity and cash buffers, and help them survive negative economic shocks and thrive.

By creating the right conditions for a truly open and interoperable protocol for money to emerge, very much like in the early days of the internet, the public sector can bring back competition to payments, and give small businesses much-needed choice.


How employers can reconnect with teams

Research from UKG has found a worrying disconnection between employers and their team members. According to the global survey which spoke to recent job leavers and managers, one in four employees admit never discussing frustrations or thoughts of quitting with their manager before they handed in their notice.

Surprisingly, the research also found that 91% of employers felt they fostered an environment where staff were comfortable communicating frustrations, while just 64% of employees said the same to their managers.

When employee retention is proving more vital than ever, it’s time for managers to take steps to narrow the communication gaps between themselves and their team members.

Understand the difference between hearing and listening

Listening involves actively paying attention to what you hear and engaging yourself. It also means understanding, precisely, employee needs. Doing so will drive better engagement throughout the business.

The reality is that when individuals feel that their needs are being met, they are more likely to maximise their talents.

Engage with ideas from all members of the business

There is widespread inconsistency in the feedback loop at organisations globally. Even though some employees feel heard by their employer, disparities remain between workers, with some more listened to than others.

For example, younger or non-caregiving employees and under-represented ethnicities and religions are more likely to feel neglected by their employers.

Sharing ideas or concerns should never be exclusive to more senior staff members – everyone deserves to have their suggestions listened to. Garnering a more comprehensive range of ideas from multiple sources will offer new ways of thinking and fresh perspectives.

Empower employees

If employees feel they cannot vocalise their concerns, they are likely to leave their job and seek opportunities elsewhere. In the wake of the pandemic, workers are faced with a host of new opportunities and are more willing than ever to venture into the unknown in search of new challenges in their careers.

Formulating formal and informal strategies for checking in on staff can be an effective way to boost employee engagement and increase productivity.

For example, businesses can schedule regular calls between team members to encourage them to open up about any challenges or issues they may be facing.

Creating opportunities for employees to express their concerns is the first step in listening to them. Encouraging employees to be more vocal can positively impact their learning and development and listening to colleagues promotes the sharing of talent across teams.

Furthermore, managers that actively engage in essential matters to aid workers will build stronger connections with their team, earning them respect and building trust.

Positive actions have been taken to reduce this inequity between co-workers, but we still have a long way to go in 2022. Business leaders need to listen carefully to their team and adapt procedures to meet their expectations.

The more diverse your workforce’s voices, the more likely you are to succeed, but only if you listen to every one of them.


Becoming Irresistible: Now Is The Time

This week we launch our Irresistible Conference at the same time the stock market has plunged, interest and mortgage rates are rising, and economists are worried about a recession. It reminds me of our first Impact conference in 2008, which we launched the month the financial meltdown began.

Whether the economy goes down or up, we know there’s economic uncertainty ahead. Inflation in the developed economies is now at 6.2%, US food prices rose by 10.8% last month, and the International Monetary Fund expects global GDP growth to drop by half. China’s economy is now growing slower than the US and the IMF projects US economic growth will drop from 5.7% in 2021 to 3.7% this year and 2.1% in 2023.

What does all this mean? As Larry Summers pointed out today, we’ve never had inflation over 4% and unemployment below 4% at the same time. In other words, the labor market is really under stress. It’s hard to hire, employers are piling on benefits, and wages keep going up. Yet at the same time, employers need to hire and jobs continue to be created.

Why is there job growth during this slowdown? Because demand for new services, new products, and new industries has skyrocketed. Not only are people excited to travel and have fun, we’re witnessing the reinvention of every industry. Banks are becoming fintech companies; retailers are becoming healthcare providers; telcos are becoming IT services and media companies; and energy companies and auto manufacturers are becoming electrified. (Read our GWI overview for more.)

This is a unique time. We’re entering a period of inflation, a possible recession, and industry reinvention all at once. It’s hard to see where it all goes. But there’s one thing I can tell you. Being an Irresistible company is the best strategy of all.

As I’ll be talking about at our conference, the #1 strategy for success is to really take care of your employees. And this doesn’t mean just give them good pay and benefits. It means carefully selecting the right people, giving them the agency to be productive and grow, and listening to everything they say.

As I often tell our clients, employees are your #1 stakeholders. Customers can buy other products. Investors can simply sell your shares. But employees, they’ve voted with their livelihood to join your companies. They are the most vested in your success. So when they tell you something should change, you have to listen to them.

This, in a sense, is why Amazon, Apple, Starbucks, and other great companies face labor unions. They’re not listening to their employees. And I can tell you from experience, if you sacrifice your employees on behalf of your customers you will be sorry. Look at the backlash from Twitter and Tesla employees when Elon Musk ignores their interests. They care about the company more than anyone, so they often take action when they’re ignored. (More on Tesla’s issues here.)

This is what my new book is all about, and this is the theme of our conference.

There’s much more to come on this topic. For those of you coming to Los Angeles this week, you’re going to hear all about it. For everyone else, please follow us (#irresistible2022) and watch for more. It’s a confusing time for many, but to me the mandate is clear. Take care of your people, and they will take care of you.


Three Ways Employers Can Improve the Recruitment Process Amid “The Great Resignation”

While the Great Resignation presents a challenge for employers and recruiters, there’s also opportunity. According to Steven Karau, the Gregory A. Lee professor of management at Southern Illinois University Carbondale, “It does create an opportunity for businesses that are willing to be progressive and flexible to create a more transformative and rewarding employment experience that is mutually beneficial for the employee and the company.” The trick for recruiters is to understand the root causes of mass resignations, such as job dissatisfaction, depressed wages, or inflexible bosses and counter them with strategic actions and the right technology. Attract Candidates With Flexibility According to the research firm Future Forum, 93% of surveyed workers note they want flexibility, both in terms of their working hours and physical work location. This flexibility ranked only behind compensation in terms of job satisfaction, underscoring the dramatic shift during the pandemic towards flexible remote employment. We have found the most popular benefit is hybrid-flexibility for the following reasons:
It offers the opportunity for a real work-life balance
It is more personal in nature and practice
It shows current and future employees that companies can be understanding and accommodating on an individual basis regardless of scale, within reason
It gives employees more choices about how to live their lives
It can be more impactful on a personal level than a few extra days of PTO, a marginal bonus, or traditional benefits that are already expected by today’s workforce
It is aligned with the values, needs, and conditioning of people who entered the workforce since COVID-19 started.
Recruiters need to recognize the flexibility expectations of employees and craft job descriptions that embrace an open results-driven culture. They also should consider contract hires and freelancers for certain roles, as there’s a massive increase of this type of talent who can perform well but do not want any of the constraints of full-time employment. See More : 3 Ways To Stand Out and Attract Top Talent During the Great Resignation Use LinkedIn the Right Way Recruiters need to develop rosters of potential candidates, not for the openings they have now but for the ones they might offer next year. Building a pool of great candidates requires a strategic approach, primarily using LinkedIn as the best way to find talent. Recruiters can use LinkedIn to find well-rounded people who’ve done well in several different roles or verticals. Teams can find people who engage in continual learning and have developed new skills that prime them for the modern work environment. Recruiters should consider what work will look like in 2022 and beyond and use that context to find matching talent for open or future roles. And when they find a standout candidate who’s not looking for a new job, they should have the flexibility to develop a new role for that person. Recruiters can move their LinkedIn data into an ATS platform to better match jobs with potential candidates. It’s the best way to save this data and get the most out of every prospect through automated tracking and communications features. Modernize With an Engagement-based ATS The newest iterations of ATS enable talent managers to engage with candidates. It combines the features of a traditional applicant tracking platform along with passive candidate headhunting. For example, it uses a tagging system to simplify recruiting that pairs open jobs with the skill sets and titles tags of leads and candidates. This greatly reduces manual sorting and gives recruiters a robust list with just a few clicks. Armed with such a platform, recruiters and HR can focus less time developing candidates or managing routine tasks. They can instead act more strategically and address employee satisfaction and retention metrics. Companies with a strategic and tech-driven approach to recruiting can create a “Great Opportunity” for their firms. They might lose some talent, but they’ll stand out from competitors through a smoother recruiting process that emphasizes growth and flexibility. And they can accomplish this with a modern ATS that eliminates routine processes and gives recruiters time to find the right talent that will keep the company moving forward during periods of uncertainty.


Key determinants for resilient health care supply chains

A pervasive idea surrounds diverse teams: They are assumed to perform much better than less diverse teams, thanks to the breadth of perspectives and ideas they generate. This is a familiar refrain we hear from the participants in our executive education seminars.

More diverse teams are believed to be particularly effective when innovation is concerned. In practice, however, they often underperform compared to homogenous teams. The reason is simple: These teams face communication hurdles that prevent them from reaching their full potential.

On a tacit level, norms and assumptions govern how we behave, how we set priorities and how we get work done. When team members come from different backgrounds, these norms and assumptions frequently clash, resulting in frustration and misunderstandings. You might have observed such situations in real life.

The good news is that our research in drug development, an innovation-intensive setting, suggests there is a solution. To unlock the benefits of diversity, the members of diverse teams need to experience psychological safety – a shared belief that team members can express their ideas, questions or concerns and not be embarrassed or ostracised.

Evidence from the pharmaceutical industry

The idea that psychological safety is key to the performance of diverse teams is not new but lacked empirical evidence until now.

We studied 62 drug development teams of varied diversity across six large pharmaceutical firms. These diverse teams had to collaborate with external partners to develop drugs with high safety and efficacy, under tight deadlines.

We measured diversity using a composite index (including gender, age, tenure and functional expertise). Psychological safety was assessed using an established survey tool. We collected team performance ratings from company senior leaders, who didn’t know how the teams fared on our two other measures.

As predicted, on average, team diversity had a slight negative effect on performance. This was even more so for teams whose psychological safety score was below average. However, in those teams with high psychological safety, diversity was positively associated with performance.

Our data support the role of psychological safety when it comes to allowing diverse teams to meet their full potential.

Team member well-being

We also found that team diversity was inversely correlated with how the study participants were satisfied with their team members. On average, the more diverse the members were, the less happy they were with their team. Again, this reversed for the subset of teams with high levels of psychological safety. In their case, the more diverse the teams, the more satisfied their members were.

So not only does psychological safety help teams optimise performance, it also improves their well-being. This is a highly relevant finding for firms in this Great Resignation era.

The question then becomes: How can diverse teams build psychologically safe environments? Here are our recommendations, centred around framing, inquiry and bridging boundaries:


Framing is about helping team members reach a common understanding of the work and the context. In the case of diverse teams, it is particularly important to clearly define the purpose of meetings and the value of individual expertise.

Meetings are opportunities for information-sharing. People generally think of meetings as forums to share updates and make decisions – a context rife with judgment and evaluation. Unsurprisingly, they think twice before speaking up, especially to offer novel ideas.

Managers can override this default frame by emphasising how the goal of the meeting is to share information and ideas. The next step is to systematically invite people with different perspectives to provide input. All ideas should be carefully listened to, captured and evaluated before the group makes a decision.

Differences are a source of value. It is easy to become frustrated when someone voices a different opinion or perspective. Overcoming our instinctive preference for agreement takes effort – even if we understand the value of diversity on an intellectual level.

Being explicit in framing differences as a source of value can help. For instance, say: “We are likely to have different perspectives going into this meeting. This will help us get a thorough understanding of the issues at hand.”


The best way to help people contribute their ideas is to ask them directly. It’s that simple. When team leaders genuinely inquire about every team member’s ideas and listen thoughtfully to what is shared, it fosters psychological safety.

The need for inquiry is heightened in diverse teams because of the number and variety of perspectives represented. But while simple, inquiry is rarely spontaneous. We all have blind spots – gaps in knowledge or understanding we are unaware of. It can be difficult to ask questions until we figure out what it is that we don’t know in the first place.

Deep listening skills take practice. They involve asking the right kinds of questions, based on a real desire to learn. Examples include: What do you see in your community? What are you hearing from customers?

Another powerful type of question shows that you recognise the possibility that you contributed to the problems or challenges at hand: Can I check if I have ever done something that put you in a challenging position? If so, how can I help?

Bridging boundaries

Typically left to team leaders, framing and inquiry techniques help build psychologically safe environments. But what can individual team members do? What do they need to know about each other, in order to build bridges?

For one thing, they don’t need to know each other’s entire life story or body of expertise. But they do need to figure out in what context their objectives, expertise and challenges come together. Any two people – or members of the entire team – can do that by seeking the following information about each other.

Hopes and goals. What do you want to accomplish?
Resources and skills. What would be the best way for you to contribute to the team?
Worries and concerns. What stands in your way?
In our experience, these questions are surprisingly efficient in helping a group move forward. They are all task-relevant; none is overly personal, but each requires the team member to open up and show vulnerability.

While diversity is conducive to breakthrough performance, particularly when seeking innovation, it is rarely sufficient. Diverse teams need to feel psychologically safe before members can bring their best.

Along team members, leaders play a crucial role in nurturing psychological safety. They can use framing, inquiry and bridge building to unite different perspectives into a cohesive whole. When this happens, team performance benefits, but a healthier work environment and a more satisfying team experience are also worthy goals.


Maintaining network connections

Our collective experience in the pandemic created a once-in-a-lifetime opportunity to rethink what we want from work and our working lives. We had a chance to question many fundamental assumptions, adopt new habits, and form new narratives about how work gets done. The experience also confronted corporate leadership teams with the challenge of how they would respond. Would they stay with their old ways or embrace the opportunity to be bold and redesign systems to make working a more purposeful, productive, agile, and flexible activity?

To begin to reimagine work, you have to create a deep understanding of how your company works. And that involves developing an understanding of the different types of jobs within the business, the tasks that they involve, and the behaviors and capabilities that support productivity. But the classic description of job tasks and the related element of productivity assume an almost static process, which is essentially about the individual. In reality, people, the tasks they perform, and the jobs they do are embedded within networks of human connections. Through these connections flow knowledge, insight, and innovation. One of the major insights from the experience of the pandemic is how important these often-overlooked human connections are to organizational health and vitality. In general, networks shrank. That’s because people working from home spent more time with those they already knew well and less time with people they knew less well, and they created far fewer new friendships.

It is also important to understand networks and knowledge flows because any redesign of work can inadvertently disrupt them. It is no surprise that the potential disruption of networks and knowledge flows is at the heart of two major concerns about the redesign of work: the socialization of the young and the possibility of serendipitous encounters. We learned that lack of face-to-face connectivity was particularly tough for young people as they joined companies without being around people in an office environment. And there is widespread fear that young joiners to a firm will suffer if they work from home, as they will not be able to observe and network with more experienced members of the firm.

In addition, there’s anxiety that the watercooler conversations and serendipitous encounters that happen when people simply bump into each other will be diminished. Andy Haldane, former chief economist at the Bank of England, explained to me: “Exposure to new and different experiences—sounds, smells, environments, ideas, people—is a key source of creative spark. These external stimuli are fuel for our imaginations, and the imagined, made real, is what we typically mean by creativity. Home-working can starve us of many of these creative raw ingredients—the chance conversation, the new person or idea or environment. Home-working means serendipity is supplanted by scheduling, face-to-face by Zoom.”

These concerns are real and valid—and so, before decisions about the redesign of work are made, you need to have a view of the current structure of networks and knowledge flows and use it to consider how the models of the redesign of work will change them.

Tacit vs. explicit knowledge
Not all knowledge is the same. Some knowledge is explicit and objective: it’s easy to write down and access, and it moves with ease across your business. It’s carried by manuals, websites, and handbooks. In companies with a history of working virtually, much of the design of work is about making explicit as much knowledge as possible. That benefits new joiners and new team members, who can quickly get up to speed on how projects work and the skills of their colleagues.

An aerial photograph of office workers collaborating in a conference room.
Building tomorrow’s workforce: Six no-regrets plays to make today
Yet much of the valuable knowledge that resides within a company is tacit knowledge: the insights, know-how, mental models, and ways of framing that are held in the minds of individuals and are part of how they see and interact with the world. Because this knowledge is held in the minds of individuals, it is much more difficult than explicit knowledge to express and codify. Indeed, there is a view that you can only really access another’s tacit knowledge when you know them and when you trust each other. So, while explicit knowledge stands outside of relationships and is codified in manuals and websites, tacit knowledge fundamentally resides within relationships.

If the nature, extent, or depth of these relationships is changed by the redesign of work, then the fear is that this precious commodity will suffer. So in the jobs that you are looking at, consider what knowledge is important to be productive in that job—how much is explicit in the sense that a new joiner could easily find this knowledge, and how much is implicit. If your proposed model of work will require more virtual working, then you need to consider investing in more knowledge-capture processes to create more explicit knowledge.

Strong ties
By the spring of 2020, still early in the pandemic, it became apparent that changing work patterns, and particularly working from home, were impacting the development and maintenance of human connections and networks. We quickly learned that many people were spending more of their time with people they already knew. Often these strengthening bonds turned out to be crucial to positive feelings of worth and mental health. In those tough situations, people were taking solace from their nearest and dearest.

Yet at the same time, people’s relations with their broader network of colleagues, associates, and more distant friends began to erode. Here are two comments from managers I noted in my daily journal in mid-2020—when many had already experienced six months of lockdown: “Some of the people in the team who are working from home are feeling very lonely. If they are naturally extroverts, this is really impacting their happiness and well-being”; and, from another manager: “At the moment, what really concerns me is the pressure on networks. People are getting close to each other and, frankly, that’s been a lifesaver for many over the past months. But what has happened to the watercooler moments? It’s impossible when everyone is at home to just accidentally bump into people.”

What is happening here is almost below the surface. Most of us don’t systematically track our networks, and few companies have empirical data on how knowledge flows within and across their business. Yet it is clear that if the redesign of work in your company includes changes to place and time, such as working from home or adopting a revised schedule, then this will inevitably impact networks. That’s why it is so important to understand how networks work and how your redesign ideas will change them. The networks framework below illustrates some of the key concepts.