Globally, the number of material new joint ventures (JVs) has more than doubled in the past two years. Across a wide range of industries, firms are using JVs and other partnerships as a way to make their businesses more sustainable and to gain access to capabilities, capital and scale.

While JVs make meaningful contributions to corporate revenue and can enable new growth strategies, they also increase their shareholders’ risk exposure, often in ways that are hard to manage; this is especially true of ventures that are not majority owned or controlled. Good governance matters. You see a clear statistical correlation between good governance and the medium-term financial and strategic performance of JVs.

For instance, joint ventures with top-quartile governance scores are four times as likely to exceed the owners’ financial and strategic expectations compared with JVs with bottom-quartile governance scores. Good governance allows joint ventures to quickly spot and respond to risks; access synergies with their owner companies; and grow, restructure and otherwise evolve in a manner that reflects the needs of the owners and the changing demands of the market.

JVs with weak governance are more likely to stagnate and suffer from swings between excessive overreach and alarming lapses in oversight. Time and again, governance fails because the partners lack a shared view of the JV’s purpose and operating model. Once the partners are aligned on the venture’s purpose and operating model, five things are key to getting the mechanics of JV governance right.

Each of The Five Pillars of JV Governance reflects unique elements of the shared ownership structure of JVs. They are separate from the general good governance practices found in public or private companies, many of which also apply to joint ventures.

1️⃣ BOARD STANCE

Any board should be involved in reviewing and approving the company’s strategy, major investments, annual plans and budgets, financial and operating performance, management compensation, succession planning and other matters.

In JVs, however, it is far from obvious how involved the board should be.

A better approach is for a JV board to start with a principles-based discussion on what type of board it wants to be. Once the board is directionally aligned on where it would like to be and how this might evolve over time, it can be valuable to go deeper.

2️⃣ BOARD COMPOSITION

Boards are only as good as the people on them. In JVs, board composition introduces a number of unique features. For starters, it is often valuable to have each shareholder designate a lead director a first among equals of its board representatives.

A lead director will spend relatively more time on the JV than fellow directors and will work with the JV CEO and the other lead director(s) between board meetings.

Another best practice in JVs is to limit the number of non directors in board meetings. The number of formal directors on JV boards tends to be fairly small, with JV boards having a median of six official directors.

3️⃣ BOARD TIME ALLOCATION AND WORKINGS

JV boards tend to do a good job and spend a substantial amount of time managing the current financial and operating performance of the JV.

But JV boards are prone to spending far too much time listening to a parade of management presentations and not enough time discussing critical issues, soliciting the input of directors, and building consensus. Because JV directors are busy shareholder executives, many use board meetings to get educated on the issues. This is not a good use of the board’s precious time.

4️⃣ BOARD COMMITTEES

In corporate boards, the purpose and use of committees is well established. Committees are generally helpful to the workings of the board, as they allow a subset of directors to review and work out the details in areas such as finance, audit, and compensation, and to make recommendations to the full board. In JVs, committees allow the board to make better use of its time and leverage the expertise of committee members.

5️⃣ INTERNAL SHAREHOLDER GOVERNANCE

Governance in JVs is not just about the board, committees, and management. The most sophisticated shareholder companies think deliberately about how they organise themselves internally to enable good governance.

The work of internal shareholder governance includes such critical activities as supporting the company’s JV board directors, managing internal approvals and audits, coordinating services and support to the JV, and ensuring that the venture is receiving the needed expertise and other help from the company to succeed.

Adapted from a study by James Bamford e Geoff Walker

New research finds that despite the importance of collaboration, most organisations fall short when it comes to helping workers build their relationship skills. Many of us spend more time on work than on all other waking activities combined. Much of this time is spent collaborating with colleagues, thinking together in meetings, acting together on project teams.  Across sectors and levels, collaboration is the key point.

In spring 2022, researchers used Workplace Collaboration Survey to better understand collaborative relationships in the modern workplace.  The 1,100 people who participated in the survey were employed full time in the United States; to qualify for inclusion, they had to work with others at least some of the time. They asked respondents what proportion of their job entails collaborating with others to advance shared goals.

Nearly three-quarters (71%) of the sample reported collaborating at least 41% of their work time. This means that in a 40-hour, five-day work week, people spend an average of 3.2 hours per work-day collaborating with others.

Given how much time people spend working and being with others at work, it’s no surprise that relational challenges generate stiff and persistent head winds in the workplace. In fact, 72% of respondents said they have been involved in at least one workplace collaboration that was absolutely horrendous.

Such collaborations create operational drag, bust timelines and budgets, trigger managerial headaches, and occupy already overloaded HR staff. What is surprising, especially considering these costs to organisations’ bottom lines, is how little professional development people reported receiving on how to build healthy and productive collaborative relationships at work. 

When asked how much professional development they had received on this front in total, 31% of the respondents said “none.” Yet professional development in how to build collaborative relationships correlates positively with a host of desirable mindsets that benefit both organisations and individuals. 

How to boost your team’s collaboration skills?

Here are six interrelated suggestions for helping individuals, teams, and organisations develop their collaborative capacity.

1️⃣ Frame the conversation

Emphasise that strong relationships make the world of work more positive for all, then highlight the role these relationships play in the organisation’s success.

2️⃣ Assess thoughts, feelings and behaviours

Rather than working from intuition or hearsay, conduct a survey to directly assess collaborative culture and relationship quality. Ask individuals about their attitudes toward collaboration with members of their team.

3️⃣ Encourage reflection to identify strengths, vulnerabilities and needs

Invite individual contributors to attend conversations to share the assessment’s findings, extract key insights about collaborative strengths and vulnerabilities, and identify specific interventions that could potentially strengthen collaborative relationships and culture within the organisation.

4️⃣ Offer development opportunities

Offering development opportunities could include 360-degree reviews for specific people, individual or team coaching, workshops, courses, or audits of how collaborative work is structured, measured and rewarded. 

5️⃣ Model collaboration skills consistently. 

In your own work, model a collaborative orientation by inviting input to early drafts of work or half-formed ideas, giving credit to those who played behind-the-scenes roles in a successful outcome, providing responsive and timely input on shared work.

6️⃣ Integrate the collaboration message broadly. 

Integrate discussions of collaborative know-how into one-to-ones with team members, in personnel reviews, and in public recognition of accomplishments and growth. A steady drumbeat of attention to the form and function of collaboration within the organisation will help establish it as a lived value.

Adapted from a study by Deb Mashek

Recently, researchers have dramatically shifted their focus away from studying managerial behaviours and toward the study of leadership styles. Lofty notions of leadership have captivated our collective imagination but as a result we’ve underappreciated and underinvested in the everyday management skills that organisations desperately need. For decades, business thinkers and executives have elevated the visionary, inspirational leader over the useful yet pedestrian good manager.  But evidence all around us suggests that we devalue management practices at our peril. What we’ve come to denigrate as mere management is in reality incredibly difficult and valuable.

After the pandemic, the so-called Great Resignation has been quite telling in this regard. The people quitting in droves haven’t done so because their company’s top executive is insufficiently visionary or inspirational. Rather, people have quit lousy jobs, jobs that lack autonomy, variety, or opportunities to grow, jobs that pay poorly and don’t reward performance fairly, jobs that aren’t clearly defined and structured, and jobs that lack guardrails to prevent chronic overload and frustration.

They’ve also quit their direct bosses, whose lack of everyday managerial competence, trustworthiness, inclusiveness and care is no longer tolerable, they’ve quit organisations that have breached the psychological contracts with employees by violating the unwritten rules of trust, fairness and justice.

While the number of workers who have left jobs has been extraordinary, particularly in certain sectors, the reasons aren’t new and shouldn’t surprise us. Organisational researchers have been studying turnover for decades. The COVID-19 pandemic might have created a tipping point for what people will or won’t put up with at work, but it has not created or significantly changed the underlying problems—they’ve been widespread for a long time.

So, why are these problems so ubiquitous and enduring? 

Because organisations and top teams downplay or ignore how hard it is simply to be a good manager to skillfully hire, engage, develop, coach, supervise, evaluate and promote people. Leadership workshops are widely available, but they tend to centre on high-level concerns and spend little to no time teaching these critical, fundamental skills. 

Most managers aren’t held accountable for building and exercising them, nor are they given sufficient psychological safety to focus on developing these basics, which people often assume anyone with a brain can readily master. Instead, they’ve internalised the strong message that qualities like strategic vision and executive presence matter much more, leaving them and their organisations poorly equipped to deal with reality.

Adapted from a study by JIM DETERT, KEVIN KNIFFIN AND HANNES LEROY

People tend to think that impostor syndrome is uniformly harmful. Certainly the belief that you’re not as competent as others think you are can make you anxious and lower your self-esteem. But there’s an upside too. Professor Tewfik’s research shows that experiencing this phenomenon can make you more adept at relationships, which is a key ingredient in career success. 

In one study, doctors in training who had more frequent impostor thoughts were significantly better at handling sensitive interactions with patients, which led those patients to give them higher interpersonal skill ratings. 

In another study, job candidates primed to have more impostor thoughts asked more questions during informal pre-interview chats and as a result were viewed by hiring managers as having better people skills. 

In addition, impostor thoughts didn’t seem to hurt performance: doctors who had more of them were just as likely as other doctors to give correct diagnoses, and job candidates who had more of them were just as likely to be invited for an interview after their chats with hiring managers.

Impostor syndrome is not a real syndrome or pathology. Interestingly, to date there’s no empirical quantitative evidence that impostor thoughts degrade performance. 

Yet this notion persists. Psychologists often point to something called the Yerkes-Dodson stress performance curve, which shows that up to a point, a few nerves actually improve performance. It may be that having the right amount of impostor thoughts can provide just enough motivation to bring out your best work.

How do you determine whether someone has impostor syndrome and to what extent? What researchers have been studying and calling impostor syndrome or impostor phenomenon over the past few decades was indistinguishable from fear. And if fear is what we’ve been studying, it’s no wonder we think that experiencing it is all bad news. These thoughts tend to peak when you’re facing a new challenge, starting a new job, or encountering new tasks after a promotion. 

Professor Tewfik also asked herself: “Do women and people of colour have impostor thoughts more frequently?” 

In all her studies, and this has been backed up by other researchers, she doesn’t find significant differences.  That is, white men seem to experience just as many impostor thoughts as women and ethnic minorities do. When people point to the impostor phenomenon in underrepresented groups, they appear to be conflating it with something more insidious: a lack of belonging. 

A true impostor thought is “My colleagues think I’m smarter than I am.” It’s not “I think other people question whether I belong here or think I’m not smart enough.” Essentially, impostor thoughts make you more attuned to other people’s perceptions and feelings, which makes you more likeable.

In fact, if managers hear an employee from a minority group expressing what sounds like impostor thoughts, they might want to check to see if there is an inclusion problem. Maybe the minority employee is operating in a hostile, biased, work environment.

To establish whether your impostor thoughts eventually fade away and with them, the benefits they provide, will require more research, but the author suspects that your impostor thoughts and the resulting benefits will never diminish entirely. 

Even extremely successful people like Albert Einstein, former Starbucks CEO Howard Schultz, and the writer Maya Angelou publicly admitted to having impostor thoughts from time to time so there will always be powerful environmental triggers that bring them on.

Adapted by “Impostor Syndrome Has Its Advantages: Professor Tewfik, DEFEND YOUR RESEARCH” from Harvard Business Review 202205

Would you decide which job candidates to interview based on their names or decide which ventures to fund based on entrepreneurs’ gender or physical attractiveness? 

Few managers would admit doing so, even to themselves. But research shows that decision makers are in fact susceptible to exactly this type of bias. Identical resumes sent in response to job postings are less likely to generate a callback for an interview if the name at the top suggests the candidate is black.

Female entrepreneurs face harsher questions from potential investors and are less likely to have their ideas funded than men. Generally, this body of research demonstrates that the fairness of social evaluations, such as whom to hire, invest in or promote, can be adversely affected by irrelevant and seemingly innocuous attributes, like name or appearance, because of the biases they evoke. 

How might these judgments be made more equitably?

The logic is straight-forward. An evaluator cannot be biased by irrelevant information about a target of evaluation (for instance, a job candidate’s name) if that information is hidden from view.

It is for this reason that Justice is typically depicted wearing a blindfold: The blindfold ensures the impartiality of her decision-making. Over the past several years, researchers have studied both the benefits of and the barriers to blinding in the context of organisational evaluations like hiring decisions and performance reviews. More specifically, they have explored the factors that might influence whether evaluators will choose on their own to use a strategy of blinding in their evaluations. 

In the absence of organisation-wide blinding policies that strictly limit the information people can incorporate into their decisions, policies that are rare and sometimes hard. One way to reduce the potential for bias and increase objectivity is to adopt a decision-making strategy called blinding — that is, limiting the information that can be considered in an evaluation. 

We have found that managers and other evaluators can make fairer and more accurate assessments by proactively blinding themselves to information about a person that could cause bias about a target of evaluation. 

Evidence that blinding works

By ensuring that only relevant information is available to the evaluator, blinding reduces the likelihood that an evaluator’s judgement can be contaminated or distorted by stereotypes and other forms of unconscious bias.

In a classic example, major symphony orchestras in the United States used blinding to counteract the prevailing negative stereotypes about women in the music world and increase gender diversity.

Blinding strategies can also be used in other organisational settings to increase the fairness and objectivity of evaluations that may otherwise be susceptible to bias and distortion. For instance, some experiments have assessed the impact of anonymous hiring, a policy that conceals candidates’ names from hiring managers.

This research demonstrates that if job applications are stripped of identifying information, members of underrepresented social groups (ethnic minorities and women) become more likely to advance to the interview stage and, in certain cases, ultimately receive job offers.

Adapted from an article by Sean Fath, assistant professor of organizational behavior at Cornell University’s ILR School, Richard P. Larrick Hanes Corporation Foundation Professor of Business Administration at the Fuqua School of Business at Duke University, Jack B. Soll professor of management and organisations Fuqua. Susan Zhu  

This study was motivated by what researchers saw as a disconnect between the rhetoric and the reality in management theory and practice concerning hierarchy.

The view that hierarchies are the enemy of new ideas seemed misguided in light of past research suggesting that hierarchies were unavoidable in groups and that they actually served important functions.

The researchers’ goal was to provide an overview so that managers and consultants could question popular negative assumptions about hierarchies. Hierarchies are often seen as obstacles to innovation. However, a growing body of research shows that the right kind of hierarchy can help teams become better innovators and learners.

Experts, academics and experienced innovators frequently espouse the virtues of eliminating hierarchies to make sure every idea is heard and to unlock innovation. As intuitively appealing as this view is, it does not stand up to scrutiny. In fact, a growing body of research shows that the right hierarchy can help teams become better innovators and learners.

Researchers have also seen what happens when teams insist upon being flat. They often become unfocused, tumultuous, and inefficient because their pursuit of perfect equality prevents the more expert team members from resolving conflicts and playing leadership roles in group learning and innovation.

Research on social species shows that hierarchies are important for group functioning. Human beings also have a tendency to think and act hierarchically. When a group has a chain of command, disagreements can be more easily resolved so that the group can take coordinated action. Coordinated action improves the odds of survival.

In fact, hierarchies can be found in virtually every human group, from children on the playground to executives in the boardroom. Depending on the circumstances, hierarchies can be formally designated or emerge naturally. And while the idea of hierarchies may go against democratic instincts and beliefs, they can and do play useful roles.

Hierarchies help teams of people innovate much the same way they help animals survive in the wild. They keep teams moving in the same direction even when strong disagreements threaten to keep the teams from progressing or even tear them apart.

Specifically, researchers found that hierarchies help teams generate, identify and select new ideas by performing three critical functions (and then getting out of the way): bounding solutions, converging ideas, and structuring processes.

Bounding Solutions

During idea generation, hierarchies set the parameters and goals of innovation. A paradox of creativity is that people are more innovative when they have clear constraints (such as time, budget, customer requirements, etc.) within which their solutions must fit.

But teams aren’t very good at establishing constraints on their own. Team members with influence can accelerate the learning process by clearly setting the boundaries for innovation and then giving the team wide latitude to explore within those boundaries.

Converging Ideas

In the early stages of innovation, teams come up with a large assortment of ideas and possibilities. Ultimately, however, some ideas are more promising than others, in part because they better align with the company’s capabilities and resources. Hierarchies can assist here by helping teams decide which ideas have promise and should be pursued, which ideas should be put on the back burner, and which ideas go on the waste pile.

To transition from generating to refining and implementing ideas, teams need to develop mechanisms for deciding which ideas to hone in on. This can be easier said than done because different team members may be emotionally attached to different ideas. By helping teams converge in a single direction, hierarchies keep teams from getting lost in aimless exploration.

Structuring Processes

Finally, effectively going through the learning process requires members to use their specialised knowledge to propose potentially wild ideas and challenge potentially sacred beliefs. These behaviours are interpersonally risky in that they open up members to ridicule and social sanctions.

As a result, teams must have norms and processes in place that lower those risks so that team members are able to engage in the learning process. Hierarchies can actually help here, too, by creating ground rules that enable and encourage members to speak up. Research has shown that brainstorming groups struggle without a hierarchy to provide structure to what can be a haphazard process.

How can we make hierarchies work?

People are suspicious of hierarchies for a reason – they sometimes stifle good ideas and the learning process that leads to good ideas. So, how can organisations foster learning and innovation? Here are three things leaders can do to leverage the power of hierarchy on teams yet avoid its pitfalls.

Have a clear chain of command

The study found that hierarchies work best when there is no confusion about who defers to whom. Teams with a clear chain of command (clarity and agreement about who defers to whom) were less likely to get bogged down in conflicts and stalemates than teams where influence was more cyclical.

Create a performance-based culture

A clear chain of command means that some team members will defer to others who are “higher up” in terms of status or respect. Group hierarchies in performance-based cultures are more likely to be based on expertise and less likely to be based on others characteristics.

Use team feedback

Another way to improve the way hierarchies function is to encourage those at the top to act in ways that support the group rather than acting in their own best interest: hierarchies promoted learning and performance when goals and feedback were group-oriented, but they stifled learning and performance when goals and feedback were individually oriented.

Group goals and feedback encourage higher-ups to use their advantaged position to encourage members to collaborate through information sharing, experimentation, and reflection. Individual goals and feedback keep people focused on their own tasks and outcomes.

Adapted from an article by Bret Sanner, assistant professor of management at Shenandoah University in Winchester, Virginia. J. Stuart Bunderson, George and Carol Bauer Professor of Organizational Ethics and Governance and codirector of the Bauer Leadership Center at Olin Business School at Washington University in St. Louis. – MIT Sloan 201804

Having the right mindset, culture and leadership behaviours is essential to practise emergent discovery. With these three things in place, you can make it acceptable to broach the unthinkable. 

Almost by definition, breakthroughs in their embryonic stages defy existing theories, principles, and bounds of experience. As such, they should be considered leaps of faith. So to foster emergent discovery in your organisation, you need to make it acceptable to consider the seemingly impossible. 

Early in the process, leaders and team members must be willing to suspend disbelief and to reserve judgement about whether a hypothesis is true or not. Common (and very reasonable) questions such as “Why do you believe that’s true?” and “How do you know that’s the right thing to do?” tend to shut down the process of inquiry. 

Instead, ask questions like “What experiment could you run to test that hypothesis?” and “If your hypothesis is correct, what are some possible areas where we might create value?” The way leaders react to early hypotheses heavily influences whether the most creative ideas are snuffed out or have a chance to evolve into something impactful. 

Leverage your critics’ insights to make your ideas even better. Breakthrough innovations typically challenge prevailing dogma, the set of collectively held beliefs about what is possible and what is acceptable. Challenging dogma also means challenging the people (the “leading authorities”) who have built their reputations around its veracity. History tells us that people who challenge conventional wisdom are often subject to accusations of recklessness, incompetence, or worse. Leaders must make it acceptable to defy dogma. Consider the common practice of engaging external experts to vet internally generated ideas or to perform due diligence on proposed investments. 

In principle, having such external input is a good idea. But too often, these experts become defenders of conventional wisdom. A better approach is to use them to improve the new ideas by identifying a critical assumption that should be tested, for example. If we engage sceptics and can tolerate their sometimes scalding critiques, we can learn a lot about what we need to do to move our ideas forward.

Make it about ideas, not personal ownership. Emergent discovery explicitly recognises that ideas are built over time with contributions from many people. One person’s ill-formed idea last month might be the essential building block for someone else’s step forward this month. The two are equally important to the process. Pursuing emergent discovery in your organisation requires a culture where ideas are not “owned” by individuals but are considered part of the intellectual commons of the enterprise. 

Disconnecting ideas from people also means that a failed idea is not a personal failure. Accordingly, emergent discovery works better if the teams involved in an effort have shared incentives and rewards.

Leading emergent discovery

The notion that breakthrough innovation is a random, chaotic process largely dependent on the visionary powers of gifted geniuses makes many organisations hesitant to embrace it as a core element of strategy. 

That is unfortunate given the massive value that breakthroughs produce for society and the companies that create them. But there is nothing mysterious or magic about the process. Breakthrough innovation can emerge through a rigorous and disciplined process of intellectual leaps, iterative search, experimentation, and selection. 

Emergent discovery is a repeatable process that can be learned.

Mastering it, however, requires more than understanding the mechanics of the process. It requires an organisation in which the people, particularly the leaders, adopt the right mindset and behaviours. 

They must be willing to consider seemingly unreasonable ideas and suspend judgement early in the discovery process. They must embrace learning through rigorous experimentation and failure and prioritise collective contributions over the personal ownership of ideas. Ultimately, whether an organisation adopts these habits depends critically on the behaviours of its leaders. Pursuing breakthrough innovation is as much a leadership challenge as it is a technical one. 

If the Covid-19 catastrophe has taught us anything, it is that the world can change dramatically in short order. Looking ahead, all companies must build the capacity to leap beyond existing comfort zones. Now, more than ever, we need leaders who can drive breakthrough innovation. 

Adapted from “What Evolution Can Teach Us About Innovation” by NOUBAR AFEYAN, co founder and chairman of Moderna Therapeutics, founder and CEO of Flagship Pioneering and GARY P. PISANO Jr. Professor of Business Administration and senior associate dean at Harvard Business School. – Harvard Business Review 202110 

Companies must be prepared to meet their moral and business obligations when operations bump up against labour abuses or worse. That’s why it’s critical for companies to have a human rights strategy and proactively consider when and how to take the action needed to fulfill their moral obligations; meet shareholder, customer, and employee expectations; and keep other stakeholders satisfied. Authors of new research looked at business ethics and sustainability, including discussions with managers and human rights groups, and how businesses have addressed these issues in the past. They created a framework to help companies develop a business and human rights strategy that is applicable to their situations. The framework offers tools to help companies gauge their vulnerabilities, and identify approaches and tactics that will assist them in meeting their social and commercial responsibilities.

Three categories of human rights violations

In their research, the authors observed three broad areas where human rights issues ariseand that companies must consider when developing a strategy.

Abuse in the way a company’s products or services are made and delivered. 

This includes abuse by suppliers or contractors or within a company’s own operations. Managing human rights risks in the supply chain is becoming increasingly complicated as geopolitical environments change, supply chains become more complex, and human rights defenders leverage digital media to highlight abuses occurring right under our noses in areas that were previously unseen. Sometimes a job such as picking tomatoes, making clothes, or working on a construction site, may appear to be normal.

What might not be seen is the way people are being controlled through intimidation, inescapable debt, the removal of passports, or threats of deportation. A 2019 investigation in the U.K. revealed a slave ring involving more than 400 trafficked Polish workers who were being held in appalling conditions. The labourers were receiving a pittance to work on farms and in factories that supplied major supermarket and building supply chains, including Tesco, Waitrose, Sainsbury’s, Homebase, Travis Perkins, Argos, and Wickes. Unsurprisingly, the companies were unaware of the conditions their suppliers’ workers were subjected to. 

In fact, most companies today are vocal in announcing policies to weed out forced labour in their value chains. However, the prevalence of modern slavery in global supply chains has become so entrenched that sadly most multinational companies benefit from it somewhere, often very far down the chain, where they have little visibility or leverage.

Abuse in the way a company’s products or services are used. 

While companies may not knowingly create products that violate human rights, they could find themselves complicit when customers employ their products or services to do so.

Even if not legally complicit, then they are at least guilty in the court of public opinion. Caterpillar, a long-standing supplier of heavy machinery to the Israeli army, found its reputation at risk when evidence emerged of its equipment being used to demolish Palestinian houses and orchards.

Abuse by regimes where the company operates. 

It is difficult to identify a country where human rights abuses of one kind or another do not take place, whether in the form of forced labour, suppression of free speech, racial / cultural / gender discrimination or unlawful incarceration. The issue is nuanced, and countries differ in their views on what constitutes basic human rights. Companies can benefit from working closely with governments, but when a regime violates human rights, they can get embroiled in scandal. 

Three key decisions for your human rights strategy

The insights gleaned while assessing a company’s exposure to human rights issues can also be used during the development and execution of a response. To help business leaders work through this, we’ve created a decision tree that highlights the key choices that could be made and their potential consequences.

DECISION 1: Exit, Speak up or Stay silent? 

The first decision a company must make is whether to get involved. Based on the conclusions reached using the exposure matrix, business leaders must decide whether the issue requires further attention and possibly action. 

Is it serious enough to warrant divesting operations and/or possibly leaving the country? If not, what other options are available? Deciding on the best option is not always straightforward, nor is flight always the most appropriate action: pulling out of a country can not only seriously impact a business’s bottom line but also harm the communities in which it operates, such as by eliminating local jobs or ending prosocial initiatives the company has taken. 

If a business makes the choice to continue operating and to work to address systemic human rights abuses within its environment, it needs to develop a nuanced strategy and be very deliberate about how and with whom it interacts.

DECISION 2: A Collective or Individual Approach? 

If a company chooses to stay and take action, it must decide whether the issue is best addressed by the company individually or should be undertaken collectively with other organisations or stakeholders. An individual approach can be most effective when companies are influential and when time is of the essence. 

DECISION 3: Which Actions and Tactics Should Be Chosen? 

Having decided on a collective or individual approach, companies are faced with the question of whether to take direct action to stop human rights violations or whether more can be done by indirectly influencing the institutional settings in which they operate.

Adapted from an article by N. Craig Smith, Markus Scholz, Jane Williams 

Formulating and executing sound organisational strategy is difficult work. Strategy is often made by elite teams and thus can be limited by their biases about competitors, customer needs, and market forces and it can be an uphill battle convincing stakeholders across the company to channel money, time, and energy in a new and unproven direction.

Hence making strategy behind closed doors is a prescription for failure when disruptions are coming from all directions. The authors’ solution to both the strategy formulation and execution challenges is radical: open up your strategy process now!Open strategy offers leadership teams access to diverse sources of external knowledge that they wouldn’t otherwise have, while also making individual leaders aware of their

biases and helping them build the buy-in needed to speed up execution.

This approach is particularly valuable when companies face disruptive threats and contemplate transformational change. It’s much easier to master disruptions when you’re forging strategy in concert with others who view the world through a different lens than you do. Progress and innovation depend less on lone thinkers with exceptional IQs than they do on diverse groups of people working together and capitalising on their individuality, as social scientist Scott E. Page has shown.

In short, diversity of perspective matters a lot.

Involving people from  outside your company in strategy-making not only provides a wellspring of fresh ideas but also mobilises and galvanises everyone involved. All this can happen without a loss of control over the strategy-making process.

Why does a Closed Approach to Strategy-Making have its limits?

According to a 2018 Bain survey, strategic planning is the most popular tool available to managers. Yet, too often, the results of that planning are under-whelming. 

Studies find that somewhere between 50% and 90% of the strategies devised by leaders don’t work. A 2018 survey of 201 American and European executives found that 52% of their strategic initiatives over the previous three years had underperformed.

These disappointing outcomes are particularly surprising considering the resources companies pour into strategy-making. Each year, they spend more than $30 billion on consultants, tapping their knowledge of industries, competencies, and business models, and CEOs spend over 20% of their working hours, on average, focusing on strategy.

At the core of this problem is the very process by which strategy is crafted. Companies have little hope of charting a reliable path forward if they limit strategic deliberations to a small group of senior executives. They can’t get the best ideas that way, nor can they effectively connect strategy to execution. Yet, strategic planning as practised today is a tightly closed, secretive, and bounded process. Executives presume that keeping strategy to themselves keeps the company safe from employees or external contributors who would inject unschooled or unruly thinking, and from competitors who would steal their ideas. But they are wrong: The hoarding of strategy isn’t helping their companies. It’s killing them, in several distinct ways.

Isomorphous strategies

Have you ever noticed that a great deal of strategic thinking in an industry sounds the same? You’re not imagining it. It’s due to a phenomenon that organisational theorists call isomorphism.

In essence, it means that in the process of adapting to our surroundings, we behave in increasingly similar ways. The same is true for companies, particularly as benchmarking and best practices have become central elements of strategy-making. 

Unimaginative strategies

It’s tough to get ideas to cross-fertilise in corporate settings. Departments and individuals compete with one another for resources or prestige, and even when leaders mandate cooperation and silo-busting, the ideas still don’t flow freely. 

Biased strategies

One of the underlying culprits was what cognitive psychologists sometimes call the status quo trap, the tendency to favour what already exists and information that confirms that choice. Other common biases that can torpedo strategies include the sunk cost trap (the tendency to irrationally support past choices that are failing), loss aversion (the tendency to give greater weight to potential losses than potential gains) and the overconfidence trap (the tendency to believe in the accuracy of overly optimistic forecasts). 

All of these biases represent dangerous blind spots for strategists who work alone or in small groups, where the pressure to conform can lead people to ignore negative information and disparage those who bring it up.

Adapted from an article BY CHRISTIAN STADLER, JULIA HAUTZ, KURT MATZLER, AND STEPHAN FRIEDRICH VON DEN EICHEN – MIT Sloan Management Review Spring 2022

Can strategy be reframed so that companies can thrive in the face of our current and future challenges?

In 50 years of researching companies both in the U.S. and in Japan, the authors’ view of the organisation has evolved from an information processing machine to a living organism continually creating new knowledge.

Advances in neuroscience research in recent years have shed light on the biological factors driving humans’ sense of purpose. We now know that the most basic need we are compelled to meet is social connection.

Neuroscientists have also found that the human brain exhibits a predisposition to seek the common good. As human beings we share the ability to rapidly adapt to changing circumstances, and we can imagine together how we might create a better world.

Considering these findings, the question is: “How should companies use both souls and brains so that strategy becomes relevant to the world we live in?”

Here are six recommended practices that may help you infuse strategy with soul. An ancient Japanese tradition says that doing the ordinary things in life a little bit better every day elevates individuals. In the same way, doing the ordinary things a little bit better every day in our jobs such as working hard, making ethical choices, being kind, practising self-reflection and self-discipline, being humble and being thankful, elevates our work lives. 

This builds culture at the organisational level and character at the personal level. These behaviours have to be practised every day so that they become a way of life. Similarly, as we have learned over decades of studying organisations, companies can adopt six daily practices to turn this strategy into a way of life:

1. Cope with complexity.
2. Adapt to change.
3. Embrace dynamic duality.
4. Empathise with everyone.
5. Tell stories.
6. Live with nature.

This set of practices helps organisations connect to the goal of building better lives and futures for company stakeholders, members of society and employees, and helps define and pursue business goals that support the common good.

COPE WITH COMPLEXITY

The growing complexity of our world and its many interrelated systems is widely acknowledged. To solve our most pressing problems, we must tap into diverse perspectives and sources of expertise across multiple domains because no single approach or field of study will provide the answers. 

Likewise, we must bring all of our own diverse capabilities to bear: The ability to sit with a complex problem and use both analytical and intuitive thinking to address it is increasingly crucial to organisations.

ADAPT TO CHANGE

The rapid rate of change of the modern world, driven largely by accelerated technological progress, demands that leaders and organisations anticipate and adapt to new circumstances at a pace unprecedented in human history.

EMBRACE DYNAMIC DUALITY

In the West, an intellectual tradition of dualistic thinking (drawing sharp distinctions between mind and body, self and other, humanity and nature) has led business executives to neatly divide knowledge into two categories: explicit knowledge, which can easily be articulated and shared, and tacit knowledge, which is more intuitive and gained from lived experience. 

They often value the former more highly than the latter. In contrast, the intellectual tradition in Japan has stressed oneness of body and mind, of self and other, of humanity and nature. Tacit and explicit knowledge form a dynamic duality interacting with, and interchanging into, each other to create something new through life experiences.

EMPATHISE WITH EVERYONE

Human survival has always depended on our ability to organise in mutually supportive groups for food and protection, which is why social connection is our top priority. At the root of connecting with others is empathising with them. Facing today’s crises, political and business leaders should unite, using this unique quality that we humans have. 

To empathise on a deep level, we need to develop a keen understanding of others’ perspectives and cultivate compassion in our hearts.

TELL STORIES

Effective business leaders understand the power of using stories to communicate the essence of their beliefs and ideals and to help the organisation internalise strategy.

LIVE WITH NATURE

Complex natural systems such as the Earth’s climate predate humans by more than 3 billion years, and we have been living with them since our species first appeared.

The Japanese tradition of “oneness of humanity and nature”, also practised by many indigenous cultures around the world, has taken on new relevance as humankind seeks to repair the damage to our natural environment caused by industrialisation.

SURVIVING THE FUTURE

These six practices must become a way of life for companies to survive in this day and age of “unknown unknowns.” They must also become the modus operandi in the life of a strategist who seeks to meet the unprecedented challenges facing businesses and humankind. Observing leaders who consistently do these things has taught us the following lessons about strategy. First, strategy must be driven by human beings. 

Strategy is as fundamental as thinking good thoughts, doing the right thing, and practising self-reflection and self-discipline in everyday life. Those six practices represent the authors’ philosophy of doing business: work with soul. Customers, employees, suppliers, communities, and shareholders want to know whether you have a soul, if you want to build mutual trust and connection. 

Second, strategy is driven by wisdom and it is about future-making. The future is hazy and unpredictable, which is why leaders need to tell stories about where they are headed, it allows others in the organisation to follow. 

Narratives illustrate a set of beliefs about what the company stands for and what kind of legacy it wants to leave behind for future generations. These stories bind the organisation together and help strategy become a way of life for all employees.