Our Guide to the Summer 2023 Issue
These summaries will help you navigate our summer 2023 lineup.
Predictive Models Can Lose the Plot. Here’s How to Keep Them on Track.
Vern L. Glaser, Omid Omidvar, and Mehdi Safavi
Key Insight: When algorithms aren’t updated to account for changes in the environment, they deliver poor-quality predictions.
Top Takeaways: AI models designed to dynamically account for new circumstances don’t always do so effectively. This scenario, called algorithmic inertia, can result in poor guidance and flawed decisions. The authors explored the causes and consequences of algorithmic inertia by investigating credit-ratings agency Moody’s and its use of algorithmic models to rate mortgage-backed securities in the years leading up to the 2008 financial crisis. They found that the most significant contributing factors to algorithmic inertia are buried assumptions, superficial remodeling, simulation of the unknown future, and specialized compartmentalization. Exposing data and assumptions, and periodically redesigning algorithmic routines, are two key practices for heading off such inertia.
Risk Intelligence and the Resilient Company
Ananya Sheth and Joseph V. Sinfield
Key Insight: Taking a more logical approach to risk management can help leaders sustain value generation amid disruption and uncertainty.
Top Takeaways: Building the resilience of large, complex enterprises is critical in today’s interconnected world. Risk intelligence — the honed ability to rigorously interpret risks and the consequences or opportunities they pose for a company — supports organizational resilience by helping leaders identify and manage a broad array of potential threats to their company’s value exchange system, both over time and across changing business contexts. To strengthen their organization’s risk intelligence, leaders should systematically categorize and interpret risk events, compartmentalize uncertainty and reduce its impact, and construct and contextualize an enterprise risk network.
How Professional Services Firms Dodged Disruption
Julian Birkinshaw and David Lancefield
Key Insight: Professional services firms with longevity hold lessons for other businesses trying to survive disruptions in turbulent markets.
Top Takeaways: Big professional services firms appeared to be in the crosshairs of new, technology-fueled competitors a decade ago, but many have maintained or even bolstered their positions. These consulting giants, top-tier law firms, and others have found resilience in their capacity to diagnose the different causes of potential disruption and respond accordingly. They have doubled down on their traditional strengths of tackling clients’ most challenging problems and providing advice and compliance in high-impact, large-scale, high-risk situations — and charging a premium to do so. And they have learned to live with a pragmatic acknowledgment that their fundamentals are sound, tempered with a touch of paranoid suspicion of emerging technologies and competitors.
The Missing Discipline Behind Failure to Scale
Andy Binns and Christine Griffin
Key Insight: Developing a scaling path for new ventures is both an art and a science, but it’s one that leaders can use to learn and iterate as they go.
Top Takeaways: Companies make significant investments in developing new business initiatives, but too few follow a rigorous path to broadly implementing them. While 80% of companies claim to ideate and incubate new ventures, only 16% of companies successfully scale them. Scaling paths require a clarity of ambition equal to the scale of opportunity; a set of plausible strategic options for what assets will be needed to achieve that ambition; smart brainstorming about how to acquire those assets; an openness to bringing in new leaders to support the expanding scope of activities; and preparation for the inevitable high-stakes moments when decisions entail commitments that will be difficult, if not impossible, to reverse.
Helping Neurodivergent Employees Succeed
Emily R. Russo, Dana L. Ott, and Miriam Moeller
Key Insight: Companies can expand their talent pools by developing a neuroinclusive hiring strategy and work environment.
Top Takeaways: When it comes to hiring, management, and retention in the workplace, individuals with neurological differences, especially those on the autism spectrum, are often discounted by employers, to everyone’s detriment. Bringing neurodiversity into the larger conversation about workplace diversity, equity, and inclusion is important not only because it’s the fair thing to do but because neurodivergent individuals can make valuable contributions. Creating a neuroinclusive organization calls for specific training and development efforts that benefit neurodivergent employees and the wider workforce. Managers are key to the success of these programs and need to be educated about how to support their neurodivergent employees.
How Digitally Mature Is Your Finance Office?
Kristof Stouthuysen
Key Insight: Many finance offices are stuck in traditional operational roles and aren’t benefiting from advanced analytics.
Top Takeaways: Finance leaders in a wide range of industries are trying to integrate data and analytics to improve operations, but not all CFOs have cracked the code. In particular, many are not capitalizing on the promise of new machine learning applications. CFOs who are able to challenge an often conservative, cautious culture and manage to successfully deploy advanced analytics can deliver more real-time insights, reduce human error and bias, and speed up processes and decision-making. What’s more, while more traditional finance leaders often guard the data they possess, those who embrace advanced analytics — what the author calls digital finance leaders — become strong advocates for democratizing data across a company’s silos.
Cashing Out Excellence
Robert D. Austin, Robert H. Hayes, and Richard L. Nolan
Key Insight: Too many leaders engage in performance hacking — delivering on particular metrics to give the appearance of effective leadership without producing real performance.
Top Takeaways: Recent disruptive events like the pandemic and war in Europe have exposed businesses weakened by short-sighted leadership decisions. An analysis of Southwest Airlines, Boeing, and GE looks at why successful companies sacrifice the business excellence they spent years building — including values and relationships that have served as their foundation — for near-term financial gains such as cost reductions and stock price improvements that ultimately harm stakeholders. The authors share the typical warning signs that indicate leaders are engaging in the practice.
Opening Access to the Fast Track for Career Equity
Haig R. Nalbantian
Key Insight: Understanding what factors drive employee promotion can help managers more equitably position women and people of color for advancement.
Top Takeaways: New research shows that factors unrelated to employees’ knowledge, capabilities, or behavior have an outsize effect on career advancement. Circumstances such as reporting to a high performer, holding a career-accelerator role such as being a supervisor, and not taking advantage of flexible work options all play a leading role in promotions and pay increases. Disparities in performance ratings also have a cascading effect that adversely affects people of color: In the author’s study, people of color in the majority of companies were up to 50% less likely to receive high performance ratings. Because ratings tend to persist, with a high rating one year predicting the likelihood of a high rating the next, getting shut out from the start can significantly impede career progression.
The Unequal Rewards of Peer Support at Work
Nancy Baym and Constance Noonan Hadley
Key Insight: Job satisfaction comes in part from how well people feel their organization recognizes and values the social support they provide to colleagues.
Top Takeaways: Employees’ supportive behaviors with one another boost engagement and productivity, but research shows that men gain more benefits from such efforts than women do. Social support includes emotional assistance, esteem reinforcement, social companionship, information or advice, and instrumental help. In the authors’ study, more women than men focused their efforts on listening, showing personal interest, and complimenting a coworker, while men reported offering career advice more frequently. Although men said they provided less-frequent social support than women overall, they received higher levels of organizational encouragement, rewards, and job satisfaction. Managers can encourage a more equitable peer culture by making the invisible visible and valuable — providing clarity about which behaviors count while also revising performance management systems.
Moving Beyond Islands of Experimentation to AI Everywhere
Amit Joshi, Ivy Buche, and Miguel Paredes Sadler
Key Insight: It may make sense to start AI efforts with isolated experiments, but new, companywide structures are needed to scale them and reap broader benefits.
Top Takeaways: Artificial intelligence often takes root in isolated experiments within an organization, and many companies stall out on their AI journeys because of difficulty moving beyond these pilots. Scaling technology requires different types of formal structures: The authors found that AI projects generally begin as islands of experimentation before coming together around a corporate center of excellence. A small number then move to a sophisticated federation of expertise model built on a centralized base of knowledge, systems, processes, and tools, and on decentralized embedded capabilities. Enterprises with AI ambitions need to be prepared to make two structural leaps away from the startup stage if they are intent on delivering on the technology’s potential.
Manage Your Workforce Ecosystem, Not Just Your Employees
Elizabeth J. Altman, David Kiron, Jeff Schwartz, and Robin Jones
Key Insight: New organizational structures are needed to coordinate workforce ecosystems that include a wide array of external workers and partners.
Top Takeaways: A majority of executives agree that the idea of “the workforce” is being redefined. They say it’s broader than an organization’s full-time employees, instead encompassing ecosystems of contractors, gig workers, service providers, and even technologies. These networks require innovative management practices, given that hierarchical, command-and-control leadership is ill suited for workforces that span internal and external boundaries. In developing new practices, leaders must address three types of issues: structural design (pertaining to the division of labor, goals, and incentives), politics (relating to resources, power, and status), and culture (affecting individuals’ search for identity and meaning). Intentionally orchestrating a perspective that considers all players leads to a more nuanced view of how organizations and their partners cooperate to meet their strategic goals.