Professional Documents
Culture Documents
ORG
Plus: How to win at
influencer marketing
PAGE 41
May–June
2024
Ask
Smarter
Questions
The key to better
strategic decision-
making
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41 May–June 2024
Spotlight
Winning at
Influencer Marketing
42
50
What Makes
a Successful
Celebrity Brand?
Stars are using their
influencer status to launch
their own products.
Ayelet Israeli et al.
56
61
How Marketers
Choose College
Athlete Influencers
The characteristics that
matter most Kimberly A.
Whitler and Graham Twente
Trunk Archive
COVER ILLUSTRATION
Michael Brandon Myers
65
Features
66 INTERPERSONAL
SKILLS
76 TALENT
MANAGEMENT
Highly Skilled
Professionals
Want Your Work—
But Not Your Job
Freelancers are in huge
demand today, and they
know it. It’s time for new
rules of engagement.
Diane Gherson and
Lynda Gratton
86 ORGANIZATIONAL
TRANSFORMATION
Transformations
That Work 132
Lessons from companies
that are defying the odds
Michael Mankins and 104 ENVIRONMENTAL 114 DIVERSITY & 124 AI & MACHINE 132 DECISION-MAKING
Patrick Litre SUSTAINABILITY INCLUSION LEARNING & PROBLEM-SOLVING
96 HUMAN RESOURCE
MANAGEMENT
To Create a Greener How Inclusive For Success with Make Decisions
Future, the West Brands Fuel Growth AI, Bring Everyone with a VC Mindset
HR’s New Role Can’t Ignore China They unlock new sources
On Board The key is to embrace risk,
In this tight labor market, of value by meeting the disagreement, and agility.
cost cutting is out. Four ways for companies needs of underrecognized When you include rank- Ilya A. Strebulaev and
Championing employee to safely engage customers. and-file employees, Alex Dang
concerns is in. Shameen Prashantham Omar Rodríguez-Vilá, you’ll improve your overall
Peter Cappelli and and Lola Woetzel Dionne Nickerson, and performance.
Ranya Nehmeh Sundar Bharadwaj David De Cremer
HBR TOOLS
UNDERSTANDING
EBITDA
AVAILABLE EXCLUSIVELY AT
store.hbr.org
May–June
2024
Our Commitment to Sustainability
We’re proud that the paper we use in our print magazine is certified
under the Sustainable Forestry Initiative® program, meaning that it
comes from responsibly managed sources and is a renewable resource.
19
Idea Watch
New Research and
Emerging Insights
19 CORPORATE
STRATEGY
142
A Better Approach Experience
to Mergers and Advice and
Inspiration
Acquisitions
Far more mergers succeed 142 MANAGING
today than in the past. YOURSELF
Here’s how to post a win.
plus Getting more traction Advice for the
from your marketing
referral program, the pitfalls
Unmotivated
of soliciting employee How to reignite your
feedback, and more enthusiasm for work
Robin Abrahams and
32 DEFEND YOUR Boris Groysberg
RESEARCH
148 CASE STUDY
When AI Teammates How Aggressively
Come On Board,
Performance Drops Should a Bank
Pursue AI?
Even if machine
intelligence outperforms A Malaysia-based CEO
people on tasks, it can drag weighs the risks and
down group productivity. potential benefits of
turning a traditional bank
34 HOW I DID IT into an AI-first institution.
Thomas H. Davenport and
The CEO and George Westerman
store.hbr.org
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Contributors
When racial justice pro- Len Schlesinger, a “I have studied the in- In September 2020 Yan Wang Preston is a
tests swept across the professor at Harvard fluencer industry since China’s president Xi visual artist who, after
United States in 2020, Business School, has before it was an indus- Jinping announced returning to China from
Dionne Nickerson, spent much of his pro- try,” says University of that China was com- the United Kingdom
an assistant professor fessional life alternating Pennsylvania research mitted to achieving in 2010, noticed that
at Goizueta Business between academia and affiliate Emily Hund, carbon neutrality old trees—missing
School, noticed how industry. As vice chair- who authored a 2023 by 2060. Watching leaves and most of their
many brands issued man at L Brands (the for- book on the subject. from his Shanghai branches—had been
statements in support mer parent of Victoria’s Influencer marketing is home, CEIBS pro- newly planted in urban
of racial equity but did Secret and other labels), at a turning point, she fessor Shameen areas. “Perhaps due to
little to market to di- he became interested in says, due to growing Prashantham sensed my own situation as a
verse customers. In this the direct-to-consumer concerns about trans- immediately that rootless migrant living
article Nickerson and business model. While parency, authenticity, enormous resources outside of my home-
her coauthors highlight cocreating an MBA exploitation, and the would soon flow into land, I felt a shared
marketing practices course on the subject, never-ending quest for the green tech space. pain toward the old
that incorporate the he began researching traffic. “This industry Almost four years later, trees,” she says. So she
needs of historically un- the power of celeb- must engage in some many Western compa- began photographing
derrecognized commu- rity influencers. And serious self-reflection,” nies are unaware of the them. Over several
nities. “A certain level of when he brought Kim she says. “What do we strides Chinese compa- years, the series, Forest,
inclusion is within the Kardashian to campus want the future to look nies are making. In this expanded to include
reach of most brands,” as a guest speaker, the like? How can we en- article Prashantham urban surroundings
she says. “I hope that news went viral. In sure that this industry and his coauthor make and human neighbors.
this article helps brands this article Schlesinger is a positive presence the case that China “It tells the adaptation
consider the needs of and his coauthors in the world?” In this and the West have a stories of the trees and
these communities explain how celebrities article she describes golden opportunity to the urban dwellers in
throughout the market- have moved beyond how to achieve the collaborate on climate the context of China’s
ing function and not endorser or influencer desired outcome. solutions that benefit mass reforestation
merely as a reaction to roles to launch brands everyone. effort.”
societal events.” of their own.
42 Why the Influencer
Industry Needs Guardrails 104 To Create a 104 To Create a
114 How Inclusive 50 What Makes a Greener Future, the West Greener Future, the West
Brands Fuel Growth Successful Celebrity Brand? Can’t Ignore China Can’t Ignore China
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IdeaWatch
T
YE ARS AG O,
WEN T Y
consultants at Bain & Com-
pany published a book that explored a
dispiriting reality: Although companies
spent billions of dollars a year pursuing
deals, 70% of mergers and acquisitions
wound up as failures. The book, Master-
ing the Merger, was released in the wake
I N T H E O RY of a series of corporate marriages that
ended badly, including AOL and Time
A Better Approach to
Warner, Daimler and Chrysler, and Cit-
icorp and Travelers. This wasn’t a new
conduct due diligence. Over time, that more frequently, they learn what inte- I N P R ACT I C E
specialization can pay off. gration tasks they need to prioritize,
“If you’re only doing deals episod-
ically…there simply isn’t a platform
what areas are likely to be troublesome,
and how to make key decisions more “We’re Not
Looking
to have a dedicated team,” says Dale efficiently. “We cringe a little when
Stafford, a leader in Bain’s mergers we reread our integration advice from
and acquisitions practice. In the past, 20 years ago,” the researchers write,
companies would often pull a disparate
group of relatively inexperienced people
because the field has advanced so
much since then. at Fixer-
away from their regular jobs to do due
diligence or work on postmerger integra-
tion. The advantages of having full-time
The overall increase in M&A has
been rewarded by investors. Twenty
years ago, even though the majority
Uppers”
specialists are obvious. “It’s a bit of a of acquisitions were unsuccessful, the Chris Koch has been CEO of
volume game: Doing more deals means researchers found, companies that Carlisle Companies, an Arizona-
that you can have dedicated M&A people made frequent deals showed higher based building-products company,
who acquire more and more experience shareholder returns—a sign that inves- since 2016. Carlisle has acquired
24 companies in deals totaling
over time,” Stafford says. tors preferred companies that were will-
$3.5 billion since he took the helm—
Consider the larger Silicon Valley ing to take these risks. Since then, this a continuation of its long-standing
companies. “Some of the tech compa- phenomenon has increased. Companies growth-by-M&A strategy. Koch
nies were doing almost a deal a week at that are frequent acquirers (doing at spoke to HBR about rising M&A
the peak,” says Suzanne Kumar, a vice least one acquisition a year) earn double success rates. Edited excerpts of
president in Bain’s M&A practice. “They the returns earned by companies that the conversation follow.
have fully built-out teams, with differ- rarely or never do deals.
ent people for due diligence and inte- Moving from a 70% M&A failure rate Looking back, do you recall
learning that M&A is fraught
gration.” And the trend extends beyond to a 70% success rate over 20 years is
with failure?
Silicon Valley. Bain points to Thermo significant, but as the deals continue,
It’s something we were indoc-
Fisher Scientific and beverage distribu- an important question has arisen: Has trinated in as MBA students in
tor Constellation Brands as examples of the success rate reached a plateau, or the 1990s. I remember someone
firms that have built substantial teams is there potential for the gains to keep teaching us: “The first rule of
focused on M&A—and given the people increasing? acquisitions is that most fail.
leading them a seat at the senior leader- “The vast majority of companies are There are no good acquisitions.”
I’ve learned that depends partly
ship table. not frequent acquirers, so they are just
on how you define failure. Some
Acquiring companies are better at starting on this journey and haven’t
acquisitions may look successful
integration. Integrating two companies really created that repeatable model because they increased earnings,
is a giant undertaking. Fortunately, the yet,” Kumar says. For that reason, the but they failed to meet the inter-
techniques, tools, and technology used researchers are hopeful that the success nal projections used to justify the
to manage large projects have advanced rate can increase even further. deal. In those cases, you would
significantly in the past 20 years. (For HBR Reprint F2403A probably have been better off
allocating that capital elsewhere.
example, the agile methodology was
invented only four years prior to the
ABOUT THE RESEARCH “How Compa- Has the way you do M&A
publication of Mastering the Merger.) nies Got So Good at M&A,” (Bain white changed?
Additionally, as organizations gain paper, by David Harding, Dale Stafford, and Years ago, we had a very small
experience by making acquisitions Suzanne Kumar) corporate staff, so our M&A
ENTREPRENEURSHIP
Temp: Americans Are
Start-Ups
Starting MoreAreNew
Surging
Businesses More in the
U.S. Than in Other
Total monthly business applications in the
Countries
U.S. for likely employers now stands at
154,000, well above a low of roughly 100,000
during
Despitethe years following
recession concerns,thetotal
global
monthly
financial crisis.
applications forLorem ipsum
new U.S. dolor sitsur
businesses amet,
consectetuer
passed 154,000 adipiscing elit,2023.
in October sed diam
Some
356,000 more new businesses opened in
the U.S. in 2022 than in 2019, a 34% increase.
T H E G E N D E R PAY G A P however, and they ended up earning JAN. 2005 U.S. total OCT. 2023
22% less, on average. 117,674 monthly business 154,153
Women Now applications for
Examining prior studies, the
Negotiate More researchers found that for many years
likely employers
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A U T O M AT I O N product’s name, brand, retail price, and participants what they thought others
weight. Independent research assis- would be willing to pay.
A Guide for AI-
tants rated the images on complexity of “Simplifying packaging design may
Human Collaboration design. Mapping the ratings against each be an efficient way…to convey product
Some activities benefit from heavy AI use, product’s price per ounce showed that information independent of text,” the
and others require a human touch. The the simpler the package was, the higher researchers write. Managers should note
lower-left quadrant consists of rote tasks that
the product’s unit price—suggesting some mitigating circumstances, they
could be easily automated or done by low-
skilled workers. Activities in the upper-right that people are willing to pay more when add. Additional experiments showed
quadrant require a combination of AI and items are presented simply. that the boost from a simple design was
complex human capabilities.
In the first of several subsequent less pronounced when the product’s
experiments, the researchers created ingredients were highlighted on the
HIGH
simple and complex packages for trail package; consumers then had no need
Strategizing
Research & mix and showed one or the other to to make inferences about purity. It was
& decision-
data analysis making each of 362 university students. The also less pronounced for store brands,
students indicated the highest amount because people assumed that the simple
Leverage
AI they would pay for the snack, reported design reflected low investment in the
whether they thought it contained few product overall. And when participants
Individual
Repetitive & or many ingredients and how pure they wanted indulgent rather than healthful
& team
simple tasks development believed it to be, and rated the package items, complex packaging elicited a
on attractiveness and simplicity. Those higher willingness to pay—so managers
LOW
who saw the simple design were willing “may want to avoid simple designs…if
LOW HIGH
Leverage human qualities to pay more, even though they were less they want to signal that their products
likely than people who saw the complex are tasty,” the researchers say.
Source: “The Best Leaders Can’t Be Replaced by AI,”
by Rasmus Hougaard, Jacqueline Carter, and design to award high marks on attrac-
Rob Stembridge (HBR.org, 2024) tiveness. The simple design got higher
ABOUT THE RESEARCH “Symbolically
scores on purity, and participants
Simple: How Simple Packaging Design
believed the product contained fewer
P R O D U C T PA C K A G I N G Influences Willingness to Pay for Consum-
ingredients. Repeating the experiment able Products,” by Lan Anh N. Ton, Rosanna
When Less Is More with a different item—hand lotion— K. Smith, and Julio Sevilla (Journal of
yielded similar results, as did asking Marketing, 2023)
Packaging designers often combine a
variety of elements—text, illustration,
color—in complex designs meant to
attract consumers’ attention. In many
cases, according to a new series of
studies, they’d get better results from
a simpler approach.
In the first study, the researchers
worked with data from the U.S. super-
market chain Kroger. They gathered all
product images across four consumable
categories—shampoo, deodorant,
crackers, and cereal—along with each
R E M OT E WO R K
The More
Lucrative the
Job, the Greater
the Flexibility
Since the Covid-19 pandemic, remote- least one day per week of remote flexi- listed remote work as an option 27% and
work opportunities have steadily bility, the researchers found. Roughly 29% of the time, respectively.
increased—but not for everyone. 10% of jobs that offered $60,000, 20% of Location matters too, the researchers
To determine which roles most often those that offered $100,000, and 30% found. English speakers actively pursu-
allowed employees to work from home, of those that offered $200,000 allowed ing remote work would be best served
researchers used machine learning at least some remote work. Researchers by moving to the UK, where 18% of open
to study more than 250 million job also found links between education, jobs offer it. They’d be wise to avoid New
postings across five English-speaking experience, and remote work. Fewer Zealand, where only 8% of job postings
countries. The findings were clear: than 2% of jobs that required a high offered remote options.
The higher the pay associated with the school diploma offered remote-work
job, the greater the freedom to work opportunities. That figure rose to 6% for
ABOUT THE RESEARCH “Remote Work
remotely. jobs requiring an associate’s degree and Across Jobs, Companies, and Space,”
Fewer than 3% of job postings with 15% for a bachelor’s degree. Job postings by Stephen Hansen et al. (National Bureau
a salary of less than $30,000 offered at requiring master’s degrees and PhDs of Economic Research working paper, 2023)
CAREER DEVELOPMENT
Temp: Which Companies Are Top Talent Incubators?
Which Companies Are Top Talent Incubators?
Temp: In 2018, 31 companies listed on the S&P 1500 were led by former GE employees. GE is what was known as an “academy company” — an
elite firm that
Following produces
in the more
footsteps talent
of GE, one than
of theitbest-known
holds on to,exporters
exportingof effective
effectiveleaders toMcKinsey,
leaders, other organizations and
Google, and even industries.
Microsoft are now To better the
considered
understand
three which
top global companies
producers are top
of talent. talent
That’s incubators
according to atoday,
surveythe
of Official Board, ainfirm
853 executives that to
midsize provides data on corporate
large companies organizational
in January and Februarycharts
2023. and
executive
Five of themovement, surveyed
top-25 talent 853 are
incubators executives on the
technology topic.
firms, the These
most ofwere
any the most frequently mentioned companies.
industry.
Most frequently
n
y
nso
ble
rsit
mentioned
any
hs
Am & Gam
Joh
companies
Sac
mp
i v
Un
n&
ure
Co
y
an
oft
*Denotes
an
nse
ns
nk
o
er
rd
te
n
org
r
nso
ent
siC
a tie
e
ros
azo
n&
ldm
stlé
cte
sch
G
ilev
me
loit
iba
rva
ple
ogl
zer
Ki
ell
PM
C
G
JPM
IBM
Pep
Acc
Mic
Joh
Pro
Bai
Sie
Mc
Pw
BC
Cit
Ne
Un
GE
Ha
Go
Go
Ap
De
Pfi
Bo
Sh
EY
* K
Industry
13*
13*
18*
18*
*
*
*
*
*
*
20
20
20
20
25
25
25
9
10
11
12
15
16
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24
1
2
3
4
5
6
7
8
ACCOUNTING/CONSULTING
CONSULTING
CONSUMER PACKAGED GOODS
EDUCATION
ENERGY
FINANCIAL
INDUSTRIAL
PHARMACEUTICAL
TECHNOLOGY
Source: “What Makes a Company Great at Producing Leaders?” by Sarah Abbott, Robin Abrahams, and Boris Groysberg (HBR.org, 2023)
HBR Prize Business Review. Previously called the HBR McKinsey Award, it was
established in 1959 to recognize groundbreaking management thinking.
The Judges
TIME
M A N AG E M E N T
P H OTO G R A P H E R PELLE CASS
Beware a Culture of Busyness Jill Avery
MARCH–APRIL 2023 Senior lecturer,
Beware a Harvard
Culture Once upon a time, leisure was a sign of prestige. Today busyness Business School
of is the new status symbol. In this article Adam Waytz explores both
Busyness the downsides of busyness (employee turnover, reduced engage-
Organizations must
stop conflating activity ment, absenteeism, and impaired health) and the reasons for our Claudio
with achievement. obsession with it. He also presents strategies for breaking away Fernández-
Aráoz
Adam Waytz
Professor, Kellogg School
Former partner,
58 Harvard Business Review
March–April 2023
Harvard Business Review
March–April 2023 59
Egon Zehnder
Hubert Joly
ABOUT THE ART
The High
selves that the labor shortages they were
experiencing were a passing phenom-
Best Buy
enon, and in response they trotted out
Cost of
the standard short-term fixes: raising
wages by a few dollars an hour, award-
ing signing and referral bonuses, and
even offering more flexibility in working
Neglecting
shifts. But none of those measures were
Many companies blame outside factors for their trouble finding and
particularly effective. So in 2022, with
the labor situation worsening, some
companies resorted to tactics that ran
Low-Wage
counter to their core strategies. CVS and
Walgreens began closing stores earlier
or shutting down on Sundays. Domino’s,
Workers
on deliveries and instead offered cus-
tomers a $3 “tip” if they picked up their
own orders. Others took extraordinary
measures to fill frontline jobs. When it
Mihnea
didn’t have enough baggage handlers,
Qantas begged senior executives to
Moldoveanu
The pandemic was a once-in-a-lifetime
shock to the system that had provoked
operations to a prepandemic normal. the scarcity. The government had exac-
have long been making, in such basic areas as hiring, career devel-
AU T H O RS
As a result they have failed to deliver erbated the problem by issuing stimulus
products and services, lost revenue, checks. High rates of churn were a fact
Joseph Manjari and disappointed their customers. of life in the world of low-wage work.
Fuller Raman Supply chains remain snarled, with But that thinking was misguided.
Professor,
Professor, Program director, warehouse and delivery operations After studying this topic for several
Harvard Business Harvard Business
School School woefully understaffed. Grocery stores years (see the sidebar “About the
and pharmacies are unable to keep Research”), as part of Harvard Busi-
Rotman School
summer of 2021 to bring frontline and waiters. Hotel chains can’t book the real problem lies in the way that
workers back into the fold, companies to their full capacity, because they organizations mismanage their hourly
are struggling to rehire and return don’t have enough housekeeping staff. workers: They are underinvesting in
40 41
how leaders can do better, for their workers and their organizations. of Management
Harvard Business Review Harvard Business Review
May–June 2023 Photographs by BRIAN FINKE May–June 2023
Karthik
Ramanna
A Step-by-Step Guide to Real-Time Professor,
Pricing | NOVEMBER–DECEMBER 2023 University
of Oxford
In today’s fast-paced world of digital retail, the ability to revise prices
swiftly has emerged as a decisive differentiator for companies. In this
article Marshall Fisher, Santiago Gallino, and Jun Li describe a pro- Stefan
cess for dynamic pricing that focuses on building computer models Thomke
Professor,
that consider not just competitor pricing but also product availability Harvard
and customer behavior to recommend optimal pricing in real time. Business School
When AI Teammates
started by having each participant play
four one-minute rounds on their own.
From the results we developed a skills
Come On Board,
index and determined each person’s
baseline level of play. Next we placed
pairs of two-person teams in a room
with a large-screen TV, a Nintendo
Performance Drops
Switch console, and four joysticks;
each pair of teams constituted a “firm.”
Players had to work with their partners
to retrieve fruits and vegetables from a
table at the bottom of the screen. They
M Y O B SE S SI O N WITH
health care in Bangla-
desh started with my
mother’s appendicitis.
It was 2011, and I had
come from my home in
New York City to Dhaka, Bangladesh’s
capital city, to attend a cousin’s wed-
ding. When my mom complained of a
debilitating pain in her side, my family
rushed her to the hospital. However, the
care she received—and the care we wit-
nessed other patients getting (or not)—
was awful. We had to chase doctors to
get them to examine her, and even then
none gave us straight answers. Scans
and tests took ages, nursing was down-
right lackadaisical, and most terrify-
ing, her surgery was delayed and then
botched. Eventually, after her condi-
tion worsened, we took her to Bangkok,
where doctors ordered a second surgery.
A year later she needed a third, in Vir-
ginia, owing to complications from the
original procedure.
Even as I pursued my career in law
and foreign policy back in the United
The CEO and Founder of States, the experience stuck with me.
After visiting a top Bangladeshi hospi-
Praava Health on Reimagining tal, in one of the world’s fastest-growing
economies, we had to leave the country
Care in an Emerging Market to get quality care. Why?
I soon realized that this was not just
a problem but an opportunity: to build
by Sylvana Quader Sinha a new and better system of health care
leading the World Economic Forum to cancer-free but suffering from joint three times the market valuations of
call it “the next Asian tiger.” Bangla- pain, doctors in Dhaka scanned her similar businesses in the United States.
desh was growing at a faster pace over a bones, determined that they were full I became increasingly convinced that
longer period of time than even China. of tumors, and prescribed intensive I could develop a better alternative for
It boasted a GDP per capita higher than radiation. But when she sought a sec- Bangladesh—one that would create
India’s and a GDP of more than $300 bil- ond opinion abroad, the true diagnosis more accountability in the system and
lion, putting it on track to be one of the proved to be osteoporosis, requiring a challenge all the country’s providers to
world’s 30 largest national economies course of treatment very different from do better.
by 2030. radiation, which would only have made
This was a market that needed qual- matters worse.
ity health care. In August 2014 I decided As I talked with more people in Ban- IMAGINING A NEW MODEL
to see whether I could build something gladesh, I found that such stories were By the spring of 2015 I had a 100-page
to tackle that challenge. all too common. People consistently business plan and a financial model for a
told me that they didn’t trust the health vertically integrated health-care system
care system. I discovered two primary that would be centered on high-quality
INVESTIGATING THE PROBLEM reasons. First, the quality of care in both primary care and family medicine—
I had a lot to learn about the country, the public and private systems varied the bedrock for patient trust—while
its health care system, the business greatly, partly because the government including secondary and specialist
and systems of the industry around the lacked the capacity to regulate it. In fact, care; outpatient procedures; in-house,
world, and entrepreneurship. At first across low- and middle-income coun- world-class lab and imaging diagnos-
my research was self-funded. I went on tries like Bangladesh, the leading cause tics; and a pharmacy that procured only
a global listening tour, meeting Ban- of mortality is not lack of access to care directly from manufacturers. It would
gladeshi patients and practitioners and but inadequate care. Second, demand be supported by Bangladesh’s first fully
leveraging networks across Asia, the exceeded supply. As in other emerging integrated hospital information system,
United States, Europe, Latin America, markets, health spending in Bangladesh its first patient app, and tools such as
and beyond to study health care busi- was growing at an annual compound telemedicine and an e-pharmacy to
ness models. I met anyone who was rate of 10%, outpacing the economy. improve accountability, quality control,
willing to teach me something. With the public system understaffed efficiency, and access. The idea was to
Over the years, I had heard other and overstretched, private facilities be the first call and most trusted re
health-care horror stories from my were left to fill the gap, but they were source for any medical issue and to help
Bangladeshi relatives. Once my aunt costly, focused on episodic care, and patients manage their health in a way
and her daughter had gone together driven by incentives that pushed doc- that would prevent hospitalizations.
to a private Dhaka hospital for routine tors to hospitalize patients and order We raised $1.4 million in our first
mammograms, and the clinicians told unnecessary tests and drugs. round of funding, at the end of 2015,
my cousin they’d found a concerning The opportunity to have an impact and have secured more than $15 million
spot requiring investigation. But when was compelling. Access to trustworthy since, all from angel investors. I began
she went for a follow-up in Bangkok, health care is a human right and some- to build a global advisory council to
her scans were clear, and she realized thing Bangladesh’s citizens deserved. bring lessons learned in health care and
that the Bangladeshi mammographers The financial opportunity was also emerging-market entrepreneurship to
had mixed up her and her mother’s evident: Across Asia entrepreneurs in Bangladesh. This group now includes
results. My aunt had breast cancer that other growing economies with simi- Omar Ishrak, MD (Intel, Medtronic);
demanded a full mastectomy. Some lar supply-demand imbalances had Esther Dyson (23andMe, Wellville);
time later, when the same aunt was scaled up thriving systems with two to David Petraeus (retired U.S. Army
Sabrina Imam, a software engineer with American-born Bangladeshi I know in AND CULTURE
more than a dozen years of experience Dhaka who moved there for any reason In the spring of 2017 I convened Praava’s
at IBM and recent stints in health tech, other than marriage. But my vision fledgling team of 20 to define our orga
signed on as our IT director. Sawsan was so clear that I wasn’t worried. I sur- nizational purpose, values, and cul-
Eskander, one of a handful of trained rounded myself with a strong local team ture. A spirited brainstorming session
on the third day, each group performed Science is not perfect, and neither are training to onboard hires and refresh
skits illustrating both a poor health care the doctors and the staff at Praava, but existing teams.
experience and how it could have been when we make a mistake, we hold our- This might seem like a lot of energy
improved—a nice way to encourage selves accountable and try to prevent for a start-up to invest in culture. But
creative collaboration and relationship similar incidents in the future. I believe it helps us ensure that all who
Winning
at Influencer
Marketing
Why the
Influencer
Industry
Needs
Guardrails
And how to professionalize a
maturing practice
fashion, beauty, and travel led the way,
Emily Hund but nonprofits, government services,
AU T H O R Research affiliate, and political campaigns are increas-
Annenberg School
O
ingly joining in, hoping to harness the
seemingly more authentic medium of
VE R THE PA ST 20 influencer marketing.
years the social media For the most part, influencer mar-
influencer industry has keting has worked: At the end of 2023
grown from nothing the global industry was worth some
into a pervasive global $21 billion, according to Influencer
force that has completely rearranged Marketing Hub. Surveys conducted by
the way information and culture are the Keller Advisory Group and Adobe
conceived, produced, marketed, and reported that 27 million Americans and
shared. Commercial sectors such as 300 million people globally consider
Winning at
Influencer
Marketing
themselves content creators. And In this article I discuss how the influ- down. And an entire generation coming
according to HubSpot, roughly 88% of encer industry became an unregulated of age at the time watched, learned, and
marketers that had already tried influ- market and how we can begin to provide reoriented their relationship to work.
encer marketing planned to increase or guardrails to prevent influencer and Advertising and marketing profes
maintain their spend. It is difficult to brand misuse. sionals, who also felt the pressure of
imagine an organization or a consumer economic turmoil, began to monetize
today who is exempt from contending the relationships between early influenc-
with the realities of a world shaped by HOW DID WE GET HERE? ers and their followers—audiences that
influencers. Surveys from Nielsen, Reu- The influencer industry was born of a were far more targeted than those of
ters, and others illustrate this striking particular historical moment, amid larger media companies. And, crucially,
reality: People trust influencers; social a perfect storm of factors in the 2000s. influencers weren’t governed by jour-
media users get news from influenc- Software such as WordPress and Blogger nalistic standards. Paying for coverage
ers more often than from journalists; made self-publishing accessible to any- with cash or free products was suddenly
people believe that brands are better one in the world with a computer. Face- something brands could do. Sponsored
positioned than governments to solve book, YouTube, Tumblr, Twitter (now content was born.
social problems; and becoming an influ- X), and others normalized the phenom- Marketers launched countless
encer is a top career aspiration for many enon of “regular” people creating con- ventures in this new medium, aimed
young people. tent for the internet. First-generation at making the process of identify-
But the industry has several major social media companies introduced ing, selecting, and pricing influencers
problems. It is an established global force themselves as more authentic and demo- more efficient. Throughout the 2010s
that sometimes behaves like a ram- cratic than the establishment—a shrewd I followed along as this cottage indus-
shackle start-up, with little professional move in an era of waning public trust try rapidly expanded. RewardStyle,
cohesion and inconsistent consequences in mass media and government—and dedicated in the early days to mak-
for unfair play. My research over the past promised connection and empower- ing blogs and Instagram shoppable,
decade has revealed a number of internal ment. That strategy continues to guide became a leader in affiliate marketing
contradictions. The influencer indus- them today. and now generates more than $4 billion
try is a space for both entrepreneur- The 2008 financial crisis and the in annual sales for its brand partners.
ship and exploitation, connection and ensuing Great Recession propelled the Digital Brand Architects pioneered the
harassment, truth and falsehood, self- industry’s growth. Within one year influencer-management model and has
expression and harm, encountering new tens of millions of workers lost their arranged industry-changing deals for
ideas and finding comfort in familiar jobs. Unemployed and underemployed creators such as the blogger and fashion
biases. Today the industry stands at an people flocked to blogging and social designer Aimee Song and the organi-
existential turning point. Those working media to try to showcase their expertise, zation experts behind the Home Edit.
within it—brands, marketers, influenc- to network, and to let people know they Meanwhile, Fohr, Dash Hudson, IZEA
ers, and social media companies—have were still there. That’s what made the Worldwide, and other agencies have
a responsibility to shape a future that seeming authenticity of early creators created a range of tools and processes
prioritizes, incentivizes, and protects so potent. They were, for the most part, to increase the volume and precision of
buyers, sellers, and influencers. We must people “just like us”—struggling amid influencer campaigns.
all ensure that unethical behavior is economic and professional precarity,
punished; expectations, pay, and desired toying with new technology, trying to
outcomes are standardized; and creators connect with others—at a time when SOLVING THE INDUSTRY’S PROBLEMS
are given the same rights and protec- people were seeking alternatives to the While the industry has developed into
tions as other professional marketers. faceless institutions that had let them a sophisticated, albeit chaotic, space,
associations American Beverage and the has been around long enough to give In 2023, amid allegations that the Chi-
Canadian Sugar Institute along with a rise to a wealth of professionals with nese ultrafast fashion company Shein
dozen high-profile nutrition influencers. a decade or more of experience. And a used forced labor in dangerous working
environments, the company paid U.S.- call social media content creation their stream for influencers. In 2021 France
based influencers to tour its facilities. full-time job—about the same number enacted legislation aimed at protecting
The resulting content was excoriated as are in the manufacturing sector. Yet child influencers the way child actors
in the press as corporate propaganda. professional cohesion is scant around and models are protected. It regulates
One influencer, who had no journalistic what the work looks like or is worth. the number of hours that children under
background or training but called her- An excellent example of the dis- age 16 may work in a week, requires that
self “an investigative journalist,” praised connect between brands, influencers, their earnings be protected in a bank
the working conditions and posted and consumers was brought to light account until age 16, and enshrines their
multiple videos glamorizing the brand. in late 2023, when Italian regulators “right to be forgotten”—meaning that
Sharp audiences knew her behavior was announced a fraud investigation into platforms must honor their requests for
out of line with the norms and expec- the influencer Chiara Ferragni. Ferragni, content to be taken down.
tations of professional journalism. But who has almost 30 million followers on The UK was one of the first countries
brand-influencer relationships like this Instagram, had endorsed a Christmas to apply advertising laws to influencers.
demonstrate the lack of clarity about cake in 2022 made by the Italian food Since 2008 it has been illegal in that
what exactly an influencer’s job is. company Balocco. According to Ferrag- country for brands and influencers to
Writer, community leader, court ni’s and Balocco’s posts, proceeds from post paid content without a disclaimer.
jester, content machine, storyteller, tech- the cakes, which cost three times as And in 2022 the UK’s Competition and
nical editor: these are just a few of the much as a normal Balocco cake, would Markets Authority published guidelines
terms that influencers and brand execu- go to a children’s hospital. But after the relating to ads and paid promotions by
tives have used to describe the influenc- campaign, for which Ferragni earned influencers. According to one guideline,
er’s role to me. Depending on their back- more than €1 million, no such donation social media platforms must give users
ground and topic niche, influencers may was made, according to Italy’s antitrust tools to label commercial content.
perform many overlapping jobs. But that authority. In December 2023 the author- But government agencies and watch-
doesn’t mean the role eludes definition. ity fined her €1 million and Balocco dog groups can do only so much. The
History shows that earlier media €420,000 for misleading consumers. influencer industry is a global force, and
industries such as newspapers, broad- Governments have begun to build an the stakes for influencers vary accord-
casting, and advertising also faced equitable industry through regulation. ing to local, national, and regional laws
existential questions during their devel- The United Kingdom and France, for and cultures. Ultimately, social media
opment—and the way leaders answered example, have introduced transparency content creation will become a “regular”
those questions had a long-range impact laws designed to protect influencers, job—another role in our ever-expanding
on the future of democracy, culture brands, and consumers alike. In 2023 global media landscape. Bringing sta-
production, and self-expression. People France passed what it hailed as the most bility to both expectations and payment
working in the influencer industry must comprehensive influencer regulation in infrastructures is necessary for long-
now confront a central question: What the world, requiring influencers to have term sustainability. Contracts should
is our purpose? Is it entertainment, a written contract for every payment or always include clear compensation terms
advertising, reporting, activism, per- gift of a certain value. They must clearly and schedules, along with the assump-
sonal connection, or something else? state in the post if it is sponsored. Some tion of compliance with applicable laws
The consequences of this uncer- things, such as tobacco and betting, and regulations. More broadly, the indus-
tainty are manifest in the lack of shared are banned from any promotion at all. try needs formal gatherings and internal
expectations around how to select, France also has rules requiring transpar- communications to share best practices,
price, cast, and use influencers—or who ency around drop shipping (whereby a set standards for dealmaking and disclo-
even counts as an influencer. Roughly business accepts orders without keeping sure, and hear about participants’ pain
13 million people in the United States inventory on hand), a popular income points. (More on this in a moment.)
DON’T: Chase clicks have gotten much press. “This campaign lies in the community and solidarity
DO: Selectively commission work that is a door to help tell a story,” Lindo says. among those working within it.
aligns with your values “[PepsiCo] gave me this platform to say, We can learn from other cultural
hey, go do some research on your own, industries. Influencers, marketers, and
The influencer industry doesn’t work if leverage your following, crowdsource, agencies should draft and implement
platforms and brands do not incentivize and figure out if there are restaurants a professional code of ethics like the one
quality content. Creators bear the brunt that need highlighting.” maintained by the Society of Profes-
of the industry’s pervasive uncertainty: Tiffaine Stephens, the PepsiCo senior sional Journalists. They should form a
They must spend a significant amount marketing manager for Dig In, explains, robust trade organization like, for exam-
of time navigating changing content “You have to be out there and have your ple, the Council of Fashion Designers of
norms, new platforms and tools, uneven feet on the street to understand what’s America, to educate the public, award
contracts, high expectations for audi- happening. Only work with people who quality and innovative work, and provide
ence engagement, and the blowback have built credibility and knowledge support for early-career workers. We saw
that can come with being a public figure and have insight about problems and in the summer of 2023 how the unions
with few professional protections. Many how they can use their voices.” SAG-AFTRA and the Writers Guild nego-
leaders on both the brand and influ- If the Dig In campaign goes viral, tiated and codified industrywide stan-
encer sides want transactional relation- great. But the goal of the initiative is to dards for pay and working conditions
ships to go by the wayside, and for good tell honest, compelling stories that align in Hollywood. The differences between
reason. Longer-term professional rela- PepsiCo with positive community out- influencers and Hollywood workers blur
tionships that focus on a genuine align- reach. Providing influencers with cam- more as time passes, from the basic
ment of values and goals rather than paign briefs and goals is still a necessary setup of their work—on a project basis,
virality and content quantity tend to be part of the process, but brands should sometimes as individual contributors
more gratifying for everyone involved. look for influencers they can trust to tell and sometimes as part of a team, typ-
At the same time, platforms and some a story in their own honest way, backed ically in collaboration with large cor-
brands pressure more people to think of up by expertise and community connec- porations that control the methods of
themselves as creators, with diminish- tions. A large following or a viral TikTok distribution—to the role they occupy in
ing returns. In such a crowded market, does not an influencer make. Get to the hearts and minds of their fans. Influ-
millions of self-identified creators make know the person behind the account as encers might take a cue from the success
less than $2,000 a year, according to the you would any other work colleague. of Hollywood unions, either by starting
Keller Advisory survey. The same survey Influencers can become a core part of their own or by joining SAG-AFTRA.
found that one-third of all creators, and your social strategy, used across the Whether through unionization or
nearly half of full-timers, report burnout organization. some other form of professionalization,
from the demands of creating content. pay equity, platform transparency and
Most would like the nature of their brand I F P R EC ARI T Y ANDa lack of boundar- accountability, and protection of influ-
collaborations to change. ies cause much of the industry’s woes, encers’ rights should remain front and
Brian Lindo, a food and lifestyle con- professionalizing the industry is the center. HBR Reprint S24031
tent creator with 379,000 Instagram answer. People working in it are opti-
followers at this writing, points to his mistic about what lies ahead. Let’s
EMILY HUND is the author of The
work with PepsiCo and its Dig In cam- translate that optimism into a clear, pro-
Influencer Industry: The Quest for
paign as an example of mutually benefi- social vision of the future, with defined
Authenticity on Social Media and a research
cial influencer-brand collaboration. Dig roles and expectations for everyone affiliate in the Center on Digital Culture and
In shines a spotlight on Black-owned involved internally, and a better public Society at the University of Pennsylvania’s
restaurants that historically may not understanding of the industry. Its fate Annenberg School for Communication.
a Successful
Ayelet Israeli
Associate professor,
Harvard Business School
I
Ryan
N R E C E N T Y EA R S as a result may be more committed
Reynolds and George Clooney THE EVOLUTION OF CELEBRITIES to the brand because it signals their
earned more money from AS MARKETERS fandom and their perceived parasocial
selling their liquor brands, Endorsement deals often require a relationship with the celebrity.
Aviation American Gin and celebrity to make promotional appear- Celebrities shifting from simple
Casamigos tequila, than from their ances and use or wear the products endorsement deals to influencer deals
movie deals. Serena Williams and Maria in public as well as to appear in ads. must be able to attract millions of fol-
Sharapova, retired from sports, now For celebrities, endorsements provide lowers, create engaging content, mix
generate significant earnings through ancillary income; for brands, they offer day-to-day (unpaid) posts with promo-
the sale of their apparel and skin care an opportunity to raise awareness and tional messaging, and recommend the
lines, S by Serena and Supergoop. attract buyers. The common wisdom, brand in ways that feel unscripted and
Rihanna and Dr. Dre make millions sell- backed by volumes of academic research, authentic. Because this work entails
ing their own brands of cosmetics and is that brands succeed when they attach higher-order skills and sustained daily
lingerie and headphones, respectively. themselves to an appealing endorser effort, brands richly compensate celeb-
Celebrity endorsements of existing who is credibly expert in a given area rity influencers.
brands have been a part of marketing and appears trustworthy. Why have celebrities now begun to
strategy for decades. But in a world With the rise of social media, celeb- imagine, launch, manage, and promote
where celebrities have built enormous rities have become influencers as well their own brands? First, the ubiquity
social media followings and have as endorsers, posting promotional of social media influencers has led
become effective influencers, many material on their own channels. To be consumers to seek authenticity in
stars are making a pivot: Instead of attractive to brands, influencers must advertising—and they perceive more of
endorsing or serving as an influencer have a sizable and loyal audience. Tradi- it in a celebrity-owned brand. Second,
for other companies’ products, they are tionally, the influencers with the largest social media (particularly with the use
launching their own brands to profit audiences were celebrities in highly of video) has opened a direct line of
from their renown. visible fields, such as acting, musical communication between celebrities
For every juggernaut celebrity performance, and sports. More recently and their fans. Third, e-commerce and
brand, however, many more have social media has allowed ordinary peo- direct-to-consumer (DTC) brands allow
crashed and burned—even those of ple to become influencers by posting much faster development and distribu-
some major stars. To be successful, the engaging content that goes viral. For tion of new products and thus higher
founders of these brands must identify example, MrBeast (who began amass- margins. Fourth, while existing brands
potential strategic advantages, turn ing followers at age 13 by posting video may use endorsements or influencers as
them into competitive advantages, and game content) has more than 241 mil- one part of a larger marketing strategy,
develop expertise in areas vastly differ- lion subscribers on YouTube, and Khaby celebrity brand owners can rely heavily
ent from the ones in which they earned Lame (a Senegal-born Italian whose on their own social media, dramatically
their fame. videos mock life hacks) has more than lowering marketing costs for a cost
In this article we introduce a frame- 161 million followers on TikTok. advantage over existing brands.
work for building a successful celebrity Influencer marketing has advantages
brand, derived from field research we for brands: As more people try to avoid
did while writing case studies about intrusive advertising, those browsing WHAT MAKES A CELEBRITY
Kim Kardashian’s Skims shapewear and social media are increasingly willing BRAND SUCCESSFUL?
David Chang’s Momofuku Goods line of to accept marketing messages from Kim Kardashian is a ubiquitous reality-
packaged foods. We also highlight the influencers they admire and rely on for TV star and celebrity. As of the end of
common pitfalls. advice. Consumers who make purchases 2023 she had 363 million followers on
Winning at
Influencer
Marketing
Instagram, 75 million on X (formerly pandemic, Chang’s restaurant group, managed by a fan has more than 4 mil-
Twitter), 35 million on Facebook, and Momofuku, launched its first line of lion followers.) Celebrity founders who
9 million on TikTok. She has done consumer packaged goods, Momofuku eschew personal social media may
traditional endorsements of brands Goods, selling sauces exclusively DTC choose to minimize DTC as a chan-
such as Balenciaga and OPI nail polish, through the company website. Since nel and instead rely more heavily on
and she served as a paid influencer on then Momofuku Goods has introduced third parties to sell their products. The
her social media platforms, promot- a variety of products, including noodles, Outset can be found at major retail-
ing Dolce & Gabbana, among others. seasoned salts, chilis, and sauces, which ers, including Sephora, whereas Skims
As she began thinking about creat- are now also available at retailers such as achieved its success relying solely on
ing her own brand, she recognized a Target and Whole Foods. DTC distribution.
market need: Traditional women’s Our in-depth analysis of Skims and Craft a good fit between celebrity
shapewear (the category pioneered by Momofuku Goods, along with observa- and product category. Advertisers
Spanx) didn’t work well for her body tion of a range of other celebrity brands, have always tried to select endorsers
type. In 2019 Kardashian launched has enabled us to identify four key and influencers who feel right for the
Skims to fill that need. She serves as principles for making celebrity brands brand. Those people must seem natural
the brand’s creative director and aes- successful. and credible when recommending the
thetic muse; a cofounder, Jens Grede, Have a strong social media following. product. If the collaboration seems
serves as CEO. They positioned Skims This is an obvious precondition for inauthentic, consumers won’t be per-
as a solutions-oriented brand with an success. As we will discuss, it’s not just suaded to buy.
eye toward body type and skin tone the number of followers but the depth The same is proving true for celeb-
inclusivity. Since its founding it has of engagement that sets successful rity brands. Celebrities typically are
expanded into other apparel catego- brands apart. Some celebrities prefer known for something: a field of exper-
ries, including underwear, loungewear, to maintain privacy. For example, the tise, a clear point of view, a distinct
sleepwear, and activewear. In 2023 actors Jennifer Lawrence, Chris Pine, aesthetic, or a particular lifestyle. Har-
Skims was valued at $4 billion, with and Emma Stone have no public social nessing that and transferring it to the
the majority of its products sold DTC media accounts. And some have phil- brand in a manner that seems consis-
through the company website. osophical objections to social media. tent with the celebrity is key to success.
David Chang is a well-known chef Scarlett Johansson, who has no public Momofuku leverages Chang’s culinary
with restaurants in New York City, social media accounts, is a prime exam- point of view to create products that
Toronto, Las Vegas, and Los Angeles. He ple. She has stated that social media is consumers readily and naturally asso-
is also a television personality, a podcast not good for her mental health (“I have ciate with Chang, such as noodles and
host, and a best-selling author. Although enough anxiety”). When Johansson “chili crunch.” Skims’ designs reflect
Chang’s social media following is far founded the skin care brand the Outset, Kardashian’s minimalist aesthetic and
smaller than Kardashian’s (1.7 million on in 2022, in part because of her own love of earth tones as well as celebrating
Instagram, 345,000 on X, and 271,000 struggles with acne, she realized the her famous figure.
on TikTok), his followers tend to be seri- importance of creating a digital place Hulk Hogan provides a contrasting
ous foodies who are highly engaged with for followers to engage with her and case study. Hogan, who wrestled profes
his content. Like Kardashian, Chang with the brand. She began posting con sionally on and off from 1977 to 2003,
has done traditional endorsements (for tent (exclusively about the brand) on has experimented (and failed) with sev-
Audi) and served as a paid influencer the Outset’s social media accounts. The eral celebrity brands. Some of his early
(for Impossible plant-based meat substi- Outset’s Instagram account has 300,000 forays were in the food business—
tutes). In the fall of 2020, after months of followers. (Meanwhile, an Instagram where, consumers perceived, he had
restaurant closures due to the Covid-19 account dedicated to Johansson and no specific expertise or point of view.
founders should be aware that some media. And she used her followers as Kardashian deeply understands pop
members of the public are skepti- a focus group, seeking their feedback culture moments and has found ways to
cal about stars’ commitment to their before launching the Skims bra line, embed them in Skims campaigns: She
brands—a cynicism that stems in part which enabled her to learn about cus- routinely features well-known celebri-
from a long history of endorsements tomers and allowed customers to feel ties in ads, and she has signed partner-
by celebrities who lacked loyalty to the they were a part of the brand. ships with the U.S. Olympic team and
products. For example, Oprah Winfrey the National Basketball Association.
advertised a Microsoft Surface tablet but She posts these offline moments on her
was seen publicly using an Apple iPad; CREATING MOMENTUM social media, creating additional expo-
David Beckham advertised Motorola The ability to craft engaging storytell- sure and virality beyond her immediate
phones and publicly used an Apple ing through their various channels followers.
iPhone; and Brad Pitt was featured in significantly reduces customer acqui- These principles also apply to the
advertising for Chanel No. 5 and later sition costs for celebrities. That is new version of celebrities—those
admitted that he never wore it. Along especially critical in an era when DTC born on social media, who earn their
with ensuring the quality of a product brands are struggling with the high status by being online influencers and
and investing in its development, celeb- price and declining return on invest- building credibility and engagement
rities must commit to actually using it. ment of digital advertising on plat- with their audiences. They develop
Be actively engaged with, and forms such as Facebook, Instagram, branded products to monetize their
listen to, followers. For influencer mar- and TikTok. influence without relying on sponsor-
keting to be effective, fans and follow- Chang creates new dishes in his ships or endorsements. One example
ers need to be engaged with and feel restaurants, touts his expertise on tele- is Emma Chamberlain, who started a
that they have a personal relationship vision, writes cookbooks, and translates YouTube channel in high school that
with the influencer. As noted, a deeply that content into consumer products. amassed more than 12 million followers.
engaged following is as important as The restaurants, the television shows, Known for her penchant for coffee, she
a large number of followers. Celebrity and the press allow him to offer a clear launched a DTC brand in 2020, Cham-
brand owners drive this engagement by point of view to followers all over the berlain Coffee, which continues to grow
peppering their social feeds with per- country (even in places remote from and is now also available at Target and
suasive messages that deliver resonant his restaurants), which made creating a other retail locations.
and relevant information, emotional food brand that can deliver to followers As a counterexample, consider
value, and entertainment. everywhere very sensible. His contin- Beyoncé’s athleisure brand, Ivy Park,
Chang, whose social media includes ual engagement in these forums helps which is lagging because it doesn’t
cooking demonstrations and tutorials, increase the momentum. observe some of these principles for
uses Momofuku products in videos and Kardashian, too, combines online success. The overall brand aesthetic
also occasionally promotes new prod- and offline behavior to power her is sporty, which may seem out of step
ucts not of his own design, to help main- success. She and her family have been with the singer’s more glamorous,
tain credibility with his followers and reality-TV fixtures for 16 years, and high-fashion image. Reviews suggest
earn their trust. For Kardashian, whose she routinely features Skims products that the product is not sufficiently
social media accounts have always on their show. Although most of its differentiated from competitor brands.
included photos of herself with friends sales are through the website, Skims And although Beyoncé’s Instagram
and family, sharing photos of her circle opened pop-up shops in key locations account has more than 318 million
wearing Skims products seems natu- in 2023, allowing for more-personal followers, she posts about Ivy Park less
ral. She often wears Skims when she engagement with the brand (and with frequently than more-successful celeb-
appears in other forums across social Kardashian) and increasing awareness. rity founders do about their brands.
Observers speculate that in contrast to Similarly, the model Miranda Kerr’s Consumer research finds that brands
Kardashian, Beyoncé is a private per- cosmetic company, Kora Organics, was that respond quickly by detaching
son whose appeal comes in part from criticized for the quality of its prod- from an influencer after a personal
remaining mysterious. Instead of using ucts, which have allegedly caused skin scandal show more-positive share per-
her own influence, she sends free prod- irritation and breakouts. Tom Brady’s formance than do those that respond
ucts to other celebrities and influencers apparel brand, Brady, was launched slowly or not at all. However, when the
in hopes that they will wear Ivy Park relatively recently. It has been criti- brand is owned by and deeply associ-
and engage with consumers. That’s cized as overpriced and appears to have ated with the celebrity, it is harder to
better than nothing, but by limiting achieved little traction. Jessica Alba’s mitigate this risk. If a brand has grown
her direct engagement and promotion, the Honest Company has faced multi- and can establish meaning above and
she’s distancing herself and her celeb- ple complaints and a lawsuit about the beyond the celebrity, managers should
rity from the brand. quality of the products, the ingredients consider some distancing from the star
used, and claims made by the com- to avoid any possible future negative
pany. (At the same time, the company impact.
WHAT CAN GO WRONG? now trades publicly, with a market
Celebrity brands get attention—and cap of more than $270 million in early I T ’S CLE AR FROM these examples that
that can cut both ways. Consumers may 2024, and at one point Alba’s personal if celebrity brands are to soar in the
be skeptical about the brands, especially stake was worth more than $100 mil- era of influencer marketing and social
if the stars behind them are contro- lion—far more than she could make media, they need at minimum a deeply
versial or polarizing. Kardashian has from acting.) engaged following, a genuine fit between
millions of followers—but also millions In addition to ongoing scrutiny, the celebrity and the product, a superior
of detractors. Sometimes it seems that celebrity brands face the risk that the product, and a strong two-way engage-
people enjoy nothing more than tearing celebrity will be involved in a scan- ment with fans and followers. Without
down a celebrity—and if that celebrity dal or a legal or ethical transgression, those, not all the fame in the world will
has launched a brand, it may get caught reflecting poorly on the brand. For help a celebrity brand fly.
in the crossfire. example, Kardashian’s ex-husband, the HBR Reprint S24032
An example is Gwyneth Paltrow’s controversial rapper Kanye West (now
Goop lifestyle brand, which has been a Ye), who developed the Yeezy clothing AYELET ISRAELI is the Marvin Bower
financial success by any measure: It has and sneakers line for Adidas and was Associate Professor of Business
raised $70 million in venture funding, an influencer for many other brands, Administration at Harvard Business School.
and in 2020 it was valued at $250 mil- saw most of his deals disappear after he JILL AVERY is a senior lecturer in business
administration and the C. Roland Christen
lion. At the same time, Paltrow is often made a series of racist and anti-Semitic
sen Distinguished Management Educator
ridiculed for promoting what many see remarks.
in the marketing unit at Harvard Business
as “health quackery”—unproved alter- When a celebrity is merely an School. LEONARD A. SCHLESINGER is the
native health practices, energy healing, endorser of a brand rather than an Baker Foundation Professor at Harvard
and other scientifically questionable owner and creator of it, such scandals Business School, where he serves as chair
wellness claims. In 2023 she mused may be more easily overcome, because of its practice-based faculty. MATT HIGGINS
publicly about wanting to sell her Goop the tie between the celebrity and the is an executive fellow at Harvard Business
School, a cofounder of RSE Ventures, and
stake in a few years, and some argue brand is more easily severed. (For
the author of Burn the Boats: Toss Plan B
that the company’s valuation would be instance, many brands moved away
Overboard and Unleash Your Full Potential.
higher if it had steered away from pro- from Tiger Woods after his 2009 car He is also an investor in companies men-
moting health and wellness products crash and sex scandal but carefully tioned in this article, including Momofuku,
that invite skepticism. reengaged as the controversy receded.) Skims, and the Outset.
Should Your
marketing grows, so do examples of
promotional relationships that caused
Brand Hire a
disillusionment and regret.
In 2017, for example, Adidas Origi-
nals created an Instagram ad featuring
Virtual
Kendall Jenner as its brand ambassador.
Detractors argued that there was noth-
ing “original” about Jenner: “[Has she]
Influencer?
really faced it all? What could a bour-
geois like [her] have possibly faced?”
In late 2023 China’s “Lipstick King”
Li Jiaqi, a pioneer among fashion and
W
consumption, materialistic lifestyle.
Those incidents raise a question:
H EN T H E M EA L - each tagged #RefreshWithHelloFresh. Can you hire an influencer whose care-
KIT delivery The campaign produced 461 influ- ful behavior and reliable image limit the
company Hello- encer posts and generated 5.5 million risk of undercutting the promotional
Fresh wanted to impressions, with 20% of the influenc- message? Yes, you can.
promote its latest ers’ followers mentioning HelloFresh on Lil Miquela is a social media influ-
line of healthful menu items, it made an Instagram—a clear success. encer who has 3.5 million followers
increasingly popular choice: It hired Results like that helped influencers on TikTok and another 2.7 million on
an Instagram lifestyle influencer. Jenna earn some $21 billion in 2023. But such Instagram. Since her debut, in 2016,
Kutcher is a Minnesota-based mother partnerships are not without poten- she has earned an average of $2 million
of two who has more than a million fol- tial pitfalls. Influencers’ credibility is a year posting content on behalf of
lowers, and as part of a 21-day challenge, built on trust, which can prove deli- brands including Dior, Calvin Klein,
she and 15 other influencers hired by cate. Sometimes a post is perceived as and BMW. Lil Miquela is far less likely
the brand posted recipes and photos inauthentic, or the influencer exhibits than traditional influencers to say or do
of meals they made using HelloFresh, off-platform behavior that’s not aligned something scandalous, because she’s
a computer-generated image, pro- much followers liked and commented Reach. Brands choose to use big-
grammed and controlled by a market- on various types of influencer content. name celebrities as influencers for a
ing company. Prior studies have shown that when reason: Celebrities have lots of follow-
Although human influencers still a virtual influencer (whether anime- ers, which increases exposure for their
vastly outnumber virtual influencers, like or humanlike) creates organic products. In December 2020 the average
the latter are becoming more common. Instagram posts, they tend to receive number of followers for human influ-
According to one survey, 52% of U.S. more likes and more positive emojis encers in our study was about 2.8 mil-
social media users already follow a vir- than do the posts of human influencers. lion, whereas the average number
tual influencer, and that percentage is Research by Chen Lou of Nanyang Tech- for virtual influencers stood at about
higher globally. Brands including Prada, nological University and colleagues 1.1 million.
Cartier, Disney, Puma, Nike, and Tiffany identified what drives consumers to In academic research about influ-
use virtual influencers to promote their engage more with virtual influencers, encers, the number of followers and
products. In this article we draw on our including the novelty of interacting consumer engagement have an inverted
academic research and studies by others with computer-generated imagery (CGI) U-shape relationship—that is, influ-
to examine how brands should choose and the different aesthetic it represents. encers with relatively higher or lower
between a human influencer and a In addition, consumers exposed to numbers of followers create less engage-
virtual one. We also offer insights that virtual influencers’ posts show greater ment than influencers with moderate
brands can use when developing their willingness to share their favorable followings do. That suggests that brands
influencer marketing strategy. experiences with others. needn’t necessarily be put off by virtual
In our research we focused on influencers’ smaller audiences. Our
sponsored posts—the kind marketers research found that when a brand is not
MEASURING THE PROS AND CONS arrange and pay for. When we compared widely known, the number of follow-
To understand the advantages and paid posts by virtual influencers with ers an influencer has doesn’t play a big
disadvantages of human influencers their organic content, we found that fol- role in how much engagement a piece
and virtual influencers, we focus on five lowers showed 13.3% more engagement of sponsored content sparks. Among
factors: engagement, reach, diversity, with paid than with nonpaid posts, the fashion brands in our sample, for
reputation risk, and cost. whereas sponsored posts by human instance, we found that lesser-known
Engagement. To learn how consum- influencers garnered 2.1% less engage- brands such as Misbhv and Moschino
ers react to virtual as opposed to human ment, on average, compared with the achieved greater engagement in
influencers, we conducted research on same influencers’ organic content. response to sponsored virtual-influencer
the way followers engage with posts Among the industries we studied, the posts than did more-established brands
from each type. We collected marketing fashion and beauty sector was espe- such as Burberry, Chanel, Dior, and
content posted by 551 human influenc- cially hospitable to sponsored posts by Louis Vuitton.
ers and 13 virtual influencers, all spon- virtual influencers—and also showed Diversity. Modern brands want to be
sored by 112 brands. Most of the brands more resistance to sponsored posts by inclusive, and that requires partnering
are in the fashion and beauty segments, human influencers: Virtual influenc- with influencers who represent a variety
with a handful representing technology, ers’ paid posts in that sector drew 16.3% of demographics. Human influencers
travel and lifestyle, health care, or other more engagement than did their organic are not a particularly diverse group.
industries. The content, which included content, on average, while human Marketers in certain segments, such as
more than one million posts, was put influencers’ paid posts drew 2.3% less fashion and beauty, say the majority of
online between June 2014 and Decem- engagement than their unpaid postings. influencers in their field are female and
ber 2020. Some of it was sponsored, and The engagement data shows a clear white. When we used an AI program to
some was organic. We measured how upside to using virtual influencers. try to detect the racial background of
the 551 human influencers in our study, geographically distant that it is logis- this risk, but it is ever present. Virtual
it estimated that 68% were white, 11% tically challenging to work with them, influencers, devoid of the autonomy
were Latino/Hispanic, 10% were Black, or have an aesthetic that doesn’t align that typically accompanies human
8% were Asian, 1% were Middle Eastern, with what the brand wants, or have behavior, mitigate it.
and 1% were Indian. In theory, brands accents or speak languages that may be Nars, a French cosmetics and skin
could try to hire from those shallow difficult for the brand’s target market to care company, turned to virtual influ-
pools, but they may face other compli- understand. Thus brands have begun encers after such a scandal. In 2018 the
cations: The influencers may already looking to virtual influencers to achieve YouTube beauty influencer Manny Mua
have deals with competing brands, or be diversity. and others were featured in a group
promoting so many other brands that When marketers are creating an photo giving the finger to and denigrat-
they’re not taking new clients, or be so influencer with computer graphics, they ing a rival beauty influencer named
Winning at
Influencer
Marketing
Jeffree Star. The post created a backlash or uninteresting. People scroll social a lower-cost marketing opportunity,
that the influencer media labeled Dra- media quickly, and it takes something brands can treat the choice to hire them
mageddon. Mua lost a large portion of unusual to make them pause. Indeed, as an experiment. They can deploy a vir-
his followers, and Nars severed ties with research has shown that one reason tual influencer or two and then closely
him. The following year Nars launched consumers follow virtual influencers is watch engagement and results. They
a trio of virtual influencers—Maxine, that they are unexpected and previously should calculate the return on invest-
Chelsea, and Sissi—who behaved the unknown. Although betting on a virtual ment and compare it with alternatives,
way their computer handlers pro- influencer may require a leap of faith, including other virtual influencers,
grammed them to. Not surprisingly, marketers should realize that human human influencers, and other kinds of
their content has been drama-free. influencers may be perceived as over- marketing. The influencer industry is
Cost. Put simply, human influenc- exposed or past their prime. mature enough to have standard KPIs
ers are more expensive than virtual Look at the data. Our research and metrics for judging performance,
influencers. For instance, a human involved studying more than a million and brands can embrace this method-
influencer with a million-plus follow- pieces of content over six years and ology as they evaluate decisions about
ers might charge a brand more than doing statistical analysis. That level of influencer marketing.
$250,000 per post. The company that research may not be feasible for every
created Lil Miquela, currently the most brand, but a fundamental analysis of A S CO NSUME RS SPE ND less time on tra-
popular virtual influencer, charges only social media data is both achievable and ditional media and more time on social
$9,000. Because virtual influencers are essential. Are your competitors’ brands media, influencer marketing is likely
cheaper—and don’t have travel expenses using virtual influencers? If so, how do to become even more important for
that must be covered—brands can hire consumers appear to be engaging with brands. Because it remains fairly new,
larger numbers of them. that content versus posts by human fewer rules and established practices
influencers, and how is that changing? exist, which creates opportunities for
Are brands in your industry using more innovation. Our research suggests that
MAKING THE CHOICE virtual influencers over time? Engage- virtual influencers offer distinct advan-
The concept of virtual influencers is just ment data is public and easily accessi- tages over traditional influencers. The
a few years old, so academic research ble on Instagram and other platforms. success brands are having with them
is only beginning to understand how Brand managers should collect and should inspire companies to be open to
and why consumers react to this form study the data relevant to their category. additional innovations as they embrace
of marketing. Nonetheless, our research Embrace a portfolio approach. social media marketing.
and close observation of the field’s evo- Brands typically do not rely on either HBR Reprint S24033
lution suggest four principles to help human or virtual influencers, or on
guide brands in their choice. any individual within either category.
SERIM HWANG is an assistant professor
Recognize consumers’ desire for Instead they choose a mix of influencers. of marketing at SKK Graduate School
novelty. When it comes to endorsers In a recent study we looked at whether of Business at Sungkyunkwan University
and influencers, some brands find value human influencers are being replaced in Seoul. SHUNYUAN ZHANG is an assistant
in stability and longevity. For exam- as brands find success with virtual influ- professor in the marketing unit at Harvard
ple, Tiger Woods’s recently dissolved encers. We discovered that brands that Business School. XIAO LIU is an associate
professor of marketing at NYU’s Stern
relationship with Nike lasted 27 years. embrace virtual influencers continue to
School of Business. KANNAN SRINIVASAN
In the social media era, however, many use human influencers as well, but they
is the H.J. Heinz II Professor of Management,
consumers crave something new and typically switch to different ones. Marketing, and Business Technologies
different. Brands that rely on familiar Experiment, measure, and learn. at Carnegie Mellon’s Tepper School of
celebrities risk being perceived as stale Because virtual influencers represent Business.
Kimberly A. Graham
Whitler Twente
Associate professor, Consultant,
Darden School EY
of Business
S
I NC E 2021 MCD ONA LD’S,
Microsoft, PepsiCo, Berk-
shire Hathaway, Amazon,
Unilever, and other leading
companies have done some-
thing that was never before possible:
They have paid U.S. college athletes to
act as product endorsers and influenc-
ers. Until a Supreme Court ruling that
year, paying college athletes was for-
bidden under the rules of the National
Collegiate Athletic Association (NCAA).
In the aftermath of the Court’s ruling,
the NCAA adopted a policy that enabled
more than 520,000 student athletes
to monetize their names, images, and
likenesses by signing what have become
known as NIL deals. Although no defin-
How Marketers
itive count exists of athletes who have
signed such deals, 278 students (40% of
varsity athletes) at Texas Tech had been
Choose
sponsored as of 2022. In just a few years
marketers have already spent more
than $1 billion on such endorsements.
College Athlete
For individual athletes these deals can
be lucrative. Consider Paige Bueckers,
a University of Connecticut basketball
Influencers
player, whom Gatorade chose as its first
sponsored college athlete. Bueckers is
expected to earn more than $1 million
Gallery Stock
Here are the characteristics that matter most. College athletes are especially attrac-
tive as endorsers and influencers for
several reasons. Brands hope that their sexualized, whether images were posed reputational risk if the athlete behaved
age will make them effective at engag- or candid, and so forth. Wherever possi- in ways (whether during the sport or
ing and connecting with a younger ble, we used objective measures or estab- not) that reflected poorly on his brand.
audience. Their sponsorship deals cost lished methods of assessing images. He eventually signed several University
less than those of professional athletes. Our analysis revealed five insights of Virginia athletes with little regard
They allow brands to tap into the loyal that may be useful as marketers con- for the size of their followings: Yonta
and passionate relationships that fans sider their own best practices for spon- Vaughn, a women’s basketball player,
(especially alumni) have with univer- soring college athletes—and as college had fewer than 2,000 followers; Skylar
sity sports teams. And by signing them, athletes produce social media content Dahl, a rower, fewer than 1,300; and
brands can build a relationship that may that may maximize their odds of receiv- Isaac McKneely, a men’s basketball
extend into Olympic and professional ing sponsorship offers. player, fewer than 16,000.
sports careers. High follower counts aren’t essen- When we asked Cotten why he was
These relationships come with risks, tial. Perhaps surprisingly, few athletes willing to choose influencers with rel-
however. Misbehavior and scandal can sponsored by the top brands had a high atively small followings, he said that
threaten celebrity endorsers, and col- number of followers compared with when he and his team identify the right
lege students may be even more likely other types of influencers. Only 29% kind of athlete, they are willing to begin
to behave in ways that cause negative had more than 100,000 followers. In by promoting the relationship on the
publicity. Therefore marketers work to fact, 59% had fewer than 50,000 follow- company’s own social media platforms,
identify and partner with those whose ers, 14% had from 2,000 to 5,000, and rather than relying on the athlete’s plat-
character suggests they represent a 3% had fewer than 2,000. Many athletes form. They are betting that the influ-
low risk. Such due diligence can take a not chosen by the top brands have more encer’s following will grow over time.
variety of forms, but one important ele- followers than those who were chosen. Our research indicates that Cotten is
ment is scrutinizing the content of the Apparently, brands select athletes for not alone in his thinking. If follower
athletes’ social media posts—especially the strength of their image: who they count was a priority for big brands, the
because social media is often a primary are and what they represent. profile of athletes chosen for sponsor-
channel through which athletes will Jonathan Cotten is a leading fran- ing would be different.
promote their brands. chisee of the Good Feet Store, a national It’s not just football and basketball.
To understand what companies retailer of arch supports. When he Historically only football and men’s
look for in college athletes, we relied on decided to sponsor college athletes as basketball have generated substantial
observed behavior—the patterns that part of his company’s marketing plan, revenue, media exposure, and game
athletes who have been chosen for spon- he paid little attention to follower attendance in the United States. An
sorship by top companies exhibit in their counts. Instead he sought “strong char- early effort to track NIL deals focused
social media posts. We identified 64 acter” in someone he trusted would on those two sports, because it was
college athletes hired as influencers by fit with the values of the company. To assumed that marketers would concen-
the 100 companies with the best reputa- gauge character, Cotten and his exec- trate on them when choosing sponsors.
tions according to the 2022 Axios Harris utive team looked at players’ social But the people chosen by the top 100
Poll. We then analyzed the Instagram media posts, had conversations with companies include athletes from golf,
posts of those athletes and identified 20 players, and even talked to the parents gymnastics, hockey, lacrosse, soccer,
characteristics, including the number of of several athletes. While considering and other sports. In fact, about 50% of
followers, the number and pace of posts, whether to spend money on college sponsored athletes came from sports
whether posts were about the athlete’s athlete influencers, Cotten decided other than football or men’s basketball.
sport, whether posts were about the that the biggest potential cost was Clearly, the value of an athlete’s brand
athlete or others, whether posts were not the payment to the athlete but the extends beyond the revenue associated
with a sport. Consider Matthew Boling, media platforms since their early teen- sense. Although brands hope that college
a track-and-field athlete at the University age years, they’ve grown up posting athlete influencers will reach young
of Georgia who partners with Dunkin’ both sports and nonsports content, audiences, the top brands are also tar-
Donuts. Boling’s social media posts such as photos from parties, concerts, geting parents, grandparents, and oth-
include images of him in competition, milestones, or activities with friends. ers who may be put off by such content.
training with teammates, and order- However, the athletes in our study have
ing Dunkin’ coffee. Boling emphasizes started to shift away from personal con- FO R B RAND S THAT are allocating mar-
excellence on and off the track—an tent and toward sports-oriented content keting budgets to college athletes, the
attractive position for the company. in their Instagram accounts. That makes obvious question is, How well are those
It’s not about striking a pose. If sense. The brands are choosing to pay expenditures paying off? It’s hard to say.
you’ve spent time looking at college ath- them because of their involvement in Sports marketing’s return on invest-
letes’ posts, you’ll have seen that many sports. Among the Instagram images ment can be especially difficult to mea-
of them share predominantly posed of college athletes with NIL deals, 48% sure. (One of us, Kimberly, once oversaw
images. Often their feeds are filled with featured sports content. The proportion the laundry brand Tide’s partnership
what look like professional modeling of sports content goes up among college with NASCAR. She tried to quantify the
photos: The camera is aimed straight at athletes who transition to the pros as return with a variety of methods, such
the athlete, who is alone in the picture. well. Sixty-three percent of the postings as assigning value to stronger business
In contrast, more than half the images of professional athletes sponsored by relationships with retailers, with limited
posted by the athletes in our study are the top brands were sports-focused. It’s success.) That’s compounded by the fact
natural and unposed. not clear whether brands are encourag- that NIL deals didn’t even exist three
Consider Blake Corum, a running ing this or the athletes are simply mim- years ago. But signing college athletes
back on the 2023 national champion icking their peers. But the difference is costs so much less than signing profes-
University of Michigan football team, striking—and when we speak with stu- sional athletes that a good ROI seems
who has worked with Subway (and a dent athletes about shaping their own likely—especially given the possibility
number of other brands not among the brands to appeal to corporate sponsors, of forging a long-lasting relationship
top 100). His social media is full of pho- we suggest that they emulate the pros with a potential Michael Jordan before
tos of him working out, playing football, and keep the ratio of sports to nonsports the athlete reaches the pinnacle of his
talking in the middle of a team huddle, content high. or her career. Future research will
walking past Michigan fans, and so The chosen athletes avoid sugges- illuminate how to maximize a brand’s
forth. More than 80% of the Instagram tive imagery. College students often odds of success with this new marketing
photos featuring Corum in our study post sexualized images of themselves. channel. HBR Reprint S24034
were candid rather than posed. They When we asked college athletes who Spotlight Reprint R2403B
make him appear more natural and post suggestive content why they do
authentic (and less self-centered) than so, they said that such posts typically KIMBERLY A. WHITLER is the Frank M.
others, and prior research indicates that increase their followings; and in their Sands Sr. Associate Professor of
audiences react more positively to can- view, gaining a lot of followers is the Business Administration at the University
did photos than to posed ones in online primary goal of their social media efforts. of Virginia’s Darden School of Business
contexts. However, our research found that 85% of and a coauthor of Athlete Brands: How to
Benefit from Your Name, Image & Likeness.
The mix of posts leans toward the athletes chosen as influencers by top
GRAHAM TWENTE is a former senior research
sports. Athletics are not everything in brands never posted sexualized imagery
manager at the Darden School of Business
the life of a college athlete. And because or content. Among the 15% who did post and currently a member of the data and
most college athletes today have been such content, just two out of 21 photos, analytics technology consulting staff at EY
active on Instagram and other social on average, were suggestive. That makes in Washington, DC.
Standards of
Excellence
Al Faleh is the first
woman-led Qatari
public shareholding
company chaired by
Dr Sheikha Aisha Bint
Faleh Al Thani.
Al Faleh Educational Holding Forging a partnership with the
is a leading group that University of Aberdeen, Al Sheikha Aisha Bint Faleh Al Thani
provides educational services Faleh introduced the first
of the highest quality in the British university offering
state of Qatar. The Holding undergraduate and
delivers a comprehensive postgraduate degrees within
portfolio of industry-led the State of Qatar. The
academic programmes and University of Aberdeen is a
initiatives. The Holding 528-year-old Scottish
became the first listed university and consistently
company to launch Qatar ranked within the top
Venture Market in April 2021. universities in the world.
Following the continued
Sheikha Anwar Bint Nawaf Al Thani
growth, the Holding
successfully moved to the In recognition of its growth
Main Market in January 2024. and the success, Sheikha
Anwar Bint Nawaf Al Thani,
Chief Executive Officer of Al
Faleh Educational Holding, was
featured in Forbes Magazine
amongst the 100 most
powerful businesswomen in
the Middle East 2024. AFG
College with the University of
Aberdeen is set to move to a
new $100 million purpose-built
campus that will house a space
dedicated to research.
“True transformation calls for breakthrough thinking and
pushing beyond current practices.”
Features
“ TR ANSFORMATIONS THAT WORK,” PAGE 86
of Asking
Smarter
Questions
These five techniques can drive
great strategic decision-making.
Arnaud Frédéric Jean-Louis
AU T H O RS Chevallier Dalsace Barsoux I L LU ST R ATO R
Professor, IMD Professor, IMD Term research professor, NÚRIA MADRID
Business School Business School IMD Business School
IDEA IN BRIEF
THE SITUATION
With organizations
of all sorts facing
increased urgency
and uncertainty,
the ability to ask
smart questions
has become key.
But business pro
fessionals aren’t
formally trained
in that skill.
WHY IT’S SO
CHALLENGING
Managers’ expertise
often blinds them
to new ideas. And
the flow of ques
tions can be hard
to process in real
time, so certain con
cerns and insights
may never be raised.
THE REMEDY
Strategic questions
can be grouped
into five domains:
investigative, spec
ulative, productive,
interpretive, and
PRODUCTIVE
can also help you transcend generic solutions and develop
more-sophisticated alternatives. Investigative questions dig Now What?
ever deeper to generate nonobvious information. The most Productive questions help you assess the availability of talent,
common mistake is failing to go deep enough. capabilities, time, and other resources. They influence the
It sounds like a straightforward process, but lapses are speed of decision-making, the introduction of initiatives,
surprisingly common. In 2014 a failure of investigation led and the pace of growth.
a team at the French rail operator SNCF to neglect an essen- In the 1990s the CEO of AlliedSignal, Larry Bossidy,
tial piece of data during its €15 billion purchase of 1,860 famously integrated a focus on execution into his company’s
regional trains. No one thought to ask whether the platform culture. He insisted on rigorously questioning and rethink-
measurements were universal. They weren’t. The trains ing the various hows of executing on strategy: “How can we
proved too wide for 1,300 older stations—a mistake that get it done?” “How will we synchronize our actions?” “How
cost €50 million to fix. The Spanish train operator Renfe will we measure progress?” and so on. Such questions can
discovered a similar oversight in 2021: The 31 state-of-the-art help you identify key metrics and milestones—along with
commuter trains it had ordered were too big to pass through possible bottlenecks—to align your people and projects and
some tunnels in the mountainous areas they were meant to keep your plans on track. They will expose risks, including
serve. The problem was detected before the trains were built, strains on the organization’s capacity.
but delivery was significantly delayed. The top team at Lego neglected productive questions
when responding to the rise of digital toys in the early 2000s.
SPECULATIVE The toymaker tried to diversify its way out of trouble, intro-
ducing several products in rapid succession. The initiatives
What If? themselves weren’t necessarily misguided, but each meant a
Whereas investigative questions help you identify and stretch into an adjacent area, such as software (LEGO Movie
analyze a problem in depth, speculative questions help you Maker), learning concepts (LEGO Education), or clothing
consider it more broadly. To reframe the problem or explore (LEGO Wear). Collectively they far exceeded the company’s
more-creative solutions, leaders must ask things like “What bandwidth, and Lego suffered record losses in 2003. The fol-
if...?” and “What else...?” The global design company IDEO lowing year the incoming CEO, Jørgen Vig Knudstorp, shared
popularized this approach. It systematically uses the prompt his diagnosis of the problem with the board: “Rather than
“How might we…?”—coined by Min Basadur when he was a doing one adjacency every three to five years, we did three
young manager at P&G—to overcome limiting assumptions to five adjacencies every year.” He later told the MIT profes-
and jump-start creative problem-solving. sor David Robertson, “Suddenly we had to manage a lot of
Consider how Emirates Team New Zealand’s innovative businesses that we just didn’t understand. We didn’t have the
catamaran won international sport’s oldest extant trophy, capabilities, and we couldn’t keep up the pace.”
the America’s Cup, in 2017. Crew members pedaled sta-
tionary bikes to generate power for the vessel’s hydraulic INTERPRETIVE
systems rather than turning handles, as was customary.
Many observers assumed that the breakthrough question So, What...?
had been “What if we used leg power instead of arm power?” Interpretive questions—sensemaking questions—enable syn-
That wasn’t a new suggestion, however. Other competitors thesis. They push you to continually redefine the core issue—
had considered and rejected the idea, unwilling to hamper to go beneath the surface and ask, “What is this problem
crew members’ ability to move around the boat. One team really about?” Natural follow-ups to investigative, speculative,
had even tried it. and productive questions, interpretive questions draw out the
The team from New Zealand went a step further, asking, implications of an observation or an idea. After an investiga-
“What else could a pedal system allow?” It could free up tive question, you might ask, “So, what happens if this trend
Interpretive
SUBJECTIVE
What did we learn from this new information? 1 2 3 4 5
What’s Unsaid? What does it mean for our present
and future actions? 1 2 3 4 5
The final category of questions differs from all the others.
What should be our overarching goal? 1 2 3 4 5
Whereas they deal with the substance of a challenge, it deals
How does this fit with that goal? 1 2 3 4 5
with the personal reservations, frustrations, tensions, and
What are we trying to achieve? 1 2 3 4 5
hidden agendas that can push decision-making off course.
Volocopter’s CEO, Dirk Hoke, once told us, “When we fail, TOTAL
role of managers became to coach and support—not monitor compensating for weaknesses. For insight into your ques-
and control—frontline staff. They learned to ask their internal tioning preferences and habits, you can take an abridged
customers, “How can I help?” version of our self-assessment (see the sidebar “What’s Your
If you neglect this mode of questioning or fail to push Question Mix?”). After you’ve identified your strong points
hard enough in it, your proposed solution might be undone and weaknesses, three tactics can improve your mix. You
by subjective reactions even though your analysis, insights, can adjust your repertoire of questions; change your empha-
and plans are sound. British Airways is a cautionary exam- sis to reflect evolving needs; and surround yourself with
ple. In 1997 it was the world’s leading carrier of international people who compensate for your blind spots.
passengers, but surveys showed that it was viewed as staid Adjust your repertoire. Having established which types
and stuffy. So CEO Robert Ayling and his team decided to of questions you are most and least comfortable asking,
boost the airline’s global image by replacing the British col- you need to create a better balance. One way to begin is to
ors on the planes’ tail fins with ethnic designs by artists from remind yourself of the five categories before your next
around the world. decision-making meeting and ensure that you’re consid-
The designs were visually striking, but the top team badly ering all of them. The CHRO at a large tech company we
misgauged employees’ and customers’ emotional reactions. worked with had us display the framework throughout an
The staff was distressed that a £60 million rebrand had been important company program.
undertaken amid ongoing cost-saving measures. British You can also try out questions from your weak or missing
business travelers—the airline’s core customers—were categories in a few low-stakes situations. That will help you
strongly attached to the national branding and antagonized understand how things you’re not accustomed to asking can
by its removal. And as if to underline the error, Virgin CEO open up a discussion. Steven Baert, a former chief people
Richard Branson announced that his planes would proudly and organization officer at Novartis, described his process
“fly the flag.” BA’s new designs were withdrawn two years on The Curious Advantage podcast. “Previously [I focused on]
later, and the misjudgment contributed to Ayling’s ouster. listening to fix,” he told the host. “‘You have a problem.
Team members may be reluctant to explore emotional I need a few points of data from you so I can solve the prob-
issues unless the leader provides encouragement and a safe lem.’ [But now] I’m practicing listening to learn.”
space for discussion. They may fail to share misgivings sim- There’s another step involved in adjusting your reper-
ply because no one else is doing so—a social dynamic known toire: You may need to discard some types of questions
as pluralistic ignorance. Leaders must invite dissenting that served you well in the past. This point was captured
views and encourage doubters to share their concerns. in a Financial Times profile of Erick Brimen, CEO of the
investment group NeWay Capital, who describes himself as
a stubborn, goal-oriented micromanager. “The lesson I’ve
Balancing Your Question Mix been learning,” he said, “is to let go of the ‘how to get there’
We created a tool to help people assess their questioning and to focus on ‘where we are going.’”
styles and gave it to 1,200 global executives. Although the Change your emphasis. Your question mix is a mov-
combined results showed an even distribution among the ing target, especially if you’re now in a new role, company,
five styles we’ve described, individual answers revealed or industry. As you take on bigger responsibilities, for
major imbalances. One category or another was barely on the instance, you’ll face increasingly complex challenges, not
radar of more than a third of the executives. And follow-up just because they have more components but also because
interviews showed that many leaders were overly attached to you’re allowed to take larger leaps. Reflecting on her own
the types of questions that had brought them success. They trajectory, Patricia Corsi, the chief marketing, digital, and
relied on those at the expense of other kinds of inquiries. information officer at Bayer Consumer Health, told us,
Assess your current question style. Self-awareness “As your career progresses, you’re offered riskier moves,
is an essential first step, of course, toward correcting or into jobs you’ve never done, domains you don’t know, and
May 2024
Managing Long Covid and
Other Chronic Illnesses at Work
February 2024
Corporate Advocacy in a
Time of Social Outrage
December 2023
Use Strategic Thinking to
Create the Life You Want
September 2023
Where Does DEI Go from Here?
Vanessa Branchi; Stephanie Singleton; Carolina Niño
MirageC/Getty Images; Mariaelena Caputi;
May 2023
How to Avoid the Ethical Nightmares
of Emerging Technology
hbr.org/big-ideas
P H OTO G R A P H E R XAN PADRÓN
TA L E N T
M A N AG E M E N T
Highly Skilled
Professionals
Want Your
Work
Freelancers are in huge
demand today, and they
know it. It’s time for new
rules of engagement.
AU T H O RS
Diane Gherson
Senior adviser, Boston
But Not
Your Job
Consulting Group
Lynda Gratton
Professor, London
Business School
THE CHALLENGE
As highly skilled
professionals
increasingly
choose freelance
work over in-house
employment,
companies are
struggling to
recruit and retain
the talent they
need to transform
their offerings,
processes, and
infrastructures.
THE IMPLICATION
A new model
for how work gets
done is taking
hold, one that
blends in-house
and freelance
talent. In particu-
lar, the role of the
manager is chang-
ing, along with
the skills needed
to respond to
the very different
needs, goals, and
interests of these
two groups.
THE LESSONS
This article looks
at successful
efforts to manage
the blended
workforce at
companies such
as Microsoft, M&C
Saatchi, and Mars
and lays out some
of the most helpful
lessons they have
learned.
Marta, the CTO at talent, told us. “And people with the most sought-after skills
are more than likely to be freelancers.” He went on to explain
a sporting goods why this works for Mars: “Freelancers tend to jump from
one project to another. That’s essentially what we’re paying
company, scans her for—their accumulated experiences and the fresh external
perspectives they bring.”
operating metrics Peter Fasolo, the chief human resources officer (CHRO) at
Johnson & Johnson, also remarked on the change in worker
and flinches at the preferences: “Without question, there has been a huge shift.
Many of the individuals we’re looking to attract—in technol-
continued “red” ogy, data sciences, machine learning, blockchain, and the
technical capability.
Talented workers have sought flexible work for some
time, but it’s only recently that the downsides traditionally
involved in freelancing have been addressed. Independent
The board is concerned that upstart competition is nibbling work used to be an unreliable source of income that was heav-
away at market share, so Marta is under intense pressure to ily dependent on personal networks, but today job-matching
help the company move faster to market by implementing platforms—such as Upwork and Fiverr—can instantly match
more-sophisticated digital and conversational AI capabil- highly skilled candidates with employers’ needs. Some
ities. But her in-house talent lacks the deep expertise and platforms are hyperspecialized, such as A.team and People
experience necessary to transform the company’s offerings, Analytics, which serve engineers and data scientists. Tech-
processes, and data and security infrastructures, and her nology also now provides administrative and other support to
recruitment team has been unable to pry away top profes- independent workers, whether it’s virtual fractional accoun-
sionals from tech firms, despite making generous offers. tants, tax apps, or AI for managing email and calendars.
Taking stock, Marta (a composite character we’ve drawn Today at least 36% of the U.S. workforce has chosen
from numerous interviews) reluctantly acknowledges that to work as contract, freelance, temporary, or gig workers,
she needs to tap the freelancer market. She recognizes according to an extensive study conducted by McKinsey in
that this is not a stopgap measure and that a major shift in 2022. Upwork’s December 2023 study of 3,000 professionals
how work gets done is underway. But she has qualms. How put the number at 38%, or 64 million workers. Of these, one-
can she properly prepare her team for the issues this new third were earning more than $150,000 a year, and just over
blended workforce will unleash? half were providing knowledge services—such as computer
At almost every company we talk with, managers are programming, marketing, IT, and business consulting.
facing the same recruiting challenge. They simply do not Significantly, 52% of Gen Z workers and 43% of Millennials
have the talent they need in-house, and they’re unable to were freelancers in 2023. And the shift is catching on glob-
persuade highly skilled professionals to come on board full- ally: Gartner predicts that independent workers will make
time. As a result, companies are embracing the freelance up 35% to 40% of the global workforce by 2025.
They help freelancers understand and embrace com- an as-needed basis by highly specialized freelancers. At
pany culture. Options abound for how to do this. Johnson & Mars, freelancers return periodically to conduct tune-ups
Johnson, for example, recognizes that its purpose, values, and on the products and services they helped develop.
credo critically shape how employees interact and how work They adopt a “sponsor” mindset to guide freelancers’
is done, so the company gives freelancers the same in-depth performance. Managers know that it’s critical to provide
introduction that it gives to employees. The software giant their employees with feedback and help them progress in
Salesforce onboards employees and freelancers together their careers while motivating them to contribute to com-
using its Culture in a Box process, which asks workers to pany performance. When it comes to freelancers, though,
commit to one another and to their deliverables as a team. managers should take a different tack, focusing on shaping
Freelancers receive in-depth training on company values and challenging work assignments and creating an environment
work processes, including the disciplined use of project tools that allows freelancers to meet their professional goals during
to manage workflows and facilitate communication. their stints with the company. Roshni Haywood, the global
At the M&C Saatchi Group, where one business has been head of HR at HSBC Digital Business Services, told us, “A key
experimenting with staffing all nonmanagement positions motivator for skilled freelancers to join us is the opportunity
with freelancers, the introduction to company culture starts to work on a major digital transformation at a legacy bank.”
even earlier—at the interview stage. Mark Dickinson-Keen, At J&J, the role of “sponsor” is formally defined, with a
the company’s chief people officer, told us, “The majority of specific job description and a training program. The role
the interview time is spent sharing how our freelance model differs from the supervisory relationship that a manager
works, helping them understand what they can expect from has with in-house employees: It is designed to forge a bond
the business, and checking that they are truly ready to work between the freelancer and the company and is aligned with
in this way. It is very much a two-way process.” the local legal and regulatory frameworks for independent
They follow rigorous practices to retain institutional work. Sponsors acknowledge freelancers’ desire to work
knowledge. A common concern with hiring freelancers autonomously and to gain a range of experiences. “Spon-
is that when they leave, they’ll take the valuable skills and sors ensure that the freelancers are not only executing their
knowledge they’ve accumulated with them. Companies are tasks,” Fasolo told us, “but are also advancing their broader
handling this in several ways: by engaging in disciplined professional development. We ask our freelancers to share
project-hygiene practices, using shared project-management their aspirations, and we support them in their journey. We
tools (such as Asana, Moovila, or Smartsheet), and assigning believe that if we are their partner in the advancement of
full-time employees to take responsibility for end-to-end their professional development, everybody wins.”
critical project deliverables. In some highly digitized work- They leverage digital workflows and build trust to
places, such as at J&J, the internal knowledge-management manage changes in project needs. One dilemma with
systems are facilitated by AI, enabling skills transfer and bringing in freelancers is that although their work is deter-
corporate knowledge management without the need for mined by a fixed contract, a company’s project needs will
extra process steps or human effort. “We try to ensure that all inevitably change. Saatchi resolves this issue with digital
the data sits in what we call the ‘operating room,’” says Fasolo. workflows. Dickinson-Keen describes it this way: “First, we
“It’s a digital workspace where we can track critical project redesigned the operational processes of how work gets done;
data in one place. It’s visible to everyone—employees and then we rebuilt the workflow system to have more of a real-
freelancers—and managers can observe the flow of work and time pulse on what everyone’s doing. It sounds controlling,
intervene to adjust workloads, reprioritize tasks, and solve but it’s smart workflow management.” This enables Saatchi
bottlenecks in real time.” to have more visibility into how the workload and hours are
Where skills transfer is of lesser concern, companies distributed. “To digitize workflow, we have to quantify tasks
can adopt a complementary workforce strategy: In-house and streamline operational workflows,” he adds. “It requires
employees develop generalist skills and are augmented on strong management of time and output daily.”
HIGHLY SKILLED
EMPLOYEES
FREELANCERS
March–April 2022), at some companies, especially those using
agile methods, managers no longer “own” the in-house talent
• Steady and but instead are project managers—scoping and budgeting
• New satisfying work a project, determining skills requirements, and contracting
experiences • Belonging and
What with workers for their time and energy.
workers • Autonomy inclusion
value • Flexibility • Professional
most
relationships
• Learning
• Variety • Benefits WHAT DOES THIS MEAN FOR IN-HOUSE EMPLOYEES?
• Upward mobility The influx of skilled freelancers into the workplace is a phe-
nomenon in gestation, but at the moment, we’ve arrived at an
equilibrium. Both freelancers and employees have a deal that
• Specific • Ability to adapt to matches their preferences. Employees get the stability of a
project diverse and changing
job, relationships at work, a sense of belonging, the promise of
deliverables business demands
• Cutting-edge • Availability in upward mobility, and benefits. For their part, skilled freelanc-
What expertise times of crisis ers can earn six-figure incomes while working when they wish,
companies
need • Diverse • Dedication to without the hassles of a commute, dealing with a difficult boss,
from them cross-industry sustaining navigating bureaucracy, or taking on less-than-fulfilling work.
experience company culture
But this equilibrium is increasingly fragile, with much
• Adherence • Commitment
to company to continuous riding on the continued engagement and performance of
values upskilling in-house employees. Those workers bear the brunt of jumping
in when the unexpected happens. More than ever, employers
count on them to keep the business running smoothly and do
the right thing to achieve the outcomes the company needs.
When freelancers are working on multiple projects at In-house employees are prized as much for their willingness
different companies simultaneously, as they often are, it can to show up and pitch in as they are for their skills. (Indeed,
be tricky for managers to gauge their availability and band- already 71% of employees say that their job description no
width. Delegation and traditional control mechanisms are longer matches the work they’re actually doing, and 24% say
off-limits for freelancers, so managers must invest in mutual their organizations have begun to drop job titles.)
trust building. Employers need to trust that their freelancers This is happening at a time when employees are demand-
will tell them if they are occupied with another significant ing more and tolerating less. A 2023 HP study of 15,600 work-
project, and workers should be able to trust that they’ll be ers in 12 countries found that expectations have changed
informed in advance if projects are accelerated or put on dramatically since the pandemic. In particular, organizations
hold. As Dickinson-Keen told us, “It’s not about controlling will need to address unhealthy relationships at work in order
the worker’s time or choices but understanding and man- to retain valued employees. For example, 83% of employees
aging expectations. It’s about keeping commitments and said they would take a pay cut to be happier at work. Accord-
ensuring both parties are aware of the work availability.” ing to a 2023 study by the American Psychological Associa-
As more work devolves from fixed jobs into a series of proj- tion, 64% of U.S. employees characterize their workplaces as
ects, managers are applying this approach even when working “toxic,” citing behavior such as disrespectful and noninclu-
with full-time employees. For example, the introduction of sive treatment. This is often missed in company engagement
internal talent marketplaces for project gigs enables full- surveys that focus on aggregate scores covering a range of
time employees to fluidly move into roles that tap their skills topics such as pride in and connection with the company and
and experience while still formally reporting to their people satisfaction with management and employee programs. In
managers. As we wrote in “Managers Can’t Do It All” (HBR, 2022, Microsoft decided to abandon its annual “engagement”
AU T H O RS
Transformations
Michael
Mankins
Partner, Bain
& Company
Patrick
Litre
Partner, Bain
& Company
IDEA IN BRIEF
THE PROBLEM
Although compa
nies frequently
engage in transfor
mation initiatives,
few are actually
transformative.
Research indicates
that only 12% of
major change
programs produce
lasting results.
WHY IT HAPPENS
Leaders are in
creasingly content
with incremental
improvements.
As a result, they
experience fewer
outright failures but
equally fewer real
transformations.
Underwhelming Results
In late 2023, Bain & Company completed the second of two
comprehensive surveys of 300 large companies worldwide
that had attempted transformations. The first survey had
taken place a decade earlier. The participating companies
included both Bain clients and nonclients. The findings (see
the exhibit “Transformation Efforts Are Still Missing the
Mark”) highlighted two concerning trends.
Less failure, but not more success. In the 1990s John
Kotter and other scholars identified the most common
reasons for ineffective transformation attempts—notably,
a lack of urgency, insufficient leadership, limited vision,
poor communication, and a shortage of “quick wins.” Many
companies have taken steps to avoid those pitfalls, often
seeking outside advisory support. As a result, companies
are experiencing fewer outright failures in their trans-
formation endeavors. If we define “failure” as achieving
less than half of what leadership aimed for, then only
13% of recent transformation programs can be labeled as
such. That’s a significant improvement from the 38% rate
observed in 2013 and can be attributed to lessons learned
over the years.
Unfortunately, most transformation programs aren’t all But there’s a catch. Despite the decline in outright fail-
that transformative. Though they typically start with great ures, success rates have not risen. If “success” is defined as
fanfare—complete with big announcements and proclama- meeting or exceeding leadership’s expectations, then only
tions of wholesale change—most fail to deliver. Our research one in eight transformations can be considered successful—
indicates that only 12% of major change programs produce and that rate has remained constant since 2013.
lasting results. Too often, leadership accepts disappointing An acceptance of mediocrity. The percentage of trans-
outcomes and moves on, only to launch another program formation programs with so-so outcomes—that is, those
in a few years’ time. One prominent U.S. bank, for example, that achieved more than 50% but less than 100% of their
has initiated three substantial restructuring programs in the targets—increased from 50% in 2013 to 75% in 2023. Instead
span of just four years, yet all of them have fallen flat. of pushing their organizations to deliver more, many senior
It doesn’t have to be this way. Over the past two decades leaders seem to settle for improved but still unexceptional
we’ve worked with dozens of companies that have effectively performance. While that reaction is understandable, it often
transformed their businesses and studied hundreds of others signals to employees that if they wait long enough, the status
that have attempted to. Our analysis has revealed six import- quo will be restored. Worse, it breeds cynicism that under-
ant differences between the programs that worked and those mines the success of future change efforts.
1
Treating transformation as a continuous pro- newly established leadership positions in areas such as com-
cess. Most transformation efforts are structured mercial PCs, servers, storage solutions, and other critical
as discrete programs—with a clear beginning and infrastructure technologies.
end. Top management sets an ambitious goal,
2
defines a series of initiatives designed to meet it, Building transformation into the company’s
assigns leaders to manage the change, and then monitors operating rhythm. Too often transformations
performance until the program is complete. It’s an approach are viewed as separate from company operations
inspired by the work of the psychologist Kurt Lewin, who and handled by a distinct program-management
believed that the process of change entails (1) creating the office. In most instances, however, working on
perception that a change is needed, (2) moving toward the both should be considered part of every manager’s day job.
new desired behavior, and (3) solidifying that new behavior Consider the approach Alan Mulally took to successfully
as the norm. This became widely known as the “unfreeze- lead the transformation of Ford Motor Company from 2006
change-refreeze” model. to 2014. Shortly after taking the helm, he introduced a rig-
Although that model may have made sense when most orous business plan review (BPR) process, which involved
business transformations were transitory—that is, a tem- weekly meetings with the entire senior leadership team.
porary deviation from “normal”—or if the change involved The BPR played a pivotal role in aligning the team around a
managing the implementation of, say, a new enterprise compelling vision and a comprehensive strategy known as
resource planning system, it’s not well suited to deliver major One Ford.
change in today’s highly dynamic environment. Most compa-
nies are (or should be) in a state of constant transformation.
It’s simply no longer possible to refreeze and step aside. The
most successful efforts recognize that transformation must Transformation Efforts Are
be continuous and orchestrate their programs accordingly. Still Missing the Mark
Dell Technologies is a case in point. When Michael Dell In 2013 and 2023, Bain & Company conducted surveys of the
took the company private, in 2013, he knew he wanted to transformation initiatives of 300 large companies worldwide. The
companies included both Bain clients and nonclients. The results
transform the PC maker into a broad-based leader in infra- reveal that despite everything companies have learned from
structure technology. He also recognized that to do so he research on what derails change programs, very few transformation
needed his team to keep stretching to drive the next level of efforts achieve their goals.
performance.
Starting in 2014, Dell’s executive leadership meetings Met or exceeded Settled for Failed
centered on what was referred to as the Dell Agenda. This expectations mediocre results to deliver
agenda amounted to a backlog of the most critical issues the
2013 12% 50 38
company was confronting at the time and, by implication,
the most important changes Dell had to make to transform
successfully. Some issues, such as the need to simplify Dell’s
2023 12% 75 13
product portfolio and transition from a made-to-order to
The BPR ingrained the implementation of One Ford into sequenced to limit disruption and prevent widespread
the company’s operating rhythm. As Mulally noted, “Every- organizational fatigue. Success is recognized and rewarded
one knew the plan, the status against that plan, and all the along the way to build energy and enthusiasm for the effort.
areas that needed special attention. Everyone was working Take the transformation of Virgin Australia. In April 2020,
together to change the reds to yellows and greens.” just a few months into the Covid-19 pandemic, the company
Under One Ford the company divested itself of Aston entered voluntary administration as a bankrupt carrier. That
Martin, Jaguar, Land Rover, and Volvo. It terminated its September, Virgin was acquired by the U.S. private equity firm
passenger-vehicle joint venture with Mazda and discontin- Bain Capital (an entity entirely separate from our firm), and
ued the Mercury brand. Ford also streamlined its vehicle by the end of November, Jayne Hrdlicka had been appointed
platforms and standardized components across its models, CEO. Under her leadership the company reorganized itself
which resulted in significant cost savings and improved as a much leaner, midmarket carrier. Once it had turned the
product quality. The proceeds from asset sales and the savings corner it expanded its fleet by 60%, hired thousands of new
from restructuring, along with external financing, were chan- employees, opened many new routes, and completely reimag-
neled into creating a “balanced business” of cars, trucks, and ined its customers’ experience. Such massive changes could
SUVs. The company revitalized its iconic brands, including have caused debilitating disruptions had leadership not been
the Ford F-150 pickup and the Mustang, transforming itself meticulous about managing organizational energy.
from a near-bankrupt relic into an industry leader. At the start of the process, every aspect of Virgin
During Mulally’s tenure, Ford rebounded from a $12.7 bil- Australia’s overhaul was carefully sequenced. The airline
lion loss to a $6.3 billion pretax profit. Though its stock price made significant investments in new planes and technology,
fell during the global financial crisis, it shot up 800% from restructured its head office, revamped its marketing and
its low point, and when Mulally left it was nearly double sales function, bolstered its procurement team’s capabil-
what it had been when he started. ities, and introduced new customer-service innovations.
Virgin’s leadership assessed how each change would affect
3
Explicitly managing organizational energy. employees and consciously scheduled the hundreds of ini-
Transformations fizzle when they consume tiatives involved to avoid overburdening any one part of the
more energy than they generate. That’s why organization at any one time. Unnecessary or lower-priority
their tendency to continually disrupt the efforts were put on hold, either temporarily or permanently,
work routines of the same group of individu- freeing up organizational bandwidth. Leadership applied a
als is problematic. Over time that group may start to ignore simple rule of thumb: Prioritize the changes that were most
further requests for change or even actively resist them. crucial to passengers and deemphasize or eliminate those
Our research shows that if an organization tries to change that weren’t. The strategic staging and focus allowed Virgin
more than two primary routines simultaneously, the odds Australia to move quickly without exhausting its people.
of failure increase dramatically. For example, consider a Hrdlicka and her team also actively engaged the organi-
scenario in which a company’s sales force is asked to sell in zation throughout the transformation, tapping into Virgin
newly defined territories while also promoting an expanded Australia’s unique “Virgin Flair” culture. They encouraged
portfolio of products and services. In such a situation it’s employees to contribute new ideas for making Virgin “the
highly likely that sales productivity will drop. Still, despite most-loved airline in Australia.” Great ideas were celebrated,
its importance, organizational energy is rarely managed and the inclusive approach injected passion and energy
effectively during transformations. into the team’s work, significantly accelerating the pace of
In successful programs leaders explicitly identify the change. Frontline staff and executives shared in the success
employees and functions that will be most impacted by each of the transformation, receiving bonuses and other finan-
aspect of the initiative and ensure that no group is expected cial rewards in recognition of their contributions to the
to alter multiple routines at once. Changes are carefully turnaround.
4
Using aspirations, not just targets, to stretch
management’s thinking. In typical transforma-
tion efforts, especially turnarounds and restruc-
turings, the initial step involves examining
external benchmarks. These are then used to set
top-down targets for cost and head count reductions, and the
organization is tasked with figuring out how to meet them.
While that approach may appear rigorous and data-driven,
it seldom sparks transformative thinking. Relying on bench-
marks tends to confine “the art of the possible” to what oth-
ers have already achieved, effectively setting the bar too low.
True transformation calls for breakthrough thinking and
pushing beyond current practices, often with the help of
new technology. Consider Adobe, the $18 billion developer
of software for creative services professionals. In 2011, when
it declared its intent to shift its entire product line to the
cloud, the strategy was deemed unusually ambitious, if not
revolutionary. There were few benchmarks that Adobe could
refer to—only the aspiration of fundamentally reshaping the
company’s business model.
Shantanu Narayen, Adobe’s CEO, challenged his manage-
ment team to reinvent the company. Historically, Adobe’s
formula of selling software like Photoshop to creative profes-
sionals at attractive prices had been highly successful. How-
ever, Narayen recognized that clinging to the past would not
be a winning business strategy. Drawing on his extensive
knowledge of the industry and the company, he set the goal
of transitioning 100% of Adobe’s products to a web-based
subscription model. The company would be among the first
to adopt the software-as-a-service (SaaS) approach.
This bold ambition unified and motivated everyone at
Adobe. Every facet of the business had to grapple with the
question, How do we need to do this differently? Transition-
ing to the cloud significantly affected the company’s product
development, operations, and go-to-market strategies. For
instance, Adobe had traditionally introduced new features
whenever a new software version was released, typically every
18 to 24 months. But in the cloud, products could be contin-
uously updated, tested, and released, necessitating a more
agile and scrum-based approach to product development.
In addition, Adobe had to invest in cloud-based compo-
nents that would facilitate seamless downloads of products
because customers still needed to have many applications
on their desktops. And the way that Adobe engaged with its and so trim around the edges rather than propose major
customers had to change. Its value proposition was reorga- changes. But midlevel executives tend to have enough expe-
nized around delivering high-quality service, not merely rience to see the shortcomings in current operations—and
introducing new features. Aspects of it like uptime, availabil- aren’t so close to the ground that they get lost in the weeds.
ity, disaster recovery, and security all became pivotal. Much Amgen, the $27 billion global biopharma company, is a
closer collaboration among the functional groups contrib- case in point. In 2013 its CEO, Bob Bradway, and his team set
uting to the overall customer experience, including product out to reshape the company, which was more than 30 years
management, engineering, marketing, and IT—which all old and grappling with the expiration of the patents on sev-
had previously operated separately—was also required. eral of its most successful drugs. The goal was to reposition
Adobe continues to transform itself, lately by harnessing Amgen as an agile, patient-centered powerhouse capable of
breakthroughs in generative AI. In 2023 alone the company developing groundbreaking drugs quickly.
introduced 100 new features and updates for its software, For each transformation initiative, Bradway and his team
including many advanced AI-powered tools. It has expanded selected two midlevel leaders—a VP-level “initiative lead”
Firefly, its AI product line, with three new image generators. and a director-level “initiative liaison.” These leaders were
Beyond the “wow factor,” the wide range and high quality of to make the transformation effort their primary focus. Their
these innovations have firmly established Adobe as the lead- selection was rigorous: A “draft,” coordinated by the chief
ing maker of creative tools for professionals. transformation officer and the chief human resources officer,
The results have been truly impressive. Since Narayen was conducted by the CEO and all his direct reports. Eligible
became the CEO, Adobe’s market value has shot to more than executives had to be among the highest rated at Amgen, with
$250 billion from just $24 billion—and the company’s average proven ability to tackle the most-pressing challenges.
annual total shareholder return has been more than 15%. This Once the initiative leads and liaisons were in place, teams
compares very favorably with the tech-heavy Nasdaq’s TSR of with the necessary capabilities and expertise were assem-
just under 9% in the same period. What’s more, Adobe’s trans- bled. Leadership emphasized the importance of assigning
formation has reshaped the entire software landscape. Nowa-
days nearly every software company, ranging from Autodesk
to Microsoft, has followed Adobe’s pioneering lead.
5
Good Practices Success rate
22
Driving change from the middle out. Most Percent of companies
transformation programs are top-down: Upper
Lead to Better meeting or exceeding
6
Accessing substantial external capital from also rose by more than 400% during Legere’s tenure, signifi-
the start. Transforming a business is often cantly outperforming the S&P 500’s 150% gain. During that
expensive. Mulally borrowed $24 billion to fund time T-Mobile’s performance even surpassed Apple’s.
Ford’s transformation in 2006, and Michael Dell
invested more than $60 billion to turn Dell into TRANSFO RMATI O N PRO GRAM S O F TE N promise break-
a leader in infrastructure technology in 2017. through results, but most never realize them. The success-
In our study nearly all failed transformations were under- ful ones adopt an approach that fundamentally differs from
funded. Many leaders tried to finance them through cost- the approach at other companies. Their leaders view change
cutting measures. While that strategy may sound appealing, as a continuous process, integrating it into the company’s
it typically falls short. Efficiency gains and waste reduction operating rhythm. They understand that organizational
alone usually can’t provide enough financial resources. energy is a scarce resource and manage it diligently, and
In contrast, nearly all successful transformations tapped they keep the focus on driving the transformation from the
the capital markets. External capital played a crucial role in middle out. Never forgetting that major change requires
fueling T-Mobile’s growth from 2013 to 2020, for instance. major investments, they secure external capital early
Shortly after John Legere took the reins as CEO in 2012, (and often). In short, successful transformations employ a
he and his team acknowledged that a substantial invest- transformative strategy—a must for companies aiming for
ment was required to pull off the turnaround the company enduring success in today’s ever-changing world.
needed. At the time, T-Mobile lagged far behind Verizon HBR Reprint R2403E
and AT&T, with only a third of the wireless subscribers of
either carrier. One major problem was that T-Mobile had not
MICHAEL MANKINS is a leader in Bain & Company’s Organiza-
supported the iPhone when it became ubiquitous. “Before I
tion and Strategy practices and is a partner based in Austin.
joined T-Mobile it was the fastest-shrinking wireless company
He is a coauthor of Time, Talent, Energy: Overcome Organizational
in America,” Legere told Investor’s Business Daily. Drag and Unleash Your Team’s Productive Power (Harvard Business
Avoiding the common mistake of relying solely on inter- Review Press, 2017). PATRICK LITRE leads Bain’s Global Transforma-
nal cost-cutting measures, Legere and his team decided to tion and Change practice and is a partner based in Atlanta.
New
Role In this tight
labor market, cost
cutting is out.
AU T H O RS
Peter
Cappelli
Ranya
Nehmeh
Championing employee
Professor,
Wharton
School
HR
specialist
concerns is in.
Harvard Business Review
May–June 2024 97
H U M A N R ES O U RC E
M A N AG E M E N T
in the labor force, will probably keep the job market tight
for some time. Meanwhile, overwork, fear of layoffs, lack of
advancement opportunities, and worries of being replaced
by technologies like artificial intelligence have created an
epidemic of workplace stress in the United States. Evidence
that companies have hit the limits of lean staffing includes
the remarkable Kaiser Permanente strike of 2023, which
was the largest health-care labor dispute in U.S. history, and
pharmacists’ walkouts and sick-outs at CVS and Walgreens.
In all those disputes one of the main worker demands was
that the companies staff open positions.
HR’s focus on minimizing personnel costs was not a prob-
lem when job markets were cool. But now keeping positions
filled and preventing employees from burning out or becom-
ing dissatisfied are the priorities. To meet the fundamental
ROM WO R L D WA R I I T H RO U GH 1980 the challenge of hiring and retaining good people, HR needs to
focus of the human resources function return to its traditional role of taking care of employees. It
was advocating for workers—first as a must play a lead role in persuading top management to treat
way to keep unions out of companies and employees better and to change company policies on pay,
later to manage employees’ development training, layoffs, vacancies, outsourcing, and restructuring.
in the era when all talent was grown from within. Then
things changed. Driven by the stagflation of the 1970s, the
recession of the early 1980s, and more recently the Great More Talk Than Action
Recession, HR’s focus increasingly shifted to relentless cost In a slew of C-suite surveys, including those conducted
cutting. Decades of slack labor markets made slashing HR by the Conference Board, CEOs ranking the importance
expenses easy because it was hard for people to quit. Pay of stakeholders place employees even higher than share-
and every kind of benefit, including training and devel- holders. They also say that talent, especially acquiring it,
opment, got squeezed. Work demands went up, and job is the most critical factor affecting their business. Yet so
security fell. far little has changed in the way that companies manage
Now the pendulum has swung sharply the other way. The their workforces. Real wages are still barely keeping up
U.S. unemployment rate has been below 4% for five years, with inflation; weekly earnings actually declined slightly
with the exception of the Covid shutdown period. Produc- in 2022 and did not grow at all in the first three quarters
tivity growth has lagged, with the 2010s being the worst of 2023. Promotions are rare, with only 4.5% of employees
decade for it in modern times. That, along with slow growth receiving one within two years of being hired, according
to an ADP Research Institute analysis of the careers of top managers say that their employees are “financially
51 million U.S. workers. A 2022 McKinsey survey found healthy,” only 55% of employees feel that way. And in their
that a lack of career development and advancement was the research Joseph Fuller and Manjari Raman of Harvard Busi-
most common reason people gave for quitting a job. A dearth ness School have found that C-suite executives believe they
of training and feedback from supervisors and two other routinely implement career advancement practices that
cost-cutting practices, “hoteling” (not giving workers a per- their employees say never happen.
manent office or cubicle and making them reserve one when To supply leaders with good information, HR must get
they need it) and open office layouts, have also contributed control of data from company vendors. Many firms can’t see
to employee discontent. how well their hiring practices work, because their applicant-
Then there are the repeated restructurings that have tracking-system vendors have all the data about job can-
become a way of life at large companies. The constant didates and their performance-appraisal vendors have the
changes raise employees’ stress levels and take a big toll data on how hires are doing. Businesses should require that
on their mental health. That not only pushes up health- their data be delivered to them in usable, compatible for-
care costs but also increases turnover and undermines mats and, if not, that the vendors themselves do analyses for
employee engagement, performance, and productivity, as companies on demand.
well as firms’ ability to recruit. Perhaps the single most important piece of informa-
It’s understandable why breaking old habits is hard. tion that most leaders lack is what turnover actually costs.
Telling leaders that the approach they’ve been following for When we’ve tested groups of CEOs about this, we’ve found
40 years—and the one thing investors seem to understand that they have no idea. Unfortunately, HR leaders often
about human capital (“cut it!”)—is all wrong does not seem don’t know either, or the figure they use is completely off:
like a career-building move. Nonetheless, HR executives Most cite the cost as $4,000 an employee, which is simply
can—and must—make the case to their CEOs and operating an estimate of the marginal administrative costs of hiring
executives that the old way is no longer working and that a new person. It ignores things like training expenses, new
their companies need to change direction. hires’ lower initial performance, and the time coworkers
have to spend interviewing candidates. If leaders real-
ized that the true cost of turnover is often a multiple of an
Make True Costs Clear employee’s annual salary, knew what the value of the firm’s
One critical step HR can take to get the C-suite to alter best employees was relative to that of average employees,
course is to show leaders what the costs of current practices and understood that 29% of people who have just been pro-
really are and illustrate the value of human capital. To that moted quit (perhaps because 39% of employers routinely
end, HR should provide a dashboard that includes metrics fail to give promoted employees more pay), they would
on turnover and what it costs the company, information immediately demand changes. It’s one thing to tell leaders
on why employees are quitting, and figures on vacancies that treating employees well is the right thing to do and that
filled from within. It should also include data on employ- it supports the company’s environmental, social, and gov-
ees’ well-being, such as absenteeism rates, incidents of ernance goals. It’s another to be able to add that the failure
new illnesses and disabilities, use of employee assistance to do it costs the business in question an extra $10 million
programs, and levels of commitment and engagement. each quarter.
Those things all can have a significant impact on firms’ Ten years ago, driven by better information on the true
success, but since they don’t show up in any single finan- costs of turnover and how the retention and performance
cial accounting category, they have to be pulled out and of frontline workers affect operational and financial results,
highlighted for the C-suite. Corporate leaders often are Walmart embarked on an ambitious change program. (See
unaware of the reality in their workplaces. A long-running “‘The Right Thing to Do,’” HBR.org, December 7, 2017, and
MetLife survey, for example, has found that while 83% of “‘You’ve Got to Set Your People Up to Succeed,’” May–June
2023.) Among other moves, it increased pay, improved numbers. But the priority should be on reducing the causes of
benefits, invested more in training, and redesigned jobs stress, not monitoring it or alleviating its symptoms. Imple-
and schedules. menting wellness programs to help employees manage stress
At Neiman Marcus, Eric Severson, the chief people offi- is like building trauma centers to deal with car accidents.
cer, spearheaded a similar transition by persuading the rest One huge cause of stress is uncertainty. That’s why HR
of the C-suite that the retail chain was investing too little in should encourage leaders to communicate their plans more
human capital. He presented top management with data on proactively with employees. If employees don’t know what’s
the costs of turnover and the benefits of retention and lev- in the works, they’ll make up their own stories, which are
eraged “voice of the customer” tools from marketing to find practically guaranteed to be worse than the reality.
out what drove turnover and successful hiring. On the basis Two of the things they’re most anxious about these days
of that information, the company introduced generous paid are technological change and restructuring.
parental and family leave for all its associates, which was Fear of AI. Perhaps the biggest worry across workplaces
rare in retail but would be especially valuable to its mainly is whether new forms of AI will eliminate jobs. That was
female workforce, and allowed many jobs to continue to be one of the main concerns prompting the 2023 Hollywood
remote after the pandemic. Severson also got the company strikes by screenwriters’ and actors’ unions, which suc-
to stop outsourcing recruiting by showing that it could be ceeded in getting studios to place boundaries around the
done better and more cheaply in-house. use of AI to replace human talent. HR needs to calm the
Such companies are the exception, however. At thou- furor by communicating to the organization, “We’re just
sands of firms, a lack of information continues to drive job figuring out how these tools can be used. In the past it has
cuts and decisions to put off filling open positions. Exec- taken decades for new technologies to be fully embraced,
utives announce restructurings and layoffs because they and virtually none has lived up to the hype.” In fact, the
think investors like them. But even when these sweeping evidence so far suggests that generative AI, which has
plans aren’t carried out, they panic employees, causing them produced widespread worker fear, will be more likely to
to freeze up and start looking for jobs elsewhere. Recent evi- enhance jobs in the near term than eliminate them. (See
dence has shown that cutting head count deep and early, the “How to Capitalize on Generative AI,” HBR, November–
typical advice when earnings fall, leads to worse financial December 2023.) It’s particularly important to be clear that
performance because of the difficulty of staffing up again. the company has no secret plan to replace people with AI.
(Meta and other tech companies that had layoffs in early In addition, it’s smart to engage employees in evaluating
2023 in response to investor pressure announced hiring AI’s potential uses, because doing so helps reduce their
plans a few months later.) And research by Ciao-Wei Chen stress and increases learning in the process.
and Laura Yue Li of the University of Illinois at Urbana- The restructuring threat. Company efforts to reorganize
Champaign shows that leaving positions open also can have to adapt to the changing business environment are another
significant costs. They found that a one-standard-deviation major source of workplace stress. The shift to “green” prod-
increase in the length of job vacancies was associated with ucts, for instance, was one of the main issues in the 2023
5% to 6% lower quarterly returns on assets. United Auto Workers strike, which ended with the union’s
Better information on the true costs of such actions might securing protections for employees from restructuring
change senior management’s decisions. HR can easily close resulting from the transition to electric vehicles.
the gap by sharing the right data with leaders. Throughout the business world, companies see the abil-
ity to restructure quickly as the key to long-term success.
Yet without employee support, change efforts fail. Lately
Address Employee Stress that support has been harder for companies to come by.
HR should establish standard, credible metrics for employee Gartner’s Cian O Morain and Peter Aykens note that a
stress and discuss them alongside financial and production survey conducted by their company found that employee
willingness to get behind new initiatives plunged from 2016 the business and its employees to remain stable. In recent
to 2022. (See “Employees Are Losing Patience with Change decades companies have done just the opposite and have
Initiatives,” HBR.org, May 9, 2023.) resorted to using contract workers and to outsourcing entire
We believe that if leaders fully understood the effects core functions, such as IT, to drive down operating costs. In
of reorganizations on mental health, turnover, and job many cases that was a mistake because the vendor couldn’t
performance, they would limit them or go about them in deliver or, worse, went out of business.
different ways. While many new organizational structures
are unlikely to last, all too often they involve changes that
cannot be easily reversed, such as laying off employees and Rebuild the Internal Labor Market
hiring new ones. One effective way for companies to increase flexibility and
reduce employee anxiety is to retrain workers and give them
opportunities to transfer into promising areas of the orga
Find Better Ways to Be Dexterous nization. HR can play a central role in making the case for
When companies do restructure, they should avoid simply those practices.
moving from one rigid architecture to another, redrawing Despite the fact that training is necessary to grow talent
boxes on the org chart and reassigning employees to new from within, companies invest remarkably little in it. A
managers. A smarter approach is to compartmentalize survey conducted in 2020 by MIT’s Paul Osterman suggests
change by creating smaller P&L units that grow or shrink that the average U.S. employee gets only a half day of train
based on needs in a company’s target markets. AIG was ing per year—and that includes training of any kind, from
famous for entering markets by creating new companies to compliance with new administrative practices to safety
go after them and then shutting those ventures down if the training.
markets became unprofitable. That was no doubt painful— The dearth of training translates into fewer opportu
but not as painful as restructuring the entire corporation nities to move up. Indeed, one of the most astonishing
first to chase a new market and then again to exit it. Two characteristics of the contemporary workplace is how little
other companies that have taken a similar approach are career advancement there is. Research suggests that only
the French infrastructure company Vinci and Haier, the 10% to 20% of job vacancies are filled by current employees.
Chinese multinational maker of home appliances and con And like the McKinsey study we mentioned earlier, a Pew
sumer electronics. Foundation survey found lack of advancement to be a sub
The downside to decentralizing around autonomous stantial cause of turnover: Sixty-three percent of people
P&Ls is a loss of synergies, but there are remedies for that. who’d left their jobs in 2021 cited it as a reason for quitting.
ING, for instance, inspired by tech companies’ agile models, Lateral moves are even rarer than upward ones: Only 1% of
loosely groups small multidisciplinary teams into larger col U.S. employees move laterally to different businesses and
lectives for the purpose of coordinating bigger tasks. When operations in a given year, according to data from the Soci
a project finishes, the team assigned to it disbands. Func ety for Human Resource Management.
tional experts in legal, finance, and operational risk are not The benefits of retraining are enormous because it
assigned to teams but can be called on to help out and give prevents companies from replacing good employees with
objective advice. The system can flex to meet new demands, people with different skill sets, who often have to be paid
but job titles and reporting arrangements do not change. more. Some companies have realized this. Several years ago,
Business leaders should also rethink how contract IBM offered some employees who were about to be restruc
employees and vendors are used. Almost 50 years ago, tured out of jobs the option of taking severance or mov
Charles Handy and John Atkinson argued that contrac ing into roles requiring new skills that they would receive
tors should do the peripheral work that shifts when busi training in for one day a week on their own time—a way
ness needs and strategies change, allowing the core of of sharing the costs with them. This approach had a huge
payoff—including better productivity, better employee fit, rewards to actual performance in a straightforward way—all
and lower turnover—and saved twice as much money as the changes that reduce perceived injustices, which can create
retraining cost. In 2019 PwC committed $3 billion to retrain- enormous stress for employees. Increasing inclusion comes
ing and promised its workforce of 275,000 that all employees down to creating an atmosphere of tolerance and helping
who agreed to undergo it, even those whose roles were elim- employees with their individual challenges.
inated by automation, would have a job with the company, A work environment in which employees feel safe being
though it might not be the same job. who they are encourages people to speak up and inspires
Internal job markets help current employees move to a sense of pride and belonging. Those positive feelings
new positions in their organizations where the growth is translate into hard work and increased employee loyalty.
and where they can learn new skills. They not only cost Employers who get DEI right are far more able to attract tal-
very little but also save enormous amounts of money by ent because it widens the pool they can access, particularly
reducing turnover and the need to hire from the outside. among younger people.
Though internal job markets date back to the dot-com
days of 1995 to 2000, they were scaled down after the Great long-term change like the shift from
RE SP O ND I NG T O A
Recession under pressure from line managers who didn’t slack to tight labor markets usually takes a great deal of
want to let their good employees leave them, even if it time. But no one wants to be at the end of the line of compa-
was for better jobs in the same organization. Now these nies reacting to an important inflection point. The question
programs are being revived, often under the name “talent is, Who will be at the front of the line? Over the past 40 years
marketplace.” (See “How to Design an Internal Talent Mar- companies have built HR practices and operating cultures
ketplace,” HBR, May–June, 2023.) based on the notion that squeezing employment costs and
HSBC says its talent marketplace was critical to its trans- HR resources had little downside. Some of the cost cut-
formation into a digital-first bank. Unilever’s former CEO ting was indirect—by not filling vacancies and letting the
Alan Jope praised its revamped internal job market, Flex remaining employees figure out how to get additional work
Experiences, for helping the company rearrange talent in done—and some was direct, like shrinking training and
a way that allowed it to weather the pandemic and become development budgets. That model is no longer working, yet
more agile. A few years ago Flex expanded into matching companies continue with it out of inertia and because costs
employees with learning opportunities on projects, partic- like turnover, unstaffed positions, and disengaged employ-
ularly those with ESG objectives. Since 2018 Unilever has ees have no line item in the financial accounting systems of
reallocated 500,000 employee hours toward more than 4,000 enterprises in the United States and many other countries.
business-critical projects, improving overall productivity (See “How Financial Accounting Screws Up HR,” HBR,
by 41% in the process. Seventy percent of the assignments January–February 2023.) To change harmful, outdated
in those projects were cross-functional, helping employees practices, HR will have to provide business leaders with
build skills that will make the organization even more agile. that vital information. HBR Reprint R2403F
Strengthen DEI Efforts PETER CAPPELLI is the George W. Taylor Professor of Manage-
A final area where HR can take the lead is diversity, equity, ment at the Wharton School and the director of its Center
for Human Resources. He is the author of several books, including
and inclusion. The “equity and inclusion” components,
Our Least Important Asset: Why the Relentless Focus on Finance
which get less attention, are where HR advocacy for
and Accounting Is Bad for Business and Employees (Oxford
employee interests is especially needed. Improving equity University Press, 2023). RANYA NEHMEH is an HR specailist working
involves making the treatment of employees and the distri- on topics related to people strategy, human capital, leadership
bution of opportunities fairer, offering opportunities on a development, and talent management and is the author of The
clear and meritocratic basis, reducing favoritism, and tying Chameleon Leader: Connecting with Millennials (2019).
To Create a
Greener Future,
the West
Can’t Ignore
China
Four ways
for companies to
safely engage
AU T H O RS
IDEA IN BRIEF
THE OPPORTUNITY
Fighting climate
change is a prom
ising area for en
gagement between
Western com
panies and China.
After all, China
is responsible
for 27% of global
emissions and of
fers a vast market
for green tech.
THE CHALLENGE
Geopolitical
strains, the disrup
tion of business re
lationships by the
Covid pandemic,
and domestic
Chinese policies
all make engage
ment complex.
THE SOLUTION
To engage effec
tively with China,
consider forming
coalitions for
safe technological
development,
forging local
partnerships for
market access,
and insourcing
innovative
technology.
in THE CURREN T
geopolitical land-
scape, marked
by escalating
tensions between
Western nations
and China, it’s a challenge to identify potential areas of
collaboration between East and West that would yield
mutual benefits and foster trust. But fighting climate
change is one. Climate change is a problem that affects
every nation, and it cannot be solved without China’s
involvement because the country contributes 27% of
global emissions, according to the World Bank.
On the surface, working together on climate change
seems like a win-win. China aims to drastically reduce
its carbon footprint, and collaborating with interna-
tional groups is key to reaching this goal. But the reality
is complicated. Many businesses hesitate to work closely
with China because of geopolitical tensions and con-
cerns about transparency, particularly after the Covid‑19
pandemic. The pandemic also disrupted important
business relationships; many foreign experts left China
in its wake, weakening ties between Chinese and inter-
national businesses. What’s more, Western governments
(particularly the United States) are now reversing years
of policy and taking steps to isolate themselves from
China politically and economically.
These tensions have real consequences. For example, Of course, other obstacles—such as strict rules about
Bill Gates’s TerraPower, an advanced nuclear-energy proj- money and business ownership, complex supply chains,
ect, had to stop working with China because of restrictions intrusive digital-data laws, competition from fast-growing
by the U.S. government. And numerous solar projects in Chinese companies, and preferential legal protections
the United States that involve China are on hold, awaiting for Chinese firms—have been imposed on Western com-
government review. These are just two examples of the panies by China. In fact, many businesses have started to
growing pressure companies face externally when dealing question whether the Chinese market is as great a prize as
with China. they had hoped: Changing demographics and high debt
threaten the once-meteoric growth of China’s domestic Strategies for Engaging with
economy. Some companies are exiting China entirely. In
2021, for example, Siemens Gamesa left the Chinese onshore
China on Climate Change
wind market because of frustrations over perceived advan- So how can Western multinationals confidently move for-
tages for local companies. ward given the size of the opportunity and the risks? We rec-
Despite these hurdles, opportunities for Western and ommend four strategies, each of which involves partnering
Chinese collaboration on climate change are promising. As in some way, particularly with local companies.
Western-trained experts deeply embedded in China, we’ve
witnessed firsthand the potential for productive engage- Make sustainability a global theme. Com-
ment. In this article we dissect the complexities of the
current climate-change opportunity in China and present
1 panies that have made sustainability a priority
will find significant advantages in China. Their
practical strategies for businesses that are ready to enter products will attract more demand from Chi-
the market. nese customers, and they’ll attract reputable partners that
are also striving to become more sustainable. In addition,
Chinese regulators are more likely to favor and protect the
A Twofold Opportunity intellectual property of companies that invest in environ-
The first thing we explain to Western business leaders mental sustainability. Perhaps most important, companies
wishing to engage with China on climate change is that the that are sustainability leaders will be better positioned to
opportunity is twofold. First, China offers a vast potential address any China-related concerns that their global cus-
market for Western-developed solutions. The Chinese gov- tomers, partners, regulators, and investors have. Because
ernment has set ambitious targets in this area, aiming to they’ve made sustainability central to their value proposi-
peak carbon dioxide emissions by 2030 and achieve carbon tion, their stakeholders will have confidence that they will
neutrality by 2060. Those goals create significant oppor- address associated risks. They will trust that these compa-
tunities for firms with cutting-edge technologies. Take, nies’ engagement with China will be consistent with their
for example, Bosch Thermotechnology and its hydrogen- strategic purpose and intent.
fueled heating systems, which could garner a significant Consider Apple. Decarbonization is a key global strat
share of China’s clean-technology market (worth an esti- egy for the company. In Latin America it’s working to
mated $500 billion). The opportunities for Bosch Thermo- combat deforestation, and in advanced markets it encour-
technology are broad and include hydrogen production, ages consumers to practice clean-energy charging. Apple
carbon capture, sustainable aviation fuels, green urban actively promotes green practices in its global supply
infrastructure, and the reduction of methane emissions chain, including in China, where a significant portion of
from livestock. its supply chain is based and where substantial decarbon-
Second, businesses have an opportunity to integrate ization expertise exists.
China’s own advances in climate-related technologies. To be credible to stakeholders outside China, however,
Chinese firms have excelled at replacing traditional energy it’s imperative for Apple (and other Western multinationals)
sources, directly with solar power and indirectly through to rigorously address risks associated with forced labor con-
the production of electric vehicles and battery technology. cerns in China. Investors are increasingly scrutinizing envi-
Chinese companies have made these advances partly in ronmental, social, and governance issues, placing them on
response to government incentives to develop clean technol- par with climate concerns. Companies need comprehensive
ogies and other innovations. Multinationals with extensive strategies that address both environmental and social gover-
supply chains in China can tap into areas where Chinese nance risks. Those strategies must be an integral part of their
firms have a competitive edge and use their innovations to operational calculus and ensure compliance with relevant
become more sustainable themselves. legislation, such as the U.S.’s Foreign Corrupt Practices Act.
Microsoft is another global company with a broad and China and beyond. When companies pool their special-
credible commitment to sustainability that has engaged ized skills and resources, they’re better equipped to grow.
with China on climate change. The Microsoft Climate And they’re less likely to develop unsustainable conflicts,
Research Initiative involves multidisciplinary researchers because they share a commitment to work together in good
from Western universities (such as MIT) and Chinese ones faith, despite ongoing geopolitical tensions. Although
(such as Tsinghua). Precisely because sustainability is so consortia always run the risks of free riders and complex
central to Microsoft’s value proposition for investors, the bureaucracies, these groups can exert more influence and
company has been able to mount a broad-based effort to incorporate more parties and perspectives than any one
bring in multiple partners from outside China, thus reducing company could alone, allowing for greater experimentation,
the China-specific risk element for non-Chinese investors, learning, and action. Additionally, there is no way to guar-
partners, and regulators. antee that a company is immune to regulatory scrutiny and
This approach isn’t just for corporate giants: Small play- pressure, but coalitions can build greater transparency in
ers that make sustainability core to their strategy and values dealings with regulators and can provide opportunities for
can also engage effectively with China. LanzaTech, a U.S.- local players to be brought into joint efforts—without harm-
based company specializing in carbon-recycling technology, ing coalition members’ prospects for operating as robust
is a prime example. Its unique microbial gas-fermentation competitors. One example is the coalition behind the Low
process mitigates carbon emissions in the manufacturing Carbon Patent Pledge. It includes companies such as Meta
of numerous products. That makes large emerging markets and Microsoft, which invited the Chinese giant Alibaba to
such as China and India (where it works with the state- join, and promotes the sharing of eco-friendly technologies
owned Indian Oil Corporation) of direct strategic relevance. among members.
Companies with strong sustainability credentials may The previously mentioned LanzaTech also has bene-
also benefit by getting their home governments to help fited from being in a coalition. In China, LanzaTech found
them foster partnerships with China. Innovation Centre a market that believed in its technology. So it adopted a
Denmark in Shanghai, for instance, facilitates collabora- strategy of partnering with reputable companies in the
tions between Danish companies and Chinese initiatives steel and petroleum industries there. Those partners
like the Sustainable Packaging Project, which aims to make accelerate the deployment of LanzaTech’s technology and,
China’s packaging sector more green. This project, which because of their prominence and stability, mitigate the risk
includes tackling plastic waste in China’s food delivery that other parties might not fulfill their contractual obli-
industry, could be beneficial to many Chinese companies, gations. The petroleum giant Sinopec became a strategic
such as Alibaba’s Ele.me. The involvement of the Danish investor, and LanzaTech developed demonstration plants
government not only helps address apprehensions inves- with steel majors Shougang Group and Baowu. Shougang
tors may have regarding business ventures in China but also and LanzaTech formed a joint venture—Beijing Shougang
helps Danish companies reach their goals of operating on a LanzaTech New Energy Technology—with participation
global scale. from the Japanese corporation Mitsui and investors such
as Beijing-Hebei Cooperation Green Industry Investment
Form or join coalitions to find safe spaces Fund and Shanghai Dehui Group and its New Zealand part-
LanzaTech capitalized on its strong sustainability technol- Start-ups, too, can take advantage of the benefits of
ogy proposition to mitigate its risk by contributing a license being in a coalition. For instance, Iceland’s Carbfix, which
rather than intellectual property. (If a transferring joint- turns carbon dioxide into stone, is working with Tencent’s
venture partner does not have a majority stake in the JV, it will CarbonX program, a combined accelerator and digital-
effectively lose control over IP rights. To limit those risks, an capability-building program dedicated to exploring next-
exclusive license is preferable to a transfer of IP rights.) Lanza generation low-carbon technologies. It’s also working with
Tech retained global distribution rights for any know-how Frontier, a nearly $1 billion advance market commitment,
and IP developed jointly with its partners—for example, for which aims to guarantee future demand for carbon-removal
extending the ethanol value chain into fiber production. technologies, thereby sending a strong demand signal to
firms working on them to accelerate progress and enhance manufacturing and marketing prowess of local partners.
supply. (McKinsey, where one of us, Woetzel, is a partner Of course, certain industries in China require foreign
emerita, orchestrated the Frontier partnership with Stripe, companies to have a local partner to operate—particularly
Alphabet, Shopify, and Meta.) These two coalitions provide in sectors that the government considers to be strategically
Carbfix with market access and an opportunity to tap into important or sensitive. But even when partners aren’t
thinking both in China and globally regarding carbon cap- mandated, Western companies can adopt a partnering
ture. Participating in CarbonX helps Carbfix reduce the risk approach in order to take advantage of the demand for
of being in China through engagement with Tencent, a lead- international green technology in China while mitigating
ing Chinese company with a solid reputation for IP protec- market access risk (as opposed to global technology risk,
tion and itself a participant in many global carbon alliances. which the coalition strategy helps mitigate). Proactive and
Moreover, the Frontier initiative creates additional allies robust partnerships between international and domestic
outside China, as it works by using global technical and companies can help meet the demand for climate-relevant
commercial experts to make purchases from high-potential offerings and help international companies scale up. These
carbon-removal companies on behalf of buyers. partnerships, moreover, need not hew to the traditional
Some consortia are started by Chinese companies. joint-venture structure.
Tencent’s Global Carbon Neutral Technology Alliance, for Consider Logan Energy, a Scottish start-up with exper-
instance, shares carbon neutrality patents and technologies tise in hydrogen energy. Because of its interest in clean
for free and includes competitors like Alibaba and Microsoft. and renewable energy, China is an ideal geography for
Other consortia are international, like the Science Based Logan Energy to scale up in. The company has teamed up
Targets initiative launched by the UN Global Compact. This with Henan Lanxing Power Equipment, a seasoned player
initiative offers a platform for setting science-based net- in China’s power-transmission sector. This collaboration
zero targets and includes Chinese firms such as Longi Green blends Western technical skills with the marketing reach
Energy, Jinko Solar, and JDLogistics. of a Chinese firm.
Western businesses can also find support through Such partnerships are more likely to succeed when there
international chambers of commerce in China. For are “bridging” executives—Western-trained Chinese profes-
example, the British Chamber of Commerce in Shanghai sionals who bring a more balanced and equitable approach
helps businesses collaborate on environmental, social, to ventures. They play a helpful role not only by smoothing
and governance issues. (One of us, Prashantham, serves cross-cultural communication between executives of the
as a volunteer adviser.) A notable effort is its ESG China two companies but also by assuaging each party’s concerns
Awards, which recognize companies having a positive ESG about the other’s competence and ethics. They help each
impact in China and are open to both local and interna- party understand more clearly the capabilities and limita-
tional businesses operating in China. As a British diplomat tions of the other by explaining them in understandable lan-
in Shanghai explains, it offers businesses peer support guage, literally and figuratively. At Logan Energy, for exam-
and the opportunity to share experience, knowledge, and ple, Yuxuan Zhang is a member of the leadership team. With
expertise. He notes, “We endeavor to help to develop an his help, the joint venture has already secured an investment
ecosystem of force for ESG best practices in China and the of more than $1 million, and there are high hopes for rapid
global market.” growth in the post-Covid era.
Multinationals like Honeywell have also embraced the
Forge partnerships with local companies direct partnership approach. Its Sustainability Research
innovative products like aviation fuel made from waste Chinese electric car company, Nio, in an effort to access
cooking oil. To address market access risk, it requires a reli- new ideas in China. Although a nonobvious partner for
able and steady supply of raw materials in the local market. a shoe company, Nio devotes a lot of effort to developing
And so the company works closely with local partners to sustainable materials for use in the interiors and seats of
ensure that its supply chain and operations within China its vehicles. The two companies collaborated to develop a
are strong. limited-edition shoe using one such material. The response
from the market was enthusiastic. Moreover, the initiative
Insource technology. It’s outdated to think allowed Allbirds to enhance its brand awareness among
Brands
Fuel
AU T H O RS
Omar
Rodríguez-
Growth
Vilá
Professor,
Goizueta
Business
School
Dionne
Nickerson
Assistant
professor,
Goizueta
Business School
Sundar
Bharadwaj They unlock new
Professor,
Terry College
of Business sources of value by meeting
the needs of under-
P H OTO G R A P H E R
BOBBY DOHERTY recognized customers.
Harvard Business Review
May–June 2024 115
D I V E RS I T Y &
I N C LU S I O N
IDEA IN BRIEF
THE OPPORTUNITY
Research shows that
the perception of in-
clusion can materially
change customers’
likelihood to purchase
and willingness to
recommend products
and services.
THE PROBLEM
Despite the many
business and societal
benefits of market-
place inclusion, there
is a systematic lack of
it across industries.
THE APPROACH
This article presents
a framework for in-
creasing marketplace
inclusion in three
areas: seeing the
market, which is about
market definition,
market intelligence,
and strategies for
growth; serving the
market, which involves
developing products,
packaging, and other
commercial practices;
and being in the
market, which looks
at advocacy and the
customer experience.
for inflation). The 2023 The company also has dolls representing people with disabil-
ities, both physical and cognitive. For example, it developed a
movie, which features doll with Down syndrome in collaboration with the National
Down Syndrome Society. Mattel’s inclusion strategy affected
empowerment, multi- icant growth. Barbie revenues increased 63% from 2015 to
2022—before the boost from the film.
gence from the narrow it takes to become an inclusive brand, which we define as
one that serves the needs of historically underrecognized
social and demographic communities (HUCs) in ways that help a brand win and make
its customers feel seen. In studies we’ve conducted over the
the original tall, thin, and willingness to recommend products and services. For
example, in one study of the sportswear market, purchase
white doll that Mattel intent among Black customers increased from 17% to 40% as
their perceptions of brand inclusion increased. We also found
a good shaving experience. In the mid-2000s new compet- underrecognized groups. For example, Microsoft, in collab-
itors such as Dollar Shave Club and Harry’s raised millions oration with organizations such as AbleGamers Charity and
to challenge Gillette’s leadership by disrupting the price the Cerebral Palsy Foundation, designed the Xbox Adaptive
of razors and the process of buying them. But they kept Controller to make the product accessible for people with
one feature consistent—multiple blades. And that’s a great limited mobility. Its success has led competitors such as
option unless you are one of the millions of men globally who Logitech to follow suit.
have coily or curly hair. For those customers, using multi-
blade razors creates ingrown hairs, leading to irritation and
uncomfortable facial bumps. With each additional blade, the To determine whether your company is serving the
incumbent brands enhanced the shaving experience of men market in an inclusive way, ask these questions:
with straight hair and moved further away from the needs of → Does your brand regularly measure inclusion in the
men with other hair types. Still, Gillette frequently used men customer base across different consumer communities?
with coily or curly hair in its advertising. That amounted to → Are your brand’s inclusion goals part of the inputs
diversity without inclusion, because those consumers did guiding the creation of new products and services?
not get good results from multiblade razors. Their alterna- → Do your brand’s inclusion targets influence marketing
tives were suboptimal given that single-blade razors tend decisions such as setting budgets, distributing and pricing
to be of lower quality and depilatory creams can irritate the products, and defining partnerships?
skin and have undesirable side effects. Some male consum-
ers simply grew beards and avoided shaving altogether,
effectively exiting the market. HOW TO BE IN THE MARKET
In 2013, Tristan Walker, a Stanford MBA, founded Walker The third dimension of the framework covers activities
& Co., the parent company behind Bevel, a shaving and related to how a brand shows up in the market, specifically
skin care brand for men with coily or curly hair. Like many in managing the customer experience, communication
entrepreneurs, he saw a market gap where others did not. channels, and brand advocacy efforts. These are often the
Like leaders of inclusive brands, he was motivated to reduce most visible areas of action and the easiest to implement.
the inequity that resulted from the gap. With the launch of They include redesigning stores, for example, weighing
Bevel, Walker awakened the industry to the value of serving in on current events and social issues, and promoting the
a historically underrecognized community. The brand he adoption of inclusive practices across an industry.
started and eventually sold to Procter & Gamble for close to Although critical in creating an inclusive brand, these
$50 million acquired a deep following and cultivated a sense activities also carry great reputational or financial risk if
of respect and belonging among many customers. they’re not designed in ways that reflect an understand-
Consider also the financial industry, which has a mixed ing of underrecognized communities. Consider Target, a
record on serving HUCs. Some fintech providers are rede- brand that has consistently embedded inclusion into many
signing service offerings in ways that provide greater access aspects of its customer experience. It is common to see
to products among HUCs. Peer-to-peer lending (for exam- models with Down syndrome and physical disabilities and
ple, LendingClub and Upstart), savings apps (Acorns and diverse body types and races represented in Target stores.
SoFi), and robo-advisers (for example, Betterment) are just In its support for the LGBTQ+ community, the retailer has
a few areas that have increased market inclusion among taken its inclusive engagement beyond simple messages
lower-income communities by addressing barriers such as of support—such as those often posted by brands during
extensive documentation, high minimum-balance require- Pride Month—into the selection and presentation of offer-
ments, and limited access to financial-literacy education. ings. For example, it stopped organizing its toy products
Serving the market is also about mass customization by gender and instead organized them by age and type of
of product features in ways that address the needs of play. This change provided a more inclusive in-store and
employees. As machines
has proved one thing time and again: The savviest leaders
prioritize participation by the rank and file throughout the
adoption process.
increasingly perform When employees are excluded from that process, they
become averse to working with AI, never develop trust in its
capabilities, and resist even the positive changes that come
intellectually demanding from using it. Nonetheless, done correctly, human-AI collab-
orations represent the most promising way of working. They
reserved for humans, your one example, from researchers at New York University’s
Center for Cybersecurity. The research team used Copilot,
a tool developed by GitHub to generate code automatically,
people feel more excluded to produce 1,692 software programs with no input from
human coders. Forty percent of those programs had critical
ever. And the problem is model inclusive behavior, and what your organization must
do to develop employee-inclusive AI practices. Those prac-
tices can make your long-term performance more likely to
getting worse. improve and your employees more likely to be happy, pro-
ductive, and engaged.
Create space and time for social connection. When suggestions regarding which AI systems will be needed.
working with AI, people have to spend a lot of time in front Meanwhile, HR can familiarize employees with the AI sys-
of computer screens communicating with machines. That tem they’ll be using and the skills they’ll require, and opera-
limits their interaction with other humans. A 2022 poll by tional staffers can focus on integrating the entire human-AI
the Pew Research Center revealed that a major concern workflow into the organizational setup.
people have about the presence of artificial intelligence To lead such diverse teams and bring them together, you
in their lives is that it isolates them from other humans. must communicate in ways that unite rather than divide
As a leader, you have an important responsibility to foster people, allowing for and integrating multiple perspectives
the social connections of your employees, which you can and identifying roadblocks that may complicate or prevent
do through events and online communities within and collaboration. As a business leader, you can start by explain-
outside the organization. Digital underwriters, for exam- ing the organization’s needs to your tech and business teams
ple, often issue insurance policies without even meeting and then outline how the tech experts will become part of
applicants. They could be asked to have weekly meetings the business process to achieve the desired results. Try to
with other underwriters and with the people who built the establish a common language and understanding for both
AI system they use to discuss possible improvements. Uber groups regarding how to approach challenges, recognize pat-
now allows its drivers, who are under constant algorithmic terns, break big problems down into smaller ones, and find a
supervision and feel dehumanized as a result, to telephone shared work method. Without that common language, your
other people in the organization when they need help or teams may fail to cohere, and the inclusive culture you’ve
have a question. tried to develop may dissipate.
The Fortune 500 dairy company Land O’Lakes provides In one of my consulting projects I watched the chief
an excellent example of how to free employees from the technology officer of a global financial institution present
solitude of working with AI. It began its AI transformation the company’s new tech strategy. Just a few minutes in, the
in 2017, when it sought to partially automate commodity CEO interrupted. He said he didn’t understand anything the
forecasting and propensity modeling. Company leaders pri- CTO was saying and pressured him to present his message in
oritized speaking with the rank and file about the expected three simple bullet points. It was embarrassing for the CTO.
challenges, helping establish a common understanding of The tech team retrenched. IT departments stopped trying to
the project’s possibilities and limits and assuring people talk to top executives. The CEO lost credibility with senior
that the company wasn’t pursuing tech for the sake of tech. executives, who realized he wouldn’t be capable of guiding
Teams coordinated across departments, but company lead- the bank through its AI-adoption project. He hadn’t become
ers also conducted weekly people-to-people check-ins with AI-savvy, didn’t connect AI to the purpose of the company,
every business unit to address any challenges, emotional and, worst of all, had not developed the inclusive mindset
or procedural, that may have arisen. That approach was needed to translate from the CTO to the business and back.
crucial to the success of Land O’Lakes’ AI transformation. Needless to say, the project failed. The CEO left the company
Employees were given opportunities to voice concern, to the following year.
question tactics, and to raise anything else that might be on When done properly, mixing teams can fundamentally
their minds. improve not only a company’s technology but also its over-
Make tech and nontech teams collaborate. As an all culture. In 2017 the agricultural equipment maker CNH
AI-savvy leader, you know that successful human-AI collab- Industrial’s leadership team decided it wanted to create a
orations cross disciplines. Your tech and business experts host of AI-powered automation capabilities. It also wanted
should not retreat to their separate corners, literal and vir- to connect customers with internal and external partners
tual. So build diverse teams that work together to adopt AI. and promote CNH as a service-oriented business.
For example, business experts can explain to tech experts The executives began the transformation process by
what goals must be achieved, and tech experts can make speaking with employees from its commercial vehicle unit,
industry-specific vehicle units, IT, and operations. Dig- Reward workers for being human. Employees want
ital advisers and a new digital team were created within you to tell them how you see their role in the human-AI col-
CNH’s existing IT organization to support ongoing strat laborative process. They also want to know how they will be
egy, implementation, and execution. By establishing cross- rewarded for the value that collaboration creates. For humans
disciplinary teams and keeping them involved through- and AI to work together successfully, you need to establish
out the process, CNH was able to quickly adopt (or retire) clear guidelines for who is credited with what. Otherwise your
experimental approaches. It lowered the barriers between employees may feel that you’ve downplayed their contribu-
developers and business owners, and it allowed for real-time tion and attributed the project’s success largely to the AI.
feedback on scheduled work. To ensure that employees feel included, let them share
Constantly develop your own leadership skills. Mak- in the rewards that come with the value that AI creates.
ing your employees feel included in your AI adoption project Emphasize that in your view, humans are crucial to the per-
requires that you account for their uncertainty and discom- formance of AI and therefore deserve appropriate acknowl-
fort when dealing with AI. As an AI-savvy leader, you should edgment. Even just a companywide email recognizing and
be seen as open to listening to their concerns. My research celebrating someone’s accomplishments can go a long way
indicates that employees are indeed more willing to trust toward boosting morale.
and engage with AI if their leaders are humble and demon-
strate that openness. a complex process that requires everyone
AI AD O P TI O N I S
Consider Satya Nadella, the CEO of Microsoft, who is involved to learn, question, and collaborate. How your com-
a master at using empathy to foster inclusion. One of the pany approaches it will depend on the level of your employ-
first things he did when he was appointed CEO, in 2014, was ees’ technological acumen, your budget, and many other
to persuade his employees that no matter how successful critical factors. But the approach I recommend is one that
Microsoft had been in the past, they should stay open to any company can take to optimize the process.
new ideas and other ways of working. Asking them to think It should begin with managers’ learning just enough
differently required courage, but it also showed the impor- about AI to feel confident communicating its importance
tance of being humble—unafraid of receiving feedback from to their teams. Then you need constant human-to-human
others. A humble attitude in a leader encourages employees connection among cross-disciplinary business units as well
to interact regularly with experts in different departments to as meetings at which everyone feels free to speak openly.
understand and relate to the diverse perspectives at work in Such gatherings provide excellent opportunities for manag-
the organization. ers to show vulnerability, communicate their own questions,
You must also guide employees in their understanding or even just listen to venting among colleagues. When your
of AI. For human-AI interactions to be truly collaborative, transformation is underway, and your business is focused
employees need strong frameworks for thinking about how on optimizing AI rather than simply implementing it, you
to work with smart machines. In airline safety, for example, should reward your employees for their uniquely human
pilots need more training to fly planes with collaborative contributions. If they don’t feel valued and respected, your
autopilot systems. That’s because, as Captain Shem Malm- transformation attempt will certainly fail.
quist, a veteran safety and aviation accident investigator, HBR Reprint R2403J
told Wired in 2022, they “must have a mental model of both
the aircraft and its primary systems, as well as how the flight
DAVID DE CREMER is a professor of management and
automation works” to manage issues that could turn into
technology at Northeastern University and the Dunton
catastrophic crashes. Only when employees have a clear
Family Dean of its D’Amore-McKim School of Business.
model of their own strengths and weaknesses, and those He is the author of The AI-Savvy Leader: 9 Ways to Take
of their AI tools, will they understand how AI can augment Back Control and Make AI Work (Harvard Business
their work. Review Press, 2024), from which this article is adapted.
Make
Decisions
with a
VC Mindset
The key is to
embrace risk,
disagreement,
and agility.
AU T H O RS
P H OTO G R A P H E R DAEHYUK IM
Harvard Business Review
May–June 2024 133
ABOUT THE ART
Daehyuk Im’s series Up & Up takes
a minimalist view of the amusement
D EC I S I O N - M A K I N G park rides on Coney Island.
& P RO B L E M -
S O LV I N G
V
use what we call the venture mindset. One of its hallmarks
is a high level of comfort with failure. VCs expect up to 80%
of their investments to fail. This is a feature—not a bug—of
their business model. The investment thesis is that even if
19 of 20 start-ups fail, one investment will be a home run and
cover the losses from all the failures combined—and then
some. In other words, home runs matter; strikeouts don’t.
EN T U R E I N V E ST O R S A R E T H E hidden VCs don’t worry about protecting capital from failures and
hand behind the most innovative losses. They fear missing out on an opportunity that might
companies surrounding us. Accord- change the destiny of a company or an entire sector. As Alex
ing to research conducted by one Rampell of venture firm Andreessen Horowitz (a16z) told us,
of us (Ilya), venture capitalists were “In the VC world, errors of omission are much more damag-
causally responsible for the launch ing than errors of commission.” Bill Gurley of Benchmark
of one-fifth of the 300 largest U.S. Capital echoed that sentiment in a Vox interview: “If you
public companies in existence today. invest in something that doesn’t work, you lose 1x your money.
They have played an essential role in If you miss Google, you lose 10,000x your money,” he said.
unlocking the power of the internet, the mobile revolution, VCs don’t seek common denominators; they look for outliers.
and now artificial intelligence in all its forms. Apple, Google, It’s more important than ever for large companies to
Moderna, Netflix, Airbnb, OpenAI, Salesforce, Tesla, Uber, understand how VCs operate. The playbook of steady, incre-
and Zoom—these firms disrupted entire industries despite mental growth served corporations well for decades, but the
initially having fewer resources and less support and expe- era of stability and continuity is coming to a close. Longevity
rience than their mature, successful, cash-rich competitors. of incumbents has diminished dramatically: Only one in
All these businesses could theoretically have emerged from six of the companies on the inaugural 1955 Fortune 500
within an established company—but they didn’t. Instead, list remains on it today. In the late 1970s, the firms on the
they were financed and shaped by VCs. Indeed, we estimate S&P 500 had been on that list for 35 years, on average; by
that three-quarters of the largest U.S. companies founded 2019, the average tenure was closer to 20 years. And rapid
in the past 50 years would not have existed or achieved their advances in technology mean that even the most stable
current scale without VC support. industries risk being upended by start-ups that can reach
The question is, Why? What makes small and nimble scale on ever-faster timelines.
venture firms from Silicon Valley, Berlin, and Beijing so Today, few companies are safe from disruption. Estab-
good at finding and funding start-ups that go on to achieve lished firms are frequently competing directly with
tremendous success and drive innovative trends? What fast-moving VC-funded newcomers, whose approach to
skills do venture firms have that experienced, networked, decision-making and innovation draws from the styles and
and powerful large corporations lack? And most important, methodology used by their investors.
are those skills replicable? Our research reveals that the venture mindset is char-
For the past decade, we have studied the most successful acterized by several key principles: the individual over the
venture investors, analyzing how they make decisions and group, disagreement over consensus, exceptions over dogma,
interviewing and surveying hundreds of their top leaders. We and agility over bureaucracy. Guided by these principles,
have also studied corporations, conducting numerous exper- VCs speed up decision-making and prevent groupthink from
iments focused on decision-making and working with many torpedoing unconventional opportunities. In this article, we
firms on their corporate innovation and venture efforts. offer guidance for understanding when and how incumbents
We’ve found that the way successful VCs make decisions should wield the VC mindset to spur innovation—and secure
is different from the way traditional corporations do: They their survival.
and thus are the most uncertain, if they can convince just
WHEN TO ADOPT THE VC MINDSET one other partner out of seven that the idea is promising. As
Embracing failure might be the VC mantra, but established the investment size grows, however, the number of partners
corporations need to be more strategic about risk-taking. needed for approval also rises. Unanimity is never a require-
They have operations that they need to protect and can’t ment, though—even the largest investments can proceed
“bet the farm” on a single idea. A simple rule: For routine with just five out of seven partners signing on.
decisions in a predictable environment, the venture mindset At corporations, sponsors of extra-large projects must be
isn’t needed. But in times of high uncertainty and disrup- mindful that risking everything on one investment is unac-
tion, corporations must think like VCs and be poised to make ceptable. Even VCs tend to spread their capital across multi-
bold decisions. ple ideas and have checks and balances in place. So corporate
Suppose a firm is planning to launch a modified version managers should garner support by testing their idea on a
of an existing product or is conducting a feasibility study for smaller scale or cultivating other internal advocates.
a mine expansion. The level of uncertainty is reasonably low Let’s now look more closely at the principles leaders can
for such initiatives, underlying assumptions follow linear use to integrate the VC mindset into their organizations.
rather than exponential laws, and discounted cash flow
numbers are readily estimated. Thus, the tenets of the ven-
ture mindset, which are focused on questioning everything, THE INDIVIDUAL OVER THE GROUP
are not necessary or even helpful. VCs look for contrarian ideas because those are the ones that
In contrast, suppose a firm is developing a radically new deliver outsize returns. They realize that sometimes just
product or service line, is reallocating budget from tradi- a single person at the table may understand the potential
tional marketing to digital and social media campaigns, or of a big idea—and that person must be heard. This is why
is considering acquiring a digital start-up in response to a VCs care so much about designing an environment that lets
threat from disrupters. Risky moves like these hold enor- every individual in the room share opinions, concerns, and
mous potential—but they are often rejected in traditional competing perspectives. At successful VC firms, individuals
corporate settings because they don’t easily generate the are not trumped by the group.
level of consensus required among various department Promoting this principle, even loudly, isn’t enough,
heads and stakeholders to win approval. These are exactly however. Specific mechanisms and processes are required
the type of situations when corporations need to be fearless because, without them, groups tend to converge on a single
or, as Rampell put it to us, “conviction must beat consensus.” idea almost immediately, often without even noticing that
At Greylock Partners, the VC firm that backed Airbnb, they’re doing so. This well-known phenomenon is especially
Coinbase, Facebook, and many others, partners can wildly pervasive at large corporations.
disagree but still trust one partner who insists on doing a One of us, Ilya, leads a course at Stanford where rapid
deal. This rule arguably made Airbnb possible: After hear- convergence happens regularly. Students are split into “VC
ing the pitch by the company’s founders, Reid Hoffman partnership” teams and asked to decide whether to invest
recounts in his podcast, his fellow investors were opposed to in a slate of real-world start-ups. The start-ups are at the
the idea. Understanding that universal approval often meant VC funding stage at the time of the class, so nobody knows
an idea was too obvious, he held firm despite the opposition. which of them will ultimately succeed. Students review
Of course, the magnitude of an investment influences the pitch decks, grill the founders, conduct due diligence, and
level of caution that corporations should have. This is true then discuss with their teams which start-ups they want to
even at VC firms. For extra-large commitments, VC inves- fund. Ninety percent of the time, teams reach agreement
tors ratchet up the level of consensus required. At Founders among all six members on which ventures they want to back.
Fund, a prominent VC firm, partners are free to cut checks Even when individuals make counterarguments, their voices
for smaller investments, which are often very early stage are usually ignored, and consensus is reached quickly.
conducted a study of more than 160 VC arms of large corpo- process so many opportunities, J&J must be disciplined
rations around the globe. A comment from one of the inter- about decluttering its funnel. It can’t leave opportunities
views summed up a common sentiment: “Quite honestly, sitting there for extended periods.
if something came to us completely fresh with a six-week Some companies maintain a broad slate of projects, many
deadline…I wouldn’t ruin our reputation by pretending of them with high-level champions, but fail to significantly
we could do it. I’d say, ‘This is for someone else.’” Lack of advance any of them. Indeed, in our work with large compa-
speed is one reason many of the best start-ups don’t bother nies, we have found it common for senior executive teams to
knocking on the doors of corporate venture entities—and have the same discussions about the same initiatives in suc-
why many corporate investment arms don’t reach their cessive meetings, without ever coming to a clear resolution.
fifth birthday. That makes it hard for new ideas to gain traction or receive
It may seem that VCs have an advantage in being agile adequate attention from decision-makers, who might be
because of their small size, but even very large organizations preoccupied with revisiting existing proposals.
can act fast. McDonald’s rolled out its instant delivery offer-
ing in a matter of weeks, having sensed the threat posed by are often worthy of
L ARGE , I NC UMB E N T CO RP O RATI O NS
delivery apps from other fast-food chains and new entrants. admiration. Who could fail to stand in awe of FedEx and its
Amazon, which has more than one million full-time employ- incredible logistics network or admire Toyota for its pioneer-
ees, managed to launch its Prime Now service in just 111 days. ing advances in manufacturing efficiency and reliability?
WeChat, an app with more than one billion users today, was But what works well in centrally controlled environments
once a side project of the giant tech company Tencent, but may not succeed in times of uncertainty or disruption. As we
seven engineers launched it in just a few months. have seen, the traditional corporate approach can be costly:
Avoid many approval layers. VCs tend to be small, but Former stalwarts GE, Kodak, Sears, Nokia, and Nortel all
it’s their streamlined operating model that is even more experienced serious—sometimes fatal—challenges because
important than size in their ability to move fast. In VC of disruption in their industries.
firms, once a partner decides to invest in a start-up, the In contrast to slow-moving businesses, VCs are not con-
deal can quickly be finalized. But their corporate coun- sensus seekers. They love arguing, fighting for their view
terparts, according to the Stanford research, tend to use a of the future, hearing new perspectives, and kicking ideas
two-tier decision-making process, often requiring additional around. “There are no firm rules in the venture capital busi-
approval by a committee outside the team. Syndication calls, ness,” VC investor Reid Dennis once said, “except that there
premeetings, and corporate politics immediately seep in. are no firm rules.” Our research, however, suggests that VCs
The number of bosses included at each stage does more than do have a playbook, full of creative and successful practices,
slow down the process. It also makes decisions “regress to that decision-makers everywhere can use to emulate an
the mean”—that is, to safer and less controversial proposals. industry that has backed the most innovative companies in
To avoid that problem, companies such as Amazon, Google, the world. HBR Reprint R2403K
and Netflix give more decision-making rights to their execu-
tives and let them decide what to invest time and money on.
As with VCs, the charter and goals are carefully defined, but ILYA A. STREBULAEV is the David S. Lobel Professor of Private
after that the individuals can make investment calls them- Equity and a professor of finance at the Stanford Graduate
selves without jumping through bureaucratic hoops. School of Business. He is also the founder of the Stanford GSB
Venture Capital Initiative and a research associate at the National
Don’t clutter the funnel. Innovation dies in the bureau-
Bureau of Economic Research. ALEX DANG is a venture builder and
cratic swamp. What you need is a deal flow. Consider JLabs a digital strategy adviser. He was a partner at McKinsey and EY and
(Johnson & Johnson’s incubator), which reviews thousands launched numerous businesses at Amazon. They are the authors of
of applications for collaborative partnerships and accepts The Venture Mindset (Portfolio/Penguin Random House, 2024), from
only a small fraction of them. To carefully review and which this article is adapted.
Advice and
Inspiration
M A N A G I N G YO U R S E L F
by Robin Abrahams
and Boris Groysberg
checked-out baristas and unhelpful a relentlessly upbeat “rainbows and straightening your desk, putting your
retail clerks, and as colleagues and lollipops” view of work. Many people laptop in a closet, or signing out of your
bosses dealing with underperforming, disengage for understandable reasons, office email account. Try not to think
apathetic team members. But what including underlying problems in their about work at all for the rest of the night,
happens when you yourself start to feel teams or organizations that need to be to allow yourself time to restore your
dead at work? dealt with at some point. Our process, mental energy. Research reveals that
This year we posed that question which we call DEAR—for detachment, this enhances well-being and reduces
to HBR readers and HBS executive- empathy, action, and reframing—is exhaustion, improving your resilience
education program participants. We meant to interrupt the cycle of numb- the following day.
heard back from nearly 90 of them, ness and paralysis and restore your Meditate. Research from Herbert
from countries around the world. They sense of agency so that you’re able to Benson of the Benson-Henry Institute at
described feeling powerless, anx- effectively address such challenges. Massachusetts General Hospital shows
ious, and depressed; suffering from that 10 to 20 minutes of extremely sim-
insomnia; struggling to perform; hav- ple meditation twice a day produces a
ing intense impostor syndrome; and DETACHMENT relaxation response that improves both
repressing their authentic selves at Though this may sound like a counter- physical and mental health and reduces
work. But disengagement isn’t just intuitive first step for overcoming disen- the fight-or-flight response. You don’t
unpleasant to experience. It can also gagement, it’s important to take time to need to follow any complicated tech-
lead to self-defeating behaviors—cyn- step back and objectively analyze your niques; just set aside the time to concen-
icism, social withdrawal, and learned situation and feelings. When people are trate on an image or a repeated phrase
helplessness—that prevent people from unhappy—at work or in general—they while either sitting still or moving rhyth-
making positive changes in their lives. interpret events and information neg- mically. When distracting thoughts
Most advice on how to address this atively. Bad things appear worse than intrude, strengthen your focus.
problem is aimed at managers and orga- they are, as if they’ll last forever. And Move your body. A considerable
nizational leaders who have the power they seem to always be happening to body of research shows that exercise—
to influence the factors that promote you no matter what you do. even a single session—reduces stress
engagement. However, it is possible for You need distance and perspective and improves mood and cognitive
individuals to take steps to sustain their to make wise choices; otherwise you’re function. Physical movement replen-
motivation or recover it, even after a merely reacting, in a fight-or-flight kind ishes your psychological energy, which
period of deep disengagement and even of way. One of the biggest career mis- will help you reengage at work. Even a
in the most stultifying of jobs. As one takes people make, for example, is “run- brief stretch or walk around the office—
HBR reader, Mason, the CEO of a talent ning from and not to”—taking a new job or better yet, outside—can make a
agency, put it, motivational valleys are purely to escape the old one. The follow- difference. Some activities can serve
“a natural part of the professional jour- ing detachment practices can help free multiple purposes: Practices such as
ney and can last from a few hours to a you from the cognitive distortions that yoga or tai chi can be combined with
few months—and affect you no matter cloud your decision-making. meditation; sports, outdoor activities,
how high or low you sit on the org chart. Reflect and then break away. At and exercise classes can be opportuni-
But there are ways out of the rut.” the end of your workday, review what ties to socialize.
After synthesizing research on work- went well and felt meaningful to Think in the third person. Odd as
place motivation and experimenting you. This practice has been shown to it might sound when people refer to
with various strategies, we’ve devel- improve people’s moods and engage- themselves this way, doing so—at least
oped a four-step process for reener- ment. Then mentally disconnect from in your thoughts—can be surprisingly
gizing yourself. It isn’t about creating work, perhaps with a physical ritual like helpful. Studies show that when people
use their names, titles, or a third-person staycations or even just short breaks warehouse manager and consultant in
pronoun instead of “I” or “me” in their were more effective ways to boost his Bengaluru, India, told us that his trick
inner monologues, they’re better able motivation back at the office. for regaining motivation is to simply
to control their thoughts, feelings, and pay more attention to his subordinates’
behavior under stress. This technique “impeccable workmanship.”
helps trick the brain into viewing your EMPATHY Ask questions. Empathy requires
problems as if they were someone When you’re feeling unmotivated at curiosity about other people. Observe
else’s—which are always less anxiety- work, you might beat yourself up for their behavior, listen to what they say,
inducing than your own. your lack of interest and ambition. But ask questions, and pay attention to
Several people who responded to compassion toward yourself is crucial their responses. Try to understand
us wrote about the power of detaching. for reengagement. It’s also important the differing views and knowledge of
“Doing less at work gave me space to to resist the impulse to withdraw from your constituencies—your custom-
discover that my lack of motivation was your manager and colleagues. We all ers, bosses, and peers in other depart-
influenced by other things,” said Marta, have psychological needs—for social ments. Deliberately seeking out new
a team leader in the Polish office of a interaction, intellectual satisfaction, perspectives increases intellectual
U.S. IT company. “I spent a lot of time positive regard from others, feelings of engagement, builds workplace rela
working on myself. I figured out what accomplishment. And one of the most tionships, and can lead to new insights
motivates me, and now I do enjoy my effective ways to meet those needs is to on how to change or redesign an unre-
job again.” help others meet theirs. warding job.
Jacki, a project management direc- Practice self-care. Do you feel Look for friends. Try to find peo-
tor for a biotech company, had left two you’re just a cog in the machine at work, ple you actually like at the office. One
previous jobs because of feeling disen- an interchangeable human resource of Gallup’s 12 elements of employee
gaged. When she noticed signs of wan- being deployed to achieve the organiza- engagement is “I have a best friend at
ing motivation in her current work, she tion’s goals? If so, remind yourself that work,” and the organization reports that
turned to reflection rather than recruit- your thoughts, feelings, and values it is an undeniable predictor of better
ers, arranging to take three weeks of matter—and honor them by being kind performance. So seek out people you
paid short-term disability leave. “I real- to yourself. The people who responded connect personally with and try to build
ized that I needed to reset the spiral,” to our email and social media call did real friendships. The idea is to make
she said. “I went to therapy and did a lot this with a range of rituals such as start- work a more enjoyable, interesting place
of thinking and journaling to identify ing the day with a really good cup of to be even if the job itself is frustrating
what was causing the issue.” coffee, playing energizing music, and or deadening.
Mason likewise told us that deep finding a therapist to see regularly. Help others. This is one of the best
introspection and establishing clear Treat people as people. No matter ways to feel empowered and make work
boundaries between his work and his how you’re feeling, you can always more meaningful. It can be done as
personal life helped him recharge pro- improve your interactions with col- part of your job or in smaller, “extracur-
fessionally. “It’s easy to fall into the trap leagues and customers by making eye ricular” ways, such as organizing the
of overworking when trying to regain contact, observing social niceties, and office refrigerator, explaining the email
engagement,” he said. But he found appreciating the contributions of each system to a new hire, or mentoring a
that setting and sticking to a specific person. A hallmark of disengagement less-experienced colleague. Engaged
work schedule, avoiding email during is depersonalization, or feeling less than employees tend to be good workplace
off hours, getting a good night’s sleep, fully human. Fight it by recognizing citizens, but you don’t need to feel
spending time on leisure pursuits such the humanity of others. For example, engaged to assist other people. Interest-
as DJing and pickleball, and taking Manjunathan, an automotive-parts ingly, providing help has been shown
from Art?
But I beseech you: Read on. If you collaborators. This is arduous,
made it to this sentence, I know disheveled, iterative work—as
you harbor at least a scintilla of messy as building a business case.
How to focus on curiosity, so I will now reward you The creatives also talk about
accomplishment over with a secret that all those hardos problem solving, communication,
who mock soft topics aren’t and collaboration—skills I’m told
achievement privy to: Understanding how art are very helpful in workplaces,
gets made, and why, is a path to too. So you start to see that you can
accomplishment and mastery— learn from art and artists. What
by Scott Berinato yes, even in the corporate world. they’re doing isn’t so different
SPOTLIGHT
SP OTLIGHT
- - - -
Why the What Makes Should Your How Marketers Winning at
Influencer a Successful Brand Hire Choose
Industry Needs Celebrity a Virtual College Athlete Influencer
Guardrails Brand? Influencer? Influencers
42 50 56 61 Spotlight Marketing
Winning
at Influencer
Marketing Why the
Influencer
Industry
Needs
Guardrails
And how to professionalize a
maturing practice
fashion, beauty, and travel led the way,
Emily Hund but nonprofits, government services,
AU T H O R Research affiliate, and political campaigns are increas-
Annenberg School
O
ingly joining in, hoping to harness the
seemingly more authentic medium of
V E R T HE PA ST 2 0 influencer marketing.
years the social media For the most part, influencer mar-
influencer industry has keting has worked: At the end of 2023
grown from nothing the global industry was worth some
into a pervasive global $21 billion, according to Influencer
force that has completely rearranged Marketing Hub. Surveys conducted by
the way information and culture are the Keller Advisory Group and Adobe
conceived, produced, marketed, and reported that 27 million Americans and
shared. Commercial sectors such as 300 million people globally consider
Illustrations by DAVID MILAN
Harvard Business Review
May–June 2024 41
Marketing The author argues for an industry in which unethical behavior is punished;
professional expectations, pay, and desired outcomes are standardized;
and creators are given the same rights and protections as other professional
marketers. HBR Reprint S24031
Over the past 20 years the social media
influencer industry has completely What Makes a Successful Celebrity Brand?
rearranged the way information and Ayelet Israeli et al. | page 50
culture are conceived, produced, Celebrities have shifted from endorsing established brands to being influ-
encers for established brands to drawing on their influence to create brands
marketed, and shared. This month’s themselves. The authors examine what it takes to make celebrity brands work.
HBR Reprint S24032
Advice and
Case Ebook + Tools. This
set of interactive tools
Inspiration
M Y OBSESSION WITH
health care in Bangla-
desh started with my
mother’s appendicitis.
It was 2011, and I had
come from my home in
New York City to Dhaka, Bangladesh’s
M A N A G I N G YO U R S E L F
HR’s
TA L E N T O RG A N I Z AT I O N A L I L LU ST R ATO R H U M A N R ES O U RC E
M A N AG E M E N T T R A N S FO R M AT I O N
KIRSTEN ULVE M A N AG E M E N T
The Art
I N T E R P E RS O N A L
Highly Skilled
SKILLS
AU T H O RS
Michael
Mankins
Professionals
Partner, Bain
& Company
of Asking
Patrick
Want Your
Litre
New
Partner, Bain
& Company
Smarter Work
Questions
These five techniques can drive
Freelancers are in huge
demand today, and they
know it. It’s time for new
Role In this tight
great strategic decision-making. rules of engagement. labor market, cost
AU T H O RS cutting is out.
Diane Gherson
Senior adviser, Boston
But Not AU T H O RS
Peter
Cappelli
Ranya
Nehmeh
Championing employee
concerns is in.
Your Job
Consulting Group Professor, HR
Arnaud Frédéric Jean-Louis Wharton specialist
Chevallier Dalsace Barsoux
Lynda Gratton School
AU T H O RS I L LU ST R ATO R
Professor, IMD Professor, IMD Term research professor, NÚRIA MADRID
Business School Business School IMD Business School Professor, London
Business School
How
David
AU T H O R De Cremer
I L LU ST R ATO R
Dean,
CHAD HAGEN
Northeastern
University
A I & M AC H I N E
Inclusive
LEARNING
D EC I S I O N - M A K I N G
E N V I RO N M E N TA L & P RO B L E M -
S U STA I N A B I L I T Y S O LV I N G
D I V E RS I T Y &
To Create a
I N C LU S I O N
Greener Future,
For Success with Make
the West
Can’t Ignore Brands AI, Bring Everyone
Decisions
with a
China Fuel
AU T H O RS
Omar
Rodríguez-
On Board When you VC Mindset
Growth
Vilá
Professor,
Goizueta
Four ways
for companies to
Dionne
Nickerson
embrace risk,
employees, you’ll
Assistant
professor,
To Create a Greener How Inclusive Brands For Success with Make Decisions
Future, the West Fuel Growth AI, Bring Everyone with a VC Mindset
Can’t Ignore China Omar Rodríguez-Vilá, Dionne
Nickerson, and Sundar On Board Ilya A. Strebulaev and
Alex Dang | page 132
Shameen Prashantham and Bharadwaj | page 114 David De Cremer | page 124
Lola Woetzel | page 104 Venture capitalists’ unique
Years before the Barbie movie AI is intimidating employees. As approach to investment and
Fighting climate change is a prom- phenomenon, leaders at Mattel machines perform intellectually innovation has played a pivotal
ising area for engagement between became concerned that consumer demanding tasks that were previ- role in launching one-fifth of the
Western companies and China. perceptions of the famous doll ously reserved for human workers, largest U.S. public companies.
However, geopolitical strains, the were out of sync with demographic people feel more excluded and And three-quarters of the largest
disruption of business relation- trends. The company conducted less necessary than ever. The U.S. companies founded in the
ships by the Covid pandemic, in-depth research to understand problem is only getting worse. past 50 years would not have
and domestic Chinese policies how customers felt about Barbie Eighty percent of organizations say existed or achieved their current
all make engagement complex. In and to determine whether more- their main technological goal is scale without VC support.
this article the authors examine inclusive versions presented a hyperautomation—or the complete The question is, Why? What
the complexities of the current strong market opportunity. The end-to-end automation of as many makes venture firms so good at
climate-change opportunities in findings led to a new inclusion business processes as possible. finding start-ups that go on to
China and present practical strat- strategy that affected all areas of Executives often pursue that goal achieve tremendous success?
egies for businesses ready to enter the brand—product design, distri- without feedback from employ- What skills do they have that expe-
the market. bution, and commercial activi- ees—the people whose jobs, and rienced, networked, and powerful
There is a twofold opportu ties—and coincided with a period lives, will feel the greatest impact large corporations lack?
nity, they explain. First, China of significant growth. Barbie rev- from automation. The authors’ research reveals
offers a vast market for Western- enues increased 63% from 2015 In this article the author exam- that the venture mindset is char-
developed solutions. The Chinese to 2022—before the boost from ines what keeps leaders from in- acterized by several principles: the
government has set ambitious the film. volving rank-and-file employees individual over the group, disagree-
targets, aiming to achieve carbon Research shows that in most in AI projects, how they should ment over consensus, exceptions
neutrality by 2060. That goal cre- industries the perception of model inclusive behavior, and what over dogma, and agility over bu-
ates significant opportunities for inclusion can materially change organizations must do to develop reaucracy. This article offers guid-
firms with cutting-edge technolo- customers’ likelihood to purchase employee-inclusive AI practices. ance to traditional firms in using
gies. Second, businesses have an and willingness to recommend Those practices will make compa- the VC mindset to spur innovation.
opportunity to integrate China’s products and services. nies more likely to improve long- HBR Reprint R2403K
own advances in climate-related This article presents a frame- term performance—and to keep
technology. work for increasing marketplace their employees happy, productive,
The authors go on to outline inclusion in three areas: seeing and engaged. POSTMASTER
four strategies, all of which involve the market, which is about market Send domestic address changes, orders,
HBR Reprint R2403J and inquiries to: Harvard Business Review,
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Printed in the U.S.A. Harvard Business Review
for technological development, to commercial practices; and being (ISSN 0017-8012; USPS 0236-520),
forge partnerships with local com- in the market, which looks at advo- published every other month for professional
cacy and the customer experience. managers, is an education program of
panies for market access, and to Harvard Business School, Harvard University;
insource technology. HBR Reprint R2403H Srikant Datar, dean.
HBR Reprint R2403G Published by Harvard Business School
Publishing Corporation, 60 Harvard Way,
Boston, MA 02163.
Hernan Diaz
thing larger than you. There’s an Yes. Terrifying but worth it, be
assumption that learning takes cause the form was inherent to
place only with genres more the content. It wasn’t a gimmick or
In his novel Trust, which won the 2023 Pulitzer Prize, Diaz anchored in the epistemological a flashy display of whatever verbal
offered four contrasting perspectives on early-20th-century standards of science, the law, dexterity I might have. It was the
U.S. capitalism—a treatment that modern-day readers found journalism. The truth of fiction way that story had to be told.
deeply resonant. The author, who was born in Argentina, raised is in showing us how we expe
in Sweden, and now lives in the United States, says he likes rience the world with emotional Are you a full-time writer now?
to experiment with different voices and “mess with” American depth. To know the complexity, I asked for a leave of absence to
Pascal Perich
mythology. A longtime professor and academic editor, he consciousness, connectedness, write a book and to see whether
published his first novel, In the Distance, a Pulitzer finalist, and finitude of being human, you I dare to be one.
at age 44. Trust was his second. Interview by Alison Beard go to fiction. HBR Reprint R2403P
HONG KONG
The Hong Kong Jockey Club University of Chicago Academic Complex |
The University of Chicago Francis and Rose Yuen Campus in Hong Kong