Category: Management

At Netflix “Adequate Performance Gets a Generous Severance Package”

Note that Netflix practices what Clayton Christensen called “emergent” strategic planning. Experimental responding to opportunities; no five year plans.

(p. B5) As a founder and co-chief executive of Netflix Inc., Reed Hastings has reshaped both the way people watch television and how the entertainment industry operates.

. . .

In his new book “No Rules Rules: Netflix and the Culture of Reinvention,” Mr. Hastings likens being employed at the streaming giant to being part of a sports team: Getting cut is disappointing but carries no shame. “Unlike many companies, we practice: Adequate performance gets a generous severance package,” reads one of Netflix’s mottos.

. . .

WSJ: In the book you say, “It’s impossible to know where a business like ours will be in five years.” What kind of prognosticating do you do?

Mr. Hastings: We keep trying experiments. The business model will be pretty similar in five years. Can we figure out animation? Can we catch Disney in family animation?

WSJ: You’ve said you want Netflix to be able to pounce on unanticipated opportunities. What’s an example of one you didn’t see coming?

Mr. Hastings: Nonfiction programming is a pretty good one. We started as superpremium TV, and the expansion into nonfiction has been a huge success. The whole sharing of content around the world has been a huge success. Prior to that, people thought Americans won’t watch content that’s produced outside the U.S.

For the full interview, see:

Joe Flint, interviewer. “BOSS TALK; Netflix’s Hastings Isn’t Fan of Remote Work.” The Wall Street Journal (Tuesday, September 8, 2020): B5.

(Note: ellipses added. “WSJ” and “MR. HASTINGS” were bolded in original.)

(Note: the online version of the interview has the date Sep. 7, 2020, and has the title “BOSS TALK; Netflix’s Reed Hastings Deems Remote Work ‘a Pure Negative’.”)

Hastings, Reed, and Erin Meyer. No Rules Rules: Netflix and the Culture of Reinvention. New York: Penguin Press, 2020.

Increase in Remote Work May Increase Quality and Diversity of Hires, Increasing Firm Innovation

(p. B1) A few years ago, Mr. Laermer let the employees of RLM Public Relations work from home on Fridays. This small step toward telecommuting proved a disaster, he said. He often couldn’t find people when he needed them. Projects languished.

“Every weekend became a three-day holiday,” he said. “I found that people work so much better when they’re all in the same physical space.”

IBM came to a similar decision. In 2009, 40 percent of its 386,000 employees in 173 countries worked remotely. But in 2017, with revenue slumping, management called thousands of them back to the office.

. . .

As long ago as 1985, the mainstream media was using phrases like “the growing telecommuting movement.” Peter Drucker, the management guru, declared in 1989 that “commuting to office work is obsolete.”

. . .

(p. B4) Apart from IBM, companies that publicly pulled back on telecommuting over the past decade include Aetna, Best Buy, Bank of America, Yahoo, AT&T and Reddit. Remote employees often felt marginalized, which made them less loyal. Creativity, innovation and serendipity seemed to suffer.

Marissa Mayer, the chief executive of Yahoo, created a furor when she forced employees back into offices in 2013. “Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people and impromptu team meetings,” a company memo explained.

. . .

At the beginning of the year, the unemployment rate was low and workers had some leverage. All that has been lost, at least for the next year or two. Widespread remote work could consolidate that shift.

“When people are in turmoil, you take advantage of them,” said John Sullivan, a professor of management at San Francisco State University.

“The data over the last three months is so powerful,” he said. “People are shocked. No one found a drop in productivity. Most found an increase. People have been going to work for a thousand years, but it’s going to stop and it’s going to change everyone’s life.”

Innovation, Dr. Sullivan added, might even catch up eventually.

“When you hire remotely, you can get the best talent around and not just the best talent that wants to live in California or New York,” he said. “You get true diversity. And it turns out that affects innovation.”

For the full story, see:

David Streitfeld. “Working From Home Has a Checkered Past.” The New York Times (Tuesday, June 30, 2020): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the story has the date June 29, 2020, and has the title “The Long, Unhappy History of Working From Home.”)

Blacks Most Hurt by Creeping Credentialism

(p. A15) Nonessential degree requirements aren’t race-neutral. They embed into the labor market the legacy of black exclusion from the U.S. education system—namely, the antiliteracy laws that made it illegal for blacks to learn to read, the separate and unequal schools that kept them from catching up, and the limited progress since then on policies designed to remedy racial discrimination.

This spring, we and six other colleagues wrote a National Bureau of Economic Research working paper that questioned the fundamental assumption undergirding the proliferation of degree requirements: that workers without four-year degrees who earn low wages are low-skilled.

For the 71 million U.S. workers who have a high-school diploma but not a four-year degree, we used the skill profile of their current jobs as a proxy for their employability for higher-wage work. Their job experience suggests they are skilled through alternative routes, so we call them by the acronym STARs. They make up 60% of the active U.S. workforce.

Our research found that 16 million STARs have the skills for high-wage work, defined as earning more than twice the national median. Yet 11 million of them are currently employed in low-wage or middle-wage work. This suggests an extraordinary market failure: U.S. companies are systematically overlooking talent.

. . .

Our research suggests there are changes companies can make to address this problem:

• Hire for skills and work experience, not degrees. Rather than using the degree requirement as a default, employers should examine the skills that their jobs require and then use skill requirements for job postings, screenings and assessments. IBM adopted this type of skills-based approach with its New Collar initiative, launched in 2017.

. . .

Black workers face extraordinary barriers to economic mobility. By valuing skills over degrees, companies can improve the way the labor market functions for black STARs—a necessary step to ensure that the economy works for all.

For the full commentary, see:

Peter Q. Blair and Shad Ahmed. “The Disparate Racial Impact of Requiring a College Degree.” The Wall Street Journal (Monday, June 29, 2020): A15.

(Note: ellipses added; bullet point and italics in original.)

(Note: the online version of the commentary has the date June 28, 2020, and has the title “A Coronavirus Vaccine: Faster, Please.”)

The NBER working paper mentioned above is:

Blair, Peter Q., Tomas G. Castagnino, Erica L. Groshen, Papia Debroy, Byron Auguste, Shad Ahmed, Fernando Garcia Diaz, and Cristian Bonavida. “Searching for Stars: Work Experience as a Job Market Signal for Workers without Bachelor’s Degrees.” In NBER Working Papers: National Bureau of Economic Research, Inc., March 2020.

Houghton Shifted Corning from Cookware to Fiber Optics

(p. A13) When Amory Houghton became chief executive of Corning Glass Works in 1964, the company founded by his great-great grandfather was thriving. Known to the general public for Pyrex measuring cups and Corning Ware casseroles, it dominated the U.S. market for the glass used to encase TV tubes.

But the company, now known as Corning Inc., proved too reliant on those tubes, which accounted for as much as 75% of profit. In the mid-1970s, the company faced a recession and the loss of TV-related business as Japanese imports captured the U.S. market. Profits collapsed, and Mr. Houghton had to chop costs, including at the headquarters in Corning, N.Y. The global workforce dropped by more than one-third.

. . .

“It was tough making these cuts,” he said, “particularly when you lived in a small town where you knew a lot of these people.”

Corning bounced back, unlike many other U.S. manufacturing giants. That was partly because Mr. Houghton made a long-term commitment to development of fiber optics. He correctly saw that hair-thin strands of glass would replace copper wire in transmissions of voice and data. “It’s our turf, with our patents,” he said.

By the late 1990s, optical fiber and related telecommunications products accounted for more than half of Corning’s operating profits.

For the full obituary, see:

James R. Hagerty. “Executive Lifted Corning With Bet on Fiber Optics.” The Wall Street Journal (Saturday, March 14, 2020): A13.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date March 13, 2020, and the title “Amory Houghton’s Bet on Fiber Optics Helped Save Corning.”)

Paul Marks Purged Old Guard in Order to Recruit New Talent for His Vision of Cancer Research

One important question, not addressed in the obituary quoted below, is the extent to which Marks’s vision for cancer research was farsighted and the extent to which it was misguided. Another important related issue is Marks’s role in support of Nixon’s centrally planned war on cancer.

(p. B11) Paul A. Marks, who transformed Memorial Sloan Kettering Cancer Center into one of the world’s leading institutions for research and treatment of cancer, died on April 28 at his home in Manhattan. He was 93.

. . .

Memorial Sloan Kettering today is very different from the institution Dr. Marks joined in 1980 as president and chief executive. It was still reeling from a scientific scandal in the 1970s involving crudely falsified data. It was also behind the times, focused more on surgical interventions than on the developing frontiers of biological science.

“Frankly, it was an institution that really needed surgery from top to bottom, and Marks was the right guy,” James Rothman, chairman of the Yale School of Medicine’s department of cell biology, said in a phone interview.

. . .

The timing was ideal, said Richard Axel, a neuroscientist and molecular biologist in the department of neuroscience at Columbia University Medical Center. Dr. Marks, he said, energized the institution to pursue the alterations in DNA that cause tumors, doing so at the very moment that it was becoming possible “to truly study DNA, to pet it, to clone it, to determine its sequence.”

What followed was a purge of much of the institution’s old guard, with attendant turmoil and alienation for many of those involved. Dr. Marks instituted a tenure system with a tough review process, and dozens of scientists left between 1982 and 1986. A 1987 article about Dr. Marks in The New York Times Magazine noted that “there are researchers who call Marks ‘Caligula,’ ‘Attila the Hun’ or simply ‘the monster.’”

The article described a scene in his laboratory during his Columbia days when Dr. Marks “grabbed a man by the throat and dragged him across a table.” His wife, Joan Marks, then head of graduate programs at Sarah Lawrence College in Bronxville, N.Y., said in the article, “He can be brutal,” adding, “He really doesn’t understand why people don’t work 97 hours a day, and why they don’t care as much as he cares.”

In his memoir, “On the Cancer Frontier: One Man, One Disease, and a Medical Revolution” (2014, with the former Times reporter James Sterngold), Dr. Marks said he had been embarrassed to see the incident recounted in the article. While he didn’t deny that it had happened, he said that he had actually grabbed the man by both arms, not the throat, and shaken him.

For all of the sharpness of his elbows, Dr. Rothman of Yale said, there was also charm. Dr. Marks, he said, “projected at once a kind of a deep warmth and, at the same time, a formidable aspect.”

Dr. Marks was known for a sharp eye in recruiting talent. “He had an uncanny ability to attract these great scientists from all over the nation,” said Joan Massagué, the director of the Sloan Kettering Institute, the institution’s experimental research arm.

For the full obituary, see:

John Schwartz. “Paul Marks, 93, Administrator Who Pushed Memorial Sloan Kettering to Top-Tier Status.” The Wall Street Journal (Thursday, May 7, 2020): B11.

(Note: ellipses added.)

(Note: the online version of the obituary was updated May 6, 2019 and has the title “Paul Marks, Who Pushed Sloan Kettering to Greatness, Dies at 93.”)

Marks’s memoir, mentioned above, is:

Marks, Paul, and James Sterngold. On the Cancer Frontier: One Man, One Disease, and a Medical Revolution. New York, NY: PublicAffairs, 2014.

Hospitals Punish Workers Who Expose Management Failures

(p. B5) In New York City, the epicenter of the crisis in the United States, every major private hospital system has sent memos in recent weeks ordering workers not to speak with the media, as have some public hospitals.

One system, NYU Langone Medical Center, which has more than 30,000 employees at six inpatient centers, dozens of outpatient facilities and the New York University School of Medicine, sent an email on March 27 [2020] warning that staff members speaking to the media without permission “will be subject to disciplinary action, including termination.” The email was reported earlier by Bloomberg.

Administrators suggested “appropriate” posts on social media instead. “Please share positive and uplifting messages that support your colleagues and our organization,” they said in another email.

Similar lines are being drawn nationwide. A doctor in Washington State was removed from his hospital position after speaking publicly about a shortage of protective equipment and testing; the staffing firm that employs him said he was being reassigned. Nurses in Detroit recently walked off the job to protest critically low staffing after a colleague who had spoken up on the issue was fired.

For the full story, see:

Noam Scheiber and Brian M. Rosenthal. “Nurse Questions Hospital On Safety. He’s Out a Job.” The New York Times (Friday, April 10, 2020): B1 & B5.

(Note: bracketed year added.)

(Note: the online version of the story was updated April 15, 2020, and has the title “Nurses and Doctors Speaking Out on Safety Now Risk Their Job.”)

Study Claims 77% of Economic Growth is Due to Incremental Innovation

I am surprised by, and dubious of, the claim that 77% of economic growth comes from incremental innovation. That implies that leapfrog innovation, or creative destruction, is not very important. I will need to read and ponder the study that claimed that result.

(p. A15) The comparison of two potential options—known as A/B testing—is now routinely baked into the development of customer-facing software, Mr. Thomke reports. Microsoft, Amazon, Facebook and Google “each conduct more than ten thousand online experiments annually,” he writes, adding that even companies without tech roots (Nike, State Farm) run trials like this regularly. The tests might evaluate, say, the components of a website—style of font, color of background, shape of buttons, choice of words—and continuously adjust them based on user response.  . . .

As much as Mr. Thomke, a Harvard Business School professor, believes that “all businesses should be experimenters,” he wisely observes that “not all innovation decisions can be tested.” A/B testing may not be the best way to evaluate a completely new product or a radically different business model, he concedes, but the approach is the ideal driver of small changes. Though we celebrate disruption, Mr. Thomke urges companies to “tap into the power of high-velocity incrementalism,” explaining that “most progress is achieved by implementing hundreds or thousands of minor improvements.” He points to a study that attributes 77% of economic growth to improvements in existing products and notes that the structured system of incremental improvements that Lego implemented following its near-bankruptcy in 2004 drove 95% of annual sales and helped restore the company to profitability.

For the full review, see:

David A. Shaywitz. “Test, Test And Test Again.” The Wall Street Journal (Monday, March 16, 2020): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 15, 2020, and has the title “BOOKSHELF; ‘Experimentation Works’ and ‘The Power of Experiments’ Review: Test, Test and Test Again.”)

The book discussed in the passages quoted above, is:

Thomke, Stefan H. Experimentation Works: The Surprising Power of Business Experiments. Boston, MA: Harvard Business Press, 2020.

The “study” mentioned above that attributes 77% of economic growth to incremental innovation, is:

Garcia-Macia, Daniel, Chang-Tai Hsieh, and Peter J. Klenow. “How Destructive Is Innovation?” Econometrica 87, no. 5 (Sept. 2019): 1507-41.

Open Offices Speed Spread of Covid-19

(p. B6) After years of squeezing ever more workers into tighter office spaces, companies are realizing how efficiently the modern workspace can spread diseases like the coronavirus.

Cubicles and private offices have made way for open floors, where a sneeze or cough can circulate uninterrupted.  . . .

Between 2018 and 2019, the average office space per seat in North America declined by 14.3% to 195.6 square feet, according to brokerage firm JLL’s 2020 Occupancy Benchmarking Report.

Many companies also have abolished assigned seating, rotating workers through the office. That means workers in many offices are now more likely to touch surfaces contaminated by others.

. . .

In a study of more than 1,800 Swedish office workers that was published in 2014, a group of researchers from Stockholm University found that open-plan offices lead to more sick leaves. Among the possible explanations is that these offices can be more stressful, and risk of infection may be greater. The study also found that offices without assigned desks lead to more extended sick leaves, but only among men.

For the full story, see:

Konrad Putzier. “Open Offices Spur Virus Worries.” The Wall Street Journal (Wednesday, MARCH 11, 2020): B6.

(Note: ellipses added.)

(Note: the online version of the story has the date MARCH 10, 2020, and has the title “Your Open-Floor Office Could Help Spread Coronavirus.”)

Remote Workers Are 13% More Efficient Than Office-Based Workers

(p. B4) Fans of remote work often cite studies showing that people who work from home are more productive, like a 2014 study led by the Stanford professor Nicholas Bloom. The study examined remote workers at a Chinese travel agency and found that they were 13 percent more efficient than their office-based peers.

For the full commentary, see:

Kevin Roose. “THE SHIFT; Work From Home? Think Again.” The New York Times (Thursday, March 12, 2020): B1 & B4.

(Note: the online version of the commentary has the date March 10, 2020, and has the title “THE SHIFT; Sorry, but Working From Home Is Overrated.”)

The paper mentioned in the passages quoted above, is:

Bloom, Nicholas, James Liang, John Roberts, and Zhichun Jenny Ying. “Does Working from Home Work? Evidence from a Chinese Experiment.” The Quarterly Journal of Economics 130, no. 1 (Feb. 2014): 165-218.

Humana Founding Entrepreneur Said Notion That Non-Profit Hospitals Are Better Than For-Profit Hospitals, Is “Baloney”

(p. 26) Mr. Jones was a genial but extremely competitive executive. During the years that Humana owned hospitals, several in Louisville, he vigorously defended the for-profit hospital model, contending that Humana’s facilities could deliver better care at lower costs.

“The notion that being nonprofit adds some weight to what you do is baloney,” he once said.

For the full obituary, see:

Richard Sandomir. “David Jones, Health Care Entrepreneur Behind Humana, Is Dead at 88.” The New York Times, First Section (Sunday, September 22, 2019): 26.

(Note: the online version of the obituary has the same date and title as the print version.)

“No One Has the Stomach to Challenge the Status Quo”

(p. B14) Before precision-scheduled railroading, or PSR, locomotives had been run the same way for more than a century. Trains waited for cargo at the rail yard, then left when customers brought their shipments and loaded them up. It was an unreliable business with plenty of inefficiencies. But that started to change early this decade, when Mr. Harrison teamed up with William Ackman’s Pershing Square Capital to take control at Canadian Pacific Railway.

“No one has the stomach to challenge the status quo,” Mr. Harrison, who started his railroad career as a 19-year-old laborer in 1963, said several years ago.

Rather than leave the departure times up to clients such as factories, farms and mines, Mr. Harrison demanded they be ready or miss their trips, much like airline passengers. This didn’t win many friends among clients, but after successfully implementing the model in Canada, Mr. Harrison moved on to take the helm of Jacksonville, Fla.-based CSX in 2017. Tragically, his tenure this time was short-lived. Mr. Harrison died just a short time after joining the company.

For the full story, see:

Lauren Silva Laughlin. “Late Railroad Guru’s Legacy Is Losing Steam.” The Wall Street Journal (Saturday, Aug. 24, 2019): B14.

(Note: the online version of the story has the date Aug. 23, 2019, and has the title “Hunter Harrison’s Train Overhaul Starts Running Out of Steam.”)