39 Posts found for Publisher: The McKinsey Quarterly

Always ask people making an investment recommendation to present their second-best choice. It’s rarely better than the first. But both might actually be good, and both recommendations of another business unit might not be. Considering just one recommendation from every business unit will deprive you of many investment opportunities you’d get if you asked for two.

Author: Dan P. Lovallo | Source: Making great decisions | Original Publication: The McKinsey Quarterly | Subjects: Finance, Management

We typically see organizational leaders tell two types of stories to inspire their teams. The first, the turnaround story, runs along the lines of “We’re performing below industry standard and must change dramatically to survive—incremental change is not sufficient to attract investors to our underperforming company.” The second, the good-to-great story, goes something like this: “We are capable of far more, given our assets, market … [ Read more ]

Author: Susie Cranston | Source: Increasing the ‘Meaning Quotient’ of Work | Original Publication: The McKinsey Quarterly | Subject: Organizational Behavior

Executives at Norwegian oil and gas company Statoil were looking for ways to make it more nimble and more realistic about its goals. So they adopted a new approach to year-end budgeting, which breaks it out into three different sets of numbers. These included targets (“what we want to happen”), forecasting (“what we think will happen, whether we like what we see or not”), and … [ Read more ]

Source: Listening to employees: The ‘Beyond Bureaucracy’ M-Prize winners | Original Publication: The McKinsey Quarterly | Subjects: Finance, Management

Managers of a product team at Microsoft offered employees the chance to pick their next assignment, rather than having the leaders hand down those decisions. In this case, to retain top talent in a competitive market and to boost employee satisfaction, team leaders pitched their projects to employees, allowing them to evaluate the opportunities and chart their own course. Some managers worried that participants would … [ Read more ]

Source: Listening to employees: The ‘Beyond Bureaucracy’ M-Prize winners | Original Publication: The McKinsey Quarterly | Subjects: Human Resources, Management, Organizational Behavior

Simple resource allocation decision rules can help minimize political infighting because they change the burden of proof from the typical default allocation (“what we did last year”) to one that makes it impossible to maintain the status quo. For example, a simple harvesting rule might involve putting a certain percentage of an organization’s portfolio up for sale each year to maintain vibrancy and to cull … [ Read more ]

Author: Dan P. Lovallo | Source: How to Put Your Money Where Your Strategy Is | Original Publication: The McKinsey Quarterly | Subject: Finance

A technique for avoiding decision bias is to request that managers show more of their cards: some companies, for instance, demand that investment recommendations include alternatives, or “next-best” ideas. This approach is useful not only to calibrate the level of a manager’s risk aversion but also to spot opportunities that a manager might otherwise consider insufficiently safe to present to senior management.

Author: Dan P. Lovallo | Source: Distortions and deceptions in strategic decisions | Original Publication: The McKinsey Quarterly | Subjects: Finance, Management

Rio Tinto institutes checks and balances to manage internal lobbying. We have something called the Investment Committee, which approves sizable investments of any kind and consists of the CEO, CFO, the head of technology and innovation, and the head of business services. In other words, it does not contain any of the divisional heads. The plan is that this committee has enough data to have … [ Read more ]

Author: Guy Elliott | Source: Breaking Strategic Inertia: Tips from Two Leaders | Original Publication: The McKinsey Quarterly | Subjects: Finance, Management, Strategy

At one well-known energy company, the five executives of a top team were asked to list the company’s 10 highest priorities. Alarmingly, they listed a total of 23 priorities; only 2 appeared on every executive’s list and only 7 on the lists of more than three members; indeed 13 of the 23 priorities appeared on only one list. In other cases, the team doesn’t agree … [ Read more ]

Author: Erika Herb | Source: Teamwork at the Top | Original Publication: The McKinsey Quarterly | Subjects: Management, Organizational Behavior

At McKinsey mentoring is regarded as a vital part of the development culture but is still not as common as it should be. To encourage it, several McKinsey offices now ask all associates at regular intervals which partners they view as mentors. Although a small number of partners were named by as many as a dozen associates, most partners were surprised to find that fewer … [ Read more ]

Author: Helen Handfield-Jones | Source: How Executives Grow | Original Publication: The McKinsey Quarterly | Subjects: Human Resources, Leadership, Management, Organizational Behavior

The Problem
Subordinates don’t want to offend the boss. Therefore, as you become more senior in an organization, you tend to get less feedback. Over time, you risk growing confused about your development needs and becoming isolated from criticism. While many senior executives do have outside mentors, because they do not directly observe the executive their advice is only as good as the narrative … [ Read more ]

Author: Robert S. Kaplan | Source: Top Executives Need Feedback—Here’s How They Can Get It | Original Publication: The McKinsey Quarterly | Subjects: Career/Employment, Personal Improvement

Every company should have a set of pricing metrics that measure the financial and operational health of pricing across the business. These metrics may include simple data, such as the average selling price, discount, and margin for key products; operational data, including the number of pricing exceptions and win/loss percentages; and special measures to track the progress and impact of specific pricing initiatives. Best-practice companies … [ Read more ]

Author: Walter L. Baker | Source: Building a better pricing infrastructure | Original Publication: The McKinsey Quarterly | Subject: Pricing

As companies in emerging markets grow in number and in strength, they become tougher competitors for multinational companies, for which a dearth of intimate local knowledge is increasingly costly. Furthermore, the war for managerial talent is heating up in the developing world. Companies with reputations for developing local leaders are far more likely to attract the talent they need to pursue attractive growth opportunities. These … [ Read more ]

Author: Jeffrey A. Joerres | Source: Beyond expats: Better managers for emerging markets | Original Publication: The McKinsey Quarterly | Subject: International

We use 70–20–10: 70 percent on our core business, 20 percent on adjacent business, 10 percent on others, as a sort of allocation principle, and we are constantly moving people around to achieve that percentage. Another thing we have is something called 20 percent time, where we tell people, especially in engineering, that they can spend 20 percent of their time on whatever they want. … [ Read more ]

Author: Eric Schmidt | Source: Eric Schmidt on business culture, technology, and social issues | Original Publication: The McKinsey Quarterly

It’s easy for organizations to fall into the habit of seeking sales growth only through existing customers. Even though the sales force is typically best placed to find and approach potential clients, individual reps may shun the uncomfortable task of cold-calling in favor of selling to customers they know well.

One large distributor of auto parts tried tackling this problem by separating these activities. Its … [ Read more ]

Author: Maryanne Hancock | Source: Using your sales force to jump-start growth | Original Publication: The McKinsey Quarterly | Subject: Marketing / Sales

Would-be innovators need to break free of preexisting views. Unfortunately, the human mind is surprisingly adroit at supporting its deep-seated ways of viewing the world while sifting out evidence to the contrary. Indeed, academic research suggests that even when presented with overwhelming facts, many people (including well-educated ones) simply won’t abandon their deeply held opinions. The antidote is personal experience: seeing and experiencing something firsthand … [ Read more ]

Author: Marla M. Capozzi | Source: Sparking creativity in teams: An executive’s guide | Original Publication: The McKinsey Quarterly | Subjects: Customer-Related, Innovation

The premortem technique is a sneaky way to get people to do contrarian, devil’s advocate thinking without encountering resistance. If a project goes poorly, there will be a lessons-learned session that looks at what went wrong and why the project failed—like a medical postmortem. Why don’t we do that up front? Before a project starts, we should say, “We’re looking in a crystal ball, and … [ Read more ]

Author: Gary Klein | Source: Strategic decisions: When can you trust your gut? | Original Publication: The McKinsey Quarterly | Subject: Management

Most companies are accustomed to identifying major internal issues, such as whether to build a business, divest an asset, or lay off people. What’s harder is the early surfacing of opportunities and threats arising out of external events such as dramatic shifts in demand, competitive behavior, industry structure, regulation, or the macroeconomic environment.

A commonsense approach to identifying such issues early is to poll, regularly, all … [ Read more ]

Author: Lowell Bryan | Source: Dynamic management: Better decisions in uncertain times | Original Publication: The McKinsey Quarterly | Subjects: Management, Strategy

A company’s business units and technology organization need to be much more in tune with each other. Here’s a simple idea: have the CEO and CTO jointly issue an annual report for technology—something analogous to the annual report for investors and the broader market. This document would not only provide a candid overview of the ability to extract business value from technology but also substantiate … [ Read more ]

Author: Driek Desmet | Source: Memo to the CEO: Why we need an annual report for technology | Original Publication: The McKinsey Quarterly | Subject: IT / Internet / E-Business

Identifying the areas where organizations need to improve their capabilities most is an important step in any change effort. Such a skill is helpful particularly in times of cost-cutting–where limited training resources must be used to close the critical competency gaps that prevent companies from meeting business objectives.

However, many training programs don’t yield the desired results. One reason is that they are usually launched … [ Read more ]

Author: Pierre Gurdjian | Source: Identifying employee skill gaps | Original Publication: The McKinsey Quarterly