The Best of the October Issue

 

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September 16, 2014 By Best of the Issue Idea Watch Putting Sales at the Center of Strategy Frank Cespedes The cleverest strategy in the world won't work if your sales staff isn't clued into it. This should be obvious, and yet this Harvard Business School lecturer has found that strategists consistently fail to connect corporate strategy to sales strategy. And that's a pity, since the correlations are powerful and fairly straightforward. The goal of any strategy is profitable growth, and there are four basic ways to do it, as any strategist could tell you: invest in projects that earn more than their cost of capital, increase profits from existing investments, reduce assets devoted to unprofitable activities, and reduce the cost of capital itself. Each of these strategies has implications for sales. Since revenue comes from customers, careful customer selection figures heavily in the success of new projects. Earning more from existing investments requires salespeople to become more productive by increasing the number of customers they contact, their close rates, or their profits per sale. Divesting lackluster investments requires clear communication to the field about which customers to stop targeting. And if capital cost is a problem, increasing close rates and accelerating the rate of sales will generate more cash organically, obviating the need to borrow it. The Big Idea The Rise (and Likely Fall) of the Talent Economy Roger L. Martin The rich are getting richer in the United States, surely, but the real problem, says this former business school dean, is who exactly is getting mega-rich and how. It's not the capitalists (that is, the shareholders and investors). It's the speculators (the people who manage their money). The top 25 hedge fund managers in 2010 raked in four times the earnings of all the CEOs of the Fortune 500 combined. How come? Through a once-obscure mechanism called the "2&20 formula." Derived from a 2,000-year-old practice whereby Phoenician ship captains took 20% of the value of a cargo successfully delivered, it's the formula that governs how hedge fund managers are compensated — a 20% cut of the profits generated (taxed at the 15% capital gains rate) on top of a 2% asset management fee. And what are those 25 people doing? They're borrowing stock, holding it for sometimes less than five minutes, and creating and profiting from the resulting volatility. This problem can be fixed with tax laws that penalize high-frequency trading and require the profits to be taxed as income, and concerted efforts among pension and endowment funds to stop lending the overpriced hedge fund managers the stock they're playing with. Listen to our interview with Roger Martin to hear him explain the implications for the talent economy. Spotlight Workspaces That Move People Ben Waber, Jennifer Magnolfi, and Greg Lindsay Facebook will soon put several thousand employees in a single, mile-long room. Yahoo famously curtailed telecommuting. The lengths Google has gone to maximize chance encounters in its offices verges on the legendary. In Silicon Valley, it's an article of faith that there's a tight correlation between innovation, high performance, and personal interaction. But is that really so? In a word, "yes," says this trio, after correlating sociometric data capturing thousands of people's interactions at work with company performance in businesses ranging from pharmaceuticals to finance to software to health care. But different spaces encourage different kinds of interactions. Spaces that let coworkers swap war stories (like small break rooms in call centers) increase engagement, which increases productivity of the core business. Atriums, coworking spaces, and strategically placed coffee machines that allow people from different departments to run into one another encourage exploration and innovation. Once a company identifies what it wants to achieve, it can calculate the value of its workspaces — not just their cost. Managing Yourself Rebounding from Career Setbacks Mitchell Lee Marks, Philip Mirvis, and Ron Ashkenas You've been fired, laid off, or passed over for promotion. At first, you're simply stunned. Then you're angry with your boss, the coworkers who let you down, the stupid company polices that led to this pass. Next, you think maybe you could try for a different job in the company or offer to take a cut in salary. Then you feel sorry for yourself. Many executives go through these classic stages of grief in response to a career catastrophe, and some never make it to the last stage: acceptance. The lucky, resilient ones take another tack. They take action by considering what they, themselves, might have done wrong, getting feedback from a wide variety of people. They consider new, possibly more fruitful paths better suited to their natures. They choose something. And then they get on with their lives. Easier said than done, certainly, but take solace from these stories of what people did to turn misfortune into the next opportunity.

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