Category Archives: Consumer Behavior

What You Should Know About Leadership Development Training

I’ve spent more than a decade working in three related and intersecting fields: Training, Learning & Development, and Leadership Development. One can certainly make a case that these all fall under Talent Development. In my current role, I am a Leadership Development Manager & Advisor. I partner with senior leaders and top decision-makers on ways to improve human behaviors in the workplace and on how to make people and organizations more effective (e.g., leadership development, training & development, etc.). I’m involved in developing and implementing key initiatives, training, and programs to create and sustain a high-performing organization. Finally, I’m often tasked with developing, designing, and delivering leadership development training.

I want to talk about some common issues and challenges in leadership development training. I’m sharing best practices drawn from various resources and lessons learned from my own experience working within organizations in the hope that it will help you avoid missteps and prevent catastrophes as you design and execute leadership training in your own organizations.

The Biggest Challenge Leaders In Organizations Face Today

Based on my experiences and observations, one of the biggest challenges leaders in organizations face today is how to recruit, develop, and sustain leaders in the company, and how to ensure that there’s a pipeline of leaders who will be able to move into leadership roles. The need for this is what all organizations experience or face, which is the need to have effective leadership, not only at the very top, but also at the mid-level and front-line level of the organization.

Leader Development, Leadership Development, and Leadership Training

Leader development focuses on developing individual leaders whereas leadership development focuses on a process of development that inherently involves multiple individuals (e.g., leaders and followers or among peers in a self-managed work team) (Day, Fleenor, Atwater, Sturm, & McKee, 2014).

The Society for Human Resource Management (SHRM) defines leadership development as “formal and informal training and professional development programs designed to assist employees in developing leadership skills” (SHRM, 2020).

Leadership training programs are programs that have been designed to enhance leader knowledge, skills, abilities. They include all types of leader, managerial, and supervisory training/development programs and/or workshops (Lacerenza, Reyes, Marlow, Joseph, & Salas, 2017).

“Leader development is broadly defined as the expansion of a person’s capacity to be effective in leadership roles and processes. For organizations, developing leaders includes enhancing their performance in current roles, improving their ability to carry out the tasks of leadership in ways congruent with changing organizational realities, and, for some, expanding their capacity to take on higher positions” (McCauley, Kanaga, & Lafferty, 2010, p. 29).

Three Mistakes about Leadership Training

The first and biggest mistake is not doing a needs assessment. Too many organizational leaders blindly dive in and begin developing a leadership training program without ever doing a needs assessment. They think that once you have someone or some team design a leadership development program that it will automatically—by sheer willpower and wishful thinking—become successful just because it was created. Leadership development does not work in a vacuum or silo. It has to be a part of an organization’s DNA and corporate culture and mindset. The leadership training program is but one event that must be part of a larger strategic plan to grow and sustain leaders for the company’s current and future needs.

The second mistake is a tendency to try to cram too much content into the training and expecting participants who attend the leadership development program to instantly become an instant expert or a “leader” (i.e., meeting all the objectives of the program) once the program ends. In some ways, they treat it like a hot dog eating contest — the faster and more you consume in the allotted time the better. Instead of a seamless, connected, and well-organized program, what results is often a confusing and disjointed hodgepodge of courses and sessions.

The third mistake is failing to evaluate the leadership training program. One of the fears to training evaluation is that evaluating will yield unwanted or unfavorable information about the training program (e.g., audience, design, delivery, presenters, instructional contents, etc.). Another fear to evaluating is struggling with when to evaluate and how to isolate the effects of training. However, rather than fearing evaluation, we should think of it in this manner: “Training evaluation provides a way to understand the investments that training produces and provides information needed to improve training. . . Training evaluation provides the data needed to demonstrate that training does offer benefits to the company” (Noe, 2017, p. 249).

We’ll delve into more details about evaluation in the Training Evaluation section.

Leadership Training

“[E]vidence suggests that [leadership training] improves learning, transfer, and organizational outcomes by up to 29% (Lacerenza et al., 2017). Thus, not only do these programs affect leaders participating in the programs (i.e., by increasing learning and their ability to utilize concepts on the job, which is known as transfer), but they also influence desired subordinate outcomes as well (e.g., subordinate job satisfaction, turnover; Lacerenza et al., 2017)” (Lacerenza, Marlow, Tannenbaum, & Salas, 2018, p. 521).

Researchers have suggested that “leadership training developers should pay close attention to the desired outcome (e.g., organizational results, transfer, learning) because leadership training programs may be more effective for some than others. While leadership training typically shows positive results for affective learning and affective transfer, they tend to be even stronger for cognitive learning, cognitive transfer, skill-based learning, and skill-based transfer . . . [W]hen designing a leadership training program, it might be more beneficial to include (and evaluate) cognitive and/or skill-based content” (Lacerenza, Marlow, Tannenbaum, & Salas, 2018, p. 522).

Key Questions Leaders Should Ask About Training (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012):

Steps to Effective Training (Davies, 2007)

[For information on how to develop and implement a coherent training strategy, consult The Training Manager’s Desktop Guide (2nd ed.) by Eddie Davies]

Step one: Identify the training need
Instead of jumping in and solving the immediate problem, you need “to investigate to identify the true cause. This will help you decide if the problem is one that can be solved by training or will other remedies be more effective” (Davies, 2007, p. 101).

Step two: Design/choose the training/development intervention
Influences on the design of training to consider include: Training facilities available (space and equipment); time available; type of trainee; organization’s culture; learning objectives; skills of trainer; principles of learning; group size; budget (Davies, 2007).

Step three: Implement the event
“Senior management will need to be seen to be backing the programme. In addition to the customary chief executive’s letter of support, try to ensure that all senior managers that are due to attend come on the early courses. . . . In addition to gaining the explicit commitment of senior managers you will also need to make sure that the immediate line managers of the participants are also involved in the process. They will form an important role in raising trainee’s expectations before they attend. An equally essential activity will involve them in de-briefing the trainees when they return to work. This discussion should focus on how the new learning can be applied to make a real difference to both the individuals and organization’s performance” (Davies, 2007, p. 108-109).

Step four: Follow-up the training/development
“Training does not start and end in the training room. It is a widely reported phenomenon that whilst trainees learn in the classroom they sometimes fail to translate their learning back to the workplace. . . [Y]ou should also be thinking about this transferability of skills as part of the overall design. Individual sessions should end with time for reflection and review, and the participants should return to work with an action plan they can discuss with their managers” (Davies, 2007, p. 109).

Step five: Evaluate the outcome
“This final stage will involve you in going back to the start of the training cycle. The whole process was started because someone identified a need that could best be addressed through training. For the training department to survive and prosper it must show that it has been of benefit by providing the solutions in an efficient, effective and economical way” (Davies, 2007, p. 110).

Training Evaluation

An area in the leadership training space that requires particular attention is training evaluation or, rather, the lack of or inadequate measurement of leadership development training. As mentioned earlier, one of the fears and obstacles to training evaluation is deciding when to evaluate and how to isolate the effects of training (Kraiger, 2002). Another fear, often understood but not openly discussed, “for not conducting more rigorous evaluations is that the training function may have everything to lose and nothing to gain from the data” (Kraiger, 2002, p. 340).

Two strategies for increasing the impact of training evaluation practices (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012):

(1) Begin training evaluation efforts by clearly specifying one or more purposes for the evaluation and should then link all subsequent decisions of what and how to measure to the stated purposes. STEP: Clearly specify the purpose of evaluation. ACTION: Determine what you hope to accomplish by evaluating the training and link all subsequent decisions back to the purpose (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012).

(2) Use precise affective, cognitive, and/or behavioral measures that reflect the intended learning outcomes. STEP: Consider evaluating training at multiple levels. ACTIONS: (a) Consider measuring reactions, learning, behavior, and results. (b) Use precise affective, cognitive, and/or behavioral indicators to measure the intended learning outcomes as uncovered during the needs assessment (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012).

As Kraiger (2002) explained: The art of training evaluation springs from knowing why. What’s the purpose for evaluation (is it for decision making, feedback, and/or marketing)? How will the results be used to make decisions affecting training courses or the training function?

We need to know what to measure but to also be able to place it into a larger context in which success indicators and reasons why the evaluation is being conducted are considered.

The training evaluation outcomes table (Table 6.1) from the Noe textbook (2017) is helpful. Training outcomes are grouped into six categories: reaction outcomes, learning or cognitive outcomes, behavior and skill-based outcomes, affective outcomes, results, and return on investment.

“Table 6.1 shows training outcomes, the level they correspond to in Kirkpatrick’s evaluation model, a description of each of the outcomes and how they are measured, and the question that each outcome can help answer. Kirkpatrick’s original evaluation model included only four levels (reaction, learning, behavior, and results) but recent thinking suggests a fifth level, return on investment (ROI), is necessary to demonstrate the financial value of training. Both level 1 and level 2 outcomes (reactions and learning) are collected at the completion of training, before trainees return to the job. Level 3 outcomes (behavior/skills) can also be collected at the completion of training to determine trainees’ behavior or skill level at that point. To determine whether trainees are using training content back on the job (i.e., whether transfer of training has occurred), level 3, level 4, and/or level 5 outcomes can be collected. Level 3 criteria can be collected to determine whether behavior/skills are being used on the job. Level 4 and level 5 criteria (results and return on investment) can also be used to determine whether training has resulted in an improvement in business results, such as productivity or customer satisfaction” (Noe, 2017, p. 252).

“A useful taxonomy of content and design dimensions for assessment was provided by Lee and Pershing (1999), and is shown in Exhibit 11.1. The exhibit lists ten potential assessment dimensions, along with the specific purpose for the dimension (what is to be learned, and how that information is useful), and sample questions” (Kraiger, 2002, p. 344).

Avoiding Leadership Training Mistakes

One important tip to always remember is this: Not all participants who attend leadership development training will be successful after training and this is to be expected. The reason is because of two things:

(1) The motivation, attitudes, and expectations of the learner are absolutely critical to training effectiveness (Tannenbaum & Yukl, 1992). If an employee is unmotivated to learn, doesn’t believe in their own abilities, and is not goal-oriented during training then the chances of this employee learning and applying the knowledge and behaviors taught will be negligible (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012).

(2) The support and encouragement from the employee’s supervisor is also key to training success. Research shows that one of the biggest determinants to whether training is successful or not is the amount and degree to which each participant’s manager will provide support and offer a chance to practice once the participant is back in his/her role after training (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012). So be sure to ask and have the answers to these post-training questions: (a) How much support and encouragement will they get from their managers/supervisors once they return to their roles after training? (b) Will there be on-the-job training to further support their growth?

It’s very demoralizing for an employee to return from leadership development training to a boss who doesn’t support, encourage, or provide an opportunity for that employee to put into practice the things he or she learned in leadership development training. Indeed, one of the major reasons employees leave an organization is due to the lack of growth and advancement opportunities (Branham, 2012).

Therefore, make sure that the culture of the overall organization and within each department is one that values, supports, and encourages growth of each employee. I would recommend surveying leaders and employees throughout your organization about the amount and level of support they believe they get for training and employee development learning from the overall organization and from within their own teams and departments.

Conducting a “PreMortem” Exercise

A great way to anticipate problems, prior to implementing a leadership development program, is to use what’s called a PreMortem. The purpose of a PreMortem is “to find key vulnerabilities in a plan” (Klein, 2004, p. 98). In a PreMortem, the group tries to anticipate a plan’s weaknesses through the simulations of different disaster and failure scenarios. The group’s job is to then find “ways to counter the weaknesses they have pinpointed” (Klein, 2004, p. 99).

“PreMortem begins with the assumption that the plan has failed. The attitude of complacency and the false sense of security is punctured, at least temporarily, and is replaced by an active search aimed at preventing trouble later on” (Klein, 2004, p. 101).

The PreMortem is designed to provide a safe “format that supports a productive critique of a plan” (Klein, 2004, p. 99). In a PreMortem, the team members independently list everything that worries them about a new plan or project. This method challenges the complacency of the group which can sometimes masquerade as harmony (Klein, 2014).

The PreMortem is used in a project kickoff meeting. The project team has reviewed the plan the members developed. “In the PreMortem exercise, the team is told to imagine that it is now some time in the future — say 6 months from now. We are looking in a crystal ball, and what we see is terrible. The plan has been a disaster. Each person in the room has the next two minutes to write down all the reasons he/she can think of to explain what went wrong. Once the two minutes are up, the facilitator captures what the team members wrote down — a blueprint for failure” (Klein, 2015).

“As a by-product of using the PreMortem exercise, team members will become better at mentally simulating how a plan or project is likely to play out. They will learn from each other about ways that plans can fail, and thereby increase the patterns they can recognize and their mental models, which in turn strengthens their intuitions. These skills enable people to produce better plans and avoid pitfalls” (Klein, 2004, p. 99).

Leader Self-Development

There are various ways to develop a person’s leadership capacity. One type of leader development is leader self-development. “Leader self-development refers to activities that leaders take upon themselves in order to develop their leadership capacity” (Simmons, 2017).

Here’s something to think about:

“Although learning and training are related, they are not the same. Some training fails to produce any learning, and a great deal of learning occurs outside of training. Learning is a desired outcome of training—a process of acquiring new knowledge and behaviors as a result of practice, study, or experience. It involves relatively permanent changes in cognition, behavior, and affect” (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012, p. 77).

What this means is that, even after a weeklong “training” program, a person might not “learn” much or even anything at all. A trainee’s motivation, attitudes, and expectations strongly influence training effectiveness (Tannenbaum & Yukl, 1992). What’s more, only 7 to 9 percent of skill acquisition comes from formal training. Instead, leaders (both formal and informal) are key factors in learning—as they greatly influence what people actually do on the job. Obviously, trainees must continue to learn on the job after they’ve attended “training” (Salas, Tannenbaum, Kraiger, & Smith-Jentsch, 2012).

Self-development is learning beyond the classroom and individuals who commit to this learning mindset will grow as a leader (Scisco, Biech, & Hallenbeck, 2017).

Leader Development Is Personal Development

“[A]ll people can learn and grow in ways that make them more effective in the various leadership roles and processes they take on” (McCauley, Velsor, & Ruderman, 2010, p. 3). Leader development is about the process of personal development that improves leader effectiveness (McCauley, Velsor, & Ruderman, 2010).

I like the Center for Creative Leadership’s view that leader development is synonymous with personal development (McCauley, Velsor, & Ruderman, 2010): “developing the individual capacities needed for effective leadership—such as self-management, social skills, and work facilitation capabilities—is synonymous with what is often labeled ‘personal development'” (McCauley, Velsor, & Ruderman, 2010, p. 26).

A suggestion I share with leaders (when they seek my advice about self-improvement) is to choose what they want to work on and focus on just that one thing or two things. You don’t need to be perfect and you don’t need to be everything to everybody. You just need to be you, not a “perfect” you, just a “better” you.

“You can’t set goals for every leadership competency you want to develop. Narrow your goals to those that you feel passionate about, those that benefit you or can reduce mistakes, and those that are not too difficult to achieve but still stretch your abilities” (Scisco, Biech, & Hallenbeck, 2017, p. 349).

Marshall Goldsmith (2007) has similar advice: “Pick one issue that matters and ‘attack’ it until it doesn’t matter anymore. If you’re a bad listener, choose to become a better listener—not the best listener in the world” (p. 192-193).

Takeaway: Everyone in an organization — from rank-and-file employees to mid- and senior-level, and C-suite members — needs to understand that leadership development is self-development and requires taking an honest and humble examination of yourself. Leader self-development means adopting a “learning beyond the classroom” mindset. Remember, you do not need to be a “perfect” you, just a “better” you. Each of us must continually learn, own up to our mistakes, acknowledge that we do not know enough, and accept that part of learning means to change something about ourselves, even changing something we don’t think needs changing.

Written By: Steve Nguyen, Ph.D.
Leadership Development Advisor

References

Branham, L. (2012). The 7 Hidden Reasons Employees Leave (2nd ed.). AMACOM.

Davies, E. (2007). The Training Manager’s Desktop Guide (2nd ed.). Thorogood Publishing.

Day, D. V., Fleenor, J. W., Atwater, L. E., Sturm, R. E., & McKee, R. A. (2014). Advances in leader and leadership development: A review of 25 years of research and theory. The Leadership Quarterly, 25(1), 63-82.

Goldsmith, M. (2007). What Got You Here Won’t Get You There. Hyperion.

Klein, G. (2004). The Power of Intuition: How to Use Your Gut Feelings to Make Better Decisions at Work. Currency.

Klein, G. (2014). Different Tactics for Making Discoveries: Each path to insight calls for its own techniques. Psychology Today. https://www.psychologytoday.com/us/blog/seeing-what-others-dont/201403/different-tactics-making-discoveries

Klein, G. (2015, October 21). The Pro-Mortem Method: Creating a blueprint for success. Psychology Today. https://www.psychologytoday.com/us/blog/seeing-what-others-dont/201510/the-pro-mortem-method

Kraiger, K. (2002). Decision-based evaluation. In K. Kraiger (Ed.), Creating, implementing, and maintaining effective training and development: State-of-the-art lessons for practice (pp. 331-375). Jossey-Bass.

Lacerenza, C. N., Marlow, S. L., Tannenbaum, S. I., & Salas, E. (2018). Team development interventions: Evidence-based approaches for improving teamwork. American Psychologist, 73(4), 517-531.

Lacerenza, C. N., Reyes, D. L., Marlow, S. L., Joseph, D. L., & Salas, E. (2017). Leadership training design, delivery, and implementation: A meta-analysis. Journal of Applied Psychology, 102(12), 1686-1718.

McCauley, C., Kanaga, K., & Lafferty, K. (2010). Leader Development Systems. In E. V. Velsor, C. D. McCauley, & M. N. Ruderman (Eds.), The Center for Creative Leadership Handbook of Leadership Development [3rd ed.] (pp. 29-61). Jossey-Bass.

McCauley, C. D., Velsor, E. V., & Ruderman, M. N. (2010). Introduction: Our View of Leadership Development. In E. V. Velsor, C. D. McCauley, & M. N. Ruderman (Eds.), The Center for Creative Leadership Handbook of Leadership Development [3rd ed.] (pp. 1-26). Jossey-Bass.

Noe, R. A. (2017). Employee Training and Development (7th ed.). McGraw-Hill Education.

Salas, E., Tannenbaum, S. I., Kraiger, K., & Smith-Jentsch, K. A. (2012). The science of training and development in organizations: What matters in practice. Psychological Science in the Public Interest, 13(2) 74-101.

Scisco, P., Biech, E., & Hallenbeck, G. (2017). Compass: Your Guide for Leadership Development and Coaching. Center for Creative Leadership Press.

SHRM (Society of Human Resource Management). (2020). Developing Organizational Leaders. https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/developingorganizationalleaders.aspx

Simmons, M. J. (2017). Leader self-development: An emerging strategy for building leadership capacity. [Doctoral dissertation, Kansas State University]. K-State Research Exchange. https://krex.k-state.edu/dspace/handle/2097/38200

Tannenbaum, S., & Yukl, G. (1992). Training and Development in Work Organizations. Annual Review of Psychology, 43, 399-441.

Keeping Your Clients Informed and Providing A Timely Response Are Essential To Great Customer Service

customer-service

Photo Credit: Flickr

I have written before about customer service on this blog (e.g., poor customer service hurts your business and customers leave you because of poor customer service).

In this post, I want to talk about the importance of providing timely responses to customer questions/inquiries and keeping your clients informed, and how failure to do either one or both will hurt your business.

Two instances come to mind when I think about consultants who lost clients because they either ignored their clients’ emails or neglected to keep their clients updated about the status of a project.

The first example involved a skilled consultant who was hired to provide technical services for a client. Although highly talented, the consultant neglected answering client emails, a key to maintaining good relationship with the customer. Multiple questions from one client went unanswered, and by the time this consultant responded, the client either had already come up with a solution or the opportunity to address the issue had already passed.

The second example involved another experienced consultant who failed to keep clients informed about problems or issues that might delay delivery of services. After the first missed deadline, inquiries from a client were met with excuses for why the deadline was missed, and instead of taking ownership and responsibility for the missed deadline, the consultant blamed others for the delay.

In both examples, highly skilled consultants lost clients.

A health professional once told me that in health care, providers will sometimes make a mistake because, let’s face it, no one is perfect and as hard as professionals try, they’re still human and can and do mess up. However, this health professional told me that he learned a very important lesson in running his own healthcare practice. He said if you have a great relationship with your clients, even if you screw up, you’ll have a much better chance of retaining your client than if you have a shoddy relationship. He told me that even if you are highly skilled, if your relationship with your clients are second-rate, the chances of losing them are much greater than if you are moderately skilled but provide excellent customer service.

“Many times . . . consumers do not complain . . . but instead take actions such as switching brands [or companies] or engaging in negative word of mouth (WOM)” (Hawkins & Mothersbaugh, 2010, p. 636).

Take-Away: No matter how skilled or good you are at your job, if you provide a service to customers (whatever that service might be), be sure to remember that you need to also provide exceptional or first-rate customer service, which includes providing timely responses to customer questions/inquiries and keeping your clients informed. Failure to do so can result in lost business (or clients) or damage to your reputation, or both.

Reference

Hawkins, D. I., & Mothersbaugh, D. L. (2010). Consumer behavior: Building marketing strategy (11th ed.). New York, NY: McGraw-Hill/Irwin.

Consumer Behavior and Importance of Context

[NOTE: This post was updated October 2016]

A recent article in the Harvard Business Review talks about how J.C. Penney’s switch to the Fair and Square Everyday Low Pricing Strategy failed. The idea was to get rid of discounts and there won’t be any need to promote sales because, well, every day is a sale with low pricing. Sounds reasonable. The campaign was spearheaded by new CEO, Ron Johnson, who was formerly head of Apple’s retail store division.

The Fair and Square Everyday Low Pricing Strategy even features Ellen DeGeneres in funny TV commercials. One commercial had Ellen complaining about the cost of a hat. Another one showed her having a hard time trying to return a toga. And in another TV ad, Ellen is wondering why she has to wake up so early to get to a sale. I like Ellen and the TV commercials are funny. But I had a bad feeling that consumers would not connect with the ads, and it seems I was right.

According to the Harvard Business Review article (2012), J.C. Penney’s same store sales dropped by 18.9%, store visits decreased by 10%, and the average spend was down by 5% for the first quarter under this new pricing strategy. J.C. Penney lost $163 million (compared to earning $64 million in the first quarter of 2011) and its stock was $43 per share after the new pricing strategy was first announced in January 2012, now trades below $30.

In the HBR article, Mohammed (2012) said that during an investor conference call in mid-May, CEO Johnson maintained that the problem is that customers just don’t know about J.C. Penney’s new pricing strategy. Not only is this an understatement, it also underscores an important misunderstanding. Even if customers do understand, I don’t believe they would buy into that strategy. In other words, just because I understand what a company is attempting to do to market its product, it does not mean that I will go out and spend money for it.

Mohammed added, “Shifting from offering 590 promotions annually to a trimmed down Everyday Low Price Strategy, as J.C. Penney did, is a big change to communicate to shoppers.”

Philip Graves, in his book “Consumerology,” talks about the significance of considering the consumer in context. He writes:

“If you want to know why someone does or doesn’t buy, you have to understand how the environment shapes behavior. Divorcing the quest for understanding from the context in which it takes place is a recipe for leading yourself astray. To maximize sales or the impact of communication, the environment has to be right” (Graves, 2010, p. 53).

Thus, without taking into account the context, corporate advertising decisions can lead to products that are not well-received by consumers or marketing decisions that are off the mark. In the case of J.C. Penney, the product is J.C. Penney itself or its stores, since Penney is a retailer that sells merchandise and services to consumers through its department stores and online.

Here’s an example,

“When McDonald’s developed the Arch Deluxe burger in the mid-1990s, the company was confident that it had a winning product that would appeal to adult consumers. In the context of its market research the product performed very well, but in the context of a McDonald’s restaurant, complete with “Happy Meals,” Ronald McDonald, and other child-associated cues, the reaction was very different. Ironically, the advertising concept, which featured Ronald McDonald taking part in more grown-up activities, probably reinforced the contradictory associations customers were battling with” (Graves, 2010, p. 59).

So why didn’t market research work, and why didn’t it translate into real-world success?

“McDonald’s developed its “Burger with the Grown-up Taste” from its Oak Brook headquarters in a direct move to appeal more to adults. Away from the plastic seating, bright primary colors, and menus of familiar, child-friendly alternatives, respondents rated the product highly for taste, freshness, and satisfaction. Despite more than $200 million of expenditure, at least $100 million of which was spent promoting this product that research had shown was so appealing, it failed and was withdrawn” (Graves, 2010, pp. 59-60).

J.C. Penney’s Fair and Square Everyday Low Pricing Strategy failed because it did not consider context. Doing a sudden U-turn from offering 590 promotions annually to an Everyday Low Price Strategy is drastic. As a consumer, when I think about department stores and shopping for clothing or other items, I want a “good deal” and I look for “deals.” My brain has become accustomed to seeking out deals, sales, and bargains. There’s also something about finding a deal or catching a good “sale.” J.C. Penney executives are learning this too late, as the new CEO admitted, “We did not realize how deep some of the customers were into [coupons]” (Bhasin, 2012).

The lesson is this: Human behavior is strongly influenced by the environment. It is crucial to consider the context that people are in. “The context can determine not just how the person behaves, but how differently they act from the way they might have expected to, and, in most cases, how they would like to tell themselves they would” (p. 60).

Written By: Steve Nguyen, Ph.D.
Leadership + Talent Development Advisor

References

Bhasin, K. (May, 2012). JCPenney Execs Admit They Didn’t Realize How Much Customers Were Into Coupons. Retrieved from http://www.businessinsider.com/jcpenney-didnt-realize-how-much-customers-were-into-coupons-2012-5

Forbes. JC Penney. http://www.forbes.com/companies/jc-penney/

Graves, P. (2010). Consumer.ology: The market research myth, the truth about consumers and the psychology of shopping. Boston, MA: Nicholas Brealey Publishing.

Mohammed, R. (May, 2012). J.C. Penney: Ditch the Risky Pricing Strategy. Harvard Business Review. Retrieved from http://blogs.hbr.org/cs/2012/05/jc_penney_ditch_the_risky_pric.html

The Huffington Post – Ellen DeGeneres’ JCPenney Ads Debut During The Oscars
http://www.huffingtonpost.com/2012/02/27/ellen-degeneres-jcpenney-commercials_n_1304578.html

Power Trip-Do You Have Enough Power to Impact Change?

I recently rediscovered the wonders of television through fantastic programs offered on Public Broadcasting Service (PBS). I especially love Independent Lens, which showcases documentaries and dramas made by independent filmmakers.

The other night I watched “Power Trip” on PBS World. It’s a powerful film about an American energy company and its attempt to operate an electric company in the former Soviet Republic of Georgia. Of course, the title suggests a power struggle for control and this was certainly the case, but there are also other management lessons that can and should be learned.

The film documents the ongoing challenges that AES (the American energy company) face in running AES-Telasi (the electricity distribution company in Georgia’s capital city, Tbilisi). While the film does a nice job of highlighting the problems of corruption, lack of infrastructure, local poverty, etc. one thing that it failed to mentioned was the ingrained culture against which a foreign company faces when it attempts to run a business in another part of the world, and whether it possesses enough power to ensure success.

Throughout “Power Trip” those working for AES talked about the theft of electricity, but considering the state of poverty the Georgian people were in, they were stuck between feeding themselves or stealing electricity. Of course, even when local people did pay it wasn’t a guarantee that they would actually get electricity because Georgia’s corrupt leaders often stole electricity for themselves or their relatives.

Here are the numbers:

  • Average monthly wage in Tbilisi: $15
  • Average monthly bill prior to AES-Telasi: $0
  • Average monthly residential electricity bill from AES-Telasi: $24
  • Time in Georgia: January 1999 to September 2003
  • Amount of money AES-Telasi spent improving power lines and meters in Tbilisi: $90 million
  • Estimated daily loss at AES-Telasi: $120,000
  • Total loss at AES during its time in Georgia: Over $200 million

In the end, the Enron scandal in 2002 caused energy stocks to nosedive. AES took a financial hit, and unable to support its Georgian operation, was forced to sale AES-Telasi in 2003. The lone buyer, a Russian state-owned company, called United Energy Systems (UES). It, too, encountered the same issues that plagued AES – corruption, poor infrastructure, and financial hardships. AES’ CEO, Dennis Bakke, resigned in the summer of 2002.

While Russia, like China, is viewed as a huge opportunity, there’s also caution that “severe political and social problems still persist in Russia and in many of the former states of the Soviet Union (like Georgia)” (Nickels, McHugh, & McHugh, 2005, p. 93).

Perhaps, in hindsight, had AES studied the history and current social, political, and economic climate of Georgia, it might not have been so hasty in wanting to set up shop. After all, how could the locals afford the average electric bill (which totaled about $24 each month) if their salary was $15 US dollars a month (yes, a month)?

Most importantly, I believe Pfeffer and Sutton (2006) offer the best wisdom. Although their suggestion is about implementing internal organizational changes, I think it’s quite applicable to this case. One question they recommend asking is:

“Do you have enough power to make the change happen?”

Have you figured out the power dynamics, the internal and external politics, as well as the overall political landscape?

As the case of Jim Walker, who was brought on to assist Nomura Securities Asian operation in Hong Kong in the late 1990s, illustrate when a leader fails to “appreciate the political nature of the environment” (Pfeffer, 2010, p. 9) in which he works, the consequence is opposition, rivalry, lost of control, and ultimately surrender.

In AES’ case, the CEO failed to appreciate the political nature of the Georgian environment and how it significantly reduced his own and his company’s power to run AES-Telasi and provide electricity to the people in Tbilisi. Had AES considered this question, it would have realized that power was never within its own control but rested, instead, squarely in the Georgian social and economic systems which were controlled by those at the very top of Georgian politics.

References

Nickels, W.G., McHugh, J.M., & McHugh, S.M. (2005). Understanding business (7th ed.). New York: McGraw-Hill/Irwin.

PBS. Independent Lens. POWER TRIP.

Pfeffer, J. (2010). Power: Why some people have it-and others don’t. New York: HarperCollins.

Pfeffer, J., & Sutton, R.I. (2006). Hard facts, dangerous half-truths, and total nonsense: profiting from evidence-based management. Boston: Harvard Business School Press.

The Changing Consumer Behavior in Japan

Unlike consumers in the U.S. and Europe, consumers in Japan are particularly selective and prefer to pay for premium goods and services. This was evident when I visited my wife’s family in Tokyo on several occasions.

Touring the local supermarkets and outdoor fruit stands, I came across the most amazing displays of fruits I had ever seen. But, these highly prized fruits did indeed cost a premium. For instance, I saw cantaloupes (in photo above) for ¥4,000 (Japanese yen) or $44.20 (USD; exchange rate on 3/21/2010) each in Tokyo, Japan compared to $1.50 each at the local supermarket here in Dallas, TX. While I don’t claim to understand why fruits cost so much in Tokyo, I do know this much — those cantaloupes (noticed how each was individually wrapped and showcased in its own box) were the best-looking, highest-quality cantaloupes I have ever seen!

That photo of the cantaloupes was taken in July of 2007 and I would venture to guess that fruit prices haven’t changed too much since then.

Though fruits, like those gorgeous cantaloupes, may still command premium prices and Japanese consumers willing to pay for them, it appears that in other areas, consumers in Japan—who had previously ignored discount and online stores—are now flocking to them (Salsberg, 2010).

A change in consumer attitudes and behavior has arrived and, it seems, is here to stay. This change “stems not just from the recent downturn but also from deep-seated factors ranging from the digital revolution to the emergence of a less materialistic younger generation” (Salsberg, 2010, para. 2).

Salsberg (2010) stated that three factors helped led to this new consumer trend. First (like elsewhere in the world), the economic downturn. The Japanese economy has been weak for almost two decades. A recent J. Walter Thompson AnxietyIndex suggested that “90 percent of Japanese consumers feel anxious or nervous, the highest rate of any country in the world” (Salsberg, 2010, para. 14).

japanese-economy

“A Gallup Poll conducted in early December 2008 shows just 5% of Japanese rated economic conditions as ‘good’ [and] the percentage of Japanese reporting that economic conditions were getting worse climbed every quarter in 2008, finishing the year at 90%” (Bogart, 2009).

A second factor is that a new generation of Japanese (those in their 20’s) has emerged with very different attitudes. Nicknamed hodo-hodo zoku, or “so-so folks”, many avoid corporate life and material possession. “As the CEO of a leading sports-apparel company in Japan recently said, ‘For the first time, we have a generation of consumers that aren’t at all persuaded by what the professional athletes are wearing. We need a fundamental rethink of how to approach this next generation’” (Salsberg, 2010, para. 16).

The third and final factor contributing to this new trend in consumer behavior is government regulatory actions. For example, the Japanese government reduced freeway toll on weekends which provided more incentives to travel to discount stores outside Tokyo (Salsberg, 2010). On the health prevention front, “regulations [has permitted] the wide sale of over-the-counter drugs…[and]…the Japanese government has also pushed to increase awareness of and access to health remedies, in part to address the challenge of paying to treat these conditions [such as diabetes and high blood pressure]” (Salsberg, 2010, para. 18).

Consumer behavior looks at the processes involved when individuals or groups choose, buy, use, or dispose of products, services, ideas or experiences to satisfy needs and desires (Solomon, 2004). Consumer behavior includes characteristics such as social class and income.

Naturally, the economic situation affecting shoppers in the U.S., Europe, and now Japan play a critical role in altering consumer behavior. When the economy combines with other contributing factors, as in the case of the Japanese consumers, consumer behavior responds accordingly.

References

Bogart, P. (2009, April 27). Japan’s stimulus aims to reverse economic negativity. Gallup. Retrieved from http://www.gallup.com/poll/117877/Japan-Stimulus-Aims-Reverse-Economic-Negativity.aspx

Salsberg, B. (2010, March). The new Japanese consumer. McKinsey Quarterly. Retrieved from https://www.mckinseyquarterly.com/The_new_Japanese_consumer_2548

Solomon, M.R. (2004). Consumer behavior: Buying, having and being (6th ed.). New Jersey: Prentice Hall.