BHI Blog - Helping You Manage Talent

The Big Game

2012-02-07T09:45:00.004-06:00

By: Belinda Smith

Super Bowl Sunday was this past weekend and both teams have reputations of being Super Bowl Champions. Both teams have great quarterbacks that act as offensive leadership (Eli Manning, Giants; Tom Brady, Patriots) as well as a great coaching staff that help to manage the entire team’s efforts to be successful (Tom Coughlin, Giants; Bill Belichick, Patriots). So what made the Giants edge out in victory?

While the leadership for both teams was great, there were execution problems for the Patriots that proved to be their defeat. Tom Brady is one of the best quarterbacks in the NFL and because of many reasons; his receivers just weren’t connecting with him or the plays. The point in the game that everyone was sure the Giants had it won was when Ahmad Bradshaw scored that last touchdown.

While a team or an organization can have very competent and talented leadership, the team needs to have competent people working for that leadership. Without that connection, an organization will lose business and a football team will lose games. The leadership could be doing everything in their power for success and a few “dropped balls” could result in ultimate failure.

In addition to having competence at lower levels, it is also important to “connect” the upper and lower levels in some way so the vision and strategy is personal to each and every individual. If the strategy isn’t understood fully throughout the organization, individuals may be working against the goal or strategy without even realizing it. The only way everyone within an organization can be sure to work towards a common goal is to actually share that goal with everyone. While the vision is normally to “win,” the path in which to take may not be so obvious. Communicating the whole picture of what the goal of the organization is to win, and how to get there is integral to success.

Organizations and teams need to be competent and connected in order to execute successfully. Hiring for competence can be accomplished by having a thorough and consistent selection process for the organization. Staying connected can be accomplished by having adequate training, not only for the position an individual holds, but also training for how to be a successful part of the organization as a whole. Ensuring those two steps happen will result in better execution to winning “the big game.”

When the Going Gets Tough

2012-01-31T09:26:00.002-06:00

By: Belinda Smith

After the resignations of co-CEOs Mike Lazaridis and Jim Balsillie from RIM/Blackberry, that organization has been thrown into a lot of uncertainty. RIM has been struggling as of late and losing competitive ground against other smartphones and particularly the iPhone. Now the organization has to overcome losing its two leaders and the uncertainty of where the new CEO is leading the company, to turnaround or sale.

It seems when organizations have issues, the first thing to happen is the highest leadership resigns. While anecdotally I understand why this occurs, is it always necessary or for the best in every situation? When RIM lost not one, but two CEOs that has to be viewed as a loss of talent and experience rather than a “good riddance.” Sometimes CEOs are inadequate, but they do bring something to the table.

Even if it isn’t seen as important, the knowledge of failure is invaluable. Often, individuals do not want to admit failure, especially in the business world. And why would you? More often than not, the acknowledgment of failure automatically is associated with incompetence and leads to unpleasant consequences. While many failures could have been avoided, many could not. Businesses are operating in uncharted territory with the consumer base and economic position continually changing. In addition, dealing with new competitive threats is never exactly the same.

It is important for leadership to be self-aware, but to also continually analyze successes and failures and the reasons behind them. Doing so will help drive the business and create a better sense of what works and what does not under what circumstances and why the outcomes occurred that way.

Recognizing failure and dealing with it quickly rather than continually sweeping it under the rug will actually minimize the failure. Operating under a sense of success even when failing will lead to more catastrophic failure. Losing talent over a failure is only adding fuel to it. Understanding why it occurred is more important than placing blame on a specific individual. While it may feel like the right thing to do, it will never eliminate the failure from occurring again.

Customer Service Rules

2012-01-24T09:43:00.002-06:00

By: Belinda Smith

How customers feel about an organization’s products and services is important because their perception drives the business. Regardless of whether the customer is correct in their conclusions about an organization, their perception can easily spread to others especially through social media outlets. Organizations also should have some sort of customer service “line of defense” after the customer has experienced inadequate customer service. While one employee could taint a customer’s opinion of an organization, one employee can also help the organization to be seen in a positive light.

I recently had an experience with an organization where an employee made a mistake and it resulted in a lot of time on my part fixing the issue. That resulted in a lot of headache on my part. Because of one employee, I was placed in a very difficult position that could not be easily rectified. I called the organization’s customer service line to help me with the situation, and because of the nature of the situation, there was not a way to fix it at that time. I was honestly to the point of not doing business with this organization, because I felt as if they did not value me as a customer and that my voice was not being heard. My situation was applicable to many other individuals and there was “nothing that they could do to help me at that time.” Both customer service agents I spoke with after the mistake was made were highly knowledgeable and helpful, but it didn’t change the fact that I was still unhappy with my service.

What these customer service agents did differently, is they heard out my story and took my feedback seriously. I told them what I wanted to get out of the call since there was nothing to be done about my situation currently. They both explained to me everything I needed to know to make sound decisions about this case. Lastly, they told me their action steps to ensure my feedback and situation were heard in something other than just a recorded phone call. Because of that, I felt better about my choice to do business with this organization. One employee put me in this position, but two employees took me seriously and I felt valued.

The two agents I spoke with after the mistake had personal attributes such as stress tolerance, friendliness, sociability and high reasoning abilities that helped them deal with the situation in a genuine and positive way. From my perspective, they were very well trained and knew the answers to my questions and came up with ways to address my issue on a larger scale. If customer service is truly important in an organization, selecting those who have natural attributes that enable them to give great customer service is essential, but not enough. Empowering individuals through thorough training programs and giving them the ability to actually assist customers rather than read a script to them enhances the customer experience. Because of these agents, I am and will continue to do business with this organization.

Accidents in Telecommuting

2012-01-17T09:43:00.002-06:00

By: Belinda Smith

Now that organizations have the option and appropriate resources to allow their employees to telecommute, many individuals are taking advantage of the opportunity. It’s nice to have the familiarity of your own home surrounding you as you work as well as eliminating the stress from an actual commute. It has been found that telecommuting reduces turnover, reduces unscheduled absences, increases employee satisfaction and increases productivity, etc. (Telework Research Network, 2012). These outcomes in turn, reduce overall organizational costs.

One obstacle to avoid when implementing such practices is the illusion that those telecommuting are not putting in as much time and/or effort as those coming into the office every day. A pitfall of many organizations is operating under the assumption that if people are present and you can see them , they are actually working to their fullest potential. Some individuals may work better in isolation and some tasks may be completed with more accuracy and more quickly when an individual has the option to complete them at home. The key to understanding if telecommuting practices are worthwhile is to have objective metrics in place to measure all individuals.

Creating performance metrics that examine the amount of output an employee is a more effective measure than just mere individual perception. Instead of assuming those who are not telecommuting are working more, actually compare their performance to those who are telecommuting. Examining things such as sales, customer service, accuracy of work, how quickly projects are completed, etc. can give organizations insight into the effectiveness of their telecommuting polices. In addition, when everyone is evaluated under the same metrics, misperceptions can be decreased or eliminated, which in turn gives an organization an accurate snapshot of their productivity and performance.

Avoiding the potential “accidents” in telecommuting can make this a best practice for an organization. By thoroughly understanding if telecommuting is having any sort of negative or positive impact, an organization can begin to more clearly understand under what circumstances telecommuting can maximize the organization’s productivity and enhance employee attitudes towards the organization.

Navigating the Social Media and HR Conundrum

2012-01-11T09:46:00.003-06:00

By: Belinda Smith

Social Media and Human Resources; it seems like those two things go together like oil and water. Some people very much enjoy the use of social media for recruiting purposes and even utilizing internal social media-like structures to keep everyone involved, engaged and on the same page within an organization. Others caution the use of social media within the workplace because there are ambiguous guidelines for using it and being compliant with all employment laws.

I was discussing this very issue with a close friend of mine recently. She works within a school district that has no concrete social media policies outside of fraternization with students online. She had mentioned that on several occasions that educators would be reprimanded for what was posted on their Facebook pages even when they had them set to private and had no contact with coworkers online. While the school district took no formal disciplinary action against these individuals, they did make a few mistakes.

Firstly, there is the argument for “expected level of privacy.” That means that when an individual does everything in their power to be sure to keep their pages private, that there is that expectation that their employer will not “get into” their accounts. In addition, if the post was made public off the clock and off of company resources, it could fall under first amendment rights if the organization in question was not mentioned or defamed and/or what was being said is 100% truthful and accurate.

Another wide use of social media is in the recruiting function. Many recruiters relish the fact that they can have more acceptable candidates at their fingertips. In addition, job postings can reach more individuals, creating that always sought after large candidate pool. While these are definitely advantages I do offer just a word of caution. Because of Title VII laws, there are certain “protected classes” that employers absolutely cannot discriminate against. In addition, because social media sites almost always include a picture and some information about an individual, if they are eliminated in the hiring process before a face-to-face meeting, there could be a case for discrimination, even if there was none present. This is where ambiguity becomes detrimental. Though there are no laws against using social media sites for screening out purposes, there could be various arguments that result in legal action when using them.

The solution to many of these problems is to have clear guidelines in place, whether that be for the use of social media in the hiring process or more centered around what is acceptable to post from social media sites. Rather than ignoring the issue or making rules that prohibit all social media usage, employers need to clearly understand how social media can affect various facets of their organizations. In addition, these affects will differ between organizations and between industries. Understanding those differences will enable organizations to positively leverage the advantages of social media while strategically avoiding any pitfalls.

For further reading, here are some guidelines concerning creating social media policies as provided be the NRLB (National Labor Relations Board).

Exapanding the Notion of Integrity

2011-12-20T10:16:00.003-06:00

By: Belinda Smith

Even the best-run organizations can have a few employees that undermine a business’ success. While we all hope our employees are honest and have a high level of integrity, this may not be true at times. Many employers cite integrity as being the single-most important trait to examine when hiring new employees into their organizations. Integrity leads to the likelihood of employees engaging in counterproductive work behaviors; and counterproductive work behaviors are very costly to an organization. Employees can engage in a variety of counterproductive work behaviors, such as stealing, harassment and discrimination that can result in huge losses for an organization. Safeguarding against these types of behaviors is important, but is there a next step that organizations can take?

Leadership integrity takes the notion of integrity one step further. In addition to understanding if an individual will engage in counterproductive behaviors, it examines if a person will accept or condemn other individuals engaging in such behaviors. A good example of this happened recently at a national fast food chain where an employee witnessed and stopped another employee from putting a mixture of chemicals into a customer’s drink. The difference between individual integrity and leadership integrity is the employee stopped another person from doing something bad, even though it does not reflect on them directly. Reporting bad behavior aids an organization in avoiding even more costs and outcomes associated with counterproductive work behaviors.

Leadership integrity is integral for managers to possess. The costs of counterproductive work behaviors increase ten-fold when going up in management level. For each senior manager that derails, the cost to an organization is estimated as $750,000 to $1,000,000. While those numbers seem unrealistically huge, take into account training costs, hiring costs, replacement hiring costs and then whatever was lost based upon the counterproductive behaviors, the numbers start to add up. In addition to financial impacts, counterproductive behaviors can impact others within the organization. Having a “bad boss” can lead to decreased job satisfaction, increased turnover, mental health issues and employee retaliation. By simply assessing for these types of traits early on, an organization can avoid these costly behaviors.

Why 1+1=3

2011-12-13T09:56:00.004-06:00

By: Kevin Impelman

A few weeks ago, BHI was acquired by Kenexa – a global leader in talent management. Once a competitor at times, I am now summoned to call Kenexa my new home. To be honest, it’s difficult to come to terms to this, as I have appreciated serving a niche market and enjoyed the benefits of working for a boutique consulting firm. From a personal standpoint, it’s difficult to cope with this type of change (as many fellow acquired workers can attest to this), but from a business perspective it makes sense. And that’s why we do what we do. To help our clients manage their talent the best way possible – and this partnership allows that to happen. And how does it allow it to happen?

Synergy. That’s right I used the most overused business-speak, jargon word ever. I actually cringe every time I hear it, as I think it’s ubiquitous nature has watered it down so much that it’s almost a parody every instance it is uttered by someone in a suit. Synergy is defined as a mutually advantageous conjunction or compatibility of distinct business participants or elements (as resources or efforts). Okay I just fell asleep half way through that definition, but essentially it means that 1 + 1 = 3 for those that are more mathematically oriented. It means that Kenexa can leverage our unique insights and experiences in the hospitality industry, while we can leverage the fact that they have 1,200 ready to use assessments, 32 offices in 21 countries, and services that span from employment branding to compensation to their unparalleled engagement survey business. It means that more employees and leaders will be using scientifically grounded talent management services and products, which will lead to a better work experience for everyone touched by this process.

And that’s the reason why I got into the field of work psychology to begin with – to improve the employee experience and help organizations make informed decisions on their talent. Taking a step back I can realize the broader positive impact created by this partnership – each organization can leverage the talents of each other to make a bigger difference in people’s work lives. And just think of the possibilities –with all of this intellectual capital maybe we can think of a better word for synergy.

The Truth About Assessments III: The Test Isn't Always Right

2011-11-29T10:38:00.006-06:00

By: Belinda Smith and Kevin Impelman

In this latest installment in our ongoing series “The Truth About Personality Assessments,” I wanted to dispel one of the biggest myths in personality testing: personality assessments are NOT 100% accurate in predicting eventual job success. After that statement, you may be thinking, well, why do we use them? While personality assessments are not 100% accurate, they do offer valuable information that is difficult to extract during an interview and increases your odds in making the best selection decision possible. It is also important to note that other types of selection methods such as interviews are also not 100% accurate, and can be even less accurate than personality assessments.

Personality assessments give an organization an overview of a potential candidate’s tendencies in general. Some traits can be easily identified in your interactions with them (e.g., extraversion) while others are more subtle and can rear their ugly head a few weeks after the employee settles in to their modus operandi. Furthermore, another benefit of personality assessments is the ability to tease apart personality differences that are seemingly highly related. A candidate may seem talkative and bubbly in an interview, (hinting at their high level of sociability); however, they may quiver in fear when asked to speak in front of a large group of people (describing their low level of assertiveness). The information gathered in the assessment can help hiring managers focus questions to identify how the individual asserts themselves in these types of situations. Many assessment vendors actually provide hiring managers with follow-up interview questions that are generating by assessment scores facilitating this process.

Even though personality is relatively more stable as time progresses, major life events can impact personality. For example, if an individual attended a theory-based graduate program, their personality may change to reflect their different way of thinking. So, instead of needing to sense and see everything, they may develop a more abstract way of thinking, which in turn changes that aspect of their personality. Because of the unpredictability of life and its changes, it is typically recommended that personality tests are only evaluated and used for one year after their completion.

The “elephant in the room” that no one seems to address is that when evaluating the accuracy of personality assessments (or any selection tool) is that performance is not always defined consistently. A highly driven and competitive employee could be a “star” in the eyes of their supervisor, but not respected or admired by their peers or direct reports. Therefore, when evaluating assessments it is wise to compare them to relevant criteria that are aligned with the areas you’re intending to measure.

Because of the reasons listed above, personality assessments never should be used as the only method for selection. A complete selection process will give hiring managers a more complete view of the candidate. As stated above, personality tests do not uncover all tendencies and work styles that impact an individual’s approach to work. While personality tests are not 100% accurate, they do offer valuable information that is difficult to collect using other types of selection methods.

Just Say NO to Horrible Bosses

2011-11-22T10:08:00.004-06:00

By:

Bill Campion

How do we define a horrible boss? I’m sure all of us have more than one thought in response to this question. We can cite situations where we were treated unfairly or when the boss dismissed something we said. Or how about when you did all the work on that project and the boss took all the credit? Then there was the time your performance review was three months late or when she yelled at you for a mistake your co-worker made. How about when she forgot your name in front of an important client?

Certainly bosses aren’t perfect. I’d bet that 99% of them don’t take the job saying, “I want to be a horrible boss” or “I’m looking forward to being in charge so I can be a dictator”. So, then why are there enough of them out there that some Hollywood writer created a movie resulting in millions of dollars in revenue? It’s probably because every Tom, Dick and Mary in America has had one.

Do we agree that a single horrible boss is one too many? So then how did they get to be the boss? I have a feeling I just opened the floodgates. No doubt everybody has a story about a boss who got promoted for the following invalid reasons:

· She is well-liked

· He has his nose firmly wedged between his boss’s cheeks

· She dresses the part

· He has pictures of his boss

· She drinks the corporate Kool-Aid

· He’s been with the company forever

· I’m sure you can add to the list.

In my opinion this epidemic is less about horrible people and more about horrible behaviors. Often times our bosses have been promoted because they have driven short-term financial results. I would never underestimate the importance of financial results, as a metric however there has to be more to it than that.

In other words, the great organizations maximize profits and treat their people well. It can be done however there are still bosses out there who believe they can “command and control” their way to success. This may work in the short term however if long-term viability is the goal a different approach is required.

If I were king of the business world I would encourage every company to assess their candidates prior to promotion. A robust assessment process will help identify the individual’s capacity to produce profits while providing a great work environment for their people. Assessment results will help you understand an individual’s willingness to collaborate vs. a tendency towards a “my way or the highway” mentality. Essentially what talent assessments do for organizations is help them minimize the risk of putting an individual in a position where he or she has a limited opportunity for success.

I suppose there will always be horrible bosses or bosses who behave horribly in the business world. If we want to reduce the horrible boss quotient across America, assessments are a tool that can help.

Talk to me. I’d love to hear your comments!

The Truth About Assessments II: Trying to Beat the Test

2011-11-15T10:22:00.003-06:00

When I try to explain to others exactly what I do as an Industrial/Organizational Psychologist, I often take the simplified, self-deprecating approach by saying this: You know those cumbersome test questions you have to answer when applying for a job – I create those. This is often followed by: well doesn’t everyone know how to answer those questions? Can’t they just beat the test? Well, not really, let me explain…

First, well developed selection systems and assessments should be designed to evaluate fit for a role and predict an individual’s likelihood for success in the position. When employees fail in their job, it’s not good for the company – or for them. Organizations should set up their employees for success and the first step to accomplish this starts in the selection phase. Not every role requires the same profile of personality traits and competencies – therefore, assessments are designed to identify the best profile for the position. So in that sense, it’s not a “test to beat”. I never like it when I hear that people “passed” or “failed” the “test” because we are assessing one’s likelihood to succeed based on a variety of dimensions. We’re gauging their match for a position, and it’s in their best interest to respond honestly because they eventually want a job that suits their natural tendencies. And I’ll give you an insider secret - assessments aren’t 100% accurate, so we’re still talking about a probability estimate (which of course is light years better than a casual interview).

So let’s take the “match” or “fit” argument aside for a second. Isn’t the “right” answer to just respond in a way that makes you look like a fanatical extrovert and team player? Not really, most self-report personality assessments have safeguards in place that flag extreme responses. We take it a step further, and actually identify the “right” amount of each personality trait necessary for the job – and more often than not “more is not always better”. Why? Well, taking a service industry example, you want a server who is certainly gregarious enough to approach a table of strangers but not so talkative that they spend the majority of their shift divulging their entire personal life to the staff in the kitchen. We apply this concept when scoring and reporting the results – so any attempts to “fake” or “beat” the test using an extreme response strategy is not beneficial.

I know and understand that when people are trying to get jobs, they see every step as an obstacle to get over, and it can be frustrating at times. I get it, we can all identify with that process. However, I want to work for an organization that carefully selects its employees as a means to set them up for success. So I encourage job seekers out there to be open and honest during all phases of the selection process in order to land a job that matches their unique talents – and not just try to beat the test.

Get Out From Under a Rock: Conference Attendance is Important!

2011-11-08T09:58:00.006-06:00

This past week has been a whirlwind of sorts for me! I represented B at r us Hollweg International at two conferences that were hosted within the DFW metroplex. It was actually a great work-cation (so to speak) from the monotony of going to the same location every day and seeing the same people (even though I still love the people I work with). I’d definitely recommend attending a conference about your industry at least once a year because my experiences were more positive than I ever could have expected.

The first conference I attended was the HR Southwest conference conducted by SHRM in Fort Worth. I was mildly nervous about attending because I was unfamiliar with the format and some of the content of the sessions. I actually rather liked their theme “HR Training Camp” because it was sports related and made the event more fun, but also concrete. We were in a training camp of understanding the new laws, expectations and best practices that HR professionals have over the course of the past year.

I met many HR Professionals from all over the country, even though the event was specified “Southwest.” In addition, I got to attend a variety of sessions on tough topics such as flexible competency modeling, how to create fruitful searches for prospective candidates, how to optimize your website and pages online and recommendations of using social media for HR professionals in general. While these topics are just the tip of the iceberg of what was offered, they all left a lasting impression on me and impacted how I will conduct business as usual.

The second conference I attended was the People Report Best Practices Conference. This event is put on by Black Box Intelligence and their primary offering is to give restaurant leaders current industry trends with data to back up those assertions. While most of the attendees did represent the restaurant industry, there were several that were outside of that sector. The information gathered is always invaluable for those who choose to use it wisely.

BHI always makes a splash at this particular conference because of a long standing and on-going partnership with this organization. Because of previous history, there is what is known as the BHI Dancers who perform a choreographed dance for the event. It’s great to show that BHI has some talented individuals outside of their job, and People Report gives all of its attendees that chance. We aren’t just all working professionals; some are dancers, singers, musicians, etc. Basically, we are all interesting and dynamic people and sometimes that gets lost when conducting business. It’s great to have a reminder of that concept!

Taking both of these conferences together, it was really interesting for me to take some of the best practices and results of data analysis from both and applying them in developing a few ideas on how to enhance BHI’s best practices. Sometimes, you get stuck in the bubble that is your organization and attending these sorts of events really helps you to understand the struggles and triumphs of others and to learn why these experiences occurred. I’ve been given a much more multi-faceted and dynamic view of my industry and other industries that I can use to develop new ideas and solutions to known struggles.

The Truth About Assessments

2011-10-25T09:52:00.003-05:00

I’ve recently read many articles and blogs about the use of personality assessments in business. Many of these articles have been critical about these types of assessments. While reading and discussing them, I found that many of the authors either had misinformation or were reporting things that are just simply not true. Through a series of blog entries, we intend to shed some light on personality assessments in general; how they are developed, why they are used, dispel some myths and highlight best practices.

Our expertise lies in using personality assessments for selection and development purposes in the business world, but they have many other uses as well. Personality tests can be used for gathering understanding about an individual or increasing the individual’s self-awareness of their natural tendencies. Because of the differing reasons that these tests are used and how rigorously they are developed; not all personality tests are created equal.

One of the biggest misconceptions about personality assessments is that they are meant to classify individuals into a group, or place a label on an individual. Some tests are designed to group people into types, such as the Myers-Briggs and the DiSC. Classification based tests typically are used for increasing self-awareness for individuals on their tendencies and should not be used for selection purposes. In addition, these tests were developed for use on a general population of individuals and are not as relevant in differentiating between people within a particular industry or job function for selection purposes.

Personality tests that are used for selection in business are developed with specific groups of people in mind (e.g., sales professionals, executives, accountants, general managers, waitresses, dentists, nurses, police officers, etc.). In order for a personality test to be developed properly, they have to demonstrate “predictive validity” on the population or group that it is intended to be used for. Predictive validity means that the test will accurately predict the performance of an individual on the job. For example, a test developed to select restaurant managers should have evidence of predicting behaviors related to successful performance in that population (e.g., leadership skills, guest service, etc.). Taking it a step further, many well designed personality tests will assess for “fit” within a specific organization. For example, Restaurant A may value a guest-centric view that wants managers who are more accommodating in nature, while Restaurant B may value efficiency and wants managers who are results-driven and will be focused on controlling expenses. Both qualities may be important at both restaurant concepts, however, the personality test would be scored and interpreted differently based on the goals and values of the respective organizations.

Personality tests are an important piece of the selection process because they offer insights into candidates that hiring managers may not identify in an interview or reviewing an application or resume'. The ultimate goal of personality tests is to indicate if an individual will be a good fit for a job at an organization. While they should not ever be used as the be-all-end-all selection process, they offer valuable information for hiring managers to consider.

The Netflix Dilemma

2011-10-11T09:39:00.009-05:00

If you are a Netflix customer, like me, you probably have received notification that Netflix will no longer be splitting their services between Netflix and Qwickster. Netflix was going to only support streaming video plans while Qwickster would be supporting the mail-in DVD plans. In addition to assigning these parts of the business to two separate companies, Netflix was also set to raise prices on their plans for the second time this year, which they have since reconsidered. While I think it was prudent of Netflix to change their strategy based on such an abrupt customer outcry, was it necessary in this situation? What even happened in this situation and how can it be avoided in the future?

Historically, Netflix has been an industry leader, ousting Blockbuster and other media rental sites from relevance. Personally, I was delighted by the bundled DVD and streaming video plans and was a customer of the bundle for a few years. When the price hike was announced in July (basically doubling my plan’s price) I just decided that I will choose one of the services (streaming only) and actually pay less. I’m sure that many Netflix users did the same, which likely resulted in a loss of profit.

After that hike in July, this new initiative of splitting the organization into two businesses to serve two needs just made it appear that Netflix’s leadership was struggling at best. While the split wouldn’t have affected me in the least, it seemed that the leadership was making rash decisions and having a very difficult time implementing changes that they thought were necessary. I could see the argument that these two aspects of video rental (streaming and DVD-mail-in) are very different; I didn’t really understand why it was necessary to make a whole new organization, and I wasn’t given much insight from Netflix about their decision making. Netflix’s stock actually ended up dropping 60% as a result of these changes.

A few questions should be answered internally before such radical changes were implemented. Firstly, did Netflix utilize a focus group or conduct any market research? If so, Netflix should have outlined their findings to consumers alongside these changes. Then, customers would recognize that Netflix did attempt to understand what the customer thought and explain their reasoning behind these changes. To be blunt, it came across that Netflix did not consider the customer at all.

Another question is what did Netflix expect to gain from the price and business model changes? Was there a thorough analysis of financial return for increasing prices, while taking into consideration that many customers may drop service? Did splitting the business save money or increase revenue in some way? A complete analysis of projected ROI on decision making is necessary before making any large-scale decisions. It seemed that this was lacking completely.

The last question is why did Netflix’s leadership team not expect such a reaction from the public? Leadership teams should have the vision and experience necessary to predict some of the future trends. While they can’t possibly be correct in every endeavor, an educated projection can be made. Leadership teams should also ideally be composed of individuals with varied experience and viewpoints to offer all perspectives possible surrounding a change or issue. A boardroom “think tank” can fall subject to groupthink in which the individuals agree something is a sound solution without critically evaluating the possible outcomes. Varying perspectives are integral to setting vision for any organization.

Hopefully, Netflix is learning from their mistakes and taking those lessons into account when planning for the future of their organization.