Category Archives: Business

I recently dined at a restaurant in Southern California that, on the receipt, included in small font what 15% of the bill was, as a guide for tipping. I’ve never seen this done before. It was helpful.

But they’re leaving money on the table. If I ran a restaurant, on each tab I’d include a "Tip Guide" suggestion with three percentages:

15%
17%
20%

If most of your patrons usually tip 15% (the standard in restaurants in the U.S.), by making 15% the lowest of three, more will choose 17%. Persuasion research shows that people tend to choose the middle of three options and are heavily influenced by relativity — ie, what a number/option is relative to other numbers/options.

Naturally, this is a concept not limited to restaurant tabs. In any kind of negotiation, framing your desired outcome in the context of other choices is key.

Last week I posted about Jack Welch earning the title "least helpful predecessor" in his public remarks about Immelt. Today, on the front page of the Wall Street Journal, former CitiGroup CEO Sanford Weill says about the current CEO Vikram Pandit:

At a time like this, you really want people marching shoulder-to-shoulder with you. The leader needs to relate to the people. They need to know who they’re following.

Which implies, of course, that the people are not marching shoulder-to-shoulder with Pandit. What good does this do? Why do former CEOs feel the need to give advice to the current CEO via the press? Egos, I say, egos. They want the spotlight.

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Yesterday’s WSJ named Gary Hamel the "most influential business thinker alive," ahead of Bill Gates and others, based on this methodology. Umm, is there any businessperson who thinks Gary Hamel is more influential than Bill Gates? Has anyone even heard of Gary Hamel? Almost all such lists / rankings devolve into silliness because it’s impossible to really measure these things. (By the way, their methodology was based on Richard Posner’s methodology in his book Public Intellectuals — it’s a great book for understanding the role and organization of public intellectuals, but even Posner’s "most influential" list of thinkers was a stretch.)

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Odds and ends: I’m on an 11 AM panel on Friday (May 9) at UCLA Anderson School Entrepreneur Conference and will also be speaking at ETH-Zurich (the best technical school in Switzerland) on May 19 at 7:15 PM in Zurich. Come one, come all!

What people remember, and relate to, quite simply, is other people.  There are few truths in marketing more important than that.

That’s Tyler Cowen, as told to Kevin Gentry and included in his "Fundraising Tip of the Week" email. Kevin goes on to say that marketing your personality is key in business.

All good bloggers are able to in some way convey their personality through their blog. If your blog has no voice or personality, readers will flee. What makes blogs fun to read is that they’re personal and don’t pretend to be Objective (aka, the Voice of Death). Many people who have shown up to the blogosphere recently, particularly academics and journalists, write like they would in a newspaper. Usually doesn’t work.

Tyler is one of the best at conveying his personality through blogging.

Bob Sutton has a great summary of the research around CEO comp and how overpaid CEOs affect business performance / recruitment. Here are the findings he cites, some editing on my part:

• You can overpay other senior executives too and thus entice them to stay; or you can create a big gap between the overpaid CEO and everyone else, which leads other senior executives to jump-ship. Either way, overpaying the CEO has costs beyond the extra dollars the CEO gets.
• When there are bigger pay differences between the CEO and other members of the top management team, organizational  performance tends to suffer — and the negative effects of such pay dispersion is most pronounced in high-technology firms.
• When the CEO is getting a lot more money than the next executive, he or she will likely be afflicted with other signs of narcissism.
• If the CEO is overpaid, the decision to overpay the rest of the top team isn’t a purely good thing — reducing pay dispersion when the CEO is overpaid can cause a company to waste even more money.
• While this research so far seems to be that paying the CEO a lot more than others isn’t a good thing for the company, there are some studies that suggest this isn’t always the case.

I’ve seen firms fall prey to the fourth point — they pay the CEO what the market rate is (they have no choice if they want the best) and then, in an effort to narrow the gap between his comp and everyone else’s, they overpay the senior execs. I would advise a company to pay the CEO what he could command in the market, pay the senior execs what they could command in the market, then use other types of incentives to retain and please the senior execs as opposed to simply escalating their cash comp to reduce the pay dispersion between #1 and #2, 3, 4, and 5.

Jack Welch, legendary former CEO of GE. Jeff Immelt, current CEO of GE. Welch groomed Immelt.

So this is not what Immelt probably expected from his former mentor as GE suffers a bit on Wall Street:

On April 16th, in an apparent bid to wrest the title of "least helpful predecessor" from Alan Greenspan, the suddenly outspoken former Federal Reserve chairman, Mr Welch informed viewers of…CNBC, that "Jeff has a credibility issue. He’s getting his ass kicked," before promising to "get a gun out and shoot him if he doesn’t make what he promised now."

It’d be one thing if Immelt was thought to have a motivation issue or didn’t know that he was in some deep shit. That’s not the case here. This is just dumb on the part of Welch.

On the topic of Welch, I’ve long been befuddled by how much businesspeople idolize the guy. I mean, OK, so he had an incredible run at GE. He’s been one of America’s most successful CEOs. That doesn’t mean every business owner can learn from him.

Circumstances matter. Are the tips from a CEO of a $300+ billion dollar company going to be useful to someone running a 10 person company, or even a 1,000 person company? I doubt it.

There are many successful CEOs and it’d be smarter, it seems to me, to find someone who is doing a little bit better than you (ie, 3-5 years ahead in terms of progress), and study that person.

Instead, we flock to read Welch and Trump and Gerstner, thinking that their experiences can help us understand our own. Worse yet, people fork over thousands of dollars just to hear Donald Trump speak in-person at a Learning Annex conference or whatever. I couldn’t think of a worse way to invest professional development money.