Motivation - moving beyond sticks and carrots

Who doesn't like a stick?

Well, no one at the receiving end of one, for sure.

However, even experienced leaders and managers, when trying to motivate their followers, think of sticks and carrots. Only.

In fact, a reportee is lucky if “carrot” achieves some share of brainwave in her manager because sometimes it's all “stick”!

Management theory has traditionally equated motivation to the "right" mix of carrots and sticks or more eloquently put, "alternate kicks and kisses".

Renowned management thinker Daniel Pink characterizes this as Motivation 2.0. Motivation 2.0 presumed that humans responded to rewards and punishments in their environment. This is an incremental improvement on

Motivation 1.0 which presumed that human beings were just biological creatures struggling for survival. Thus motivation was considered entirely extrinsic.

In 1949, an American psychologist called Harry Harlow conducted a learning experiment on rhesus monkeys. The task involved solving a simple mechanical puzzle (pulling a pin, undoing a hook and lift a cover on a small device). Once the device was placed in the monkeys cages, they immediately started playing with it. In the absence of any rewards of food, affection, etc., the monkeys rapidly became proficient at solving the puzzle! Perhaps the motivation is the pure joy of having solved the puzzle.

Multiple new studies now suggest that humans also have a 3^rd drive (outside of rewards and punishments) – to learn, to create and to better the world. This is Motivation 3.0, which implies that motivation can also be intrinsic.

What are the implications for managers in the workplace?

Firstly, managers need to know the different types of motivation techniques, and when are each suited.

Extrinsic motivation may be of the following types:

1.     Status: Spot awards, public announcements of achievements, etc.

2.     Access: Allowing access to top management (lunch with the CEO, etc.)

3.     Power: A bigger set of responsibilities/ budgets, more reportees, etc.

4.     Stuff: Cash or other such perks

Extrinsic motivation has been shown to be very effective for quotidian tasks. However, when there’s even some amount of creativity involved, extrinsic stimulants reportedly fail. Speaking from personal experience, extrinsic rewards might even diminish performance. Economists call it the overjustification effect in which the external reward such as money, crowds out motivation for an inherently enjoyable task.

Enter intrinsic motivation.

According to Daniel Pink, there are 3 types of intrinsic motivation:

1.     Autonomy – Provide people freedom in doing work (e.g. 20% free time at Google). Specify the what, leave the “how” to the person’s discretion

2.     Mastery – Show people how the job helps in improving individual skills.

3.     Purpose – Help people appreciate how the work matters. How it impacts others.

Thus for roles that involve even a modicum of creativity, managers should seek to make the work intrinsically motivating to ensure top performance.

If we want our employees to innovate, we should ensure we just don’t throw money (or such “stuff”) at them. After all, you can’t bribe people to innovate. We should ensure that key tenets of intrinsic motivation are laid before expecting employees to do their creative best.

Finally, with work becoming remote worldwide, there is a large need to motivate remote employees. In today’s world, work consumes a lion’s share of our conscious lives and in many ways define us. Here’s hoping that we can move beyond the “carrots and sticks” and make work a truly enjoyable and fulfilling experience it deserves to be.

Din pore jaye din
Gaan pore gayi gaan
Akasho batashe...

The days pass me by
My songs float in the sky, in the wind

Rahul Dravid on “Patience”

“When I’m requested to speak to youngsters I like talking about this phase of my life and liken it to fascinating plant: The Chinese Bamboo. You can take a Chinese bamboo seed and plant it in the ground, water and nurture the seed for an entire year & not even see a single sprout. Infact, you’ll not see a sprout for 5 years. But suddenly, a tiny shoot will spring from the ground. And over the next 6 weeks, the plant can grow as tall as 90 feet. It can grow as fast as 39 inches every 24 hours. You can literally watch the plant grow.

What was the plant doing during these 5 years, seemingly dormant period, it was growing its roots. For 5 full years it was preparing itself for rapid, full growth. Without this root structure, the plant simply couldn’t support itself for its future growth. Some would say the plant grew 90 feet in 6 weeks, I would say it grew 90 feet in 5 years & 6 weeks”

Media and Entertainment Industry: The changing landscape

The world is changing - the world of media and entertainment. With technology the traditional landscape has undergone a complete revamp.

Innovations in technology has blurred the boundaries across industries. Leaders from ancillary and even unconnected industries have bulldozed their way into this segment. Looking at the value chain, there are three main segments. Content producers, broadcasters and distributors.

Let’s look at the dynamics of each segment –

Producers are the creative institutions such as Balaji Telefilms, etc. Which produce and develop . For the purpose of this article, let’s focus on the next 2.

Distribution comprises of MSOs such as Hathway, Den (a B2B biz) which engage LCOs to reach the end subscribers.

In India, with the advent of DTH and OTT (Over The Top or streaming) players such as Box TV, Bigflix, this segment will soon become a B2C business.

The major infiltration has happened here from other B2C businesses. Amazon through online B2C portal, Netflix through DVD business, Google through Social networking (Youtube, Android), Apple through well, all its products, etc. have all come riding in on robust tech platforms and a strong suite of loyal customer base and can provide content as an additional service. It’s only a matter of time before FB joins the bandwagon. There are huge cross selling opportunities for these players and with increase in broadband penetration and through network speed improvements via 4G players, etc. will only accelerate this infiltration.

That’s not the whole story though.

 The distributors need content to sell. This content is in fact provided by the broadcasters such as Zee TV, Sun TV, etc. who are aggregators of various content programming and are recognized brands.

Couple of major shifts have happened in this industry – 

1. Digitization
2. Rise of on-demand programming

Far higher revenues will now be realizable compared to earlier i.e. the revenues that were earlier not declared by LCOs. Thus ad revenues which forms about 65% for broadcasters will gradually become ~50% with the share of subscriber revenues going up proportionately. Secondly, through rise of on-demand programming, ARPU has increased as subscribers may pay higher prices to skip unnecessary ads lowering ad revenues further. Subscribers have thus become much more important for broadcasters.

The challenge is that Broadcasters which were typically B2B businesses dealing with either distributors or Advertizers have to deal with consumers more directly now.

This means that now they have to reorganize and become more nimble, make faster decisions, hire people or teams that understand consumer behaviour and develop analytics capabilities among other things. This is aided by better ability to get registered subscriber information because of digitization.

Since technology has changed the nature of the industry to more consumer facing, the power has shifted to tech players. These new entrants are not stopping at distribution. Netflix, through better understanding of consumer behaviour has been able to commission blockbuster shows such as House of Cards that suits its subscriber base’s taste.

Thus the only way for broadcasters to defend their position is to attack by going down the value chain. They should invest in evolving technologies (organic will be too time consuming), launch OTT services like HBO Go, etc. and investigate other means of engagement directly with consumers such as Mobile apps, games, etc.

There are exciting times ahead for the industry and the next few years may radically change the landscape

[Part 2] Budget for Success! Here are 5 steps to tackle the budgeting beast

This is the 2nd part of this 2-part series on budgeting fundamentals:

Step 1: Prepare an exhaustive list of service lines/revenue streams

A budgetary exercise typically focuses on only costs – but in this author’s experience that may be inappropriate because a lot of costs depend on your strategy and revenue plans. For example, if you are an Indian firm, planning on serving customers in Asia, the travelling costs will differ vastly from those if you serve clients in USA. So a better approach is to first prepare a revenue plan after discussion with the top leadership. Very often in small firms, this can be a key challenge because of lack of clarity on customers and sales locations. The sales team will typically provide an inflated lump sum. Here (just as in life) the devil is in the details. One approach is to ask for a list of prospective customers– categorized by location, probability of conversion, (expected) deal size, etc. After agreement on which projects to consider, add a lump sum for other unforeseen new revenue opportunities but it should be justifiable in terms of prospects.

Step 2: Classify costs into revenue buckets

Costs can be divided into Capital Expenditure (Capex) and Operational Expenditure (Opex).

Capex is typically a large investment say investing in a new plant or R&D, etc. whose benefit will accrue to the business for multiple periods.It shall help to first prepare the exhaustive list of service lines and revenue types and then identify capex required for each item. This will ensure that any key capex item is not missed. Typically for R&D projects, further break-down details may be sought for on-going vs. new investments planned along with phase wise commitment information. Such soul-searching questions shall lead to numbers closer to reality and force Capex spend to align more closely with the long term strategy.

Step 3: Determine Multiples

One approach for budgeting for variable cost items is to identify multiples from either industry benchmarks or from the business leaders based on their past experience. For example, in services industry, one can come up with the number of resources required per unit size of project, volume of raw materials (respective) required per unit of final product volume, etc.

Material or input acquisition expenses should again be broken down by as much details as possible. For example if a media company is acquiring content, it shall help to identify what form of media – which language, which provider, which vendor, etc.

Similarly G&A and travel costs can be estimated from past experiences but again there should be quantifiable assumptions behind those numbers –

Let’s take travel costs as an example.

Travel Cost (separately for domestic and for foreign):

i.            Flight fare: No. of trips * Fare per round trip (including Visa etc. for foreign trips)

ii.            Hotel Cost: No of trips * Average hotel stay duration/trip in days * Avg. per day rate

iii.            Local Conveyance: No. of trips * Avg. fare per trip (normal taxi fare, etc.)

The key is to ask for details and break any cost into its components so as to get more clarity and base the numbers on a strong foundation.

Step 4: Prepare estimates for all financial statements

Typically small companies will only project their P&L along with capex.  Don’t fall into this trap. Estimate both P&L and Balance Sheet so that Cash flows can be estimated. This will also bring into focus exact funding requirements including sources of funding and associated financing costs. Probably the most valuable commodity for an investee firm is cash and without a diligent mapping of both P&L and Assets/Liabilities, the business may find itself with insufficient funding (or untimely funding).

Step 5: Integrate

Once the above steps are followed, it is imperative to run them by the Sales, Procurement, HR, R&D and other department leaders along with the top management or board to check the sanctity and to ensure that they make sense as a whole.

A diligent budgeting process enforces discipline in a business. Thus robust budgeting helps a start-up mature and enables it to grow without hiccups. In sum, budgeting is an indispensable business activity and needs to be looked at not as a necessary evil but as an important value generating step in a young business’ growth.

[Part 1] Budget for Success!

Yes it’s that time of the year again. The sales and the procurement people who passed snide remarks against the “bean counters” all year round suddenly seem to be smiling pleasantly – even waving and exchanging pleasantries with the “finance wizards”. No, it’s not Christmas or Diwali time. It’s time for the budget. This is the time the finance department suddenly becomes the cynosure of the organization.

All departments from HR to Procurement to Sales need the finance team to sign-off on their budgets for the next year. Hence the dramatic change in attitude. Most business teams treat the budgeting exercise with either dread or dispassion. This author has been in budgetary meetings where department heads joke about having two budgets – one presented to promoters or investors to keep them happy and another that resides in the business teams’ minds which shall actually be realized.

A few weeks before start of the new FY,the various teams get together (probably for the first time in months) and put something down on paper (or excel as the case may be) just to have the budget done with. Like most organizations, if you follow this cycle of Dr. Jekyll and Mr. Hyde behaviour towards budgeting, expect the process to end similarly – in a tragedy. The main reason for a budgeting activity is to better plan for the future – to get a handle of what is required to achieve the revenue targets.Additionally a budget may also aid in evaluating resourcing requirements. A sound budget is also mandatory to justify a funding request to a (potential) investor.

Thus unless due diligence is carried out while preparing a budget, the business may be in danger of facing cash flow risk going forward. This due diligence along with a strong framework should be provided by the finance team.It is vital that finance team is involved throughout the year on planning and the strategic decision making process to prepare the various types of budgets.

A budget is typically of two types – a one year detailed budget and a 3-5 year long-term budget.

The one year budget is used to predict monthly, weekly and sometimes even daily cash flows and expenses. This may become very important for a trading company as it typically prepares a 15-day rolling budget and a rolling P&L because the business is extremely dynamic and the risk management has to be timely and highly granular. Thus any business that has a trading angle to it needs to have a rolling short interval budget and a constantly updatable one year budget. Every business nonetheless needs to have a monthly or at least a quarterly budget that will help plan ahead.

The longer duration 5-year (or 3 year) budget helps put the long term goals in perspective. Of course the 1st year of such a budget needs to be in sync with the one-year budget discussed above. The longer term budget may not have as objective a set of assumptions as a one-year budget but each item needs to be based on solid references. For example,5-year revenue growth may be benchmarked against 5-year industry growth, 5-year SG&A percentage rise may be benchmarked against 5-year expected inflation and so on.

The challenges faced by all companies are broadly similar for both types of budgets. The task gets more complicated for a young company because of lack of past data. In an established firm, the budget numbers typically vary by a small fraction of last year’s values unless the management is investing heavily in a new plant or acquiring a company, etc. However, for a small and fast growing company, the challenge is absence of any past indicators.

The task is further complicated by the nature of investments and expenditures: whether capex or opex, whether fixed or variable, etc. The uncertain future of a nascent technology and sometimes of even the industry adds to this complexity.

In short, a budget is a dangerous animal and a structured well-thought out approach is required to tame it.

In the next part of this article which will be released tomorrow, we shall look at a set of steps that may be followed to do exactly that.

One liners

Groucho Marx - 'I never forget a face, but in your case I’d be glad to make an exception.'

Peter Kay (2 July 1973-):

'My Dad used to say 'always fight fire with fire', which is probably why he got thrown out of the fire brigade.'

Tommy Cooper (1921-1984)

'I'm on a whiskey diet. I've lost three days already.'

Woody Allen (1 December 1935-):

'Life is full of misery, loneliness, and suffering - and it's all over much too soon.'

Billy Connolly (24 November 1942-):

'My definition of an intellectual is someone who can listen to the William Tell Overture without thinking of the Lone Ranger.'

W.C Fields (1880-1946):

'Start every day off with a smile and get it over with.'

Tony Hancock (1924-1968):

'This radio lark's a wonderful hobby, y'know. I've got friends all over the world, all over the world... none in this country, but friends all over the world.'

Les Dawson (1931-1993):

'My wife sent her photograph to the Lonely Hearts Club. They sent it back saying they weren't that lonely.'

Spike Milligan (1918-2002):

'Chopsticks are one of the reasons the Chinese never invented custard.'

Dorothy Parker (1893-1967):

'If you want to know what God thinks of money, just look at the people he gave it to.'

Gore Vidal (1925-2012):

'Every time a friend succeeds, I die a little.'

Bob Newhart ( September 5, 1929-):

'I don't like country music, but I don't mean to denigrate those who do. And for the people who like country music, denigrate means 'put down'.

Jimmy Carr (15 September 1972):

'I saw that show, 50 Things To Do Before You Die. I would have thought the obvious one was "Shout For Help". '

Ken Dodd (8 November 1927-):

'I have kleptomania. But when it gets bad, I take something for it.'

Mark Twain (1835-1910):

'Age is an issue of mind over matter. If you don't mind, it doesn't matter.'

Bill Cosby (July 12, 1937-):

'Always end the name of your child with a vowel, so that when you yell the name will carry.'

Mae West (1893-1980):

'I used to be Snow White, but I drifted.'