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Harvard Business Review
29-04-2025
- Business
- Harvard Business Review
The Growth of the Private-Sector Space Industry
CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I'm Curt Nickisch. I'm beginning with an announcement. This episode is my last episode as a regular host of the show. It has been a privilege and honestly, a blast. Over the years I've talked to hundreds of insightful people on this show. Creators, builders, researchers, deep thinkers, future thinkers, leaders you'd love to follow, managers you'd love to work for, coaches and mentors. All these people have cast too many valuable ideas to count, and I with a fantastic team, have been able to engage with these ideas, interrogate them, employ them, and present them in conversation to you, and I could not ask for a better audience to work for. Speaking of the show, IdeaCast, it's not going anywhere. It's in the best of hands, and I'll be listening and learning and getting inspired with you. Now for today's episode, we're going to look beyond the near horizon and explore the economic frontier of space. In the last decade or so, the space industry has evolved into a more privatized one. Government still plays a big role in financing contracts, but increasingly, its job is to foster a market where competition and innovation can flourish. This shift, generally in the U.S., from NASA doing everything to hiring everything out, is creating new opportunity for businesses and individuals in their careers. We're joined today by two guests who have studied the public and private sector aspects of the space industry. Matthew Weinzierl is a Senior Associate Dean and Professor at Harvard Business School. Brendan Rosseau is a strategy manager at Blue Origin. Together they wrote the book, Space to Grow: Unlocking the Final Economic Frontier. Matt, thanks for coming on the show. MATTHEW WEINZIERL: Thanks, Curt. I've been listening to your voice for many years, so it's a real pleasure to be talking with you. CURT NICKISCH: Brendan. Thank you, too. BRENDAN ROSSEAU: Yeah, great to be here. CURT NICKISCH: We've seen the rise of private sector space companies like SpaceX, like Blue Origin, where Brendan, you are. In your book you argue that this isn't privatization per se, but a decentralization. What do you mean by that? What are the implications of what's happening? MATTHEW WEINZIERL: I think it's a really fundamental distinction, partly because there's a misunderstanding that's easy to have out there in the world, which is, we hear so much as you said about SpaceX and Blue Origin and various other space companies, and it seems like the days of NASA and the Department of Defense and other international space agencies playing a big role in space might be over, and there's a sense in which that role has changed a lot, but the role is definitely not over. Why we call it decentralization, is that the way you think about the first 50 years of the Space Age is that it was really run from the center, whether it was NASA or the Department of Defense or other agencies, they set the agenda, they operated the vehicles. They really decided where we were headed in space, why and when. But what's happened over the last 20 years is that we've brought more decision makers into the fold. Private companies are being asked to develop vehicles and services that are valuable not just to public sector customers, but to private sector customers. And so, it's really becoming much more of a marketplace like our decentralized marketplaces are for most goods. The role of the government is still incredibly large in space, both as a customer for those services that those companies are providing, and for setting some of our key social priorities in getting them done, but now there's many other players. BRENDAN ROSSEAU: And actually, if you look at NASA's history, it's a really great case study in just those two things. What can the government be good at versus the private sector? The origins of NASA, of course, are the post-Sputnik space race, that culminated in astronauts landing on the moon. NASA was so good at doing that, it was such a remarkable achievement pulling off a goal that even a decade earlier to NASA insiders had seemed completely crazy. Why were they able to do that? And part of the reason is because they were rallying the country to provide national goods. Things like basic science, research, exploration, things that the market left to its own would grossly under-provide. What we call NASA's act one, The Apollo era, was a great example of what the strengths of that system can be. Fast forwarding to what we call act two, which was the space shuttle and International Space Station era, it's kind of '70s and beyond. The goals changed remarkably. Space flight was too expensive, and so the idea was to create reusable space planes and destinations in space that would be reusable. So the idea was, okay, iteration, get efficiency, bring down costs, and these are things that we don't typically associate with government programs. And in theory, that would create an opportunity for the private sector to come in and compete and bring all those gains of private sector involvement that we're familiar with elsewhere. But the model struggled to evolve. We kind of put all of our eggs into the space shuttle and ISS basket, and it was only the space shuttle was retired following the 2003 Columbia accident, that the private sector was given a real opportunity to try to be an agent in directing the U.S. space enterprise. And of course, that's worked out remarkably well and we're frankly just living in the ripple effects of that, where launch has now been largely commercialized with astounding effects even just in the past decade or so. CURT NICKISCH: Let's underscore this – launch being shorthand for just getting stuff up into space. How much have costs come down? MATTHEW WEINZIERL: It's difficult to compare perfectly across time, across different vehicles, but at the highest level, one way that we summarize it and that's commonly used in the industry is for the act two era that Brendan was just talking about with the space shuttle, you can think about the cost of getting a kilogram of mass to what's called low earth orbit where a lot of our internet and telecommunication satellites fly, as being on the order of $20,000 to $30,000 per kilogram to what's called LEO. With SpaceX and its Falcon 9 rocket, which is now the workhorse launch rocket in the world, those costs have come down essentially 90%. So we think about a range of somewhere more like $2,000 to $3,000 a kilogram. SpaceX's newest rocket, the Starship. The hope is that once that's flying routinely, it will bring costs down another order of magnitude, down to something in the hundreds of dollars per kilogram to LEO. So all told, that would be a decline of 99% in launch costs. And it's not just SpaceX, they've been the driving force, but there's a whole host of other launch companies and startups forming, trying to also bring costs down and in different ways provide access to space for satellites and other equipment at much lower cost. BRENDAN ROSSEAU: We focus on the cost because of course that's the most important thing. I mean, a 90% reduction in cost is hugely important, but what I think is sometimes harder to capture is just how much that change in costs and increasing access to space really transforms the community and the thinking and who does space. So for example, in the early two 2000s, we had maybe 50 launches, and if you look at who is actually launching on those, it was all national security satellites and commercial satellites from large conglomerate companies, and that shaped the ethos and the approach of everyone in the industry. It was extremely risk averse, planning took years, and it was meticulous and every little bit of risk really had to be burned down before the launch could happen. Part of that just came down to launches were so expensive, if you're going to pay the 100-plus million dollars to launch this thing, you better be sure that it's going to work. If you fast-forward, last year we had 263 orbital launch attempts from across the world. Not only are launch costs going down and launch availability going up, but because launches are so frequent and it's less of a huge hurdle that you have to cross to secure your launch spot and everything, it allows this whole cast of characters who really had no entry point into the space industry before to jump in and say, 'You know what? I've had this idea for how space and a constellation of satellites could be useful for us. Now's the time for me to jump in because I think my business plan can close and I think I can actually get a launch. So, let's try it out.' CURT NICKISCH: So what is the government's role in this market now? National security is still there. What's the mix of priorities that's now sort of at the forefront for the government's role in this market? BRENDAN ROSSEAU: Yeah, that is really the question ahead of us. There's so much excitement and opportunity, but also with a new model come new challenges. So the way that Matt and I have tried to break it down in the book is a three-pronged framework that we think are really the three critical steps that it will take to not only create a robust and growing space economy with huge benefits for everyone back here on earth, but also to make sure that it's taking us to a place that we want to go. The first step is to continue to establish and reinforce this market approach to space activities, recognizing the strengths of what the private sector can do, and increasingly allow more and more private activity, encourage more and more private activity through different government programs and smart investing. We've seen already the launch sector become more and more commercialized, and that's been a real success. More and more we are seeing the satellite sector, satellites that provide connectivity and internet and data and all sorts of things. We're seeing a huge amount of experimentation and value creation in the satellite sector now, so that's an area where there's strong market presence and market growth. CURT NICKISCH: I think most consumers have known that TV programs and everything come over satellite, but now it's like you can't go a day without- BRENDAN ROSSEAU: Oh, yeah. CURT NICKISCH: … seeing in your inbox that an airline is partnering with Starlink or a mobile phone company is using it to get better access in remote areas. I mean, it's brought the technology to just a lot more companies. BRENDAN ROSSEAU: It's remarkable. And for me, I think it's reinforcing the idea that at its core, space is just a place. It's a place that we can do certain things and use certain technologies to create value back here on earth. I think that's a different way of thinking about it than we did say, during the Apollo era when space was, we celebrated that it was kind of foreign and dramatic and everything, which it still has that frontier allure. But I think the real crux of what's happening now and why we're so excited about it, why two folks who like us who think from an economics perspective are excited about it is because we think with the market coming in and more and more companies seeing space as a place of opportunity and value creation, those companies need customers. And for 99% of them, the customers aren't going to be other space companies, it's people on the ground, it's people like you and me. So when you have an army of entrepreneurs and engineers and brilliant space technologists who are all laser focused on using space to create value for you and me and everyone else on earth, that for me has got to be a recipe for success. So the first step, as I mentioned, was to realize the potential of the private sector and continue to expand the role of markets in space. So that's step one, what we call establish the market. The next step is to recognize that markets are not perfect by any means. They're often very far from perfect, as we all know in our daily lives. So the next step, and this is a real key place of government intervention, is to refine the market by addressing market failures. So that's through policies that address market failures, like let's say orbital debris or other externalities that aren't priced into company's decisions, address those as they come up. And also, capture the opportunities that the private sector can't do on its own. The government still can play a really powerful role as an organizer or a coordinator of activity across different companies. And then step three recognizes that the role of markets is really just to create efficiency, but there are things that we care about in society beyond just efficiency. So step three is what we call temper the market, which is aligning it with society's moral and ethical judgments. And for us, this means answering really hard and fundamental questions about what should happen in space and why. Who has property rights and over what? Who sets the rules and who enforces them? That gets back to the national security question. As we celebrate that space as becoming more and more prosperous side of value creation, but who should benefit from the riches that we reap in space? And what is an equitable distribution of those benefits look like? These are huge questions that for a long time felt kind of sci-fi-y, but more and more by the day they are feeling pressing. CURT NICKISCH: Is there an example from history – I'm thinking here, I mean, you often hear people mention the railroads, right? Building railroads across the North American continent. The internet. There's also, to stay with trains, there's also, there are places where supply and demand curbs maybe never meet, and that's where government can step in and create public transportation that people otherwise just can't afford. So, what do you liken this to or what do you like to liken this to? MATTHEW WEINZIERL: Well, you've already named a couple of the areas that we often do talk about Curt, and then semiconductors, because that's another example that we sometimes make reference to. I think there's no perfect analogy, as you would guess. There's been some interesting work done by some NASA historians, in fact, to explore some analogies to space. The railroads is an interesting one maybe just to spend a moment on. There are a lot of really important similarities. The railroads pushed out into frontiers, they built infrastructure that allowed businesses to flourish, businesses we could never predict would flourish. A lot of the common examples from the railroad age are surprising success stories, and that's part of the beauty of market forces, and yet there are some major differences. So railroads were generally connecting to existing sites of economic activity, and therefore creating the surplus and the synergies between them. Whereas here, we're reaching out into places where at least there is not yet very much economic activity and trying to create it at the end of the line, so to speak. So we always want to be careful about reasoning from analogy. CURT NICKISCH: Right. BRENDAN ROSSEAU: The uncomfortable reality is, we don't know and we can't know. That's one of the double-edged swords of market forces coming in, is we're used to, especially in the space enterprise, five-year plans, ten-year plans, major programs where we can point at a calendar and say, 'At this date the space shuttle will be flying or we'll be doing XYZ, or the next space telescope will be coming up.' I think increasingly, if we look at the commercial activity in the space realm, it's going to be more and more unpredictable, and that makes it challenging, but also that's where the beauty of markets comes from. The killer app that no one thought of can pop out of the blue and take over very quickly. I think even though this commercial space revolution that we've talked about is young, we've already seen a few of those kind of incredible unexpected ideas pop out of it, especially reusable launch vehicles. They now dominate the world's launch pads, and 15, 20 years ago, that would've been pretty much unthinkable. So I would say we're cautiously optimistic about where this future space economy is heading. I think there's strong tailwinds across the board, but we should also recognize that it's still young, it's still very fragile, particularly it takes individuals making decisions to continue the momentum of what we see today. So I think the worst thing we could do is just kind of slap ourselves on the back and say, 'Okay, mission accomplished. We've got a commercial space enterprise.' And also, it could be skewed at point. We could have setbacks the role of different public priorities because the public sector still plays such an important role in shaping the space economy. Different public priorities could really skew the direction of space activities. So we don't really know where it's going to go, but I think we're hopeful that it will be a real source of value and one that we look back on and say, 'We're really glad that this happened.' CURT NICKISCH: It's funny, I mean, when I was growing up as a kid, I feel like the thing you would always hear is that, 'Oh, someday there are going to be space stations where drug companies are going to be developing drugs in zero-gravity environments,' and I don't think that's happened, but all sorts of other things that people did not imagine did happen. MATTHEW WEINZIERL: Well, and Curt, I don't want you to lose your childhood dreams. I mean, the idea that we might actually do some really important pharmaceutical or other R&D up in space or even manufacturing, that may be also having its own renaissance. You're right, those ideas have been around for decades, but very much as in where we saw launch costs come down over the past couple of decades, there's now at least potentially on the horizon, an era of commercial space stations, which we hope will engender a similar decline in costs and increasing capabilities to make possible some of the things that people have been dreaming about for decades and to also make possible things we never would've really thought about 30, 40 years ago. For instance, data centers in space – there are startups trying to figure out how to make that happen. CURT NICKISCH: That's fascinating. And now they can afford to try it. MATTHEW WEINZIERL: Right, exactly. CURT NICHISCH: You now have a situation where SpaceX has been so successful. It's almost like, is SpaceX a monopoly? MATTHEW WEINZIERL: That's certainly a question a lot of people are asking. I think with antitrust concerns, it's always a tension because often you acquire that lead by doing really remarkable things that generate a lot of value for customers. CURT NICKISCH: Right, to wit, costs coming down 99%. MATTHEW WEINZIERL: Right, exactly. And SpaceX is yet another example of a company that went much faster, farther than I think really anyone could have expected or even hoped, in terms of opening up the space sector. The tension is between celebrating the companies that do really well and gain dominance because of that, but then making sure that they don't turn into value capturers, rather than value creators. And our recommendation in the book is that we all, whether we're government contractors or government agencies or people trying to build our own businesses, we try to keep people nipping at the heels of SpaceX and posing real challenges to keep competition. One of those key market forces, healthy. And so I think keeping that at the core of contracting is a key idea. BRENDAN ROSSEAU: The concern becomes in those programs where they're specifically trying to create competition and bring in new entrants and kind of let the new guys come in and bring in more competition, when even those contracts are going to SpaceX, as we've seen happen, then I think it starts to get a little bit concerning but right now, I think we're still in a good point. And I think that the government has been forward thinking about this, about being intentional about bringing in competition. CURT NICKISCH: It's interesting, you talked about space as just another place, but you've also described yourselves as optimists. And in this arena there is, I don't know, it seems like story and drama and the frontier of possibilities is a big part of what motivates people to work in the industry and what motivates people to fund it. And I'm just curious what you think of story and drama as part of the branding space enterprises, how helpful it is or is this an issue for you in the space industry that you yourselves kind of come to terms with? BRENDAN ROSSEAU: I think a good place to start for me would be just kind of how I ended up here. So I actually, I've always loved space. I thought I was going to be an astronomer or astrophysicist. I just have always loved the space story. I mean, if you look at the relationship of humanity outer space, every culture across the globe, even before they were in contact with one another, seems to have had their own relationship with outer space. And of course, it's if I can be patriotic for a minute, I mean, it's a particularly beautiful aspect of the American space story. The quest and sacrifices to push out beyond the frontier is something that I think is also uniquely American and I've always thought of it as kind of like our space story is this gilded thread in the American tapestry. Like other things, it can be a double-edged sword. If we start doing space things from a commercial perspective or even from a public perspective, just because we want to be doing space things, I think that can be a distraction. And we have seen plenty of space companies start out with a lot of excitement and momentum only to later realize and have their investors later realize, oh, wait a minute, you guys kind of just wanted to do space stuff, and that's not really a business plan. I think the businesses and ideas that Matt and I are most excited about are ones where if you presented them to someone who really did not care about space, and you just said, 'Hey, there's this value that can be created in space, and it just so happens that space happens to be the best way to do this.' Whether it's transmitting satellite internet around the world to billions of people at a low cost, or providing data that can really only be captured from space or a million other things. There's a lot of things that space is truly uniquely good for. Ones that check that box are great, but also businesses that have that kernel of inspiration behind them, companies that even though they're pursuing real business models are doing something hard, they're pushing the frontier. They're not just any other company. There's many of those today, and that's why we're so excited. We see how motivated the founders and the workforces are, and that although they're pursuing commercial business cases, they're also pushing the needle forward. The hope is that yes, we can expand what space means to us to also be commercially viable and like a sea of true commerce, while also not losing that wonder and excitement and exploration. And today, the space economy has all of that. We've got people who want to settle Mars while also being dead set on very profitable businesses. So, I think you can do both. MATTHEW WEINZIERL: We teach a course at Harvard Business School that has almost 100 students enrolled, we've been teaching it now for a few years. And one of the really neat stories that keeps coming out for many of our students is that they found their way to space from a different technological or tech-heavy sector. So whether it's from various internet companies or other tough tech sectors, they find that space offers this combination of inspiration that Brendan was talking about, and really delivering practical value to people on earth through various different capabilities that just really excites them. And so it's great to see some of that technical talent and business people interested in technical sectors finding their way to space. CURT NICKISCH: There's a new administration in the White House. It has a close relationship with a very space-friendly person, right? Elon Musk. This is the same president who created the Space Force. There's also a climate of just, government shouldn't be spending people's money on things. If you could give advice to government leaders right now, what would it be? And alternatively, what about private sector CEOs? MATTHEW WEINZIERL: Maybe I'll actually start with the second one. One of the reasons we wrote this book, we wrote it partly for people in the sector already to try to give them a framework for thinking about what's happening in space that's informed by some of the basic ideas in economics. But one of the key reasons we wrote the book is to widen the circle of business leaders who are thinking about how they might create value in space. We often like to say, if every Fortune 500 or pick your group of companies had someone in the C-suite whose job it was, at least in part, to think about how space might change what they do and deliver value to their customers. The ideas that we would have for activity in space would just blossom tremendously, because that's where all the real knowledge is, is at the individual local level. And so we really hope that this book brings a large group of people in to just start thinking about what space might make possible for them through data, through manufacturing, through resources, and through so much else. BRENDAN ROSSEAU: The key thing that I would love to, if I could just get everyone in a room, all the public sector decision-makers in a room, the key thing I'd love to get across is, if we can all arrive at an understanding of what the public sector can be good at, what its strengths are, what we need the public sector to be doing. Things like basic research, organizing, activity, exploration, science, R&D, these things that are in a lot of ways the engine of the commercial space activity that we see today. If you pull the rug of all that out, I think you would really hamstring what's possible in space. So to the public sector community, I would say we need you, we need you to be forward-thinking, we need you to be organizing your programs and projects in such a way that you are encouraging competition and ensuring that this tide that is rising, this space tide is one that will lift all boats. I think that's really important, and especially now, because it appears that we may be at a fairly significant inflection point in the history of, well, I mean, our country and the government, but especially NASA and the Department of Defense and the relationship with space in particular. There were fairly significant cuts proposed to NASA. There are many significant changes that are happening with the Department of Defense's approach to space. I think some of that can be positive. I think that this change can be good as long as it is based in a solid understanding of, what should the government's role be here and why are we doing it? So I'm hopeful that as we make potentially dramatic changes to NASA and the Department of Defense, that they're smart, that they're enduring, that they're forward-thinking, they're ones that allow the commercial sector to kind of have a platform and foundation and then build on that to thrive. CURT NICKISCH: Matt and Brendan, this has been really, really fascinating and it's been a pleasure to have you on. Thanks for coming on the show. MATTHEW WEINZIERL: Well, thanks so much, Curt. What a pleasure to be with you. BRENDAN ROSSEAU: Thanks, Curt. CURT NICKISCH: That's Matthew Weinzierl and Brendan Rosseau, the authors of Space to Grow: Unlocking the Final Economic Frontier. And if you have space to grow in your career, we can help. There are more than 1,000 episodes of IdeaCast , and HBR has more podcasts to help you manage your team, your organization, and your career. Find them all at or search HBR in Apple Podcasts, Spotify, or wherever you listen. Thanks to our team, senior producer Mary Dooe, Associate Producer Hannah Bates, Audio Product manager Ian Fox, and Senior Production Specialist Rob Eckhardt. Thank you for listening to the HBR IdeaCast . I'm Curt Nickisch.
Harvard Business Review
15-04-2025
- Business
- Harvard Business Review
The Conversations You Should Be Having with Your Manager
CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I'm Curt Nickisch. You want to advance in your career from getting things done as an individual contributor to showing you can build and motivate a team to demonstrating ROI and results. You're most often doing that within an organization, a management system, an organizational culture, and a power structure that you don't often fully understand, appreciate, or even see sometimes. How to succeed within such a system, what many people call managing up, is a skill that you can learn and develop with experience, and that effort pays off not just in opportunities and rewards, but also just in your satisfaction in your work day to day. Today's guest is here to help you stop seeing yourself as a victim of workplace whims and start moving forward in a productive way. Melody Wilding is an executive coach. Her new book is Managing Up: How to Get What You Need from the People in Charge. Melody, thanks for being here. MELODY WILDING: Thanks for having me. CURT NICKISCH: What do you consider managing up? How do you define it? MELODY WILDING: I think very simply, managing up is navigating your relationships with people that have more positional power than you. Primarily, that's going to be your boss, your direct supervisor, but it has to extend beyond that because we are working in environments where you may have a project lead, you want to make sure you're building a relationship with your skip level. So work is more complex now. You may have many different bosses, and the way we think about managing up has changed over the last 10, 20 years. It's no longer just sucking up or ingratiating yourself to your manager. It's more so positioning yourself as a thought partner or a trusted advisor to them. No matter what way you slice it, you are going to be dealing with politics at one level or another. That is just human nature. It is how human systems work, and so you can be smart and navigate that with integrity and with full strategy and building trust, or you can opt out of it and you do that at your own peril. CURT NICKISCH: Why do you think people have such a hard time with it? I mean, you're an executive coach, you've had these conversations with clients, you surveyed thousands of workers for this book. What's the common thread there? MELODY WILDING: I think first and foremost we're dropped into our careers and we are taught the technical aspects of excelling at our job, but no one really ever gives us the psychological playbook. So much of work is being able to navigate human behavior, understanding what motivates people, how do you get buy-in, how you persuade them to go along with your idea, or how do you avoid someone getting defensive if you need to push back. That's really the crux of what we do every day, but we're not equipped with that knowledge or those tools. And I think many of us, we come from upbringings or cultures where you are told to stay in your place, don't rock the boat, respect and defer to authority. So we think that managing up, it's not our place to do that. That would be stepping out of line. Who am I to tell my manager what to do, or why should I have to do my manager's job for them? Shouldn't they just be a better leader? It's a little bit of a both and that yes, leaders have a responsibility to be better, to improve and so do the systems around us that we work in. And at the same time, you don't want to wait for that to happen. CURT NICKISCH: So you've identified 10 common types of conversations that often arise with one's manager regardless of what level you're at, and I'd like to ask you about some of them. Starting with the alignment conversation, what's the goal of that conversation? MELODY WILDING: The alignment conversation, it's the first conversation because it's also the most foundational and the alignment conversation is really understanding what are the priorities, what does success look like in this role, in this team? So you make sure you are working on the highest value, most meaningful and promotable work because there's nothing worse than toiling away on something. You bring it to your manager and they say, 'This isn't what we wanted or we've already moved in a different direction.' So the alignment conversation is about making sure you are on the same page. You are rowing in the same direction as your leadership. CURT NICKISCH: Where do people stumble here? MELODY WILDING: We gloss over this conversation. We think that we have alignment, but really we spend so much of our day in the weeds responding to the minutiae that we rarely zoom out and have a higher level understanding of what pressures our leader is under, what is keeping them up at night. That's really key because only then can you make sure you are working on the right things. You are prioritizing your time correctly. The other thing I see is that if you've been working with a leader for a while or you've had the same manager for a while, you may think, 'How am I going to bring this up? This feels very awkward,' but it's never too late to have this conversation. And actually again, the higher you rise in your career, the more important and frequent this conversation often has to become because it shows you're operating at a more strategic level, you're thinking about the bigger picture, and usually things are changing very quickly. You need to make sure you have closer, tighter alignment than you may in other situations. Some people are fearful of having this conversation because they don't know how to bring it up without it sounding forced or contrite. CURT NICKISCH: Yeah. Or they don't know what they're doing. MELODY WILDING: Yes, I don't want to reveal or create a perception that I don't know what my job is here. I think even sneakier is that we may not want to have this conversation and then realize we're not on the right things and we have to make some tough decisions, or we have to advocate for ourselves to get onto a different project, which it can open a can of worms around a whole new area that we need to focus on. And sometimes it's easier just to stay the course, do what you're doing every day. That's easier in the short term, but in the long term can have consequences. CURT NICKISCH: You also recommend that it's part of this alignment that you meet with your skip level boss, your boss's boss? MELODY WILDING: Yes. Managing up has to extend beyond your boss. You want to make sure you have the bigger picture, and your skip level operates at a higher level than your manager. So they are in different conversations. They may have information or line of sight that your manager doesn't have that can inform what you're doing day to day. Also from a career growth standpoint, you want to make sure that person knows who you are. They know your name, they know the types of things that you work on because your advancement in the organization, even project assignments may involve and typically will involve other people besides your manager. Meeting with your skip level can be a little tricky because you don't want your boss to feel like you're going around them, you're cutting them out. There's also organizational culture here. In some organizations, some of the people I work with, skip level conversations are baked into the culture. There's an expectation that you will meet with your manager's manager somewhat frequently, whereas in other cultures that isn't as common. First you have to understand what environment am I operating in? But if you feel like your manager may assume you're going around them, there's a few ways to approach this. So first of all, when you make the request for a skip level, make sure your manager understands why are you asking for this? You can say, 'My intention is not to go around you. I want to make sure that I'm understanding from a higher level what they're seeing, what is most important so that I can take that back to the rest of the team, and make sure we're focusing on the right things.' So explaining the why and contextualizing it, but also if it would even feel better, instead of asking to meet with your skip level alone or separately, you could say, 'Do you think your manager would be willing to sit in on one of our one-on-ones where I would be able to hear from both of you about this?' Or maybe you ask if that person can come to one of your staff meetings, for example. So there's ways to do it that feel a little less threatening. CURT NICKISCH: And does this help you avoid those situations where all of a sudden your boss is fired or let go and you realize, 'They weren't even on the same page with their manager or this project that we're working on is actually not in alignment with what the organization's looking for right now?' Is that unpleasant realization that people sometimes have when their boss that they get along with great suddenly disappears? MELODY WILDING: That's exactly what happened to me, is I got along great with my boss at the time, but it came as a shock to me, I was very suddenly laid off. And when I looked back on it was because I was working on something that my manager and I were aligned on, but the project was not in alignment with the strategic direction of the organization. So when time came for cuts, I was the easiest candidate to let go of. So yes, it is also important for you to have that connection because change can happen at any time. I have a lot of clients now who their organizations are going through one, two, sometimes even three reorgs in a year. A lot can change. And you want to make sure you have relationships at different levels to see that through. CURT NICKISCH: I want to talk about management styles. Understanding what your manager's leadership style is. That often is at the root sometimes of personality clashes between you and your supervisor. MELODY WILDING: I like to say that often what we perceive as difficult behavior comes down to a difference in styles. There is truly toxic damaging behavior, but most of the time our frustrations, our annoyances, if we decoded and understood other people's styles, a lot of that would go away. So to give you an example if- CURT NICKISCH: Yeah, play decoder for me here. MELODY WILDING: Yes. CURT NICKISCH: I don't know, if I complain my boss is a micromanager. MELODY WILDING: What may be happening is that you are working for someone that has higher dominance. When we talk about communication styles, generally speaking, there's two dimensions to it. Dominance and sociability. Dominance is how much control does someone like to assert in a situation? How quickly do they move? And then we have sociability, how much do they care about personal relationships, connections with other people? And you could be high and low on either. You map those, you get four different broad communication styles. Now understanding that, when you understand someone may have a higher drive for control and certainty in a situation, it doesn't mean you have to like that or accept it, but you can put it into context more to understand that this person's tendencies are not necessarily a reflection of they don't trust me. It's more of a reflection that they have a high drive for a lot of detail. They want to be in the weeds of this, and so maybe I can make some selective strategic adaptations. I can overshare, I can give them a dashboard that they can pop into at any time so they can get the data that they need. And you eliminate so much frustration for yourself because once you do that, the person may loosen the reins and may feel more comfortable because you're meeting what their needs are. CURT NICKISCH: You also mentioned in the book a story I liked about somebody who basically had a conflict because they had lots of ideas. They came into those meetings and they wanted to blue sky and share some of the things that they were thinking and wondering about. And they basically had a boss who was, I don't know what Daniel Goleman would consider a pace setting boss. Somebody who's just driving ahead and trying to get everybody to follow and keep up with them. And there was just a ton of conflict there between those two. And that got ironed out once this employee understood the style of the manager and adapted to it. MELODY WILDING: Yeah. That's what I would call in the vernacular I use in the book, the pace setter type is more of what I would call a commander, someone who's high on dominance, low on sociability. So that person is very results outcome oriented, no nonsense, moves quickly, tends to communicate very concisely, which to some people may be perceived as rude versus someone who is a cheerleader. A cheerleader is still high on dominance, so they like to move quickly, but they tend to be more blue sky, big picture, visionary type. They're high on sociability, so they tend to be more people oriented. Enthusiastic, they like telling stories. And again, that can lead to misunderstandings between the two because the commander can see some of that vision boarding as just a waste of time. But if as a cheerleader you are saying, 'Actually, this is going to help us move faster in the end because if we have a sound strategy, we can make better decisions, we'll get better results.' So it's all about that translation piece. CURT NICKISCH: So let's talk about having a conversation about boundaries because that can also jive here with personality clashes. And for some people, they want to get away from just, I got to please the boss, I got to please the boss. And continually finding themselves unhappy doing that. That's not the kind of managing up that you're advocating for here. How do you see this conversation playing out? MELODY WILDING: Yeah. The boundaries conversation is about walking that fine line between being a team player without becoming a pushover. In the workplace, no is not a complete sentence. We're often told that, and it may be true in many other areas of life. CURT NICKISCH: I mean you hear people talk about it a lot more recently, it sounds like you're cautioning against that a little bit. MELODY WILDING: I'm cautioning to set boundaries in a tactful diplomatic way because we do need to set boundaries. I have seen so many situations where when someone just says yes chronically, that backfires of course in the form of burnout for them, but you also create this perception that you don't know how to push back, which when you go up for promotion, they may say, 'Well, how could we possibly give you more responsibility if you're already stretched thin, or we don't really see how to negotiate in terms of workload, and that's really something that's required at this next level.' CURT NICKISCH: Wow, that's harsh. MELODY WILDING: Yes. So diplomatic boundaries, let's put it that way. The way you straddle that line, there's a few tactics. One of them is to ask questions first. Seems deceptively simple, but most of us, when yet another task is dumped on our plate, we either just roll over and say, 'Sure. I'll figure it out.' Or we snap back because we're already so overloaded. We reactively say, 'How could you put one more thing on my plate? I can't believe this. I can't get this done.' So asking questions allows you to by yourself some time to calm down, to collect yourself, but also get more details about what the request is because on the surface you may not know everything. And once you ask, 'Okay. Can you tell me more about the urgency here or who else will this be visible to? Do you see this becoming a ongoing request or is this a one-time thing?' When you ask those questions, you not only get a better understanding of is this something I can want to need to say yes or no to. You also make it a piece of information that allows you to latch on and say, 'Actually, what you're describing really sets with the operations team, and so I can pass this over to them because it's going to be more efficient to do it that way.' And it subtly puts the ball back in the other person's court to justify why are they asking you for this, at what time or at this time? If you say, 'What made me come to mind for this request in particular,' then that person has to explain their rationale. CURT NICKISCH: Well, I want to ask about taking ownership of things, because you talked about how promotable work is really important to do and you want to be able to lay claim to some of that and take ownership. But we're also in much more collaborative, less hierarchical organizations now in many ways. So it's a tricky balance to take ownership without stepping on toes. How do you recommend people approach this conversation with their manager? MELODY WILDING: The ownership conversation is best approached in an incremental way. When ownership really puts people on, the defensive is when we come in very strong and we think we know best, or we make sweeping changes, and that's where people feel a little taken aback or like, 'You didn't listen to our needs.' They just feel railroaded. So when it comes to going beyond your job description, you have to do what's called pre-suading. So we've all heard of persuasion, but one of the top psychologists who has studied this for decades, Robert Cialdini has this idea of pre-suasion, which is how can you plant a seed in people's head that this change is needed? Basically, how do you get incremental buy-in for this idea? And that may involve asking people questions about, 'Hey, I'd love to hear how it's going with that product or project management process. How is that working out for you? Are you hitting any barriers there?' You're breadcrumbing objections or challenges they may have that you can then solve later, for example. That matters, and so does presenting a path forward because yes, it's one thing to identify a problem, you also want to make sure you make it easy for the people around you to say yes or no to your proposal. That is a core tenet of managing up is how can you remove cognitive overhead for the people around you. That may mean creating a couple of sample slides that they can present to the senior leadership team on this idea or maybe a template email they can send around. At the beginning of proposing this idea, you may bring them three ready-made options to say, 'This is what I've considered or the factors I've weighed. My recommendation would be, we go with option A, but I would love to hear what you think, which of these would be the best way to go?' CURT NICKISCH: Do you find that most people make mistakes by going too far in taking ownership, or don't take enough ownership – that they don't go far enough? MELODY WILDING: Yes, I would say it's that one. That most people play it too safe and will think, 'Well, it's not my place. It's not my place to solve that problem. Someone's probably thought of that or had a better idea for that and that we are not bold enough to step up. CURT NICKISCH: That gets to the visibility conversation, getting recognized for what you do or what you accomplish, that can vary a lot by workplace, that can vary a lot by boss. How do you bring that up with your manager? MELODY WILDING: We all have to operate in workplaces where we have to share credit. Nobody wants to look like a credit hoarder. One tactic to straddle that line is called 'we, then me,' and this is great, this is a structure you can use in your one-on-ones with your manager when you're talking with an executive, when you're presenting in a meeting, you first share, here was the group's effort and then here was my individual effort. So you may say something like, it was really wonderful to see how the team pulled together to really get all of that over the finish line. Rebecca did an amazing job with the analysis, and Bobby really was a key player in making sure that the client was on board, and I really enjoyed working on the product side, making sure we had everything buttoned up there. That really balances that, making sure that you're giving credit where credit is due, but you're also making sure that your piece is not lost in there. CURT NICKISCH: Now, we've been talking a lot about maybe call it soft power, that we're talking about getting influence, about getting assigned better work, we're talking about getting credit, but there are certain things that we would like to see from bosses that are more concrete, more tangibly associated with career development, even though those other things play into that, and that's earning raises and promotions. There's a lot out there and we've got a lot of episodes about this too, but how would your advice for that differ from what people have maybe already heard, or know how to advocate for yourself for getting a raise or getting a promotion? MELODY WILDING: There's two things that I have observed where my clients stumbled the most. The first of those is that they don't start early enough. Many of us fall into the performance review paradox, which is we await that all-important conversation and we think we're going to get the raise at that time, or we're going to be assigned to that new role, and then the conversation comes and goes and nothing happens and we feel overlooked. When in actuality, we needed to start six months ago talking about that. So I am always recommending that if you have a goal, let's say you approach your manager and you say, 'By the end of this year I would love to expand my team from two to four people, what would you need to see in order to feel comfortable doing that? Or what would have to happen to make sure we have the budget?' So that way you are getting your ambitions out on the table early. It's not going to be an afterthought. You can surface objections from your manager early, so you hear, we need to see you improve in these couple of key areas, and that helps you contract so that as the year goes on, let's say once a quarter, you can follow up. You can have a dedicated one-on-one where you are talking about, 'Okay. Last time we talked about this, I've done X, are we still on track? Are we still on track for that title change by the end of the year? Has anything changed? Does anybody else need to be involved?' So it's making sure that the goalpost does not keep moving on you and that it's a priority because you're treating it that way. So that's the first thing. The second thing, specifically when it comes to compensation is we talk a lot about asking for what you're worth, which is important. You deserve to get compensated for what you bring to the table, but how you make that business case is critical. And what I see is that people focus way too much on what they've already done and not enough on the value they can continue bringing to the table if they're compensated to do that. CURT NICKISCH: Well, that's interesting. It's almost like thinking of yourself as a stock. Here's my future value because you've already been paid for what you've already done. MELODY WILDING: That's a great way to think about it. Yes, exactly. So when you are making a case for bigger compensation, yes, you do have to talk about your past accomplishments, very important. But you also have to say, 'All right. If I'm promoted and compensated at the VP level, here's what else I would be able to undertake or what I would be able to launch.' So paint that future because your manager has to go make a case to their leadership, and prove how is there ROI in this for us. CURT NICKISCH: Melody, this has been really helpful. Thanks so much for sharing this practical advice, and I know that you've helped a lot of people see a wider path forward than they maybe saw it before. So thank you. MELODY WILDING: Thank you. CURT NICKISCH: That's Melanie Wilding. Her new book is Managing Up, and whether you're managing up or down or just managing yourself, we can help. There are more than 1000 episodes of IdeaCast and HBR has more podcasts to help you manage your team, your organization, and your career. Find them all at or search, HBR and Apple Podcasts, Spotify, or wherever you listen. Thanks to our team: senior producer Mary Dooe, associate producer Hannah Bates, audio product manager Ian Fox, and senior production specialist Rob Eckhardt. Thank you for listening to the HBR IdeaCast . We'll be back on Tuesday with our next episode. I'm Curt Nickisch.
Harvard Business Review
02-04-2025
- Business
- Harvard Business Review
Why Your Frontline Employee Turnover Is High
HANNAH BATES: Welcome to HBR On Leadership, case studies and conversations with the world's top business and management experts—hand-selected to help you unlock the best in those around you. Many companies struggle to retain low-wage employees, and executives often assume they leave for higher pay. But research suggests money is only the tip of the iceberg; the reason has way more to do with how companies treat, support, and develop those workers. In this 2023 episode of HBR IdeaCast , host Curt Nickisch speaks with Harvard Business School's Joseph Fuller and Manjari Raman, coauthors of the HBR article 'The High Cost of Neglecting Low-Wage Workers . ' They reveal how businesses underestimate the strategic importance of these essential employees—and how mentorship, career paths, and better job design can increase retention, performance, and morale. The conversation begins with the surprising findings from Fuller and Raman's research. CURT NICKISCH: For your research, you looked at some broad data on jobs and wages. You also surveyed executives, and you also surveyed more than a thousand low-wage workers. Why did you kind of put that combination of pictures together, and what did that help visualize for you? JOSEPH FULLER: Well, Curt, what we've done in our project on a number of occasions is to try to understand simultaneously the way business leaders' view of an issue or a problem and also the way employees or job seekers see that same problem. And what we've consistently found is they're very often significant misconceptions, almost always rooted in the business community, about how the labor market works, about the attitudes of workers, about what causes workers to respond to anything from offers of training, to quitting their job, and that by amplifying the opinions of workers, we can help inform decision-makers in ways that broaden their understanding of an issue, cause them to make different decisions. Give you a quick illustration. Most employers assume that when a low-wage worker quits their job, they're primarily motivated by the ability to make more at a different job. And that is a consideration about 40% of the time, but the dominant consideration when a low-wage worker quits a job is our transportation issues. How easy is it for me to get to and from work? That's almost two-thirds of the explanations are, 'It's easier for me to get through this new job than to my current job.' Employers are just not aware of that. CURT NICKISCH: So let's describe these workers some more. Who are we talking about here? MANJARI RAMAN: We're really talking about a rather large population of the U.S. workforce. These are about 40 to 44% of the U.S. workforce, which could come as a surprise to many. These are workers who were at or below the 200% of the poverty threshold, which quite simply translates into jobs and positions that had them earning, they were all early wage earners earning less than $20. Now, $20 sounds a lot; when we are talking about a metro like Boston and San Francisco with high expenses, it's not that much. But we also looked at many, many workers, a majority of them were earning below $15, below $10, and even $7 per hour. What we saw, and the pandemic highlighted actually, was that these workers were essential to the business model of most companies and most industries. We were able to see that a large number of women are overrepresented in low-wage workforces, and that has big implications for how we want to think about this. Also we saw that not all the folks in low-wage positions were less educated. There were folks who even had four-year college degrees who were in low-wage positions. The other thing we did, which was very interesting, which was pre-pandemic, was we looked at a database of more than 180,000 job resumes of low-wage workers, and we compared them between 2012 and 2017, and we found that over five years in that period, 60% of workers were trapped in these low-wage positions, even if they had moved in a job. CURT NICKISCH: Yeah. You wrote in your article about how hourly wage increases were kind of a short-term solution, and that may underscore the misconception that people are leaving for better pay, that it's really pay is just the simple motivating factor here for a low-wage worker. JOSEPH FULLER: I think it's rooted in the logic that employers apply to low-wage work. Low-wage workers are not really the subject of investment by companies. Many of them don't have career paths for low-wage workers. Often, low-wage workers are in fairly large work groups where there'll be 15, 20, even more than 20 workers per every supervisor. Meaning that the next leg up in the ladder is pretty hard arithmetically to achieve because that supervisor's got to retire or leave, and you have to be picked out of this group of 15, 20, 25 workers to get elevated to that role. I think the fixation on wages really betrays the fact that most companies think about this purely through the economics. They don't think about attachment to work. Low-wage workers or people who are capable of making great commitments to companies, loyal to companies want to stay where they're currently working. More than half of low-wage workers' aspirations is to grow with the company they're currently working with. That took many, many business people by surprise, who assume that a low-wage worker thinks about this in a mercenary way, which unfortunately, largely is the way most employers think about it. MANJARI RAMAN: A lot of these low-wage workers are actually dealing with many, many challenges. It's not simple and easy just to get to work. There's financial insecurity, there's food insecurity, there could be homelessness, and few companies think about what is happening to the lives of their workers outside the company. CURT NICKISCH: Yeah, that word security jumped out at me, you know you said in the article that it's not just more pay that these workers are looking for. They're looking for security, which is a different concept, but that also gives businesses more flexibility of what they can offer to those workers. JOSEPH FULLER: The nuanced picture that comes out of this research, I think puts low-wage workers in context, that they do face, as Manjari was saying, challenges in their lives that are familiar to all of us—that you're taking care of a parent or a child, that you have to have reliable transport because you've got to be home, because your kid's coming back from school and you don't want them to be alone. But that low-wage workers, once they get in an environment where they feel that they're being productive and they feel that they've got a supervisor that maybe isn't dedicated to advancing them, but is a decent person, isn't a sexist, isn't a racist, low-wage workers skewed to women, skewed to ethnic minorities and racial minorities, so I'm in a community where I'm being productive, I've got some friends here, I've overcome that learning curve effect of both learning the role, but also learning basic things like how we do things around here, and where do we all get lunch? Once people get settled in a comfortable environment like that, they will actually go to pretty great lengths to avoid putting themselves at risk by going to another unfamiliar environment where the workers, there might not be receptive to them coming on board, where the supervisor might demonstrate behaviors that are objectionable or frightening or otherwise demotivating to people. The notion of low-wage workers as people who are prepared to invest in building their future in a company, if opportunities are provided them, is something we very much want to impress on businesses. Most low-wage workers' aspiration, over 60%, is to stay where I am if there's some opportunities for me to advance. MANJARI RAMAN: The irony is that most companies have convinced themselves exactly in the opposite direction, which is high churn is a result and a constant phenomena in our low-wage positions. It's almost as if managers are telling themselves, 'We know these jobs are, we are under-investing in these jobs, we are not helping support these workers, so let me just accept the idea that there's going to be a tremendous amount of churn.' The research actually shows that people are keen to stay, and if you were to invest in them, they would stay even longer and be more productive, which is then how they earn more, and it's not just about paying $1 more, it's about paying $1 more linked to higher productivity. CURT NICKISCH: So you've got a little bit of a self-fulfilling prophecy here, where if you view them as mercenaries, they may end up acting like that, rather than estimating the goodwill that those workers have. I'm curious why you think companies have misjudged this so much? JOSEPH FULLER: In many instances, it is a self-fulfilling prophecy, as you suggested, Curt, that the policies and procedures of the company are honed, they're understood by everybody, and the basic assumptions underlining their original design are not being questioned. Let's say I'm running a retailer, and I regularly experience 70% turnover in my frontline retail staff. That's an eye-watering number, and so now I'm saying, 'How do I think about the job design of an entry-level retail worker?' Well, it's got to be very simple, 'cause it's regularly occupied by somebody who's new to the job. 'Am I going to make it more complex?' 'Am I going to train that new worker up?' Well, why would I invest their training when 70% of them leave every year? It'd be a foolish investment. I'd just be training my competitors' future workers or some other company's future workers.' And that whole logic is embedded how we hire, what skills we value when we evaluate applicants, what type of feedback we create, what types of attributes we value in that worker, what types of advancement opportunities we offer them. By having this logic, we create the very high level of turnover that we blame for imposing on us, the company, the obligation to have large numbers of low-skill, low-paid workers. It's so embedded in the thinking of management and their business models that undoing that fundamental logic is something that never occurs to them. MANJARI RAMAN: It was quite hilarious, actually, when we did a whole number of interviews with business leaders, and there were those who got it and had the right logic, and saw that there was much to be gained by investing in the three most important practices, which is provide mentorship to low-wage workers, help them figure out their career pathways, either inside the company or even outside the company, and thirdly, give them guidance on the learning and development and the skills that they needed. Most companies who get it figure out that the math on that works out much better than the hidden costs of high churn, high turnover, constant hiring, low morale, on and on and on. CURT NICKISCH: So let's talk through some of those things that companies can and should be doing. When you talk about providing mentorship to a low-wage worker and having career advancement discussions, what can that look like, and maybe we can talk about some companies that have some success stories here? JOSEPH FULLER: The best practices are, first of all, that there's a supervisor that's giving regular, actionable feedback. The feedback's got to be regular chronologically, not strictly limited to when there's an annual performance review cycle, and it's got to be comprehensible and actionable for the listener, for the worker. 'Don't do it this way, do it that way. Let me show you,' or, 'If you had knowledge of these two additional processes, did you know that you might get promoted?,' or, 'We're going to be changing the work environment here, let's say adding a new technology. Here are some ways for you to get familiar with that before we make the changeover.' It's very important also that companies have some set of pathways for people to advance, to become more productive, to be worthy of earning more, or to be qualified for a promotion when opportunities exist or when the company expands. Now, those pathways, they can't just exist in a binder. They have to be communicated regularly in a way that the workers understand both that they're there, what they require, how to access them. If you do those things, you're signaling that worker that you're committed to their improvement, that you care about their outcome, and you're providing workers with specific mechanisms for being in a position to deserve to earn more, to be earning more because they're more productive, they're more flexible, they're a worker that is adding more value to the enterprise. One thing that we found that was quite startling in the research, Curt, is that when you ask executives, managers, and frontline supervisors, they have very different understandings and beliefs about how effectively their company implements the types of policies I just talked about. The C-Suite is absolutely adamant that they do a very good job, but what they're really saying is, 'We have policies, we have practices, we have binders.' 'We tell supervisors to give good feedback,' but when you get closer to that shop floor and you're actually asking someone to execute those policies, the fall off is dramatic, and that disconnect between intentions and implementation is a big driver of the high turnover, low-wage cycle that actually damages the prospects of workers and their employers simultaneously. MANJARI RAMAN: It's ironic, but a lot of times, these practices are being implemented in the company for higher skills, higher wages jobs, and the implementation is weak for low-wage workers. In our interviews, we often heard, we interviewed workers who had grown within the organization in the last three years and those who hadn't, and the ones who grew were folks where somebody, a mentor on the shop floor reached out and said, 'I think you can do this. I think you're capable of doing this.' Even a little piece of positive feedback and a little bit of guidance went a long way. Many managers, on the other hand, said, 'Well, if a low-wage worker wants to grow within the organization, why don't they just speak up?,' but it's actually very difficult to speak up and ask for a promotion or a pay raise if you're living day-to-day, check-by-check and you're petrified that you lose the job you currently have. So one of the key things that we need to fix in all of this is break down the assumptions that let people ask us, just like higher-skill, higher-wage workers would do it. No, I think in this case, you have to work top-down and create the mechanisms, as Joe pointed out, for feedback to be given, for input, for the worker to be inspired and taken down a pathway of career enhancement. CURT NICKISCH: Are there companies or businesses that have successfully overcome this perception gap and have done good things that you think are good examples for other companies to look to? MANJARI RAMAN: Well, yes. We are starting to see that very large employers, companies like Disney, Walmart, and Amazon are putting in a lot of effort in terms of thinking about how they attract low-wage workers, retain them, train them while they are in employment for better positions, either within the organization or outside the organization. Disney, for example, has partnered with Valencia Community College in Florida, and imagine you have Haitian housekeepers. Now, housekeeping is a very difficult job and usually has very high turnover, but Disney will offer such a person the ability to perhaps take English courses to learn the language better, perhaps take front office management courses, and so they have created pathways where you might see a housekeeper move on to a front office customer-facing position, which is no longer an early position, and actually pays much better benefits and wages. JOSEPH FULLER: It's also, we're seeing some innovations, Curt, that are very encouraging from small and medium enterprises as well. Smaller companies and medium-sized companies, management is closer to the workers literally and physically, and they have a better appreciation often of the stories behind the job description and the paycheck. A very innovative program in western Michigan, called The Source is a good illustration of this. The Source is a confederation of local employers that have banded together to create essentially what amounts to case officers, who can help the low-wage workers that work for those companies access all the various services that are available to them in Western Michigan. They could be services offered by a not-for-profit or a social entrepreneur. They could be state or local programs, but it's designed to help workers solve problems that the HR department isn't equipped to solve, doesn't understand, doesn't have the resources to address. So if you go to the HR manager of your factory and say, 'I think I'm about to get evicted,' what are they going to say? 'I feel badly for you.' But if they can say, 'Here's a local social entrepreneur that both helps people avoid eviction, but also helps people who are about to be evicted, find a place to make a smooth transition to stable living circumstance,' that, of course, is very much in the interest of the employee, but this is doing well by doing good for the employer, because that worker isn't sleeping in their car. That worker isn't spending all their time on the job, being worried about their kids having nowhere to go anymore after school. That worker isn't preoccupied by having the sheriff come up with an eviction notice, and so a lot of it has to do do with companies saying, 'I understand these workers where they are, what their life is like, where the role work plays in their life, and I can get a more productive worker, more likely to stay, more likely to speak well of me in the community, more likely to be anxious to perform well if I make investments that really speak to their needs and their ambitions.' CURT NICKISCH: I mean, one thing you found in your research is that companies sort of disregard the strategic importance of what we've called here essential workers, which is counterintuitive, right? It's essential, but they're overlooking the strategic importance of this labor force. Do you think that companies need to sort of step back and approach this as kind of like a war for low-wage workers that they have underestimated up until this point? MANJARI RAMAN: That's a great point. The war for talent is a zero-sum game where everybody's fighting to get to the bottom of the barrel. What we are saying is you've already got the talent in your companies. Find a way to retain them, grow them, encourage them. They will put word out that you're a great place to work and bring in more friends, families, neighbors applying to your open positions, because if you don't do that and you have open positions, you have hotels that don't have housekeepers, you have airlines that don't have baggage handlers, you have restaurants that have to shut down early, you have pharmacies that can't deliver, basically, you're not able to deliver your business model. So instead of going to war, it's much better to think about this in a constructive way in peace times and say, 'What could I be doing constructively to retain the talent I already have, the workers who have already signed up and say they want to work with me?' JOSEPH FULLER: As a manager, it's a safe assumption that any process that you're supervising is perfectly designed to create the outcomes it regularly creates, not the outcomes you want it to create, so if companies are very satisfied with 70% turnover, with low levels of engagement with workers, with poor performance on diversity, equity, and inclusion, they should just keep executing their current policies because that's what they're getting, but if they want to get a more engaged workforce, if they want to escape the war for talent. What they need to start doing is engaging the workers where they live and where they are, and they need to be revisiting fundamental elements of the policies and procedures they use to hire, retain, train, upskill, manage low-wage workers. Low-wage workers are a disproportionately diverse, so they're an instant pool of talent for responding to DEI challenges. They already know your company. They already have shown commitment to your company, so rather than go into the spot, market for labor to meet your needs, invest in upskilling who you've got, and you're going to have better all in economics than the churn and burn model you're currently operating with. CURT NICKISCH: Joe and Manjari, thanks so much for coming on the show to talk about your research and sort of open our eyes here. MANJARI RAMAN: Thanks a lot. JOSEPH FULLER: A pleasure to be with you, Curt. HANNAH BATES: That was Harvard Business School's Joseph Fuller and Manjari Raman in conversation with Curt Nickisch on HBR IdeaCast. We'll be back next Wednesday with another hand-picked conversation about leadership from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you're there, be sure to leave us a review. When you're ready for more podcasts, articles, case studies, books, and videos with the world's top business and management experts, find it all at This episode was produced Mary Dooe and me, Hannah Bates. Curt Nickisch is our editor. Music by Coma Media. Special thanks to Ian Fox, Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.
Harvard Business Review
02-04-2025
- Business
- Harvard Business Review
To Make Better Decisions, Think Like a Venture Capitalist
HANNAH BATES: Welcome to HBR On Strategy —case studies and conversations with the world's top business and management experts, hand-selected to help you unlock new ways of doing business. Is your company slow to make decisions? Afraid of failure, maybe to a fault? A risk-averse mindset can thwart a company's growth and competitiveness. Stanford Graduate Business School professor Ilya Strebulaev says the antidote is for senior leaders to start thinking like venture capitalists. He talked to Curt Nickisch on HBR IdeaCast in 2024 about what the 'venture capitalist mindset' is, and what it can do for businesses. CURT NICKISCH: So let's dig into the VC mindset and what sets these decision makers apart. One thing that probably anybody would tell you if you ask them on the street is that this willingness to fail, comfort with failure is sort of at the heart of that mindset. Does your research bear that out? ILYA STREBULAEV: It does. Of course, willingness to fail is one of the many principles that we identified that constitute the venture mindset. In fact, the way I think about failure is in terms of baseball. For venture capitalists, home runs matter, and strikeouts don't. What you'll see is that out of 20 typical early-stage venture capital investments, most may fail. A few will maybe return the money back, and maybe will earn a little bit. And it's only one out of 20 that becomes a home run. In one of my venture capital classes at Stanford, we had one quite famous venture capitalist. And he was talking about one of his venture funds that he started back in 1999. And many, many years later, that fund was still going. All of his companies but one failed from that fund. And when students asked that venture capitalist, 'So that fund was unsuccessful, right?' And his reply was, 'Not at all, because there is still one company that actually is doing very, very well.' And so that company might become a home run. It's easy to say, 'Let's embrace failure.' It's much more difficult to implement it in a practical way. So we can think about specific, what we called playbook mechanisms, of how you can implement every single principle of the VC mindset, including how you can implement your approach to failure, so that indeed you concentrate on home runs, and you decide to let go of your strikeouts. CURT NICKISCH: Before we get into that playbook, let's just talk about this game strategy first. And that is that you're swinging for the fences, to use the baseball analogy of hitting a home run. That's an economic model that works, but is it wrong for companies to say, 'Let's try 10 things, and it's okay if only five of them are moderately successful.' But they're not. None of them are big hits. ILYA STREBULAEV: The way to think about this principle of home runs met and strikeouts don't, is not to think about each individual project or each individual experiment, but think about a portfolio of bets that you have. I think when smart venture capitalists make decisions about how they're going to allocate their budget, very often the most important decision is not about a specific startup, but the most important decision about the portfolio allocation. My first reaction is let's think about your strategy. Maybe you don't take enough risk. So recently I worked with one venture fund that's quite successful, or used to be quite successful. And the fund increased, almost tripled in size, and almost tripled in terms of the number of partners. And the managing partner realized that well, we're not as successful as we used to be. So they invited me, and I looked at their data. And I quickly realized that their portfolio allocation strategy changed. They no longer made a lot of risky bets. Well, behind that was another principle of the venture mindset, which is agree to disagree. In that venture capital fund, they used to have three partners. Now they had eight or nine partners. And yet they continued exactly the same decision-making process they used to have 10, 15 years ago. And one of the important principles they had is that every single partner should be very enthusiastic about the deal. And with let's say nine partners, it no longer works. That means that all nine partners must now consent to invest in the deal. And one of the specific recommendations from me was, you have to change this consensus culture. You have to agree to disagree. By the way, there's a specific playbook mechanism that I recommend, and not just for venture capitalists, but in fact for any organization. And it is called Anti-portfolio. And anti-portfolio means look at the projects that you decided not to implement, and have a look at what happened to those projects. And if your anti-portfolio performs better than your portfolio, I think there's a good reason to sit back and think what happened. And in a large organization, it's very similar. You have a lot of internal projects that you then decide maybe not to pursue. Well, have a look what happened to similar projects or similar ideas elsewhere. CURT NICKISCH: So let's dig into one thing that you just talked about a bit, which was this agree to disagree, which goes against a lot of companies that are consensus driven. And it goes against just this idea, I guess, that if it's a good idea, everybody should recognize it and come around to it. But if you really try to go with consensus, then you tend to not have very pathbreaking, groundbreaking investments or ventures that you're developing inside your firm. Is that right? ILYA STREBULAEV: That is right, Curt. I think consensus is very important in the era of stability so that when we all know the final goal, we all have more or less the same information, and none of us expect dramatic changes, then consensus is likely the right approach. But once we face what I call unknown unknowns, once in fact the end goal is unclear. For example, maybe we're entering the new market. For example, we are trying to adopt a new technology, then consensus is dangerous. CURT NICKISCH: I'm curious what specific things venture capital firms do then to get around this inertia, I guess, of consensus. What do they do to actually support that kind of disagreement and that kind of environment where disagreement can thrive and still let people proceed? ILYA STREBULAEV: They use several very practical mechanisms. The first one is they assign a devil's advocate. You kind of appoint one person or a small group of people to take the opposite view. In fact, in a group decision making, it's very often difficult for people to say, 'I disagree.' Especially if somebody else is very enthusiastic about the deal, or maybe if the boss is enthusiastic about the investment. So you appoint somebody, and let's say I'm going to say, 'Curt, tomorrow we're going to discuss this specific project. And it is your responsibility to come up with all possible weaknesses, all possible reasons why we should not pursue this project.' For example, Andreessen Horowitz, a large venture capital firm, also known as A16z very often designates what they call a red team. So they have a blue team that argues for the deal, and they have a red team tasked with arguing against a deal. Now in large organizations, they decide to implement a devil's advocate, make sure that you alternate who the devil is. If you are going to be appointed as a devil again and again and again, then in fact your influence is going to be diminished over time. Another mechanism that venture capital firms use is what I call a consensus minus X rule. So let's say going back to the example I gave earlier about a partnership of nine decision makers. Consensus minus X, let's say consensus minus two means is that the investment will be approved even if only seven people are in favor. So you can set this number depending on the size of the investment. CURT NICKISCH: And so you might even make it smaller than for smaller investments, so that even if one person was in favor of doing it, you could do a seed stage investment, for instance. ILYA STREBULAEV: That is true. That is correct. And in fact, it's not just about seed investment. Let me give you an example. Venrock, which is a very storied venture capital firm, the firm behind investments in Intel, Apple DoubleClick and many, many other companies. There are a number of partners, and they vigorously debate every deal. And then the partner who initially presented the idea, who is the pioneer of the idea, will have to make the final decision unilaterally. Think about this Curt. There are nine partners, and one partner will hear all the feedback. In fact, you're facing now eight devils. And then you will have to make your own decision. CURT NICKISCH: I'm going to mention just a couple of other things that I thought were noteworthy in your article about improving this decision-making process. Number one, a lot of VC partnerships try to keep the team small, right? You just improve communication, you improve the speed, and that adding a lot of people to the decision-making process doesn't actually help you that much. They ask for feedback in advance, some of them, so that people can read up on the companies, see the decks ahead of time, and then weigh in with their thoughts before they discuss as a group. And they also allow junior members of the team to speak first, just so that when the boss speaks, it doesn't bias people's opinions or influence the real feedback that they wanted to give. Some of those maybe are good practices that people know about, but I guess it's important to underline, right? ILYA STREBULAEV: These practices might be well known. It doesn't mean though that they're frequently implemented in large organizations. You mentioned keep teams small. In all venture capital firms, teams are always kept very, very small. But in large companies, very often you go into a meeting room and there will be a lot of people. And sometimes you might ask, 'What on earth are all these people doing here?' In practical terms, think about the following rule that is implemented in Amazon. Now, Amazon is one of those venture-backed company that retained it's a venture mindset. Amazon has a very simple rule, two pizza team, so that if you're still getting hungry after you consume two pizzas, then the team is too large, it's around eight or ten people. And I think that there is in fact a lot of research that supports this notion. In fact, there's a lot of research suggesting that maybe the teams should be even smaller. But in a large organization, every single time your decision-making team is more than ten, you have to ask a question why? And most often that will not be an efficient decision. Now, you also mentioned asking for feedback in advance. And in most successful venture capital firms, I observed that. And by the way, it is done for a number of reasons. One is because they would like to minimize the influence of authority. Because Curt, if you're my boss, let's say you are the senior managing partner of the venture capital firm, and I'm a junior. And I maybe know something very interesting about this startup or about the founder. I have some really value-add soft information. If you speak before me, then it's very difficult for me to provide this information if it somehow disagrees with your assessment. CURT NICKISCH: Yeah, it becomes you like you're arguing with that person. ILYA STREBULAEV: That's right. In fact, where large organizations I think can and should use it is not just when they decide on investments or on projects, but also in the interview process in hiring decisions. Google, again, another venture-backed company that retained its venture mindset has a policy. There is an interview committee when you hire people. The policy is you ask members of those committees to record their comments on each candidate individually in advance of the meeting, so that when you meet, you can have a look at what every single committee member independently said. By the way, sometimes venture capital firms go even further. They request anonymity. And there is something else, which in my experience I find very counterintuitive for let's say corporate leaders, is that if we have an expert in the room, the natural tendency is to ask the expert first. I'm sure you've been Curt, in the meetings where people said, 'Well, Curt is the expert, so let's hear from him what he has to say on this topic.' Venture capitalists very often do exactly the opposite. They'll say, 'Curt is the expert on this specific technology or this specific space. You know what? He is going to speak last.' Because well, you are the subject matter expert Curt, which means that if you say something and I happen to disagree with you, it'll be much more difficult for me to talk. CURT NICKISCH: Yeah, so much of decision-making in organizations is often about repeating past performance, right? Finding previous patterns and trying to repeat them. It sounds like you're saying the venture mindset is almost trying to divorce yourself from that, and be open to exceptions, and be open to what's different and what's new. ILYA STREBULAEV: In the large organization that deals with innovative projects, you always have to think about designing an efficient portfolio allocation. And try to avoid making an individual micro decisions on every single investment. So in the corporate VC environment, I think the parent company executives should decide on the total budget. They should decide on the number of investments that can be made. They should overall impose criteria, what kind of startups you can invest in, what kind of startups you can't invest in. That depends on the overall strategy of the firm. But my advice is try to avoid making individual decisions. CURT NICKISCH: The other tip that you have in the article is just to set ambitious timelines. And one thing I hadn't really understood is that a lot of venture capitalists know that these are highly uncertain deals. You really don't know how these are going to turn out. In all likelihood, most of these are going to fail. So spending a lot of time thinking about it, trying to game it, and all these different scenarios, it doesn't actually help you reduce the risk. You just have to make a decision and move on. And so that's a big recommendation of yours is just to set ambitious timelines, make decisions quickly on these companies that come to you or these investment opportunities, and just move on and not overthink things. ILYA STREBULAEV: Curt, it is my recommendation. But note that I'm not saying that because you have to make decisions quickly, your decisions are going to be inefficient. In fact, venture capitalists came up with ways to make fast decisions very efficiently. And the chapter is titled How to Say No 100 Times. We do say it 100 times, because my research shows that for every startup that venture capital firms invest in, on average they say no, so they turn down 100 opportunities. Just think about this, think about all those thousands of startup investments that they decide not to invest in. And they do it quite efficiently. So very quickly how they do it, is that the venture mindset thinks about the funnel of all the deals in two different ways. The first, at the top of the funnel, you have a lot of deals. And I think of this as 100 to 10, using the automobile terminology, you are going to use a fast lane, which means that you are trying to make a very fast decision here as efficiently as possible. And here is one specific trick that venture capitalists use that I found amazingly efficient, and in all my work with large organizations, I observed that they don't use this trick typically, before I explain this to them. They ask a different type of question. The typical question that you would ask Curt is, 'Okay, here's an investment. Why we would like to proceed with this investment?' But in the fast lane, 100 to 10 lane, venture capitalists ask a different question. They ask, 'Why we should not proceed with this investment?' And just by adding not, it completely changes the picture. So that as long as you find a red flag or a critical flaw, you decide not to proceed with this deal and just move on to another investment. But once you go into what I call a slow lane or 10 to 1 lane, you switch. And venture capitalists very often subconsciously, they in fact, they don't realize themselves. They switch from asking one question, why we should not invest, to asking another question, which is why we should invest. Or in fact, as one of my VC friends told me, 'Why are we greedy to invest?' And then they proceed into relatively slow, still fast, but relatively slow due diligence. And I think that in large organizations you can really implement that approach, 100 to 10, 10 to 1, fast lane, slow lane. And so that the questions you are asking or ask your team to investigate are going to be different at the different levels of the deal or project funnel. CURT NICKISCH: Ilya, I want to ask you something about taking on this VC mindset at companies, because it's different for them, right? Venture capitalists in some ways have it easy, because they're not employing those people that are doing this. When those companies fail, they've lost their money, but they don't have to pay severance. Often at companies, when you're deciding on an internal venture, there is opportunity costs. You're taking some of your employees who aren't going to be working on other things, and then performance engine, I guess, instead of innovation engine to keep running. Knowing that these decisions are a little more complex just because of the nature of their business. What do you tell them when they feel like it's just harder, or I have these realities that I have to pay attention to, that just doesn't seem to factor for a company that's just investing in companies and doesn't suffer the same externalities that a corporation does with its own employees? ILYA STREBULAEV: That's a great question, Curt. First of all, we talked today about several principles of the venture mindset and specific mechanisms, specific ways to implement it. For large organizations specifically, I think you have to take a parsimonious view. In our book, the Venture Mindset, we in fact discussed nine principles. And what I observed especially for large organizations, is that all those principles are interconnected. So that you might want to, as a Chief Executive Officer, let's say, or a leader in a large company, you would like to get acquainted with all of them to start with. Because I think that will give you a much fuller picture with how to deal with all those complexities. Another point to keep in mind is that if you change the culture of your organization so that people are incentivized both financially and non-financially to pursue home runs in projects, in project teams, then it'll be much easier to reallocate teams within your company, so that if a project fails as many projects in a large company should fail, it does mean that there will be layoffs. It does mean that there will be severance or separation from workers. It means that your team members are going to be reallocated. And indeed, many large companies pursue this strategy quite successfully in various industries, not just in technological industries. So in a way, I think large organizations, and this might sound counterintuitive, but that is both my observations and outcome of my research. Large organizations in fact, could use the venture mindset more efficiently than venture capital firms. Exactly because, first, unlike venture capital firms, they have a lot of resources. They have the budget, they have the people. Also, unlike venture capital firms, in fact, they can control better what those internal startups, let's say, those intrapreneurs are doing. So in fact, if you exercise just the right dose of control while at the same time allowing a lot of flexibility, in fact, I think the venture mindset in a large company can flourish much more than even in a venture capital firm. CURT NICKISCH: Ilya, this has been really, really interesting with a lot of great takeaways for companies to copy something that's successful in an industry that we can all learn a lot from. Thanks so much for taking the time to share your research and your insights with our audience. ILYA STREBULAEV: Thank you, Curt. HANNAH BATES: That was Stanford Graduate Business School professor Ilya Strebulaev in conversation with Curt Nickisch on HBR IdeaCast . We'll be back next Wednesday with another hand-picked conversation about business strategy from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you're there, be sure to leave us a review. And when you're ready for more podcasts, articles, case studies, books, and videos with the world's top business and management experts, find it all at This episode was produced by Mary Dooe and me, Hannah Bates. Curt Nickisch is our editor. Special thanks to Ian Fox, Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.
Harvard Business Review
01-04-2025
- Business
- Harvard Business Review
Navigating the Hybrid Work Dilemma
CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I'm Curt Nickisch. Remote work, especially hybrid work, exploded far and wide during the COVID-19 pandemic. In the past five years, companies have made substantive changes in their IT, workplaces, and policies, and it's had a huge impact on the lives of many workers. Today there's a clear shift back in the other direction. More CEOs are telling workers to come back to work onsite across industries: financial services, government, even technology companies like Apple and Amazon that you'd think would be the most prepared to support effective remote work. Their argument? That collaboration, communication, innovation, and productivity suffer if you're not present in the workplace. Today's guest says leaders face a much more complicated dilemma than the binary choice between remote work or return to the office. His research shows that, for some companies, it is optimal to work in-person, but remote work gives a clear competitive edge for many others. There are strategic choices to be made between different types of hybrid work, quarterly, monthly, and weekly. He'll break down the specific management practices necessary to make those arrangements effective. We're joined today by Raj Choudhury. He's an associate professor at Harvard Business School and the author of the new book The World is Your Office: How Work From Anywhere Boosts Talent, Productivity, and Innovation. Welcome, Raj. RAJ CHOUDHURY: Thank you so much. Great to be here. CURT NICKISCH: Now we had you on the show speaking with Alison Beard back in October 2020, which seems like a lifetime ago. What has been the real change and shift that you have seen in these last five years? RAJ CHOUDHURY: I think the first thing that we have observed is a very stable pattern where about 25 percent of the days workers work in the economy in aggregate are now being performed in a remote way. Before the pandemic, this was about 5 percent. This is a 5 percent to 25 percent jump. The really interesting pattern has been across multiple data sources that I've looked at, it's been a very stable 25 percet. Yes, we see all these Amazon stories and other stories in the media, but the aggregate number is very stubbornly around 25 percent. My interpretation is that we see the stories on one side of the spectrum, and not that Dropbox is shutting down their offices, or there are many other companies like Nvidia, Microsoft, Citibank sticking to a very stable pattern. The other thing that I think has changed in the last five years is now we know a little more about the plane that we were building while flying. CURT NICKISCH: One thing I like about your book is just how realistic you are about some of the challenges. You even point out that, for some companies, they really should be in the office. When is it something where getting people back full-time in-person gives you that strategic advantage? What situations are we talking about here? RAJ CHOUDHURY: The unit of analysis should never be, in my opinion, the company, or neither the person. It should always be the team. The team should assess based on what the team does, the nature of their work, their tasks, whether the project is an early stage project, or a mature project, or a project that's winding up. And also, based on where people on the team live. They need to decide the frequency of in-person and the venue of in-person. The critical element here is that whatever the team decides, whether the team decides to meet every week in the downtown office, or to meet quarterly at a retreat or an offsite, it needs to be backed up with the appropriate management practices. You cannot expect work from anywhere to work if you are still focused on management practices from the 1980s, and if you're still onboarding like you would do in the 1990s. You need to really not only update your technology, but more critically, you need to update your management practices. CURT NICKISCH: What are some of the clear obstacles that companies need to address, the challenges that workers have when they're working remotely or using hybrid work? RAJ CHOUDHURY: There are three challenges in my opinion. The first one is isolation, that people might fall through the cracks. They might be the only person in that geography with no team members around, no one to tap the should. The second challenge is communication because, as you allow work from anywhere and tap a more national or even a global labor market, you're going to encounter time zones; the team might be distributed across multiple time zones. The third challenge is socialization. How do we develop the social ties that are critical, especially for new hires and younger employees? CURT NICKISCH: Help me understand the difference between isolation and socialization. RAJ CHOUDHURY: Isolation is just not having someone to ask a question. Socialization is where you're developing the deep social ties within the team where they develop trust. You're also developing the broad social ties across other departments and other teams, where you need to know someone in accounting or someone in finance in case there's a problem. CURT NICKISCH: And your research shows that all three of these are real. These are often things that you hear cited by opponents or people who question the effectiveness of hybrid work. But your research shows that these are valid concerns that need addressing. RAJ CHOUDHURY: Oh, absolutely. I'll just give you a quick example. So, on the communication problem across time zones, along with a couple of colleagues, just Jasmina Chauvin and Tommy Pan Fang, we did a study to document actually how time zones constrain synchronous communication. We used daylight savings in that experiment to tease out the exact effect of how being two time zones away versus three time zones away effect how people change their communication patterns. The effect was very strong for routine workers. When they experienced greater time zone gap because of daylight savings, they just reduced the number of synchronous calls that they were having. This was, of course, a pre-pandemic dataset. There was no Zoom, but they were having calls on Skype. Then for the non-routine workers, people who were in R&D or product development, the volume of synchronous calls didn't go down, it just shifted to later hours. I think many of us have experienced that, where we have done team calls at 10:00 PM or 11:00 PM at night because our colleagues are in different time zones. An additional thing we find there is that workers from certain countries were especially disadvantaged because of that, given the norms of when people work. Women also were especially affected by that. That just told me that, when you have a distributed team because of work from anywhere, there needs to be concerted effort to solve that problem. CURT NICKISCH: When it comes to hybrid work, I know one question on a lot of people's minds is is there some kind of optimum number of days in the office a week or month, versus days from home? Because that's the conversation you can hear from a lot of people. How many days do you have to be in the office? RAJ CHOUDHURY: The first thing I'll say is that, to me, the question should be not phrased as days in office, it should be days in-person, because office is just one place where we could be in-person. I think the evidence, the scientific evidence there is evolving. We have a study that's published, and our study was conducted in a sample of HR workers. What we did is, for nine weeks, every day we ran a lottery to determine whether each worker in our sample would work from home or work from the office. Then at the end of the nine weeks, we collected lots of outcomes. So this is a randomized control trial. We find that workers who were in-person for 25 to 40 percent of the days, they did the best. They did better than people who were more in office or less in-person. The interesting thing is, because of the randomization, the 25% in-person doesn't mean 25% every week. If you think about 25%, it could mean a day a week. It could also mean a whole week every month, which is also 25%. It could also mean a couple of weeks every two months. That opened my thinking to saying that, yes, there is some number. I think my honest suggestion is every team should run their own experiment to figure out what is the sweet spot. And once they know the sweet spot based on where people live, they can decide how frequently to meet and where to meet. CURT NICKISCH: You lump some of these different arrangements into some clear groups. Quarterly hybrid, monthly hybrid, and weekly hybrid. Can you break down those models for folks who don't know? RAJ CHOUDHURY: The weekly hybrid is I guess what is traditionally called hybrid, which is where you go to a company office typically, for two days or three days every week of the month. I think there, the most important thing is to ensure that everyone in the team is showing up on the same days. Because if you and I are on the same team, and you go to the office Monday, Tuesday, and I go to the office Thursday Friday, then that's a complete breakdown of the system. Then we never see each other. The monthly hybrid model is where we work from anywhere, but we get together one week every month in some predetermined location. That allows for what I call regional work from anywhere. A person could live in Connecticut, but take the train down to New York and stay at an Airbnb one week every month. That's essentially four Airbnb nights. The other model which many teams are practicing is the quarterly hybrid model, where now you can nationally work from anywhere. You can live anywhere in the U.S., and you need to go and spend a quality week or 10 days with your team every quarter. That retreat can happen not in a fixed place – the location can travel around from coast to coast, making it fair and easy for everyone to attend. CURT NICKISCH: I'm sure a lot of people immediately jump to the economics of this. They start thinking about the costs of travel, of bringing teams in, or doing a retreat quarterly to different places. They start thinking about having offices that might only be used one week a month, for instance, under a monthly hybrid. How real are those costs, just in relation to the benefits? RAJ CHOUDHURY: Yeah, it's a great question. I think for decades, we've thought about the costs of hosting workers as a fixed cost. We invest in creating an office, the leasing costs, and whatnot. I think this work from anywhere phenomena and this movement is a great opportunity to convert the costs of in-person to a variable cost. Why should a company take a 20-year lease if teams are meeting all over the country at their own convenience? I think one interesting thing, they could meet at a co-working space, they could meet at a conference. The sales team that I'm studying, they go to sales conferences all over the country. They have decided to stay back for a couple of days after each sales conference to do a deep in-person social bonding time. The other interesting thing that's happening is now there are companies which are having this Airbnb model for working spaces. I don't want to evangelize any company, but there are at least a couple of companies that I know of that are doing really well. Where you can go to their website and find office space around the city, or the state, or the country that you could book for a few hours or a few days. I think there are lots of models where now real estate costs are becoming a variable cost instead of a fixed cost. CURT NICKISCH: For quarterly hybrid, monthly hybrid, weekly hybrid, are there certain kinds of companies or industries that really speak to one of those models over another? What questions should leaders be asking themselves when they are trying to decide between these different formats? RAJ CHOUDHURY: I think it boils down to, again, the characteristics of the team. When we talk about industry or company, there are multiple kinds of teams in any company. Even in financial services, which has been extremely conservative with this model, there are technology teams in financial service companies. So if you mandate a every week hybrid model, or a five-day in-person model, you're going to lose your tech talent in a bank or in an investment bank, because they have lots of outside options in the tech world. I think the prudent thing to do, in my opinion, is not do a top-down, one size fits all, all company mandate. But rather, put some broad guidelines, like I said, 25% in-person days, or 40% in-person days. Then allow teams or departments to choose what model works best for them. CURT NICKISCH: Let's go through each of those challenges then and talk about what managers need to consider. Let's start with isolation. This idea that you're bringing in workers who are, because they're where they are and because where their managers or team members are, they feel like they're flying a little blind and don't have what they need to really succeed. RAJ CHOUDHURY: So for this isolation problem, there are two kinds of solutions. One is focused on knowledge codification. That now, we need to change the culture of the company from listening and speaking to reading and writing. If I'm the only person in my team in, I don't know, Idaho or in Boston, and I don't have a way to tap a shoulder and ask a question, my alternative is to go to a source of knowledge and read it up. That's what the GitLabs of the world have done very successfully, and there are hundreds if not thousands of such companies now, what I call the all remote companies. Git Lab, which is about 3000 or 4000 people. There's a company called Deel, which is about 12,000 people. Zapier, which is 800 or 900. There are many, many more, and they don't have any headquarters, any regional office. They're just completely office-less. But they all do retreats. They do team retreats and they do company retreats. CURT NICKISCH: Explain the codification part, the reading and writing instead of speaking and listening. I thought this was very interesting in the book. You actually gave examples of companies that asked people this when they hire, whether they are the type of person to take the time to document processes because that's the only way the system works. RAJ CHOUDHURY: That is correct. And it's a cost of living where you want to live. I think my learning has been, among many others, that this way of working really benefits introverts. Because if you think about meetings and who speaks at meetings, it's usually the manager and a few extroverts. There are many people sitting in the room, quietly nodding their heads. But those people might thrive in an environment where they're writing up their work and reading other people's work. The final thing I would say here is now, with generative AI, it is so much more easier to codify knowledge in real time. There are many solutions. I visited a company in San Francisco a month back, they have a product which transcribes every Zoom call, every call that you can have. It's much easier. Then you can prepare a summary of the call. It benefits companies in many ways. If I'm a new employee who's joining a project that's three years old, I now have a repository to read up quickly and generate a summary of what's happened on this project before I joined. I think knowledge codification is hugely beneficial. It was a hard task, because no one likes to read and write. But now with gen AI, I think the work has become much easier. CURT NICKISCH: What about the communication challenge to hybrid work? RAJ CHOUDHURY: The communication challenge to work from anywhere, especially if people are living across multiple time zones, is that you cannot do a synchronous call for everything. There are many solutions and I'll just highlight two again. One is where you have to embrace some form of synchronous-asynchronous mix. Where you have to try to at least allocate some part of the communication to asynchronous, where the manager cannot expect a response just in that moment. You have to trust that people will respond to your question in Slack whenever they wake up in their time zone. Extending that, what I found is that some of these successful all-remote companies also practice brain writing quite effectively, which is the parallel of brainstorming. Brainstorming is when, of course, we are all in the same room or the same Zoom room and we're sharing ideas. Brain writing is where we are sharing our ideas and commenting on each other's ideas, but in writing. That, again, the research shows is helpful for many people because when you are brainstorming, you may not get the best idea in that very moment. But if you suggest an idea and I take my dog for a walk, maybe in that deep reflective moment, I'll come up with a better response to your idea. I'm not saying we should do away with brainstorming, I'm not saying we should do away with Zoom calls, and Team calls, and Google Hangout calls. But you know, we have to put asynchronous in the mix. Again, this is a learning curve and teams might find it hard initially to do. But like anything, our muscle memory develops on these management practices. CURT NICKISCH: What about socialization then? That seems like one of the trickier ones that have confounded a lot of leaders who, for a long time, all they could think of was happy hours or some kind of activity like that to try to bring workers back in-person. RAJ CHOUDHURY: Correct. I think what I've discussed at length in the book is this idea that it doesn't matter if you're meeting in an office, or an offsite, or a co-working space. That's just the venue. The purpose of going to these in-person events in a larger group is trying to have serendipitous conversations. If you go to the office campus, you're hoping to bump into some people and have conversations that are serendipitous. We've had longstanding research starting from MIT Professor Tom Allen's book in the 1970s which shows that these serendipitous conversations in the office typically happen within 40 meters of where people are sitting. It's very siloed. It's based on the floor and the people on your floor. If you're on different floors, you're much less likely to have a serendipitous conversation. If you're in different buildings on the same campus, you should just forget about it. CURT NICKISCH: Yeah, you might as well just be remote then. RAJ CHOUDHURY: That's right. CURT NICKISCH: I thought that was really interesting in the book, is just the research that you showed how this idea we have that great ideas are exchanged and the water cooler is where work is getting done, this collaboration. Just the reality, from research, that if you're not close to somebody else, you're probably not going to talk to them, you're not going to have communication. You might be looking at your computer all day anyway. RAJ CHOUDHURY: Correct. In the book, what I mention, again, two solutions and the details are all there. The first one is what I call virtual water coolers, because in the physical water coolers, the in-person water coolers, they're very siloed. I've never had an intern tell me that they had a water cooler conversation with the CEO. It just doesn't happen, that's the reality. But on Zoom or on Teams, you can have a virtual water cooler between the CEO and a group of interns. We ran this experiment where we found that, even having a 30-minute Zoom call with a very senior leader in the company had a positive performance outcome for these interns. The other idea in the book is that it doesn't matter where we go, the venue to me is a second-order question. We need to engineer serendipity when we are in-person. What I mean by that is my research shows that when we go to in-person events, and there's a long tradition of this finding, that we tend to hang out with people who are just like us, who are the similar gender and similar ethnicity as us. We found this in one of the offsite studies that we did with Zapier. The only way that siloed interaction was broken in that study was when two people shared the same taxi ride from the airport to the retreat. Because if you're in the back of a taxi with a person who's a different gender, different ethnicity, you still open up and have a conversation. Then chances are, you make a new connection. I think this debate about whether to go to the office or whether to go somewhere else, I honestly feel the bigger problem is how do we solve for homophily, our biases of interacting in silos. We need to engineer serendipity wherever we're meeting. CURT NICKISCH: Yeah. How do you do that virtually? RAJ CHOUDHURY: In the virtual world, you can have an algorithm which will say that we will intentionally create pairings of people to do a virtual water cooler, which is very different from a Zoom happy hour. Because Zoom happy hours are optional, it's typically the same group of people, extroverts and friends who show up. But a virtual water cooler can pair up someone, two people who are very different ethnicities and/or genders. Then they can come together and make a new connection. In the physical world, the taxi ride is one example of what we have called constrained co-location. That you need to find a way to create an interaction between two people who would normally avoid each other, or not come together because of the choice homophily playing through their subconscious. I think we need more research on how to make that possible in the office or at other physical venues. It's just first-order design question about how to make in-person more effective. CURT NICKISCH: Considering we're at this moment where there's a little bit of a shift back, at least in the news apparently, and this idea that people working from home are just slacking off, this idea that if you're not in the office, you just can't be gotten a hold of. They're out of reach, out of touch. It sounds like you're saying that a lot of these perceptions of remote work are pretty simple and aren't really taking the full problem into account. RAJ CHOUDHURY: I'm an academic, not like a journalist. I see these stories as journalistic stories, and there are other stories that need to be told as well. Like Airbnb's story, like Dropbox's story, and many other companies. But the data is very stable. It's 25% remote days for now multiple quarters in the U.S. economy and other major Western economies. The second thing is I think there are CEOs who have other incentives going on which are not spoken of. In many cases, I think RTO has been used as a tool to retrench people without paying full benefits. I think the incentives are often not about attracting and retaining talent. The thing is, the labor market has a long memory. It's going to be very hard for companies to not change course at some point and not adopt flexible work practices, because at some point you'll have to go after the talent that you need. CURT NICKISCH: One thing that's really intriguing is how much this work from home, remote work, work from anywhere shift – that's also happening now at the same time that we're having a huge shift in technology with artificial intelligence really changing work and a lot of the work that people do. What kind of interesting things do you think are on the horizon for how artificial intelligence is changing work, and then by default changing how much people need to be in person or how they actually work? RAJ CHOUDHURY: One of the things I'm most excited about for my own research going ahead is this idea that now its possible to work from anywhere and adopt flexible work practices in blue collar settings. Now, with digital twins – which is a combination of sensors and AI and automation – what is possible is to create a virtual copy of a factory in real time, or a virtual copy of a hospital ward or a virtual copy of a warehouse. So you have a replica of the physical operation on the cloud. And because of that you don't need the engineers and the technicians to be physically there anymore. CURT NICKISCH: And what's the benefit to them being able to work from essentially a dashboard right? RAJ CHOUDHURY: Correct. So the big benefit – I'll give you the example from Turkey. The problem was none of these engineers and technicians wanted to live where the power plants are. CURT NICKISCH: Which is often like in a remote river, in a canyon. RAJ CHOUDHURY: Correct or in the mountains of Turkey. So all of them wanted to live in Istanbul, which is the large city, where the schools are good for their kids. Now all of them live in that city and there's a huge digital twins headquarter in that city, where they run all their powerplants all over the country. And there's been lots of benefits because of that in terms of knowledge sharing between engineers. But their jobs have changed as well. So now instead of running a turbine or running the hydropower plant gates, they are looking at a screen, interpreting machine learning predictions. So they are becoming what I indigo workers. So they are mixing the white and the blue collar aspects and becoming indigo color workers. CURT NICKISCH: That's really fascinating. And you can see how the company can benefit because they're ostensibly getting better workers, or are able to attract and retain superior talent because they're able to let them live where they want to go. RAJ CHOUDHURY: That is correct. CURT NICKISCH: Raj, this has been really great. Thanks so much for coming on the show to talk about this. RAJ CHOUDHURY: Thanks for having me again. CURT NICKISCH: That's Harvard Business School's Raj Choudhury, author of the new book The World is Your Office: How Work From Anywhere Boosts Talent, Productivity, and Innovation. Whether you're commuting or working remotely, we have over 1000 episodes and more podcasts to help you manage your team, your organization, and your career. Find them at or search HBR on Apple Podcasts, Spotify, or wherever you listen. Thanks to our team, Senior Producer Mary Dooe, Associate Producer Hannah Bates, Audio Product Manager Ian Fox, and Senior Production Specialist Rob Eckhardt. Thank you for listening to the HBR IdeaCast . We'll be back on Tuesday with our next episode. I'm Curt Nickisch.
