Internal Communications & Employee Engagement Archives

Internal Communications & Employee Engagement

We provide unmatched expertise and cutting-edge engagement capabilities to help clients solve their most complex challenges, navigate change, and realize their goals. Broadbridge serves business leaders, organizations, and entrepreneurs, enabling them to identify and overcome those issues which stand in the way of their progress. Our embedded approach focuses on informing, motivating and inspiring employees in a way that is directly aligned with business strategy, financial strategy and talent optimization. We create an enriching collaborative experience for our clients that drives growth and success.

Saying Goodbye with Grace: How to Lay off Employees Without Being a Heartless Jerk

// by Peter LoFrumento

Microsoft, Disney, QVC, Rivian, Dell, Boeing, Alphabet, eBay, Twitter, General Motors, Ericsson…

The list goes on, covering more than 500+ firms that have been laying people off in droves over the last several months.

And as many of us know, a layoff – or reduction in force (RIF) – is a difficult and often unpleasant experience for everyone involved.

But what makes the experience even more painful is when RIFs are mishandled: when leaders refuse to take accountability, act with transparency, or even acknowledge the emotional toll they have on employees.

Just consider the less-than-empathetic manner in which Twitter laid off employees and closed offices through an unsigned Slack email that was super-light on details and bereft of any accountability.

Or PagerDuty, whose RIF caused blowback that ricocheted from Silicon Valley to New York thanks to overused buzz-words like ‘volatile‘ and ‘transformative,’ touting positive fiscal results and new employee promotions, and concluding with a quote from Rev. Martin Luther King.

But with the right approach, you can avoid these missteps and keep your team engaged and productive.

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Here’s how: implement a two-way internal communications plan which can help you ensure employees receive clear and accurate information, while guaranteeing that the RIF process is handled with sensitivity and professionalism.

Why is this important?

A recent Glassdoor study found that employees who felt that their company handled layoffs well were more likely to recommend their company to others and to have a positive outlook on their future at the company, even if they themselves were laid off. And employees who felt that their company handled layoffs poorly were more likely to post negatively about the company and to discourage others from applying there.

Moreover, a study by the Journal of Applied Psychology found that employees who felt that they had been treated fairly during a layoff were more likely to remain engaged with their work and to perform well, even in the face of uncertainty.

The secret sauce of a two-way internal communications plan is that it features numerous touchpoints on how to reach and be reached by employees, where you not only deliver the necessary information, but maintain and demonstrate the company’s culture and values throughout the process.

Here are key considerations in implementing a two-way communications plan for your RIF:

Determine the key messages: Announcing employee layoffs is a challenging task that requires careful planning and sensitivity. The first step is to identify the key messages that you want to convey. These might include the reasons for the layoffs, the number of employees affected, the timeline for the layoffs, the support and resources available to affected employees, and the impact on the company’s operations and future plans.
Choose the right communication channels: Once you have identified the key messages, you can determine the most appropriate communication channels to use. These may include a combination of face-to-face meetings with affected employees, email announcements, a company-wide video message, or a dedicated web page with information about the layoffs and resources for affected employees.
Develop the messaging: When developing your messaging, it’s important to be clear, honest, and empathetic. Avoid using vague or overly buzzy language, and focus on the impact of the layoffs on the affected employees and the company as a whole. Also, be prepared to answer questions about the layoff process, severance packages, and any other relevant details.
Prepare for feedback: A two-way communications plan should also provide opportunities for employees to ask questions and provide feedback. This includes town hall meetings, one-on-one meetings with managers, or a dedicated feedback line or email address. Be prepared to listen to employee concerns and feedback, and to provide honest and transparent answers to their questions.
Provide support and resources: Finally, it’s important to provide support and resources to affected employees. This includes career counseling, job search assistance, access to unemployment benefits, or severance packages. Be sure to provide clear information about these resources and how to access them and be available to answer any questions or concerns that employees may have.

The Takeaway

Layoffs, whether large-scale or small, are one of the most difficult and painful actions a business can take.

And if not handled properly, it will have a lasting impact on the well-being of your employees and cause reputational damage – such as making it more difficult to hire employees in the future and contributing to higher costs down the road when your company may look to grow.

To mitigate against these unwanted outcomes, utilize a two-way internal communications plan to ensure that you are putting compassionate, authentic and accountable communication into action, while offering the appropriate support and resources to employees.

When it comes to layoffs, don’t be the company that confuses cleverness with acting like a heartless jerk.

Instead, act gracefully.

By treating employees with compassion and empathy during this difficult time, you can demonstrate your commitment to them and to maintaining a positive company culture. This will enable you to continue operating at a high level – even during such dramatic periods of transition.

Mistaking Diversity for Inclusion (and what you can do about it)

// by Peter LoFrumento

I was surprised by the invite to meet about Diversity & Inclusion, since the company had previously earned kudos from industry colleagues and such mainstream publications as DiversityInc and GreatPlaceToWork (owned by Fortune Magazine).

However, once our meeting started, the reason for it became quickly apparent: like many companies of similar size (5,000+ employees), it embraced diversity. Their senior managers adopted policies, initiatives and tools to increase levels of diversity among its global workforce. But they mistook their robust diversity program for inclusion, and were now facing the challenge of how to best maintain their diverse workforce.

In other words, how to create a more inclusive environment for diversity to thrive.

Too often, managers fail to realize this distinction; having diversity in your workplace does not mean it’s also inclusive. For sure, diversity is important to attract top talent and drive innovative results.

But there exists a certain asymmetry between diversity and inclusion: hiring for diversity without creating an inclusive environment is less likely to be successful over time than promoting a culture of inclusion before hiring for diversity.

Think of it this way: it’s one thing to invite people to the party, and quite another to get everyone to dance.

You have to make the dance floor accessible to all, set the right mood with lights and decor, and certainly, pick the best playlist.

This is what inclusivity does: it helps foster and maintain diversity within your firm.

Intuitively, we know this makes sense: if a company fails to be inclusive toward employees, especially those whose skills, characteristics and experiences differ from those of everyone else, the company will find it difficult over time to recruit and retain them.

But if your firm has a reputation for being inclusive, it’s more likely that someone from a different background would be willing to join your team.

As a practical matter, then, inclusion is the process of putting diversity into action, and requires working cross-functionally (C-suite, Human Resources, Legal, Sales, Communications, etc.) to create an organizational culture where people from all backgrounds feel informed, part of the process (valued) and ultimately, work with a sense of belonging.

Here are several of the best practices we used to help our client promote a more inclusive work environment. Hopefully, they will assist you to do the same:

1) Start With Your Employees

Create an internal communications campaign that not only informs about your diversity initiatives, but also helps employees to understand their role in them and in the company’s overall culture.

Simply issuing edicts from the top won’t work. All too often we see this top-down approach and nothing more. Memos from the C-suite drive compliance, not commitment. From managers to rank-and-file employees, everyone must understand their role in your company’s culture.

For example, including employees in your recruitment process will not only provide you with a broader view of what potential employees may bring, but will make your staff feel valued and that their opinions count when making important decisions for the company.

2) Measure, Measure, Measure

Diversity training is now commonplace at most firms. But are you measuring the effectiveness of these programs and acting on this data?

A good starting point is an employee survey to determine whether they’re seeing improvements in inclusion. The goal here is to fully understand the trouble spots in your company, then put in place initiatives to address them. Use this approach to review your company’s key touch-points, such as recruitment, promotions and leadership. How inclusive are they? How do your employees perceive them?

3) Evaluate Inclusion

Don’t treat inclusion like a school elective.

If you do, then so will your employees. Right now, they’re focusing on the skills they perceive as necessary to get ahead: financial, technical, pleasing their bosses, etc. If your incentive system doesn’t recognize inclusion as a necessary skill, employees will likely ignore it.

If, however, you treat inclusion as a desired skill, then employees will see it as necessary to get ahead and will learn it.

To begin, consider evaluating your employees based on how well they moderate discussions to make sure everyone has a chance to contribute, share opinions and give colleagues proper credit for their work.

The Takeaway:

Hiring a diverse workforce is not enough. True inclusion as a hallmark of the workplace experience is what allows employees to feel valued and represented, leading to more diverse hires that stay, grow and thrive.

An easily understood and truly participatory inclusion policy enacted at all levels of your company not only serves as a business driver, but as a way for your company to connect with its increasingly diverse workforce.

And if you do that, then you’re on your way to creating a culture of belonging that allows employees to realize their full potential.

Time to get up and dance.

REMOTE TEAMS: 3 Effective Managing Strategies During COVID-19

// by Peter LoFrumento Leave a Comment

For many CEOs and managers, COVID-19 has catapulted their businesses into a forced global experiment of working from home.

Companies are now scrambling to change the way they conduct business. In fact, how to set up an effective remote working environment for your team has not only become essential, but in many cases, existential.

Case in point: we were recently hired by a multinational B2B brand to help their executive team adjust to this new day-to-day and codify best practices that facilitate remote high-performance teams.

Here are a few tips about what works and what doesn’t when managing remote teams. Hopefully, these will help you to maintain a successful business and keep your employees connected and inspired.

1) Communicate! I know, obvious, right? But you’d be surprised how often we get wrapped up in our own heads and forget about our people until we need answers.

What’s most important here is keeping a steady rhythm of communication that’s right for your team or company.

For example, daily check-ins with team members help in more ways than one: they allow you to know what everyone is working on, and what direction they’re headed. The latter is key to ensuring projects are done on time. And certainly, the morale boost you can give your remote team with a casual conversation can’t be overstated.

Remember, interaction with your team is more than just communicating. It is about sharing ideas and discussing new projects. Try some team-building exercises, such as having them list a few facts about themselves, or even just talk about their likes and dislikes. The goal here is to get your team to interact in this new remote environment and to know each other better.

One note of caution about emails: It easy for managers to simply rely on emails as their main channel of communication. The last thing you want is for your team to get hammered with nonstop, nonessential emails. Pick your spots.

Key takeaway: the more often you effectively interact with your team, the more trust and sense of collaboration you build, which is essential for achieving goals.

2) Relate! COVID-19 has taken health officials, governments and all of us by surprise. It has restricted our movements and closed schools. As a result, we are all stressed.

And your employees, who may have never worked remotely, now find themselves having to do it for the first time.

This adds up to being a significant transition and an adjustment for everyone.

As a manager, practice empathy. Try to understand these dynamics from their perspective and anticipate potential problems. Be proactive. Talk to your teams and see how they are doing, and that goes beyond simple work issues. Try to make sure they have what they need to get the job done. Establish regular one-on-one calls with department heads to review any obstacles or challenges they are facing. This could also be very helpful in identifying team-wide problems.

3) Time Management: As challenging as it may be at times to ensure office-based meetings are productive, doing them remotely can take this challenge to another level. To be most effective, consider the following in your preparation:

* Choose the right platform: whether Zoom, Livestorm or GoToMeeting, the last thing you want to do is frustrate your team by wasting time on something that doesn’t work very well for your needs;

* Set the schedule: it is important to set expected work hours. Create a specific time frame for when employees are required to be responsive and check-in with each other. This can be your normal business day hours;

* Agenda: be sure to have an agenda that you can alert team members to ahead of time;

* Stick to your plan: keep things moving along. There’s nothing worse than a meandering conversation that’s hard to hear during a video or phone conference;

* Tools: consider using project management tools like Trello to help you track projects and tasks with ease. These allow for your team members to add their tasks onto the relevant projects/boards, ensure tasks have deadlines and create a system where your employees can comment on any project roadblocks;

* Finish: end the meeting promptly and make sure to summarize your key takeaways; and

* Follow up: send a post-meeting email that summarizes these key points in writing

Here’s the unspoken truth: managing your teams remotely can be as easy or as difficult as you make it. The secret is preparation. These challenging times don’t have to be about fear and panic, especially in your organization. Certainly, there’s a lot out of our control, but there are things you can still do.

You can lead.

And that means creating new structures and routines that enable your employees to quickly adapt to the remote workplace.

Please feel free to reach out if you have any questions or wish to share any comments.

Rethinking Your Competition

// by Peter LoFrumento Leave a Comment

When It’s No Longer Who You Think It Is

Have you ever wondered why making dinner reservations on OpenTable is so easy while trying to get your cable company – like Optimum or Comcast – to answer billing questions is as painful as pulling a bad tooth?

Apples-to-oranges comparisons like this are quickly becoming the hallmark of how customers are judging brand experiences.

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Case in point: we were recently asked to evaluate customer brand experiences for a leading financial software company. Typically, you’d expect these customers to rate their experiences against their encounters with similar software companies.

But that’s not what happened.

Most customers took a broader view in their ratings approach.

When asked about their brand experiences with our client, customers made comparisons to account monitoring programs at American Express and earning rewards benefits similar to Amazon Prime.

Customers have begun to expect the same high standard consumer experience across brands.

Grant it, this is a small snapshot.

But perhaps it offers us a glimpse into a larger movement underway, often referred to as liquid expectations, where customer experiences with one brand seep into their expectations of another. It’s experience based on a much broader view of how they spend their money.

The implication for your brand of such a radical shift in customer expectation is clear: customers will compare their experiences with your brand to their experiences with OpenTable, Amazon and Starbucks, even if you sell financial software, car insurance or commercial real estate.

In fact, it may no longer just be the direct competitor right in front of you that you should be most worried about.

But what can brands do to meet these evolving customer expectations?

A good start is to redefine your competition.

In our case, we helped our client to identify those companies outside of their direct competitors who are innovating in ways that could be adaptable to expanding their customer service programs.

The idea is not to provide a similar service, per se, but a similar experience which results in a positive brand response.

If you’re a CEO, COO, CMO or brand manager, here are few ways to navigate your customers’ liquid expectations and keep your brand competitive:

1) Expand your approach: when creating brand experiences, look beyond your industry to see where else your customers are engaging and adapt.

For instance, not only did Uber upend the personal transport industry, but through UberEats, it helped create the on-demand expectation for food from sit-down restaurants. Uber effectively created a more fast and convenient way of accessing this new category.

2) Innovate: customers are now judging brand experiences based on what they see as possible in other industries. As your brand’s manager, consider doing the same. Look to other industries and adapt their innovation as a way of increasing personalized brand experiences.

3) Don’t fear Disruption: it remains an effective competitive tool. Take charge to reshape these expectations so you can foster greater brand engagement and loyalty.

Consider Vans sneakers, a brand that had been struggling over the last few years. It recently made a pop culture comeback with new online offerings that allow customers to create their own designs.

The take-away: Customers now crave brands that offer products and services which combine the convenient and intuitive. If your brand is not evolving to meet this demand, you’re only frustrating would-be buyers.

To be more competitive, don’t simply focus on your industry. Instead, actively listen to your customers to determine what they are engaged in; remember, the real competition isn’t next door, it’s wherever your customers are spending the most time and money.

Image result for cable companies customer

Optimum and Comcast, are you listening?

3 Tips to Being Pre-suasive

// by Peter LoFrumento Leave a Comment

Getting Your Audience in the Right Frame of Mind

I was recently asked by a private equity company to help sell the launch of a new co-managed fund to prospective investors.

What a great opportunity to apply pre-suasion!

That’s right. Pre-suasion.

Whether you are in communications like me or a consumer, we’re all too aware of the typical persuasion tools – glowing testimonials, emotional tugs, last-chance opportunities — used to trumpet, convince and sell. Perhaps because they are effective, most of us miss the accompanying truth: for maximum impact, it’s not only what you do; it’s also what you do just before you do it.

In other words, pre-suasion is about how we can best set up a situation to be optimally persuasive. It’s about positioning our message in a way that puts our audience in the right frame of mind to take action.

Practically speaking, when we have a precise goal for a message, say in this instance launching a new fund, the before and during the exchange can have a significant effect on the outcome.

Here’s how: in trying to sell this fund to new investors, our challenge was one of establishing trust. Beyond numbers and sleek decks, it was about getting prospective investors to trust the management team enough to fork over tens of millions of dollars.

Part of encouraging this sense of trust, we structured our investor meetings into three parts: first, discussing a particular instance where the management team missed the mark on an investment; second, discussing their recent investment wins; and third, making the investment pitch for the new fund.

While this approach eventually resulted in a fully subscribed fund, it was the feedback that was particularly surprising: investors often used the words genuine and authentic when describing the management team.

The lesson here: by activating a concept in someone’s mind – for us, manifesting trustworthiness by discussing investment misses first – we’re increasing the importance of that concept (trust) for a short amount of time. This set the stage for persuasion to occur (pitching the investment).

Here are 3 tips to help your team step-up their marketing or sales game with pre-suasion, or simply be more aware of attempts to influence them:

1) Define Your Goal. Before each interaction, define what you want to emphasize. Ask yourself, what are my goals, and then support these with a specific anecdote, image or even a quote. Identify something specific that will reflect your goal and resonate with your audience. These are as your openers to attention in that they begin to move attention towards something while saying this is important to your audience.

2) Ensure alignment. Set up the situation so that the context you’ve chosen is aligned with your request.

For instance, if you want someone to try a new product, you could ask them if they consider themselves an adventurousperson beforehand. By having them think about the fact that they’re adventurous, they’ll be much more likely to comply with your request.

3) Identify commonalities. Tailor your pitch to each audience, always with your overall goals in mind. Identify commonalities up front with those involved in each setting. Consider such shared interests as core values, locations or charitable organizations. Highlighting these commonalities will not only make other individuals feel closer to you, but the process will also make you feel closer to them.

Final Take-a-way: Whether you’re trying to sell a new product or service, or seeking consensus during your Monday morning staff meeting, optimal persuasion can be more effectively achieved through optimal pre-suasion.

If you only concentrate on the message itself, then you’ve missed a crucial component of the persuasion process: the practice of getting your audience in the right frame of mind so they agree with your message before they know what’s in it.

Talk Ain’t Cheap, It’s Priceless

// by Peter LoFrumento Leave a Comment

How Private Equity Can Use Better Branding

Imagine that the former face of your prominent private equity firm is now more famous for lurid emails to his female assistants, losing important deals to competitors and telling everyone that you fired him after he quit.

Suddenly, your house is ablaze and what you say and how you say it becomes the difference between a severely damaged reputation and your firm’s future growth.

While this true-to-life example comes from a recent situation in which I was asked to consult, it highlights why brand building and communications have become more important than ever for private equity firms.

Think about it: if your firm has a strong brand, then you can withstand such reputational crises, fend off competitors and quickly regain a foothold with proper assistance.

Based on my experience, I’ll go further and suggest that a strong brand helps private equity firms source the best deals, raise the most capital and attract the most desirable employees.

It directly translates into higher awareness, greater cache and stronger deal flow. A strong brand can even result in proprietary deal flow, which means fewer of those troublesome auctions.

The downside to not having a strong brand? Private equity firms that ignore branding and effective communications put themselves at risk of competing solely on price (valuation and terms).

And please don’t confuse branding with making a cosmetic fix.

For example, remember when Bill Ackman’s Pershing Square Capital Management tried to ditch the term hedge fund for the less evil-sounding alternative asset manager? Or when Cliff Asness’s AQR Capital rebranded itself as a diversified asset management company, which came across as sounding so broad as to be meaningless to everyone within an earshot?

These days, due to the proliferation of dry powder and fierce deal competition, it continues to be a seller’s market. So it’s difficult for firms to find quality businesses at price points where their risk-adjusted target rates of return on invested capital are reasonable.

As a result, asset managers face increasing demands from stakeholders. And success is no longer just about returns, but figuring out how to differentiate your firm from the competition and then successfully communicate these advantages to limited partners, portfolio companies, investors, prospects and media.

Getting the best deals is no longer just about competing on price, but on what longer term strategic advantages your firm offers.

This is why private equity firms can benefit from better branding and communications.

Now, how do you accomplish that?

Whether you are in private equity or another business, the process is the same.

To start, be aware of the effective branding trends that are occurring in your industry, and then address them head on.

Here are a few to consider:

1) If you think you are communicating enough with your stakeholders, you’re probably not

These days, your stakeholders, especially investors and limited partners, are demanding proactive and transparent communication.

Don’t be fooled, they know you only call when it’s time to fundraise.

Further, their appetite for information is growing more insatiable. They want information about the portfolio companies in which you invest, from the management teams and competition, to market developments and diversity (an ever-growing concern for those firms whose clients include state and federal pension funds).

2) Differentiate or die

Ok, that’s a bit strong. But since competition is so fierce right now in fundraising and throughout the bidding process, private equity firms must develop and grow their brands or get lost in the clutter.

This means you have to clearly articulate your vision and values to stakeholders in order to win. Capitalize on positive news and demonstrate your expertise to everyone who matters.

A good place to start is refining your investment philosophy and identifying those core values that support it and allow your firm to deliver. Don’t simply focus on what everyone else does – past performance, transparency, excellence. Sure they’re important, but what will really set your firm apart from the clutter are those unique qualities that really position you as different and THE best alternative to the competition.

Also, keep in mind that these qualities have to be based in reality. In other words, demonstrable. Just because you say it, doesn’t make it so.

For instance, consider Goldman Sachs’ odd attempt at rebranding itself as a startup tech company. If Lloyd Blankfein’s pronouncements about being “a technology firm” or “a platform” didn’t convince you, then you had the same reaction as everyone else (Goldman is now a what??).

We can certainly credit them with trying, but it’s hard to create such a quick transformational narrative around a 149-year-old bank as being hip without doing the necessary branding work to get you there.

Don’t make the same mistake. Do the work.

For example, for our challenged PE client mentioned earlier, we conducted objective, third-party branding exercises to hone their messaging and narrative, developed a thought leadership program and identified key differentiating attributes. We then used this information to help reposition our client among its competitors to drive business.

3) It’s about your portfolio companies, not just you

Certainly, the most effective way your private equity firm can demonstrate its performance is through the success of its portfolio companies. So use these successes as opportunities to articulate how your firm is supporting these investments.

This kind of information can boost deal flow, better position your firm as a leader in its field and help recruit the best talent.

4) Channeling success

Picking the right channels to highlight the value your firm brings to limited partners, portfolio companies and other industry stakeholders is as important as your message.

Whether it’s through the media, your website, thought leadership content, social networks or conference appearances, the question to ask is where are my prospective investors and partners consuming information?

That’s where you should be.

As private equity firms increasingly have to compete for dollars and deals, finding a way for your firm to stand out is now more critical to success than ever.

Branding and communications will enable you to differentiate yourself from the competition, and that means being bigger, bolder and braver in your approach.

Remember, what you say and how you say it matters to your stakeholders.

It’s priceless.

When Winning Is A Curse

// by Peter LoFrumento Leave a Comment

“Be careful what you wish for”…sound advice for any situation, especially in business.

Case in point: our firm was recently asked to assist in the auction of a notable music publishing catalog. The auction ran like most others – bidders were given a period of time for due diligence, which included reviewing the catalog’s financial performance.

While our client, the seller, was pleased with the financial outcome, something fascinating occurred.

The winning bidder did what you or I might do in a similar situation, especially if we really wanted the asset being auctioned: he outbid the nearest competition by close to ten percent.

But the winner’s victory dance was short-lived due to a phenomenon in game theory known as the winner’s curse. This occurs when a winner’s bid exceeds the intrinsic value of the asset purchased.

Think of it as a type of buyer’s remorse, but on steroids.

How did this happen, especially when the winning bidder had scores of executives, lawyers and accountants pouring over the asset prior to the auction?

There are two key reasons for succumbing to the winner’s curse: first, there’s always going to be a level of incomplete information, especially in auctions. In this case, the value of exploiting the catalog’s songs over time is, at best, an informed guess; and second, emotions can run high, especially in ultra-competitive situations where revenues, and egos, are on the line.

During our auction, both of these factors served to cloud the ability of the winning bidder to determine the catalog’s true intrinsic value. Not only did the winner’s curse reveal a flaw in the winner’s approach to auctions, but it provides a framework for us to understand why winning is not always the best outcome, and in this particular case, it would likely prove an unprofitable one.

Adverse Selection, a Song Sung Blue

Music catalog sales often operate as common value auctions. The rights to the music contained in the catalog have a common value to all of the bidders, which is equal to the current revenue its commercial exploitation generates. However, bidders will also estimate future earnings and do so differently, depending on what strategies they employ to exploit songs. Perhaps these songs will be featured in an upcoming movie or part of a Coca-Cola or Apple media campaign.

In our case, each bidder interpreted the available information in their own particular way, but not a single bidder had all of the information to know for sure how much money the rights to the catalog would eventually earn. After all, the appeal of songs is fickle at best, especially over the long run.

Moreover, competition for this catalog was fierce. It included a number of chart-topping songs, which attracted over a dozen bidders including music publishers and venture capital firms.

In the end, the winner forked over an amount other bidders likely thought preposterous. His overly inflated notion of projected returns from the exploitation of the catalog represented a form of valuation Viagra, which he used to justify such an excessive premium. Even though he won the catalog, he ended up overpaying for it.

Clearly the market (the other bidders) didn’t see the value of this catalog at his price. So his win proved too costly. If he were a more rational bidder, he would have anticipated this adverse selection, so that even though his information would still have been overly optimistic when he won, he wouldn’t have paid so much on average.

Getting a Hit, Shading your Bid

To avoid this type of mistake, make a more accurate assessment of an asset’s value and have the discipline not to bid more than that value. This requires establishing a walk-away price before making a bid. One way to accomplish this is to shade your bids. This means setting your opening bid at a fraction of your walk-away price based on competitive considerations. This will help account for the risk of overpaying.

Whether you are purchasing a music catalog, a new house, paid search on Google, or bidding on players in your Fantasy Baseball league, auctions can be profitable and fun. But the phenomenon of the winner’s curse can ensure that sometimes winning comes at too high a price.

So if you are not careful, you may get exactly what you wish (bid) for.

#1 Mistake That Makes Us Wrong More Than We Think

// by Peter LoFrumento Leave a Comment

There is no expert as authoritative – in his or her own mind – as the know-it-all.

No one is more sure that he or she is right about everything, that he or she knows the exact right thing to do and when exactly to do it.

Even if that makes the more experienced people in the room roll their eyes in disbelief.

Such was my experience this week when I walked into a pitch meeting for a new client.

The know-it-all in the room quickly revealed himself, and sadly, it was the CEO!

His behavior was textbook: he found his way into every conversation and answered questions not even directed at him. He acted as though he was the smartest person in the room despite having little to no experience in the area under discussion.

While we can politely jest about this CEO’s behavior, it can pose a real problem when your resident know-it-all keeps on getting in the way and shutting down key decisions or suggestions. Or, if we are honest with ourselves, when that person is you or me.

We call this misplaced confidence the above average effect, which is a cognitive bias that causes us to overestimate the positive and underestimate the negative relative to others around us.

Think of it as an organizational flu – it infects everyone that it touches and has the ability to inhibit real growth.

But like any infection, rooting it out begins with recognizing its symptoms:

Symptom #1: We Are (Always) Better Than the Competition

Healthy competition is good. Even motivating.

But believing we are better than the competition anchors us to the notion that positive or negative trends will continue to go in our favor. In our above average world, we believe that we know best. This bias clouds judgment and results in an underestimation of the competition, a misunderstanding of the needs of customers, and a belief that change is not required to maintain current success.

Remember, being better than the competition is a mirage; a fleeting state of being that can change in a moment of innovation or crisis.

Instead of trying to be better, try to be different. That is, how are you and your company different from the competition? Being different allows you adapt to change more effectively. Being different not only allows you to establish the playing field, but allows you to control it.

Symptom #2: Everyone Should Be Like Me

When executives who suffer from the above average effect compare themselves to others, they tend to highlight their own strengths and focus on everyone else’s weaknesses. Suffice to say, this doesn’t help companies build and maintain high performance teams who value diversity of skills. Instead, these executives overvalue the traits they believe have made them successful and devalue those traits that have made others successful.

Think of it this way: these executives play checkers, where things are either black (their way) or red (your way). Instead of playing chess, where each piece is different, but each is most effective when used in their area of strength.

Symptom #3: Failure Is Never an Option

It’s not that above average effect executives aren’t afraid of failing. They are. And profoundly so.

They just do a good job of covering it by being overbearing, controlling and passing the blame. Because, well, they know better; so if a plan fails, it’s clearly not their fault.

Ultimately, this false belief results in an unhealthy view of risk. And you’ll see this when sales teams set unrealistic goals or when your boss is sold on an idea and requires you act on it, no matter how bad it is.

Healthy people try, fail, learn from their failures, and try again. If you are not failing every so often, then you are likely not taking enough risks. And if you can’t remember the last time you failed at something, then chances are you aren’t growing as much as you think.

So how do avoid succumbing to the above average effect?

* Remember that we are not as good as we think.

Confidence is good; overconfidence is dangerous. I think the best executives are acutely aware of how much they don’t know. They have no need to be the smartest person in the room, but have a real desire to learn from colleagues, staff and friends.

And the easiest way to do that is to be open, show an interest in each other’s success, and create an environment of positive exchange that provides value for everyone.

* Our competition is better than we think they are.

While I was sitting in that pitch meeting this week, the CEO told us anecdote after anecdote as to why his company was superior to all of his competitors.

Just like him, we weave stories around the market and our competitors in a way that make us seem the most favorable and likely to succeed. This helps us feel safe and in control. It’s an unfortunate fable that does more damage than good.

Instead, ask yourself whether the competition can solve a problem I’m trying to solve better than me? The sooner you’re honest and get to the point where you’re outlining the competition’s advantages, the sooner you can work to offset those advantages and create some of your own.

* We are the sum of our choices. Don’t play victim.

Executives suffering from the above average effect are quick to assign blame and pull out all the excuses as to why something did or did not happen.

But by not owning up to our actions, we are taking away our part in doing anything different. We simply remain stuck while we continue to complain and feel miserable in our status quo of negativity. Break free by making a move, doing something different, or trying something new. Grow.

And growth means we must fail occasionally. By doing so, we learn how to avoid mistakes, gain credibility, cultivate our support systems and keep focused on what matters most.

Walking out of that pitch meeting this week, I do admit to fighting the urge to tell that CEO, ‘since you know it all, you should know when to shut the heck up.’

But instead, I took the meeting as a reminder what not do.

And to remember that it’s what you learn after you know it all that counts.

Sold Out!

// by Peter LoFrumento Leave a Comment

Top 2 Ways to Beat Ticket Scalpers: Supply & Demand

We’ve all been there before. It’s Thursday morning and you realize that your favorite band or sports team is playing on Saturday. But tickets are long sold out and all that’s left is the unappealing option of paying a hefty premium to a ticket scalper.

I mean, er, ticket broker.

Kidding aside, the resale ticket market is booming. Northcoast Research recently estimated that this secondary market is moving north of $5 billion.

But why?

One reason is that to appear more fan-friendly, recording artists such as Metallica, The Chainsmokers, Jimmy Buffett and Green Day have been reducing the cost of their concert tickets well below market value. While seemingly good-natured, by making their tickets less expensive, they are allowing ticket brokers to capture much of the revenue without bringing lower prices to a majority of fans.

This occurs when ticket brokers take advantage of these lower prices and limited supply to buy concert tickets in bulk, and then resell them to fans at astronomical mark-ups.

During a recent consulting project for a major recording artist, we were tasked to come up with a solution for the second leg of her U.S. tour that would keep lower-priced tickets in the hands of her fans, while reducing the ability of brokers to acquire these seats.

During the first leg of her tour, our client charged $75 for every seat, regardless of location. This was well under market value. Brokers acquired a majority of the seats and marked them up to over 200% of face value. By pricing her shows under market value, our client was inadvertently doing herself a disservice as brokers captured the excess revenue through scalping.

After careful consideration, we offered a three-fold solution: first, we had our client increase the amount of her shows being offered on the second leg of her tour. This enabled us to increase the supply of tickets, ensuring that low-priced tickets would always be available to fans; second, we reserved a number of higher priced tickets for sale (‘VIP’ seating ranging from $95-$200); and third, we offered all tickets as paperless and instituted an ID system for ticket purchases to further exclude brokers.

The result was a relatively sold-out tour and virtually no broker involvement.

This strategy worked due to the law of supply and demand. Simply, excess demand occurred on the first leg of the tour because tickets were priced at $75 apiece. Since this price didn’t reflect true market value, the quantity demanded exceeded the quantity supplied and a shortage was created. After the entire quantity of tickets supplied was sold at $75 apiece to fans and brokers, demand still remained at various price levels which were above the $75 mark.

Ticket brokers, taking advantage of this low price and limited inventory, responded to this remaining demand by raising the price of tickets to market-clearing levels, capturing revenue that could have gone to our client.

By increasing the supply of tickets, we created a new ticket price equilibrium where market value now equaled face value.

In addition to these supply and demand effects, we also employed price discrimination by creating a two-tiered pricing schedule (VIP and general seating). This allowed our client to capture extra revenue as fans self-selected their seats within these two tiers. We knew that fans had different elasticities of demand, but we were unable to separate those elasticities. We therefore presented a price schedule, making sure that we marketed the new VIP seats as more exclusive. This helped us to distinguish among groups of buyers.

This sort of price discrimination was achievable because our client met three specific conditions: she was the price maker for the second leg of her tour; we identified at least two groups who were willing to pay different prices (low price seats (high elasticity) v. VIP (relatively inelastic)); and utilized paperless tickets and an ID system that prevented buyers in one group from reselling tickets to the other.

In this way, she was able to charge each group what they were willing to pay.

Overall, winners included the fans that were able to see more concerts than usual, and for a majority of them, at a reduced price. And our client, who happily recaptured revenue from the brokers. Losers were the brokers, who suffered from reduced access to tickets and from us eliminating the difference between the market and face values of the tickets.

Our takeaway from this experience was that to reduce scalping, you should charge a more accurate price in the first place.

Now it’s time to order those tickets!

Are Netflix, Amazon & Hulu Encouraging Piracy?

// by Peter LoFrumento Leave a Comment

Try this: close your eyes and think about your favorite Netflix original series.

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Stranger Things?

Black Mirror: Bandersnatch?

You?

Ok, now if you could get your shows for free, would you?

Don’t worry; your answer is safe here.

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But for the rest of the viewing public, the secret is out: piracy seems to be making a comeback and surprisingly, Netflix may be part of the reason.

That Netflix has become the Godzilla of video streaming services since its launch in 2007 is undisputed. In fact, its stats say as much: Netflix grew subscribers by 17% in the just-reported quarter, for a total of 139 million paying subscribers. In contrast, Amazon sits at 100 million subscribers while Hulu has signed a paltry 25 million. Netflix also announced its plan to spend a whopping $10 billion on original content in 2019, which is more than Amazon, Apple, HBO and the other streaming services will spend on a combined basis.

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With so many programming choices available to consumers, why has BitTorrent traffic (piracy) increased 9.2% in the Americas, 19% in Asia and a staggering 32% across Europe, the Middle East, and Africa (2018 Global Internet Phenomena Report)?

The answer has to do with consumer convenience.

In music, we use piracy levels to help determine the health of the streaming market because it highlights a key value proposition for consumers: convenience.

Think about it.

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Spotify proved that even in a world where music piracy is easily accessible, users are willing to pay for its convenience. These days, very few want to spend time searching sketchy, potentially virus-infested links on the internet just to stream Post Malone’s Sunflower if they don’t have to.

Perhaps, it’s this growing lack of convenience on the part of Netflix, Hulu and Amazon that is at the heart of why some consumers are switching back to piracy.

Where do we see this lack of convenience?

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1) Market Segmentation. That is, there are too many players.

Let’s say you want to watch Stranger Things (Netflix exclusive), Handmaid’s Tale(Hulu exclusive) and The Marvelous Mrs. Maisel(Amazon exclusive).

Getting the picture?

That’s roughly an extra $40 per month to subscribe to all three services. And as streamers continue to invest in exclusive content, we will be forced to sign up for even more services or miss out.

Not very convenient.

And chances are good that this issue will only get worse for us as Disney, Apple and Facebook launch their own exclusive streaming services later this year.

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2) Licensing. No really, it’s becoming a nightmare of inconvenience.

Were you disappointed when Netflix canceled most of its Marvel shows, like Daredevil and Luke Cage?

Remember, Disney, which owns Marvel, is getting ready to launch its streaming service this year (Disney+). And The Mouse not only owns Marvel, but Pixar, Star Wars, 21st Century Fox and part of Hulu.

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So if you were hoping for Moana or any of the new Star Wars movies to stay on Netflix, you probably should rethink your monthly entertainment spend before Disney+ debuts.

Then you have AT&T, which owns Warner Bros. Studios and DC Comics, also planning to launch its own streaming service this year. So it’s not a stretch to imagine AT&T launching separate services to exclusively stream all things Harry Potter and Looney Tunes.

Also, not very convenient.

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Internationally, licensing and distribution of all this programming is even more complicated. Local regulations and certain censorship rules across Europe and Asia, in particular, make content harder to find, forcing consumers to seek out alternatives, like BitTorrent.

THE TAKEAWAY: It’s All About Convenience

Both market segmentation and fragmented licensing force consumers to pay more and makes content harder to find. These combined forces create a perfect storm, effectively making individual streaming services less convenient—and therefore, less valuable—to consumers.

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As a result, the trade-offs of piracy may be appearing more worthwhile.

What to do?

Moving forward, Netflix, Amazon and Hulu, among others, would do well to remember that the entertainment business spent the last two decades trying to battle piracy through all manner of heavy handed-tactics and lawsuits, only to realize that offering users convenient services (inexpensive, accessible, quality) was the best solution.

Streaming services need only look to see where people are going for their content.

They’re the customers.

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If not, it may be them walking the plank.

Internal Communications & Employee Engagement