People Have an Irrational Need to Complete 'Sets' of Things. 01-05

People are irrationally motivated to complete arbitrary sets of tasks, donations, or purchases—and organizations can take advantage of that, according to new research by Kate Barasz, Leslie John, Elizabeth Keenan, and Michael Norton. 

Here’s a tip for persuading people to finish more tasks, buy more products, or donate more money: Simply present assignments, requests, or items as arbitrary sets, rather than as individual units.

New research reveals that people are irrationally but effectively motivated by the idea of completing a set, even if it means working harder or spending more money—with no additional reward other than the satisfaction of completion and the relief of avoiding an incomplete set. Imagine arriving at your boss’s summer BBQ and presenting her with five beers in a box designed to hold six. No matter that your favorite craft beer store permits you buy bottles one at a time. Chances are you’d still buy six, just to fill all six spaces in the box.

“People really don’t like to leave things incomplete,” says Kate Barasz, an assistant professor of marketing at IESE Business School and lead author of the paper “Pseudo-Set Framing,” written while she was a doctoral student at Harvard Business School. The term “pseudo-set” refers to the idea that the set is kind of arbitrary—manufactured for the sole purpose of creating the idea of wholeness.

“People really don’t like to leave things incomplete”

Do you want customers to refer more of their friends to your company’s website? Ask them to refer friends in arbitrary “batches” of five at a time. Looking to increase charitable giving to your nonprofit organization? Ask potential donors to contribute a set of six gifts. Are you and your fiancé struggling to write thank-you cards for all those wedding shower gifts? Try batching the unwritten cards into sets of eight. Rather than feeling overwhelmed by the prospect of writing one note at a time, you’ll feel oddly motivated to finish a whole set at a time.

Appearing in a forthcoming edition of Journal of Experimental Psychology: General, “Pseudo-Set Framing” was co-written by Barasz; Leslie John, the Marvin Bower Associate Professor at HBS; Elizabeth Keenan, an assistant professor at HBS; and Michael Norton, the Harold M. Brierley Professor of Business Administration at HBS.

The Canadian Red Cross puts pseudo-sets to the test

The researchers proved the efficacy of pseudo-set framing through a series of laboratory and real-world field studies.

In one study, they teamed up with the Canadian Red Cross, a humanitarian charitable organization, to find out whether pseudo-set framing could influence gift-giving behavior during its 2016 holiday online fundraising campaign.

More than 7,000 potential donors were randomly (but evenly) directed to one of three landing pages.

The first page emphasized cash donations.

The second page emphasized specific gifts over cash donations. This page also included an image of a globe. For each new item added to the donor’s online cart, a location marker would appear in a particular geographic region, signaling that the item would be donated to that part of the globe.

The third page invited donors to give one of each of six items in order to complete a so-called “Global Survival Kit”—in other words, a pseudo-set. This page had a globe on it, too, but instead of location markers, it featured a line that grew closer to circumnavigating the globe each time an item was donated.

The rationale: “Who wants to donate six blankets, when you can donate one blanket and feel just as good?” Barasz says. “But, if you frame it as a set, then there is a reason to want to complete the set and to donate all six of the items.”

The results of the field study were stark. Among those who chose to give gifts, 21 percent of those in the “Global Survival Kit” condition chose to donate all six items, compared with just 5 percent in the “gift” condition and 3 percent in the cash condition.

“The strength of the increase was a really nice surprise,” says Doug Wayne, director of national digital marketing and web strategy at the Canadian Red Cross, who decided to collaborate with the research team after meeting Norton through a colleague. “Ultimately, it speaks to how powerful that framing is.”

People incur the cost of a bad gamble just so they can complete a pseudo-set

In fact, the human drive for completion is strong enough that people will strive to complete arbitrary sets even when there’s a risk associated.

In another study, 201 participants had the opportunity to accept up to four online gambling opportunities, with the chance of winning up to 25 cents. (The stakes were notably low—the online equivalent of nickel slots.)

The chances of winning decreased with each successive gamble, and participants could stop and cash out at any time. Gamble 1 offered a 90 percent chance of winning a nickel and a 10 percent chance of winning nothing, Gamble 2 offered a 75 percent chance of winning, and Gamble 3 a 50 percent chance. In the first three gambles, there was no chance of incurring a loss. But Gamble 4 offered a 50 percent chance of winning a nickel and a 50 percent chance of losing a dime.

The odds were stupid. It made no rational sense to take that last gamble. And yet….

The researchers rigged the system so that all participants won the first three gambles, such that they’d all be facing the final risk having accrued 20 of the possible 25 cents. Everyone saw their successive winnings displayed both numerically and graphically on screen.

However: Half of the participants saw a visual display consisting of five nickels—with separate blank circles depicting money not yet earned. The other half saw a single quarter, divided into fifths such that unearned money was depicted as a missing piece.

Overall, 29 percent of participants in the single-quarter condition chose to accept all four gambles, compared with 16 percent in the five-separate-nickels condition. For them, the need to complete that picture of a quarter seemed to supersede their rational knowledge of the bad odds.

“People persist with completing pseudo-sets even when it’s costly for them to do so,” John says. “That, to me, is especially compelling as a researcher—that completing this totally arbitrary set is so motivating to people that they are willing to participate in an obviously bad bet.”

Future research and advice for managers

The researchers acknowledge that it’s possible for a pseudo-set to backfire. For instance, a person who might have given seven items to the Red Cross might decide to give a single set of six items instead. And a badly designed pseudo-set could prove annoying or demotivating—say, if the arbitrary set comprises 200 parts. “If the number of tasks required to fill a ‘pie piece’ is prohibitively high, people may decide not to engage at all to avoid anticipated dissatisfaction with partial completion,” the authors write in “Pseudo-Set Framing.”

Future research may investigate the ideal size of a pseudo-set in any given situation. In the meantime, Barasz offers this rule of thumb, especially with regard to encouraging people to complete repetitive tasks: “My advice to a practitioner would be to find out, on average, how many people usually complete, and then make your set slightly larger than that,” she says.  

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Asking Questions Can Get You a Better Job or a Second Date 01-05

Knowing how to keep a conversation going can improve your career as well as your social life, according to research by Alison Wood Brooks and colleagues. 

New research suggests that people who ask questions, particularly follow-up questions, may become better managers, land better jobs, and even win second dates.

“Compared to those who do not ask many questions, people who do are better liked and learn more information from their conversation partners,” says Alison Wood Brooks, assistant professor and Hellman Faculty Fellow at Harvard Business School. “This strategy does both. It’s an easy-to-deploy strategy anyone can use to not only be perceived as more emotionally intelligent, but to actually be more emotionally intelligent as well.”

The research, published in the paper It Doesn’t Hurt to Ask: Question-Asking Increases Liking (pdf), examined data from online chats and face-to-face speed dating conversations. In addition to Brooks, the coauthors were Karen Huang, HBS and Department of Psychology, Harvard University; Michael Yeomans, Institute for Quantitative Social Science, Harvard University; Julia Minson, Harvard Kennedy School; and Francesca Gino, Harvard Business School. It was published in September’s Journal of Personality and Social Psychology. 

“Follow-up questions are an easy and effective way to keep the conversation going and show that the asker has paid attention to what their partner has said”

The first two studies in the paper examined more than 600 online chat participants tasked with getting to know each other. A third study consisted of 110 speed-daters engaged in round-robin dates—over 2,000 conversations.

In all three studies, those who asked follow-up questions were better liked than those who didn’t. “Follow-up questions are an easy and effective way to keep the conversation going and show that the asker has paid attention to what their partner has said,” the researchers write.

Researchers study 2,000 conversations

In the first two studies, people were assigned a random partner and told to chat for 15 minutes in order to get to know each other. In the first study, one person in each pair was told to ask at least nine questions or at most four questions, and the other person was unaware of his or her partner’s question-asking instructions. In the next study, both people in each pair were told to ask many (at least nine) or few (at most four) questions.

Nine research assistants read through a sample of 368 transcripts and identified question types. They discovered and hand-labeled six different types of questions: introductory, mirror, full-switch, partial-switch, follow-up, and rhetorical questions. Forty-four percent of the questions—more than any other type—were follow-ups.

Based on the hand-labeled question types, the research team was able to create its own machine learning algorithm, natural-language-processing software to analyze the speed dating conversations. For the third study, armed with their algorithm, they examined data from a 2013 Stanford speed dating study called Detecting friendly, flirtatious, awkward and assertive speech in speed dates (pdf) as a way to test in-person interaction.

And there, perhaps, was revealed the ultimate proof that follow-up questions work. The top third of question askers got the most second dates. Researchers found that if a participant were to ask just one more question on each of the 20 dates, he or she would succeed in getting a “yes I want to see you again” on one more of the dates, on average.

Be careful, though. Asking too many questions can have the reverse effect, the research shows. “Asking a barrage of questions without disclosing information about yourself may come across as guarded, or worse, invasive,” Brooks says.

Brooks, who has been fascinated by “why people don’t ask more questions” since grade school, has mulled over this topic in many discussions with her mother, whom she thanks in the study. “My mom, a talented natural psychologist, and I would often reflect on why people don’t ask more questions. What holds them back?”

One reason might be ego. People may be so focused on sharing what they know that they aren’t considering what they might learn from others. Or, they may think to ask a question, but are afraid of asking one that is perceived as rude, intrusive, or incompetent.

But, there’s a third, darker reason. Potential questioners, such as a manager, may not ask because they don’t care about the answers—they may feel apathy or disinterest in what the other person has to say.

“This type of apathy is often misplaced—we have much to learn from others, perhaps especially from those lower in status than ourselves,” Brooks says.

“Every workplace has norms and rules of conduct, explicit and implicit. There are rules of appropriateness. And rules of professionalism,” Brooks says. “It is possible that we are more likely to make conversational mistakes at work and violate these rules and norms and expectations.”

A job interview is one circumstance that may benefit from asking more questions. For example, standard practice suggests that a potential new boss is expected to do the asking. But asking more questions as a job candidate may show how much you can contribute in a potential job, that you are an engaging listener with high emotional intelligence. Plus, the manager may like you more.

“We don’t have many evidence-based prescriptions about what you can do to become more emotionally intelligent or to take other people’s perspectives,” Brooks says. "In fact, there’s research that shows even if you tell people, ‘try to put yourself in other person’s shoes,’ we aren’t very good at it.”

The right way to question

For those who aren’t natural question-askers, Brooks recommends heading into any conversation with an explicit goal of asking questions.

“Think to yourself, I need to ask at least five questions in this conversation, or, I need to ask questions in this conversation, listen to the answers, and ask follow-up questions. It’s easy to do, and—even better—requires almost no preparation.”

The researchers are interested in looking at other areas, now that they’ve established a link between question-asking and liking.

Potential areas include:

What happens in extreme situations when someone asks zero questions, or, when they ask 50?

What can be gleaned about gender, status, age, or personality from question-asking in conversation?

What can be learned from groups in terms of productivity or happiness when it comes to question asking? 

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Power Posing: Fake It Until You Make It 04-07

Power Posing: Fake It Until You Make It

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Nervous about an upcoming presentation or job interview?

Holding one's body in "high-power" poses for short time periods can summon an extra surge of power and sense of well-being when it's needed, according to Harvard Business School professor Amy J.C. Cuddy.


We can't be the alpha dog all of the time. Whatever our personality, most of us experience varying degrees of feeling in charge. Some situations take us down a notch while others build us up.

New research shows that it's possible to control those feelings a bit more, to be able to summon an extra surge of power and sense of well-being when it's needed: for example, during a job interview or for a key presentation to a group of skeptical customers.

"Our research has broad implications for people who suffer from feelings of powerlessness and low self-esteem due to their hierarchical rank or lack of resources," says HBS assistant professor Amy J.C. Cuddy, one of the researchers on the study.

“It's not about the content of the message, but how you're communicating it.”

In "Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance", Cuddy shows that simply holding one's body in expansive, "high-power" poses for as little as two minutes stimulates higher levels of testosterone (the hormone linked to power and dominance in the animal and human worlds) and lower levels of cortisol (the "stress" hormone that can, over time, cause impaired immune functioning, hypertension, and memory loss).

The result? In addition to causing the desired hormonal shift, the power poses led to increased feelings of power and a greater tolerance for risk.

"We used to think that emotion ended on the face," Cuddy says. "Now there is established research showing that while it's true that facial expressions reflect how you feel, you can also 'fake it until you make it.' In other words, you can smile long enough that it makes you feel happy. This work extends that finding on facial feedback, which is decades old, by focusing on postures and measuring neuroendocrine levels."

The Experiment

In their article, to be published in a forthcoming Psychological Science, Cuddy and coauthors Dana R. Carney and Andy J. Yap of Columbia University detail the results of an experiment in which forty-two male and female participants were randomly assigned to a high- or low-power pose group. No one was told what the study was about; instead, each participant believed it was related to the placement of ECG electrodes above and below his or her heart.

Subjects in the high-power group were manipulated into two expansive poses for one minute each: first, the classic feet on desk, hands behind head; then, standing and leaning on one's hands over a desk. Those in the low-power group were posed for the time period in two restrictive poses: sitting in a chair with arms held close and hands folded, and standing with arms and legs crossed tightly. Saliva samples taken before and after the posing measured testosterone and cortisol levels. To evaluate risk tolerance, participants were given $2 and told they could roll a die for even odds of winning $4. Finally, participants were asked to indicate how "powerful" and "in charge" they felt on a scale from one to four.

Controlling for subjects' baseline levels of both hormones, Cuddy and her coauthors found that high-power poses decreased cortisol by about 25 percent and increased testosterone by about 19 percent for both men and women. In contrast, low-power poses increased cortisol about 17 percent and decreased testosterone about 10 percent.

Not surprisingly, high-power posers of both sexes also reported greater feelings of being powerful and in charge. In addition, those in the high-power group were more likely to take the risk of gambling their $2; 86 percent rolled the die in the high-power group as opposed to 60 percent of the low-power posers.

Previous research established that situational role changes can cause shifts in hormone levels. In primate groups, for example, after an alpha male dies the testosterone levels of the animal replacing him go up. The hormonal shifts measured in this experiment show that such changes can be influenced independent of role, situation, or any consciously focused thoughts about power. The physical poses are enough.

And that, she suggests, has broad implications for people who suffer from feelings of powerlessness and low self-esteem due to their hierarchical rank or lack of resources.

Why We Judge

Cuddy's overall research agenda focuses on stereotyping and questions around how we form judgments of others' warmth and competence.

Just Because I'm Nice, Don't Assume I'm Dumb

reveals how and why we come to snap judgments about coworkers (and how to fight that natural instinct). The article was cited as a "Breakthrough Business Idea" for 2009 by Harvard Business Review.

"The power poses paper came about in part because my coauthor Dana and I had noticed that women in our classes seemed to be participating less," says Cuddy, who teaches the MBA elective Power and Influence. "Some of the women exhibited body language associated with low power, so we wondered if that was in turn affecting how they feel," she adds, citing the "fake it till you make it" research that shows smiling can affect feelings and hormone levels.

“It's about understanding what moves people.”

"The poses that we used in the experiment are strongly associated across the animal kingdom with high and low dominance for very straightforward evolutionary reasons. Either you want to be big because you're in charge, or you want to close in and hide your vital organs because you're not in charge.

"It does appear that even this minimal manipulation can change people's physiology and psychology and, we hope, lead to very different, meaningful outcomes, whether it's how they perform in a job interview or how they participate in class."

Cuddy acknowledges that there are moderating factors in how easily some groups can use traditional power poses. It would run counter to social norms, for example, if a woman wearing a skirt sat with her feet up on her desk while talking to a colleague.

"I'm not saying it's fair, but there is a different range for women versus men," says Cuddy, who also teaches several HBS Executive Education programs.

Female managers seem to have an intuition about the need to communicate confidence by striking expansive poses through other means. They might use a whiteboard as a prop that they can reach out and rest a hand on—allowing them to take up more space.

"There are implications across cultures as well," she adds. Cuddy believes American poses are bigger and more flamboyant than what would be acceptable in Korea or Japan, for example, and expects to focus on this question in future research.

Warmth Versus Competence

It ultimately boils down to how we connect to one another. In general, she says, people form impressions of others through a matrix of how much we trust and like them and how much we think they're competent and respect them.

For the most part people underestimate the powerful connection of warmth and overestimate the importance of competence.

"We are influenced, and influence others, through very unconscious and implicit processes," she says. "People tend to spend too much energy focusing on the words they're saying—perfectly crafting the content of the message—when in many cases that matters much less than how it's being communicated. People often are more influenced by how they feel about you than by what you're saying. It's not about the content of the message, but how you're communicating it.

"Many students believe that if they have a great idea, they should be able to magnetize their audience toward them because their audience will recognize the 'greatness' of that idea—that they'll get on board because the idea is so good," she continues. "I try to show students that it doesn't work that way—you have to go meet people where they are and then all move together. You have to connect with them before you can lead them."

If understanding how you are influenced and can influence others feels a bit too Machiavellian, Cuddy helps bring it down a notch.

"It's not about politics," she says. "It's about understanding what moves people."

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How Do You Hire an 'Impostor'? 02-05

How Do You Hire an 'Impostor'?

Impostors are highly talented people who believe their success is a mistake—that they don't deserve the honors. James Heskett argues these people have too much to contribute to ignore. But how do you find and hire them? What do YOU think?

Have you ever felt that you didn’t deserve admission to a prestigious school, an award, or even a particular job that you’ve always prized? Students in my Harvard Business School MBA classes often expressed the notion that they were “admissions mistakes.” In my case, I had doubts about whether I should have been admitted to the Stanford MBA program. I filled out the application in pencil to please an Army buddy when we were stationed in Europe, and my grade record at a little college in Iowa didn’t warrant admission anyway. Then I got his seat in the Stanford class.

I’ve learned that this is called the “impostor phenomenon.” Researcher Pauline Rose Clance defines it as “an internal experience of intellectual phoniness.” HBS professor Amy Cuddy in her new book, Presence, sums up the research on one aspect of the impostor phenomenon by pointing out that those who experience it most are “People who have achieved something; people who are demonstrably anything but frauds.”

So maybe it would be worthwhile to have at least a few impostors in our organization, although we probably wouldn’t want just any impostors. The trait is a double-edged sword.

Research shows that some people who experience imposterism allow it to build to such an extent that the fear of failure takes over, making it harder for them to succeed as they battle feelings of low self-esteem, second-guess themselves, and experience performance anxiety. Some may actually suffer serious depression. Among my MBA “imposters,” a few left School after the first week of class.
Most, however, succeeded in completing their MBAs with honors. They used the phenomenon as an incentive to succeed, setting high standards for performance and worrying about being under-prepared. They were (and are) achievers, the kind we could benefit from hiring. But how do we identify the right kind of impostors to bring on board?

Believe me, they become very good at covering up their feelings. If impostors—even the achievers—were to expose their fears and other impostor-like feelings in an interview, we probably wouldn’t hire them. How do we distinguish between productive and nonproductive impostors? Will the person overcome by fears and uncertainty let it show differently than a candidate unconsciously using the feeling to succeed? Should we even allow anyone to interview them, instead relying solely on what such imposters have achieved in order to eliminate interview bias?

Should we be focusing on hiring impostors anyway? There are probably plenty of other candidates with more “normal” confidence levels, motivations, and abilities. An organization comprised solely of impostors could be a pretty exhausting, chaotic place. On the other hand, can we afford not to hire a few of them?

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Are We Entering an Era of Neuromanagement? 11-07

Will you be taking a brain-scan for your next job interview? Jim Heskettexplores the emerging world of neuromanagement and what it means for both organizations and employees. What do 

                  

 For years, behavioral scientists have been telling us that they have a great deal to contribute to decision theory and management. Their work most applicable to business, however, was often overshadowed by that of economists. But as the assumptions of rational behavior and "perfect information" that formed the basis of much of the work in economics concerning markets came into question, behavioral science not based on those assumptions gained ascendance.

At first, the contributions from behavioral science were based on laboratory tests, too many of them involving handy college students. They helped describe biases (at least among those being tested). For example, we learned that people tend to devalue long-term returns in relation to short-term gains. They tend not to buy and sell according to self-set rules.

A person willing to pay up to $200 for a ticket to a sporting event is not, once he owns it, willing to sell it at any price above $200—counter to what economists would predict. Behavioral science regards it as perfectly reasonable behavior, explained by what they call the "endowment effect." It is one of many behaviors that help explain why markets are not always "rational," why they may not be a reflection of perfect information, why people buy high and sell low.

“WE CAN BEGIN TO LEARN WHICH PARTS OF THE BRAIN GOVERN HOW WE FEEL, HOW WE RESPOND TO STIMULI, AND HOW WE REACT TO CHALLENGES”

Brain scanning technology adds a new dimension to this work. It has provided fodder for books on a variety of subjects, all of which rely to some degree on brain reaction to stimuli. By introducing various stimuli while scanning a person's brain, we can begin to learn which parts govern how we feel, how we respond to stimuli, and how we react to challenges.

A recent study of "midlife northeast American adults" raises questions about whether we are entering the next stage in what might be termed an era of neuromanagement. In it, a group of researchers claim to have found that brain structure and the density of cells in the right posterior parietal cortex are associated with willingness to take risks. They found that participants with higher gray matter volume in this region exhibited less risk aversion. The results "identify what might be considered the first stable biomarker for financial risk-attitude," according to the authors.

The study is a distant cousin to those that have located the side of the brain associated with creativity and the portion of the brain that is stimulated, for example, by gambling or music. Assuming: (1) there will be more research efforts combining the results of brain scans with behavioral exercises, and (2) findings are proven to be more valid than, say, those associated with phrenology, it raises some interesting questions about the future.

Is it possible that some organizations selecting and hiring talent may, in the future, require a brain scan, just as some require psychological testing today? Is hiring on the basis of brain structure much different than hiring, for example, on the basis of height or other characteristics required to perform certain jobs? Or does it raise too many ethical questions? For example, who will own the data? How will it be used? How would we apply the results?

Are we entering the next stage in an age of neuromanagement? What will it look like? What do you think?

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Who Is the Chief Sustainability Officer? 10-09

H

Who Is the Chief Sustainability Officer?

There are only a few dozen chief sustainability officers in American companies, although their number has been growing rapidly. A new study byGeorge Serafeim and Kathleen Miller explains who they are, where they come from, and how to make them more effective.

Since the start of the 2000s, a high-level corporate position has evolved that is still something of a mystery. As companies have engaged in more efforts around sustainability, environmental and otherwise, the "chief sustainability officer" has been created to champion and monitor these efforts.

But despite dozens of individuals in some of the world's largest companies taking on these duties, the role has been little studied. Just what are chief sustainability officers (CSO), where do they come from, and how much influence do they exert?

“THE APPOINTMENT OF THE CSO REFLECTS AN UNDERLYING NEED FOR COMPANIES TO NOT ONLY MONITOR BUT ALSO IMPROVE THEIR PERFORMANCE”

"Companies are monitoring the impact they're having environmentally and on society, and the appointment of the CSO reflects an underlying need for companies to not only monitor but also improve their performance," says Harvard Business School associate professor George Serafeim.

To create more understanding about the position, Serafeim wrote the paper 

"Chief Sustainability Officers: Who Are They and What Do They Do?" 

with Kathleen Miller, CEO of Miller Consultants. 

Their results suggest that CSOs are of critical importance in successful sustainability efforts, but ironically become less central as sustainability efforts blossom.

Although often linked with environmental issues such as water and energy use, a growing number of companies are taking sustainability efforts much further by improving working conditions in their supply chain, creating better safety procedures, and reaping profits from products that address environmental and social problems.

"Regulators and investors are asking for it, customers are demanding it, and employees are expecting it," Serafeim explains. "Once you reach a point where a customer says, 'What are your policies in terms of your supply chain operations?' you better have a good handle on that."

Enter the CSO.

The position of CSO has been created at an increasing number of companies over the past few years. In 2003, twice as many companies had fulltime sustainability officers than in 1995, and between 2003 and 2008, the number doubled again, research shows. (The first CSO with that title in an American publicly traded company is believed to be DuPont's Linda Fisher, appointed in 2004.)

THREE STAGES OF SUSTAINABILITY

To study a CSO's responsibilities and to look at how the role shifts depending on the company's level of commitment, Serafeim and Miller surveyed 66 CSOs and people with similar duties but different titles in 27 industries. They found that companies are often engaged in sustainability at one of three stages:

Compliance: In this initial phase, companies often start with activities related to complying with regulations. Activities are not strategic or centralized. In addition to compliance, employees may volunteer to work on recycling projects or green teams. Most companies at this stage have not created a formal CSO position.

Efficiency: Next, companies become more strategic about sustainability by finding ways to achieve efficiencies that will save corporate dollars, such as cutting energy and water use or reducing waste generation and carbon emissions. "These things are an easy sell," Serafeim says. "They're a good thing to do and the obvious thing to do."

At this stage, more companies are likely to hire or appoint an official corporate sustainability officer, who works with the CEO. The CSO is often tasked with building a business case for making changes that improve the company's bottom line, while also protecting or enhancing the company's reputation. "The CSO is really driving the execution of the sustainability strategy," Serafeim says. Many companies end up hovering in this phase without moving on to the final stage, innovation, the research shows.

Innovation: A select number of companies shift to a more advanced innovative stage by integrating sustainability into the core of the business in ways that transform the company. Strategies tend to be driven by the market with an eye on maximizing long-term profitability, and sustainability efforts often look to address bigger problems in society, including climate change, water management, and obesity.

Study findings imply that in this stage ultimate responsibility for sustainability shifts from CEO to CSO. The CSO's main responsibility is to help develop a sustainability strategy as well as map out how changes will be made, and the CSO must often unify subcultures within the firm.

But the CSO also delegates more sustainability responsibilities to various departments. So while at the Efficiency stage the CSO concentrates responsibilities, at the Innovation stage he does exactly the opposite: He delegates decision rights and makes functions and business units accountable.

"What companies are doing at this stage is refocusing their strategy from an inward perspective to an outward focus," Serafeim says. "How can we enable our customers, suppliers, and others to behave and operate in a more sustainable way? It allows you to envision new markets, new opportunities, and new needs. Very few companies have reached this stage."

BOOSTING COMMITMENT

Many companies don't make it to the innovation stage because they focus only on short-term goals like the cost savings they achieve from reduced energy use, rather than taking risks with more ambitious sustainability plans.

"Many organizations are afraid to raise the stakes and make bigger bets," Serafeim says. "It's not easy to make that transition. That's why you need the CSO to make a push to move on, become more ambitious."

Nike and Dow Chemical are examples of companies that have made it to the innovation stage. After Nike faced accusations about violations of human rights by subcontractors, it made drastic changes to operate more responsibly in its supply chain. At Dow, company officials used its science capabilities to develop components for solar panels and are now working on materials for cars that make them safer and more efficient.

"Dow is using its science background to address fundamental issues and problems we're having," Serafeim says. "That's a whole different level of sustainability strategy. And it's trying to understand how those environmental, social, and governance issues create value in the long term."

SUCCESSFUL SUSTAINABILITY

The CSOs in the study made a variety of suggestions for success:

• CSOs should plant themselves as close as possible to the corporate areas where sustainability can produce value for the company. Initially, CSOs need to work with company officials who oversee compliance and issues. As sustainability goals become more ambitious, the areas where sustainability will produce value will vary from company to company.


• CSOs should have their finger on the pulse of the company culture, understanding what motivates employees and devising a strategy for implementing change that aligns with the workforce. Sometimes the strategy needs to be customized to work for offices located in separate geographic locations. "If you come up with a strategy that the workforce is not going to buy, you will have a very tough time implementing that strategy," Serafeim says. "The strategy needs to be compatible with what employees are expecting, the skills they have, and their aspirations."


• Some say the CSO should be placed on the executive team because the mere presence of the CSO at the C-suite table keeps sustainability on the agenda.


• It's important to articulate a compelling business case for such efforts and to make the strategy understandable and relevant to internal stakeholders. CSOs are often challenged with pushing company leaders out of the "trade-off" mentality. "For years there was this institutional logic that says if you do the right thing, your competitiveness will be hurt and it will come at a cost to the firm," Serafeim says. "People don't understand that if you do things strategically, you can create significant value for the firm. The CSO is in the best position to change this perception, but he needs to have the data and the tight business case to communicate that."


• CSOs should focus on a manageable set of sustainability issues, rather than biting off more than they can chew at once. And they should keep in mind that sustainability goals will change over time. Edelman says his approach is "evolutionary, not revolutionary." IKEA CSO Steve Howard says, "You can't transform everything at once. The hardest thing about leading the change is managing the complexity …"

Serafeim agrees that companies need to constantly rethink and revise their sustainability strategies.

"Sustainability is not something that's static," Serafeim says. "It has to be dynamic because social expectations are continually changing."

It helps to have a dedicated employee—the CSO—steering the ship.

"The way to think about the CSO is it's the person who is the change agent," Serafeim says. "It's the person who sees how the future is developing, how social expectations are changing, how regulations and the business environment are changing in the future. The CSO is the ambassador with the vision, the person who decides what needs to change when it comes to how the company is interacting with the communities and the broader societal context in which it operates."

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