Storytelling that moves people. A conversation with screenwriting coach Robert McKee

When executives need to persuade an audience, most try to build a case with facts, statistics, and some quotes from authorities. In other words, they resort to "companyspeak," the tools of rhetoric they have been trained to use. In this conversation with HBR, Robert McKee, the world's best-known screenwriting lecturer, argues that executives can engage people in a much deeper--and ultimately more convincing--way if they toss out their Power-Point slides and memos and learn to tell good stories. As human beings, we make sense of our experiences through stories. But becoming a good storyteller is hard. It requires imagination and an understanding of what makes a story worth telling. All great stories deal with the conflict between subjective expectations and an uncooperative objective reality. They show a protagonist wrestling with antagonizing forces, not a rosy picture of results meeting expectations--which no one ends up believing. Consider the CEO of a biotech start-up that has discovered a chemical compound to prevent heart attacks. He could make a pitch to investors by offering up market projections, the business plan, and upbeat, hypothetical scenarios. Or he could captivate them by telling the story of his father, who died of a heart attack, and of the CEO's subsequent struggle against various antagonists--nature, the FDA, potential rivals--to bring to market the effective, low-cost test that might have prevented his father's death. Good storytellers are not necessarily good leaders, but they do share certain traits. Both are self-aware, and both are skeptics who realize that all people--and institutions--wear masks. Compelling stories can be found behind those masks.     

The ethical mind. A conversation with psychologist Howard Gardner

Business leadership has become synonymous in the public eye with unethical behavior. Widespread scandals, massive layoffs, and inflated executive pay packages have led many to believe that corporate wrongdoing is the status quo. That's why it's more important than ever that those at the top mend relationships with customers, employees, and other stakeholders. Professor Gardner has spent many years studying the relationship between psychology and ethics at Harvard's Graduate School of Education. In this interview with HBR senior editor Bronwyn Fryer, Gardner talks about what he calls the ethical mind, which helps individuals aspire to do good work that matters to their colleagues, companies, and society in general. In an era when workers are overwhelmed by too much information and feel pressured to win at all costs, Gardner believes, it's easy to lose one's way. What's more, employees look to leaders for cues as to what's appropriate and what's not. So if you're a leader, what's the best way to stand up to ethical pressures and set a good example? First and foremost, says Gardner, you must believe that retaining an ethical compass is essential to the health of your organization. Then you must state your ethical beliefs and stick to them. You should also test yourself rigorously to make sure you're adhering to your values, take time to reflect on your beliefs, find multiple mentors who aren't afraid to speak truth to your power, and confront others' egregious behavior as soon as it arises. In the end, Gardner believes, the world hangs in the balance between right and wrong, good and bad, success and disaster. "You need to decide which side you're on:" he concludes, "and do the right thing."     

Sleep deficit: the performance killer. A conversation with Harvard Medical School Professor Charles A. Czeisler

Companies today glorify the executive who logs 100-hour workweeks, the road warrior who lives out of a suitcase in multiple time zones, and the negotiator who takes a red-eye to make an 8 A.M. meeting. But to Dr. Charles A. Czeisler, the Baldino Professor of Sleep Medicine at Harvard Medical School, this kind of corporate behavior is the antithesis of high performance. In fact, he says, it endangers employees and puts their companies at risk. In this interview, Czeisler describes four neurobiological functions that affect sleep duration and quality as well as individual performance. When these functions fall out of alignment because of sleep deprivation, people operate at a far lower level of performance than they would if they were well rested. Czeisler goes on to observe that corporations have all kinds of policies designed to protect employees- rules against smoking, sexual harassment, and so on-but they push people to the brink of self-destruction by expecting them to work too hard, too long, and with too little sleep. The negative effects on cognitive performance, Czeisler says, can be similar to those that occur after drinking too much alcohol: "We now know that 24 hours without sleep or a week of sleeping four or five hours a night induces an impairment equivalent to a blood alcohol level of .1%. We would never say, 'This person is a great worker! He's drunk all the time!' yet we continue to celebrate people who sacrifice sleep for work." Czeisler recommends that companies institute corporate sleep policies that discourage scheduled work beyond 16 consecutive hours as well as working or driving immediately after late-night or overnight flights. A sidebar to this article summarizes the latest developments in sleep research.     

Technology and human vulnerability. A conversation with MIT's Sherry Turkle

For most of the last 50 years, technology knew its place. Yes, we all spent a lot of time with it, but even five years ago, few people would seriously claim that technology had taken over their lives. It's very different today. Technology is not only ubiquitous but has become highly intrusive as well. On the Internet, people invent imaginary identities in virtual chat rooms, playing out the lives they wish they really lived. Children are growing up with interactive toy animals that respond to them like real pets. Indeed, some critics claim that technology has not just entered our private lives but started to define them. If we want to be sure we'll like who we've become in 50 years, we need to take a closer look at the psychological effects of current and future technologies. The smartest people in technology have already started. Universities like MIT and Caltech have been pouring millions of dollars into researching what happens when technology and humanity meet. To learn more about this research, HBR senior editor Diane L. Coutu spoke with one of the field's most distinguished scholars: Sherry Turkle, MIT's Abby Rockefeller Mauzé Professor in the Program in Science, Technology, and Society and the author of Life on the Screen, which explores how the internet is changing the way we define ourselves. In a conversation with Coutu, Turkle discusses the psychological dynamics that can develop between people and their high-tech toys, describes ways in which machines might substitute for managers, and explains how technology is redefining what it means to be human. She warns that relatively small differences in technology design can have disproportionate effects on how humans relate to technology, to one another, and to themselves.     

Leveraging the psychology of the salesperson. A conversation with psychologist and anthropologist G. Clotaire Rapaille

We have to admire salespeople's resilience in the face of endless rejection, their certainty that things will work out in the end. At the same time, we're repelled by what their job can do to them. (Think Death of a Salesman and Glengarry Glen Ross, dramatic portraits of hollowness and moral capitulation.) Just what type of person goes into sales, and how do salespeople cope with their jobs? For insight into these questions, HBR approached G. Clotaire Rapaille, a psychologist, anthropologist, and marketing guru who researches the impact of culture on business and markets. In particular, he studies archetypes--the underlying patterns in psychology that illuminate the human condition--and shows organizations how to use those patterns to sharpen their sales and marketing efforts. He points out, for instance, that a keen understanding of the Great Mother archetype has helped Procter & Gamble achieve great success with Pantene hair products. By promoting nutrition--and reminding consumers that hair must be nurtured--the Pantene brand appeals to the maternal instinct. Rapaille says that salespeople have their own archetype: They are Happy Losers who relish rejection and actually seek out jobs that provide opportunities to be turned down. That, of course, has implications for how they should be managed. Rapaille's research shows that the leading motivator in sales is not money; it's the thrill of the chase. "Hold huge company meetings where you give a salesperson the gold medal of rejection," he advises. "Jonathan sold 500,000 computers last month, but he was rejected 5 million times! It may sound ludicrous, but this is the way to get fire in the belly of your sales force--particularly in America, where beating the odds is highly prized".     

A reading list for Bill Gates--and you. A conversation with literary critic Harold Bloom. Interview by Diane L. Coutu

In today's technology-driven world, who has time to pick up a 400-page novel? Most executives don't--they have urgent e-mails to answer, training seminars to attend, meetings to lead, and trade publications to scan. But according to Harold Bloom, one of America's most influential scholars, they should make time in their hectic schedules to read great works. In a wide-ranging conversation with HBR senior editor Diane Coutu, Bloom discusses the importance of literature: every individual--regardless of profession--needs to stretch his or her mind and reflect now and again on the human condition. "By reading great imaginative literature, you can prepare yourself for surprise and even get a kind of strength that welcomes and exploits the unexpected," he says. Because there are so many great works and there is so little time, Bloom presents a reading list for busy executives. Shakespeare's King Lear can teach businesspeople about change. Ralph Waldo Emerson's essays capture the ethos of the American spirit--individualism and inventiveness. Bloom says Sigmund Freud's conceptions "form the only Western mythology that contemporary intellectuals have in common." And people will never fully understand some aspects of themselves until they read Miguel de Cervantes's Don Quixote. In short, Bloom believes the humanities have much to offer businesspeople: great books broaden their awareness and their range of sensibility, he says. But reading literature will not make businesspeople more moral, he cautions. Bloom also discusses other topics such as how to read well, the state of popular fiction, the role of irony, and the subject of change.     

Sense and reliability. A conversation with celebrated psychologist Karl E. Weick. Interview by Diane L. Coutu

Most of us see the organizations we operate in--our schools or companies, for instance--as monolithic and predictable, subjecting us to deadening routines and demanding dehumanizing conformity. But companies are more unpredictable and more alive than we imagine, according to Karl Weick, a psychology professor at the University of Michigan and an expert on organizational behavior. Weick says executives can learn a lot about managing the unexpected from organizations that can't afford surprises in the workplace--nuclear plants, firefighting units, or emergency rooms, for instance. In this conversation with HBR senior editor Diane Coutu, Weick examines the characteristics of these high-reliability organizations (HROs) and suggests ways that other organizations can implement their practices and philosophies. The key difference between high-reliability organizations and other companies is the mindfulness with which people in most HROs react to even very weak signs that some kind of change or danger is approaching. For instance, nuclear-plant workers Weick has studied immediately readjust dials and system commands when an automated system doesn't respond as expected. Weick contrasts this with Ford's inability to pick up on weak signs in the 1970s that there were lethal problems with the design of the Pinto gas tank. HROs are fixated on failure. They eschew plans and blueprints, looking instead for the details that might be missing. And they refuse to simplify reality, Weick says. Indeed, by cultivating broad work experiences and enlarging their repertoires, generalist executives can avoid getting paralyzed by "cosmology episodes"--events that make people feel as though the universe is no longer a rational, orderly system.     

Putting leaders on the couch. A conversation with Manfred F. R. Kets de Vries. Interview by Diane L. Coutu

Much of the business literature on leadership starts with the assumption that leaders are rational beings. But irrationality is integral to human nature, and inner conflict often contributes to the drive to succeed. Although a number of business scholars have explored the psychology of executives, Manfred F.R Kets de Vries has made the analysis of CEOs his life's work. In this article, Kets de Vries, a psychoanalyst, author, and instead professor, draws on three decades of study to describe the psychological profile of successful CEOs. He explores senior executives' vulnerabilities, which are often intensified by followers' attempts to manipulate their leaders. Leaders, he says, have an uncanny ability to awaken transferential processes--in which people transfer the dynamics of past relationships onto present interactions--among their employees and even in themselves. These processes can present themselves in a number of ways, sometimes negatively. What's more, many top executives, being middle-aged, suffer from depression. Mid-life prompts a reappraisal of career identity, and by the time a leader is a CEO, an existential crisis is often imminent. This can happen with anyone, but the probability is higher with CEOs, and senior executives because so many have devoted themselves exclusively to work. Not all CEOs are psychologically unhealthy, of course. Healthy leaders are talented in self-observation and self-analysis, Kets de Vries says. The best are highly motivated to spend time on self-reflection. Their lives are in balance, they can play, they are creative and inventive, and they have the capacity to be nonconformist. "Those who accept the madness in themselves may be the healthiest leaders of all," he concludes.     

Session III: Securities Law in Twenty‐First Century America: A Conversation with SEC Commissioner Robert Jackson

SEC Commissioner Robert Jackson comments on three major issues the Commission has been investigating: (1) the concentration of ownership among American stock exchanges; (2) the extent of common ownership of, and potential for undue influence over, U.S. corporations by large institutional shareholders; and (3) the role of corporate boards in promoting and protecting stakeholder interests as well as shareholder interests. In the first of the three areas, Jackson argues that the ownership of 12 of the 13 U.S. stock exchanges by just three financial conglomerates suggests a competitiveness problem— one that, despite the significant reductions in trading costs during the last 15 years, should receive further investigation. To the concerns raised by the common and increasingly concentrated ownership of U.S. public companies by institutional shareholders, the Commissioner's main response is to note that whatever culpability corporate America is forced to assume for our large and growing environmental and social problems must be shared with the largest U.S. institutional shareholders, whose collective resources and influence confer a responsibility to help guide companies when responding to such problems. Finally, on the issue of stakeholder theory and ESG, Jackson insists that asking corporate boards to put the interests of all stakeholders on a par with their shareholders’ when making strategic business decisions would be a mistake. Besides creating a major accountability problem, the adoption of stakeholder theory in place of “the clear, single‐minded objective function of increasing long‐run shareholder value” would deprive boards of their principal guide “when making the difficult tradeoffs among stakeholders that effective oversight and management of public companies require.”     

The Valuation of American Options with Stochastic Interest Rates: A Generalization of the Geske—Johnson Technique

The Geske–Johnson approach provides an efficient and intuitively appealing technique for the valuation and hedging of American-style contingent claims. Here, we generalize their approach to a stochastic interest rate economy. The method is implemented using options exercisable on one of a finite number of dates. We illustrate how the value of an American-style option increases with interest rate volatility. The magnitude of this effect depends on the extent to which the option is in the money, the volatilities of the underlying asset and the interest rates, as well as the correlation between them.     

The CEO as organizational architect: an interview with Xerox's Paul Allaire. Interview by Robert Howard

As chairman and CEO of the Xerox Corporation, Paul Allaire leads a company that is a microcosm of the changes transforming American business. With the introduction of the first plain-paper copier in 1959, Xerox invented a new industry and launched itself on a decade of spectacular growth. But easy growth led Xerox to neglect the fundamentals of its core business, leaving the company vulnerable to low-cost Japanese competition. Starting in the mid-1980s, Xerox embarked on a long-term effort to regain its dominant position in world copier markets and to create a new platform for future growth. Thanks to the company's Leadership through Quality program, Xerox became the first major U.S. company to win back market share from the Japanese. Allaire describes his efforts to take Xerox's corporate transformation to a new level. Since becoming CEO in 1990, he has repositioned Xerox as "the document company" at the intersection of the worlds of paper-based and electronic information. And he has guided the company through a fundamental redesign of what he calls the "organizational architecture" of Xerox's document processing business. Few CEOs have approached the process of organizational redesign as systematically and methodically as Allaire has. He has created a new corporate structure that balances independent business divisions with integrated R&D and customer operations organizations. He has redefined managerial roles and responsibilities, changed the way managers are selected and compensated, and renewed the company's senior management ranks. And he has articulated the new values and behaviors Xerox managers will need to thrive in a more competitive and fast-changing business environment.     

Structure of regulation: Lessons from the crisis. A view from the Institute of International Finance (IIF)

The IIF's Committee on Market Best Practices has been working on five subjects: (1) Risk management, realignment of incentives is necessary; (2) Ratings, an SRO for CRAs is proposed; (3) Valuations, more dialogue on processes; (4) Disclosure, some new initiatives; (5) Liquidity risk, a review is in hand. Regulation's enforcement intensity is not a good measure of effectiveness; instead a more supervisory, risk-based approach is desirable. There is a need for a framework of mutual recognition in the context of cross-border regulation, with greater use of colleges of supervisors. Within Europe a start would involve putting the Level 3 Committees onto a stronger legal basis.