Job Survival Advice: Don't Fear the Whitewater

Change is the new status-quo, and success at work will require agility, talent and the ability to learn from -- rather than fear -- failure, according to Gregory Shea, adjunct professor of management at Wharton, and business writer Robert Gunther. The two recently co-authored a book titled, Your Job Survival Guide, a Manual for Thriving in Change. In an interview with Knowledge@Wharton, the authors compared the economy and job market to a whitewater river in which every kayaker is certain to spend a significant part of the journey under water.

Knowledge@Wharton: Robert, tell us a bit about Greg's whitewater comment that led to your collaboration on the book.

Robert Gunther: Well, I was sitting in a classroom, actually at the Wharton School, and listening to Greg speak. And he was talking about change in environments. This was a presentation to the large telecommunications firm, obviously going through lots of changes. And he used this phrase -- he dropped this phrase. He said, "We're in an environment that's permanent whitewater. It's not a steady -- it's not a change, steady-state change kind of environment, where you catch your breath between. It's a permanent whitewater." And when he said this word, "whitewater", it really caught my attention. Because I had grown up, since I was a teenager, paddling whitewater rivers. Paddling kayaks. And I knew that kayakers look at whitewater in a totally different way than other people do. You might say ordinary people, or "sane" people. And so if you were to look at, say, Lava Falls on the Colorado River, going down the Grand Canyon, you would think there's no way you can get through this thing without being killed. It is just huge water, and it's all over the place, and it's massive confusion. But if you have a certain set of skills, you understand how to meet that environment in a way where it's not only -- you not only can survive in going through it, you not only can live through it, which is what people think of when they see turbulent environments -- but that you can actually thrive in that environment. It's fun! There's play places. The bigger the water, the more the play.

And so this is a whole shift in perspective. And there are a number of shifts in perspective that kayakers have, such as failing is not something that you avoid. It's something that you prepare for, and you recover from quickly. You prepare to recover from it. And so there's a whole shift in mindset from what we typically have. Most of us go into our careers thinking that we're signing up on the crew of an ocean liner. We're a sailor, and we know our place. And as long as everyone does their job, you end up being -- everyone will be fine and safe and secure. And then they find themselves thrown into the water, and it's a totally different environment. And if you aren't in whitewater now, you probably will be. And if you don't recognize that you're in whitewater, you're gonna do all the wrong things. And that's what we describe in our book. Is, how do you survive and thrive in this environment?

And so the metaphor is really the key to the book. But it draws upon Greg's experience in working with individuals, CEOs, and organizations, and really addressing, "How do you work and live and thrive in fast-changing environments?"

Knowledge@Wharton: I see. Well, then, Greg, why don't you tell me what you would do if you consider yourself a kayaker, and you've learned those skills, but you find yourself on an ocean liner commanded by a real old time sailor?

Gregory Shea: Let me just say one other piece, back to the metaphor, and then I'll talk directly about the question youasked. One of the implications of the metaphor that Rob talked about -- which is actually one that Peter Vail came up with many years ago -- but what we've tried to do is both push the metaphor, but also introduce another metaphor, which is this kayaking metaphor. This takes us into your question about, "What would you do?"

My flippant, or first response would be, "Get outta there." Because there are so few parts of the economy -- and we've learned yet again in the last few weeks, that you can have Bear Stearns, you can have Merrill Lynch, you can have Lehman Brothers as a name on the door, and you can put those on with all the other large names that we've watched go through extremely turbulent times over the last 30 years. So unless you're in some remarkably exceptional part of the economy, if you're on what feels like an ocean liner, my first piece of advice would be, "Get outta there." Because in all likelihood, they don't understand the world that they're in. And if they don't understand it, you're going to pay the price for that. So it's better for you to understand it, and go someplace where other people do understand it.

Knowledge@Wharton: You tell the tale of a CIO who approached a huge six-week project by telling his team to spend the first week suspending or canceling all their other internal projects and commitments, and then take few days at the end of that week to go home, turn off their pagers and cell phones, and relax and recharge. How was that CIO able to do that within the organization? And how would you recommend -- or would you recommend such a strategy to most managers?

Shea: So, you asked, how was he able to do this? And the way he was able to do this is very much linked to your last question. Which was, he's working for a CEO who does understand this environment and gave him room to have a basic way that he operated. It worked because he was very good. He had a boss who understood the need to do this, and that you could burn up these employees -- and they had lots of job options. And he had a way to do it -- namely, this contracting. And he consciously spent time doing external bench marking, so people could tell that he was in the top-ten percent of people in that kind of a function in that kind of an organization. So he could prove he was doing very well. People inside knew he was on-time and often early, and at or under budget. So his internal and external measures. So that manages most of the whitewater.

And then when this particular event occurs, he can actually act quite paradoxically. So when he tells his staff that, "I want you to go cancel, postpone, delay -- if you need anything from me to clear the decks, I'll do that," it's so unusual, it's so different from the way that he normally operates. He doesn't have to tell them it's important. He doesn't have to tell them that he cares about them. They got all that just from the way that he's talking. And he has a back-up plan, which is, just as Rob will describe, giving them the advance time. Taking the time off up front, because I don't know if you can do it later. So it's multiple layers of him attempting to do the pacing. Both what was fairly creative in the beginning, and signing on with someone who he knew would understand what he was trying to do. And then when that breaks down, he's got another way in -- to use Rob's language, to move into the eddies about that.

Gunther: And yet, he was able to say, "I'm in whitewater. My job might be CIO, but my real job is change. And unless I get the change right, my entire team is going to be burnt out. I'm going to be dealing with rapid turnover of staff. I'm not going to get anything done, unless I concentrate on that first challenge." And one of the biggest challenges in a permanent whitewater environment is pacing. The water just races forward. And you see this, and -- you know, with the technology that we have, the Blackberry's and the e-mail and the cell phones -- everything is constant. And it's non-stop, and it's running at you. And in the old days, on the ocean liner, sometimes you'd hit a storm and you'd have all hands on deck, and everybody would be racing around to deal with an immediate crisis or change. And then you'd get some R&R. You'd get some time in your bunk. But now, you can't promise people that any more. Because the environment doesn't give you a natural pace. You have to learn to pace yourself.

And so what he did, which was really surprising, was he had the CEO give him this top priority project. He had six weeks to do it. He knew the team that he needed to do it, and he told them, basically, "Take the first week off. Take the first week clearing the decks, clearing your minds, and then take a long weekend to just take a vacation." And he didn't even tell them what the project was. He said, "come back Monday morning and be prepared to work." But he didn't tell them, because he knew they were so dedicated they'd work on it during their vacation time. And so he gave them the break before they plunged into the water. And that's a totally different way than we think of dealing with projects in our world. And it's very similar to what happens on a whitewater river. On a whitewater river, there are things called eddies. They're the spot behind the rock, where the water is racing down the stream, and all the rest of the current is going upstream. Now, kayakers know that you don't just race down a rapid. You pull into the first eddy. You can stop there. The water's racing around. You're stopped. You look downstream; you see where the next eddy is. And then you make your way down to that eddy. And it's a very orderly process through a disorderly environment. So you're in the chaos, but you're not of the chaos.

Knowledge@Wharton: So you're saying that to a limited extent, at least, you can impose some order on the chaos.

Gunther: Yes. And you actually have to. Because the alternative is, if you throw yourself into whitewater and get pushed pell-mell down the stream, all you're going to end up -- you're going to be burned out. You're not going to be good to anybody.

Knowledge@Wharton: Now, that also involves taking a risk for lots of people involved -- certainly for the CEO and the CIO. That gets to my question about your concept of failing quickly and recovering gracefully. Tell me about that and the kind of patience it takes from everybody involved.

Gunther: Well, it's not really an option not to fail in this environment. Things happen too quickly, the world is changing too quickly. But I'll tell you about how kayakers see this. And one of the interesting things I found out that I actually didn't know was that when a paddler uses the term "capsize" it only refers to flipping over and getting out of the boat. Most people see a capsize as a disaster. You've flipped over. That's the end. And on the ocean liner, if you're on the Titanic and you run into an iceberg, that's the end. But we have this little story about an Eskimo on the Titanic. He obviously wouldn't go to sea without his kayak. And for him, this is not an outrageous environment that he can't beat. Because he pops into his kayak, and launches over the side. And he's in his element, because he has the tools and the equipment to deal with this environment that other people can't. But one of the things that you learn as a kayaker is the Eskimo roll. It's very hard to learn, mostly because it's psychological, because your first impulse, when you're deprived of oxygen, is to get air. You may have noticed this in your life. And so when you flip over in your boat and you have a spray skirt on, your first impulse is to get out of the boat and get air as quickly as possible. That impulse is wrong. If you're out of your boat, you can get swept under an undercut rock. You can get into really nasty things. If you're in your boat, you can roll. You can learn a simple series of moves that allow you to right the boat again. And so, during the winter, kayakers practice rolling. They practice failing and recovering from failure. And it does two things. It protects you from dangerous situations. And it allows you to play. Because if you know you can recover from a failure, you can play. You can go into waves, and surf waves, and pop up out of holes. And they will flip you over, and you can recover.

Okay. So, how does this relate to what you do in work and life? Well, when you have a mindset that you're going to experiment with things, you try a lot of different experiments. You try a lot of things that may not be related to exactly what your main work is. But you do them in ways that you can fail, and then recover. And they may be related to what your main work is. They may be experiments that allow you to fail and learn. And then those are the things that may open doors for the next stage of your career in a company, or a career outside the company.

Shea: One way of thinking about the challenge that somebody faces in this environment is that the question is not really, "How do you deal with that form of risk?" The question is, "Which form of risk do you want?" Do you want the form of risk in which you're on an outdated structure? Or do you want the risk that you're going to have to learn how to kayak in permanent whitewater? So it's not a risk-free choice. It's a question of, which one do you want?

Knowledge@Wharton: Still, an organization can still have a low-tolerance for failure. Is that the kind of organization that you want to get away from?

Shea: Well, we'll give you the classic academic and consulting response, which is "it depends." So, you don't want to go to work for a power company and be stationed inside the nuclear division and say, "well, that's close enough." That would not be the kind of tolerance for risk that you'd want to have in the technical part of that operation. It'd be foolish. But the orientation in general -- if you were in a place that had no tolerance for risk, then what it's doing is building a brittle organization. And it makes it more likely that it's going to snap at some point. So obviously you don't want somebody who's risk-foolhardy. You don't want to take risk in those areas that are absolutely essential either to your well-being, or the well-being of the large organization, if we think about the nuclear power plant as an image, right? But at the same time, as Rob was saying, there are clearly places that they should be tolerant of risk. You don't want to get narrowly defined and confined to a particular expertise that gets narrower and narrower and narrower, unless you believe that in fact that's going to have increasing market power for you as an individual actor.

So you want to spend as much time as you can making sure that you have broader, not narrower skills in general, and you want to make sure that you're paying attention to the market -- namely, that what I'm learning is going to have value in the market. And I want to continue to press for those types of assignments that will allow me to try to expand either the depth or breadth of what I know, so that I can carry it out of here if and when either I choose or you choose that I have to do. And that, as we talk about in one chapter about personal flotation devices -- that is up to you, to do the work to construct that. Because the organization and the marketplace, unfortunately, are not going to do that.

Knowledge@Wharton: You also talk about this notion of getting out of the water when you hear the roar of the falls. Which, I guess, is sort of like recognizing that this company that you're with is going to cause damage to itself or to you, personally, and you have to be able to recognize that. But how do you recognize the roar of the falls?

Shea: Well, I think there are at least two forms of roars of the falls that we talk about in the book. One would be that this puts more pressure on the individual to spend time looking up from their desk, metaphorically-speaking, so that they're taking in the larger environment, and trying to make that call from a business perspective. We also talk in the book, though, about paying attention to your own inner voice, about the falls, and what you need. And so we have a story in the book, for example, of an individual who is tired of the way that their boss is handling them. She's at a very senior level, and she decides to make the potentially career-limiting move of going around her boss to talk to her boss's boss about the fact that she started doing her boss's job. Right? And the response that she gets is, "We're so glad that you're doing so much work. Because actually, we don't think this guy's very good," namely your boss, "and we're really glad that you're doing the work for him."

Well, the person talking to her intended that as a compliment. For her, that's the roar of the falls. This is not a place that I want to stay, right? So part one of the story with her is, that's an internal indication that this organization is not being run in the fashion that I would think it should be run, or that will be good for the organization over the long term. A little later in that story, she's very successful -- although she makes a variety of choices, which include her going, for family reasons -- because she needs time to start her family. Once all that's happened, she decides she can't stay where she is, because it's the wrong place for her to be. Not from a job standpoint, necessarily, but rather because of family and personal reasons, that she needs to find a place that she's actually going to raise the family that she's now given birth to. And that's an internal roar of the falls. And she gets out of the river, takes a look around, and ends up actually in a better position. But she had to take that risk that was internally-driven, as opposed to driven from some sort of external -- in this case, reconnaissance about the nature of the organization.

Gunther: And if you think about the ocean liner, how you know when you're headed for trouble. Well, you know, there's the captain up there who's looking. You've got people on watch. And they'll tell you when you're headed into an ocean liner. Well, this is not true in whitewater. In whitewater, you have to -- you can be going down the same rapid as somebody else, and you're a few feet over, and you're in a completely different situation. And so you have to look at your own company, what's going on, and you have to look at the bigger environment. You know, what did the housing -- you know, as the housing market collapses, what does this mean? How is this going to play out in my little part of the world? And what are the opportunities that it creates? And so, instead of waiting for somebody else, instead of waiting for the sirens to go off on the ship, and the horns to go off and wake you up, you've got to be attentive to what's going on in your environment, so you can see when you're headed for trouble.

Knowledge@Wharton: And another roar metaphor that you speak to in the book is communicating above the roar, a skill that one has to have to share ideas, and direction, and to explain what you're doing to the other kayakers. What are some of the skills involved in that?

Shea: One of the key points, I believe, in this environment -- in the permanent whitewater environment -- is that part of what gets shredded is context. We know from a wide range of studies that anywhere from 70 to 80 percent of the meaning of language lies inside of context. So I can say the same words in one setting, and it means something entirely different than if I say them in another setting, perhaps with a different intonation, perhaps with a different affect, or whether I laugh or don't laugh. So, language itself depends a lot, for its meaning, on context. In permanent whitewater, the context is changing all the time, which means it strips language of meaning. So the argument is not to give up language, but to understand that in this context, one needs to look alternatively. So, where are you left, if we stay with the image of permanent whitewater? I have to be able to signal. I have to be able to demonstrate symbolically.

We tell a story in -- this is a made-up example, but captures different experiences of things that I've seen. Imagine that you've got a rapidly-churning workplace. And you have a new boss. And the first thing that boss does is call you into their office, and he tells you how important you are, and how he lives to serve. And your success is his success, and hopefully you'll have a good working partnership. Well, you've probably heard all those words before in some fashion, some way, if you've been in the work force very long. And it's unlikely that made much of a dent or communicated much to you. Imagine that you had a different new boss. And she doesn't say anything to you on day one. However, you can't help but notice that in her first day on the job, she has had removed a large finished oak door that separates her work suite from the rest of the work area. And they've got people in there with chainsaws taking out the entire wall that separates her conference room and her desk area from the rest. No matter how busy you are, no matter how much whitewater you're in, you don't need a lot of explanation of what it is that she's trying to signal. You're gonna pay attention, and you've got it. There's something here about access, there's something here about collaboration. And I've got far more communication that's occurred in that second case, than if James Joyce on a good day had had the first conversation. I'm betting on the symbolic communication, no matter the roar in the office, of that second person.

Knowledge@Wharton: Is it possible that an organization can have too many kayakers? It would seem to me that that might be like trying to herd cats.

Shea: Yes. [LAUGHTER] Part of the challenge is to understand the game that's being played at any given time. We draw heavily on the work of a friend and colleague of mine, Bob Kydel, who talks about the different types of games. He uses both music and sports as images. So if we imagine a game that's like a recital, where what makes it a recital is basically a lot of independent activities -- it's a lot like baseball or track meet or swim meet. There's the type of game that looks a lot more like football, where you have a lot of time-out, time-ins. It's largely about the very scripted plays. It's like orchestral music. You don't walk into an orchestra and say, "I, a second clarinetist, think I'm going to alter Mozart's score here, because I think there are too many notes for the clarinet here." And then there's a third type, which is far more collaborative, like good jazz, where people don't actually know what's going to happen prior to walking in, and start playing off of one another's riffs. It's much more like lacrosse, or basketball.

Depending upon the game that's being played at any given moment, one needs to have the type of teaming that's most appropriate. So even on a kayak trip, if we stay with that metaphor for a moment, most of it is spent playing much more like a recital, or a game of baseball, where as Rob has described, a lot of individual activity. When you're on shore, however, it looks like football. Because what we're doing when we're on shore is, there are certain things that have to happen. We need a fire. We need meals prepared. We need people to handle latrine duty. All that work has to happen. And ideally, the best way to do it is, you go in a very machine-kind of mode to do it. The third thing, when an emergency occurs on the river, you better get interdependent very fast. So although we were playing baseball for much of this, a very independent activity, right now there's something -- maybe a whistle blow that signals we have a problem. You scan for a problem, and you immediately see, "How do I team, in a very interdependent way, to get through this moment?" So there are multiple games. We believe the dominant game is this permanent whitewater or kayaking game. But even inside that, one of the traits of being in this environment is the need to be flexible about the type of teaming that one engages in at any time. And connected to that, you want to make sure you're with people who can engage in different kinds of teaming.

Knowledge@Wharton: Now, in our executive education program here, you're probably dealing with lots of different kinds of corporate executives, Greg. And I wonder how many of those folks do you think either get this, or can do it?

Shea: Well, I just came out of spending a week with a set of executives who were here at the Aresty Institute. And the topic for the week was leadership and change. And what happens much of the time, and certainly fortunately happened, was the dominant experience this week -- at least as they reported it -- was, in terms of the image of permanent whitewater, it helps them create a framework for organizing their own experiences. And then as soon as they've done that, they can start drawing implications for their own leadership. How they want to go back home. So my experience over many years of doing this is, that's the standard response. Is that both they understand it, it speaks to them, it helps them cognitively, but it also helps them normalize it emotionally and then get on with the work of being a leader in that context.

Knowledge@Wharton: So, how do you apply these principles, say, if you're a trader at one of the financial firms on Wall Street that's finding so much difficulty in the current crisis?

Gunther: Well, I think that it's more obvious now that we're in permanent whitewater. So if you didn't realize it -- more people actually realize it. And in a way, that can be a good thing. Because you're not looking to say, "Well, I'm at this investment bank, and this will be my entire career. And it'll be a stable situation." But what's important to realize is, even though it's more apparent now that we're in whitewater -- whitewater is a feature of the environment that goes through good times and bad. And Greg has some statistics on the job hirings and firings. And during the -- from 1998 to 2000, 30 to 50 percent of companies were laying off people. They were hiring people, a lot of them were hiring people at the same time, but they were laying off. So there was this churn and turbulence that's in the environment. And this was during sort of a white-hot period in the economy, before the dot-com bust. And this is still a period where there are a lot of companies doing lay-offs. And it's a very turbulent environment.

So the specific question about, "What do you say to somebody who's in this environment?" I think the principles that we have in the book, the guidelines for how you exist and live in permanent whitewater, are probably what I would say, would be what you want to follow in this environment. But there aren't any -- it's a dangerous environment. This is not a simple, straightforward place. People get hurt in whitewater. People get killed in whitewater. And so nobody's saying, "Oh, if you learn how to paddle a kayak, you're going to be fine." You're not. You're going to be better than you would be if you didn't learn how to paddle a kayak. And you're going to be able to figure out your way to actually meet this environment. Meet this environment, and recognize it for what it is. It's not a stable environment. It's not a steady state. It's not steady state, little bit of change, steady state. It's permanent whitewater.

Knowledge@Wharton: Everybody's going to get wet.

Gunther: Everybody's going to get wet. [LAUGHTER] You're going to be without oxygen. But hey, that's part of the fun of the environment. If you think that your career is uninteresting, or it's going to stay in sort of a narrow path -- it's going to be a lot more work, but a lot more fun. There are a lot more opportunities to play, the bigger the water is. And this is really big water that we're headed into. And what you need to look for is, you need to recognize the environment and then look for the opportunities that it creates.

Shea: Certainly in this, one of the lessons would be that you can't predict the specific manifestation of what we're talking about as permanent whitewater. What you can predict is, we're in permanent whitewater. So this time it's Wall Street. It's gonna be some other time somewhere else. Depending if we're in the '70s, we're talking about consumer electronics entering this world. If we're in the '80s, we're talking about health care, financial services, and the first wave of deregulations. Those are the manifestations in that particular moment of what is an overall gestalt. This is the background. This is what we're all playing in front of, is this kind of dynamic. And it's going to continue to drive, due to changes in the -- as we mention in the book, in globalization and in the financial markets, as well as the escalation of technology. So to your specific question about, "What should that person do now?" That specific advice would be more, "Open your eyes and take a look at the world that you're in." Right now, you're in a choice of whether you're going to confine yourself to what you thought was the world view before, or are you going to move to a world view that says, as Rob has been explicating, that this is a rapidly changing world.

And among other things, besides the skill base that we've talked about a bit, there's also -- it puts particular weight on networking. Not in the sense of some kind of schmooze. It means, who knows that you're good, and who do you know that's good? So when you want to construct the next trip, move to the next river that you're going to try to go down, to stay with that image, where in your network can you go to do that? And these are people who view you as competent, who you view them as competent. These are people you want to re-enter the river with.

I was just going to finish -- we had one story that we talked about, about a female executive who ends up leaving a stable environment. She thinks, for personal reasons, that she doesn't like the direction of the firm. Goes to an entrepreneurial firm, and then eventually comes back in, being requested to rejoin the organization that she left originally, and eventually takes her boss's job. Because that's part of the reason they want her back in. And at the end of that we asked her, "So, how would you sum up your experiences?" And it's not unlike, perhaps, some of the experiences that you're referencing of people who are now in flux in Wall Street. And here's what she said, as a successful senior person who went through these and other changes in a permanent whitewater world. She says, "Work hard, do the right thing, keep your eyes open, and don't be afraid."

Half-a-Million Job Cuts: Is There a Strategy Behind the Layoffs?

One month into 2009, job cuts by corporations have become a major news story around the world. In one week alone, almost 100,000 jobs were eliminated. These included 20,000 layoffs at NEC, 19,500 at Pfizer, 15,000 at Metro, 10,000 at Boeing and 8,000 at Sprint Nextel. Thousands more from Starbucks, Ericsson, Kodak, Philips, Microsoft, Caterpillar, Home Depot and others added to the total. According to an estimate by outplacement firm Challenger, Gray & Christmas, layoffs in January totaled 241,749, up 45% from December and the highest monthly number in seven years. In response to this situation, U.S. President Barack Obama pushed even harder for passage of an $819 billion economic stimulus plan. "The most important number for this recovery plan is how many jobs it produces," said Rahm Emanuel, Obama's chief of staff, "not how many votes it gets."

Unfortunately, more cuts are probably on the way, according to economists watching the situation. "From what we are seeing, the fourth quarter was breathtakingly weak for companies,' says Christopher Portman, a senior economist at Oxford Economics, which builds macroeconomic models for banks and governments around the world. "In terms of the global economy, 2009 will be the worst year since World War II and even since the 1930s. I don't know that the job losses we have seen so far show the full picture. Unemployment does lag [behind other indicators of economic performance], and even after we hit the bottom of this downturn, the job loss numbers will continue to rise.'

Beyond the individual trauma of lost jobs and wages amid a global economic crisis, the cuts are notable for their depth and breadth. Since September 2008, major companies world-wide have cut some half a million jobs -- and these numbers exclude the financial services firms that have been at the heart of the crisis. Almost every sector has been affected -- autos, airlines, consumer products, retail, chemicals, technology and pharmaceuticals, among others. For some companies, the layoffs are more of a cyclical experience, but others are going through layoffs for the first time. For many firms that have announced or will announce cuts, it is a dramatic turn of events given that they were doing relatively well just a short time ago. It is this all-encompassing aspect that has fueled talk among analysts and strategic planners of a fundamental change in business -- a restructuring of the global economic system.

But is that really the case? Experts at Wharton and elsewhere argue that what companies are experiencing now is neither an indication of a transformation nor a blanket prognosis for the rest of the economy. Instead, they say, the job announcements highlight operational weaknesses and strategic issues that have been lurking under the surface for years. In the past, these were effectively concealed in the same way that weakness and instability in the capital system were hidden by the apparent boom in asset values. Now, the downturn has brought them to the forefront.

What's Going

Peter Cappelli, director of the Center for Human Resources at Wharton, says the problem is that the crisis is forcing many managers to focus only on the short term. "At least in the U.S., companies don't seem to be thinking about much beside the immediate impact. To some extent, this could be because of the pressure to manage operations to conform to quarterly performance expectations. It could also result from the fact that the negative effects of layoffs -- such as the long-term costs associated with hiring again in upturns; delays in getting performance back up; and morale [issues] -- are hard to track. And it also may result from the implicit assumption that the workforce is really a just-in-time resource -- that it will be easy to bring in new workers when business picks up.'

Nevertheless, the track record of companies that have gone through job cuts is terrible. "Virtually all studies show a decline in performance associated with layoffs,' Cappelli notes. "But the caveat is that layoffs are a proxy for the fact that companies which decide to do them are already in trouble. It is hard to sort the effect of the layoffs, per se, from the proxy effect.'

This means that, for many of the companies which have announced or will soon announce layoffs, the current economic crisis is not necessarily the cause of their problems; it is simply what has exposed them. As intuitive as that argument may be, experts say that managers within the companies as well as analysts, investors and policymakers outside the business face the risk of putting too much, or even all, of the blame on the current economic crisis, rather than looking at deeper causes.

Jay Anand, professor of management and human resources at Ohio State University, says challenging times like the present make differences between companies stand out in bold relief. "Looking at the strategic implications, not every company is feeling the impact [of the crisis] in the same way. Some companies have better buffers in place, better capabilities to withstand the pressures, better demand or loyalty for their products, cost structures that are a little more flexible, supply chains that are a little more adaptable, and so on.'

Experts note that job cuts should be recognized as an indication of the change that is happening -- even accelerating -- within some industries. This is clearly the case in financial services and autos, for instance, but it is happening in technology as well. It's part of the reason why some of the IT industry's biggest names like Microsoft, Hewlett-Packard, EMC, Dell, SAP and others have been hit. Each of these companies, in some way, is facing a transition point in its evolution, forcing changes in its business models.

At Microsoft, for instance, its first-ever significant cuts are tied to the sharp decline in demand for traditional PCs, which have long been the company's core market. The company recently announced some 5,000 layoffs. Signs of the shift in Microsoft's market in recent years had already forced the company to begin looking for ways to further diversify its business -- as seen most notably in its failed bid for Yahoo last year. Now Microsoft must accelerate those efforts. According to company reports and analysts, this could happen in at least two ways: First, even as Microsoft sheds jobs in traditional businesses in order to cut costs, it plans to add up to 3,000 jobs in areas such as search, online services and cloud computing. The number of people hired for search will depend on what some analysts describe as a potential "wild card" -- the Yahoo factor. They believe that with Carol Bartz at the helm at Yahoo, a future deal with Microsoft could still happen. In any event, the layoffs -- and hiring plans -- at Microsoft are driven by these strategic considerations rather than just the weak economy.

Similarly, at Caterpillar, the world's largest maker of construction and mining machines, the massive restructuring was primarily attributed to high operating costs in its manufacturing operations. These costs became unsustainable as capacity utilization plunged due to low demand. As a result, Caterpillar announced it would cut 20,000 jobs since the sales volume for construction equipment -- hit hard by the housing market's collapse -- has shrunk by 25%.

For both Microsoft and Caterpillar, and many other companies, the sudden drop in demand exposed inefficiencies in their operations.

As these examples reveal, the problems leading up to announcements being made now have been in motion for a long time. Job cuts, in fact, are trailing indicators, not just for the economy as a whole but also for the specific businesses involved. It takes time for them to be announced and hit the headlines because they are usually among the last steps companies want to take in response to challenging conditions. They also are extremely complex issues to handle, forcing management to make extremely difficult choices.

Looking Ahead

Now comes the hard part. For all the companies that have announced job cuts, operations will become significantly harder to manage in the months ahead, as they work through the process of notifying workers, supporting them and, not the least, finding ways to compensate for staffing changes through existing or new business processes. All these efforts will take a significant amount of management bandwidth, and at the same time many important projects will potentially be either understaffed or delayed. And all of this comes at a time when companies can least afford distraction.

Are any companies or management teams notably "good" at handling situations like this? Wharton's Cappelli says the key is to consider and pursue alternative arrangements first. It is difficult to believe that any company is really good at this process if they aren't also doing some other creative arrangements for cutting labor costs (wage cuts, job sharing, sabbaticals, mandatory vacations, etc.), he notes. "The reason is, it would be remarkable if, after careful analysis, the only option that made sense across a company was layoffs.'

Ohio State's Anand says it is critical, in the end, to maintain perspective. Specifically, he suggests that companies focus on the current crisis but also be prepared for a rebound. "When everybody agrees that times are wonderful, you need to hold on. Similarly, when everybody says times are awful, you should think things through in a balanced way. There will be regression to a mean in time, and it is very important that firms are prepared for that. Even though managers need to act now to respond to the situation, it is important to look ahead and keep open options for growth. You do not want to overreact in a way that causes a substantive reduction in competencies, and in turn fundamentally impinge on your future.'

The turn could come sooner than some expect. Portman at Oxford Economics points out that while previous recessions developed more slowly, and in a less global fashion, businesses are now seeing a fast transition of weakness from the U.S. to the rest of the world. But there is an upside, he says. "This crisis has come about very rapidly, but the converse is that the recovery in time will also come about much quicker than we have seen in the past. Today, the gloom and doom is being extrapolated without taking into account the dynamics that are present. The downturn shouldn't last as long as some people are expecting.

"We have received quite a big setback, and we will continue to be hampered over the next year or so," Portman continues. "But when things can start to move forward again, I don't see any reason to expect huge changes in how business operates -- I don't quite see how that will transpire. Businesses will adapt, and we are already seeing that. We are seeing improved labor productivity, improved competitiveness, and that will underpin and come to the fore when things pick up again. In two years, we will see things improving, and business will be able to focus again on growth.'

The caveat, of course, is deciding which companies will be able to do so. The answers here are unclear. Without a doubt, firms that have approached layoffs -- or alternative solutions to preserving their talent during difficult economic times -- will be better positioned for the recovery than those that have adopted a knee-jerk approach to job cuts as a way of slashing costs for short-term gains. "Today, some companies are being forced to let go of their competencies, while others have not had to cut into any muscle," says Anand. "When the economy improves again, we will start to see the difference."

Steve Jobs's Succession Plan Should Be a Top Priority for Apple

When Apple announced on December 16 that Philip Schiller, the company's senior vice president of worldwide product marketing, would deliver the keynote speech at this week's Macworld conference instead of CEO Steve Jobs, speculation swirled again about the future of the company -- and Jobs's health. Jobs disclosed in August 2004 that he had a cancerous tumor removed from his pancreas. Observers at recent Apple events reported that the visionary technologist appeared gaunt. Adding fuel to the fire, Apple also announced that it would not be participating in future Macworlds, saying, "Trade shows have become a very minor part of how Apple reaches its customers."

Responding to questions about his health, Jobs said in a January 5 open letter that he was suffering from a hormone imbalance that was "robbing" his body of nutrients. He also noted that he is receiving treatment and will remain CEO of Apple. "I have given more than my all to Apple for the past 11 years now. I will be the first one to step up and tell our board of directors if I can no longer continue to fulfill my duties as Apple's CEO," stated the letter.

Meanwhile, the looming question of who would replace Jobs if he had to leave Apple remains unresolved for shareholders, analysts and customers. While the company maintains it has a succession plan, it has offered no details. Observers are left to question what Apple might look like without Jobs and whether the company can continue pumping out hits like the iPhone, MacBook and iPod.

A succession plan is critical for most companies, but especially so for Apple, according to Wharton faculty. They acknowledge that every company is different, but also point to established best practices for succession planning, including hiring from within, conducting an audition period, easing the successor into a leadership role and providing some level of succession disclosure to shareholders.

Companies with strong corporate cultures can usually count on continued success if they can seamlessly transfer power to an executive from a strong bench of managers. But selecting Jobs's successor will be challenging, given the degree to which he is tied to Apple's identity. As Wharton management professor Michael Useem puts it: "There are few companies where the top person has as much of an impact [as Jobs has had] at Apple."

Apple and Jobs seem almost inseparable in the public mind. Jobs cofounded Apple in 1976, left during a power struggle with corporate investors in 1985 and returned to Apple in 1997 after the struggling company acquired NeXT, another computer firm started by Jobs. Apple ousted CEO Gil Amelio, who had been at the helm a little more than a year. Jobs became interim and then permanent CEO, quickly establishing himself as the voice of Apple and launching a string of consumer electronics hits.

"He really is the face of the company," says Kendall Whitehouse, senior director of IT at Wharton. "When you speak to Apple employees, there is always a lot of talk about Steve and what Steve wants. It's palpable. That has generally been a positive thing for [Apple]. Jobs was the centerpiece for refocusing the company and brand" following his return.

But some Wharton faculty say Apple now seems eager to show that there is more to the company than the vision of Steve Jobs. At an October press event, Jobs appeared on stage with Schiller and chief operating officer Tim Cook, the latter wearing Jobs's trademark black shirt with jeans. "The strategy here appears to be showcasing different members of middle and upper management to illustrate that Apple, as an organization, is more than just a cult figure at the top," says Wharton management professor David Hsu.

Analysts agree. "Apple could have diffused speculation regarding Jobs's health by having him keynote this year's Macworld," Piper Jaffray analyst Gene Munster wrote in a research note. "While we do not believe that this change provides any indication regarding Jobs's health, we do believe that it is a sign we are in the early stages of changing roles in Apple's management structure."

Although Apple's succession plan for Jobs remains unclear, experts at Wharton offer a few tips to help guide the company's succession planning process.

Promote from Within

Apple has a strong bench of executives who could succeed Jobs, but major stakeholders, such as investors, customers and partners, don't know much about them, according to Wharton faculty. The first step in any succession plan may be illustrating that Apple is more than Jobs.

According to Wharton management professors Useem and Peter Cappelli, Apple's effort to highlight executives other than Jobs is a good test for any successor. Why? Part of Apple's mystique revolves around messaging and generating buzz. By putting executives like Cook and Schiller in the limelight, Apple can give other managers some practice introducing products and familiarize them with investors and customers. "It is important for any company to be developing talent internally. And it is also important to be promoting people from within," notes Cappelli. The board "should pay a lot of attention to the abilities and potential of their leadership team -- always."

Wharton management professor Lawrence Hrebiniak also urges Apple to show off executives beyond Jobs. "Apple wants the world to know that it doesn't sink without Jobs. The company is addressing a common concern [that arises] when you have a powerful, well-known leader."

Useem suggests that a board of directors should be responsible for ensuring that a company has the right leader as well as the right leadership team -- especially if there is any hint that the chief executive may step down in three to four years. He cites numerous research studies indicating that internal successors are more effective.

One related challenge is determining whether a company even has the talent to adapt to the new environment. If the decision is made to hire from the inside, then "a CEO and board should be looking at the top contenders" and analyzing what is known about each one, says Useem.

If a company develops its internal talent well, there should be a strong bench of executives who can lead under various scenarios, thus making succession planning easier. "Succession planning per-se is a waste of time," says Cappelli. "It means trying to determine in advance who will take over a top job. But because the needs change so frequently, as often do the players, there is no real ability to plan. These plans take a lot of time and energy, they divert the attention of people in the company and they almost always get tossed aside because they are out of date." The solution: Companies need to develop talent internally so that they have multiple options when a successor is needed.

Useem notes that some companies turn to testing as a way to vet internal candidates. For example, they may hire third parties to interview executives who report directly to the CEO. More often, companies like GlaxoSmithKline pick internal candidates and then ask each of them to take on a CEO-level project and present it to the board. "This approach gives a company a better fix on how executives perform head to head. It can be awkward because these executives work together every day, but it is important to pick the right person."

What remains to be seen at Apple is whether Jobs would stay as a non-executive chairman with a new CEO. While these arrangements are rare in most American industries, says Useem, there are many examples among technology firms. Intel, Microsoft and Dell have all had CEOs become chairmen as day-to-day management was transferred to a new executive. Such an arrangement is more likely if a company founder -- such as Michael Dell or Microsoft's Bill Gates -- is involved, Useem adds.

Meanwhile, a company also has to prepare for the inevitable mop-up duty that follows the appointment of the new CEO. It is unlikely that executives who lost out on the top job will stay. For example, when General Electric transitioned leadership from Jack Welch to Jeff Immelt, the other top candidates for Welch's job -- Robert Nardelli and James McNerney -- departed to become the chief executives of Home Depot and 3M, respectively. Nardelli is now CEO of Chrysler and McNerney is chief executive of Boeing. "Having successors just waiting in the wings is not a good idea," Cappelli says. "If they're good, they won't stay."

Transparency Is Key

Generally speaking, companies in the midst of succession planning need to deliver some kind of transparency to customers and investors. In Apple's case, disclosure -- or lack of it -- about Jobs's health and future plans appears to be a sore point with some analysts. Wharton faculty agree that Apple needs to disclose more about its succession plan, but how much detail is needed is open to debate.

Wall Street is clearly worried about Apple's future post Jobs. Any rumor about Jobs's health can move the stock. Following Apple's announcement that Jobs would not be the keynote speaker at Macworld, Oppenheimer analyst Yair Reiner downgraded Apple shares because the company would not disclose details about the state of Jobs's health or a succession plan.

In general, having a succession plan is a good idea since it minimizes uncertainty, but how much a company discloses depends on culture, says Hrebiniak. If a company is too transparent, "every would-be CEO would leave if he or she was not a finalist," and performance would suffer.

Cappelli agrees. It "isn't obvious" that Apple needs to outline its plans. "Whatever [Apple] outlines today will be irrelevant as soon as circumstances change, and that will happen in months. Apple probably will go through three or four plans before Jobs steps aside, so what's the point?"

Meanwhile, it's unlikely that Apple will fall apart without Jobs, suggests Cappelli. "Investors get worried if they think the future of an entire company depends on a couple of key individuals. In fact, that is almost never the case. This bias -- attributing the success of organizations to individuals -- is pretty common. Several studies have looked to see what happens when CEOs ... die unexpectedly. All the studies show that, rather than collapsing, share prices in fact actually go up. The current leaders are not that crucial. Companies don't collapse when the leader departs and there is some time to fill the job."

Whitehouse, however, says Apple "needs to articulate something." If the company needs a disclosure blueprint, he adds, it doesn't have to look any farther than its long-time rival -- Microsoft.

In January 2000, Bill Gates signaled the beginning of a transition of power at Microsoft. He named Steve Ballmer, who became president of the company in July 1998, as CEO. Gates said he was stepping down to focus on long-term strategy, but he remained chairman and added a new title -- chief software architect. At the time, Gates said making Ballmer CEO was a "very good transition" for Microsoft. Over the next eight years, Microsoft gradually put other executives in the spotlight. In June 2006, Microsoft announced that Gates would transition out of his day-to-day role to focus on the Bill & Melinda Gates Foundation. The biggest change for Microsoft was appointing Ray Ozzie, then chief technology officer, to be the chief software architect working side-by-side with Gates. Gates' last day as an executive was June 27. He remains chairman and advises Microsoft on "key development projects."

"Microsoft had been about Gates for so long. But he scheduled a long, phased wind down. You can see the way that the succession was comfortable for the company, customers and shareholders," Whitehouse notes.

Preserve Corporate Culture

What remains to be seen is whether a post-Jobs Apple will retain the corporate traits that made the company successful with its iconic leader at the helm. The conventional wisdom is that Jobs's control has influenced everything from marketing to design at Apple, says Hsu. After a decade of leading Apple, he argues that it's quite possible Jobs's imprint is permanently etched on the company. "No one could move up in the organization without Jobs's approval. Eventually, management fits the mold Jobs wants."

Hsu says the secret sauce for all successful companies is having a corporate culture that transcends any individual. "You want a culture to be so ingrained in the rest of organization that it [provides a] competitive advantage."

Useem agrees. "You cannot overstate how important corporate culture is -- if it's a good one -- in sustaining and carrying on a company." Some companies, such as Wal-Mart, Mary Kay Cosmetics and Southwest Airlines, support strong cultures that have lasted well beyond their founders' departure, Useem notes. "A strong culture will transcend the exit of leaders. At Wal-Mart, pictures of Sam Walton keep the company thinking about the values that were used to create the company."

The problem for Apple is clear: No one will know until after Jobs leaves how thoroughly his imprint permeated the company. Useem acknowledges that developing a corporate culture is not clear cut. "Culture is one of the great mysterious aspects of company business. It is very important, but poorly understood. You can try to copy a company like Southwest, but rivals can't get their hands around what it is that makes these companies so successful."

Not on the List? The Truth about Impulse Purchases

For years, retailers and manufacturers of consumer products have taken for granted the notion that attractive presentation and a bit of whimsy profoundly influence most shoppers' purchasing decisions. In his 1999 book Why We Buy: The Science of Shopping, psychologist and market researcher Paco Underhill described supermarkets "as places of high impulse buying.... Fully 60% to 70% of purchases there were unplanned, grocery industry studies have shown us."

Underhill's book and subsequent studies have since prompted retailers to devote growing resources to in-store promotion -- for example, featuring certain products at the ends of aisles and in checkout lines to encourage impulse buying.

Describing the idea that most supermarket purchases are unplanned as something of an urban legend. In a new research paper, "Unplanned Category Purchase Incidence: Who Does It, How Often and Why," Bell and his co-authors arguethat the amount of unplanned buying is closer to 20%.

Their research does not indicate that in-store marketing is unimportant, but that retailers may need to rethink strategies for it. The researchers found that certain traits of shoppers, including age, income and their particular shopping style, have a greater effect on making unplanned purchases than does the store or environment.

In other words, Bell says, "the differences are based on who they are rather than what they're exposed to. It relates to the issue of nature vs. nurture. Is it demographics or the in-store stimulus? The prevailing view is it's more nurture. We're saying it's more nature."

Bell's co-authors are Daniel Corsten, professor of operations and technology at the Instituto de Empresa Business School in Madrid, and George Knox, professor of marketing at Tilburg University in the Netherlands. Their paper is based on a detailed study of grocery shoppers' behavior in the Netherlands, but the findings can be applied generally to American retailers as well, Bell says.

The researchers began by reviewing a substantial body of academic literature that appears to support Underhill's estimate of unplanned purchasing activity. The authors say that the literature, partially underwritten by the Grocery Marketing Association and the Point of Purchase Advertising Institute, has fueled the substantial growth of in-store marketing budgets in recent years.

"The debate over the extent of unplanned purchasing and the underlying drivers has enormous practical significance," the authors write. "It dictates where marketing dollars are spent (in store or outside the store) and in what amounts."

Looking at Real Purchases

What the researchers found missing in the previous studies was "appropriate and robust" data from actual purchases that would indicate what shoppers' intentions were when they went to a store. The previous studies also did not clearly define "unplanned purchases" to Bell and his colleagues' satisfaction. Does it mean switching brands of detergent from what a shopper usually buys, or buying any product from a category not on a shopping list? And if a shopping list included detergent but not a brand or size, is the final purchase planned or unplanned?

The starting point for Bell's study, which was partially funded by a large European consumer products company, was a review of data from 2,945 supermarket shoppers over a two-week period in July 2006. The consumers shopped at 21 different supermarkets, making 18,000 purchases in 58 categories, such as bread, beer, coffee, produce, detergent, diapers and shampoos and conditioners.

The shoppers completed short questionnaires after each trip, checking off purchases in a category and indicating whether a purchase was "planned in advance of the store visit" or simply "decided in store and purchased." The shoppers attached their store receipts to ensure accuracy. More information on household traits and perceptions of the supermarkets where they shopped was gathered in 90-minute in-home interviews.

The questionnaire and the interviews provided Bell, Corsten and Knox with demographic data, including income bracket and life stage; "shopping style" information, including whether a shopper considered himself "fast and efficient"; and whether the shopper learned about prices from newspaper advertising or in the store. The respondents also were asked about their knowledge of a particular store and its prices, range of offerings and image; if they shopped on weekdays or weekends; and whether shopping trips were long or short.

Bell noted that American shoppers are different from their Dutch counterparts in at least one respect that may merit further study. While most Americans drive to a grocery store, people in the Netherlands are just as likely to walk or ride a bicycle as they are to drive. The researchers found that shoppers who walk to a market are less likely to make unplanned purchases than those who bike or drive.

The most basic information the research revealed is that no unplanned buying was done on slightly more than 60% of all shopping trips. On the rest of the trips, the shoppers made an average of three unplanned purchases -- far fewer than previous research indicated.

The amount of unplanned buying goes up with the total number of categories in which shoppers make purchases, such as bread or milk. But because a smaller percentage of shoppers are doing much of the impulse buying, the average number of unplanned purchases stays low.

More telling data about what makes shoppers behave as they do came from correlating 32 variables with the fact that the majority of all shopping trips include no unplanned purchasing. Here are some of the variables compared with the overall average:

• Young, unmarried adult households with higher incomes do 45% more unplanned buying.

• Households led by an older person and those that have larger families do 31% to 65% less spontaneous purchasing.

• There is 25% less unplanned buying among shoppers who mainly use newspaper ads for price information.

• People who consider themselves very "fast and efficient" shoppers are far less likely to make impulse buys -- 82% less than the average.

• If the purpose of a shopping trip is "immediate needs or forgotten items," the rate of buying in unplanned categories falls by 53%.

• Unplanned purchasing goes up by 23% if the shopping trip itself is unplanned, but it goes down by 13% if it's a major or weekly trip.

• If a shopping trip includes stops at multiple stores, there is 9% less unplanned buying at the second or third store.

• Unplanned purchasing goes up by 44% if the shopper goes to the store by car instead of on foot.

"The message ... is that the amount of unplanned buying that takes place is more about person-to-person variance than about the store environment itself," Bell says. "Can you really jack up unplanned buying with stimuli, when the greatest amount of variance is in people?"

Two Strategies Emerge

The answer to that question, according to Bell and his fellow researchers, is yes, but it will take sales strategies based on more thinking and market research. The researchers note that their data has enough detail to enable them to offer two possible strategies retailers could use to increase spontaneous purchasing in their stores.

"They can 'do more' with existing customers, or they can make a deliberate attempt to attract ... shoppers who are more likely to make unplanned purchases," they write. "The 'do more' strategy takes the existing mix of shoppers as given and focuses on the in-store environment. The 'attract better customers' strategy involves a broader change to marketing strategy, store image and so on."

The data indicate that the "do more" approach, using, say, better in-store signage or increasing the number of promotions, would be less difficult but perhaps less effective than trying to attract more customers who are inclined to do more unplanned purchasing. The benefits of the two strategies would need to be weighed against the cost.

"Overall, traits [of customers] appear more important than states [of stores] in generating unplanned category purchase incidence," the researchers write. "This raises some important questions for both retailers and their suppliers. Retailers may wonder if their current in-store marketing budgets are too high. Suppliers might want to revisit budget allocations: Should they re-prioritize marketing activities designed to place the brand firmly into the shoppers' [planned purchases]?

"More fundamentally, this research suggests that different consumer segments have different and varying 'receptivity' to different marketing activities. If so, marketers need to develop ... plans with an understanding of these varying levels of receptivity in mind."

Bell suggests that one possible avenue for learning more about how much impulse buying a person might do is to use the data retailers collect through their customer-loyalty programs. "They need to learn more about the shopper from a holistic perspective."