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  • The Five Stages of Small Business Growth

    HBR
    HBR
    Categorizing the problems and small business growth patterns in a systematic way that is useful to entrepreneurs

    seems at first glance a hopeless task. Small businesses vary widely in size and capacity for growth. They are characterized by independence of action, differing organizational structures, and varied management styles.

    Yet on closer scrutiny, it becomes apparent that they experience common problems arising at similar stages in their development. These points of similarity can be organized into a framework that increases our understanding of the nature, characteristics, and problems of businesses. Ranging from a corner dry cleaning establishment with two or three minimum-wage employees to a $20-million-a-year computer software company experiencing a 40% annual rate of growth.

    For owners and managers of small businesses, such an understanding can aid in assessing current challenges. For example, the need to upgrade an existing computer system or to hire and train second-level managers to maintain planned business growth.

    It can help in anticipating the key requirements at various points—e.g., the inordinate time commitment for owners during the start-up period and the need for delegation and changes in their managerial roles when companies become larger and more complex.

    The framework

    also provides a basis for evaluating the impact of present and proposed governmental regulations and policies on one’s business. A case in point is the exclusion of dividends from double taxation, which could be of great help to a profitable, mature, and stable business like a funeral home but of no help at all to a new, rapidly growing, high-technology enterprise.

    Finally, the framework aids accountants and consultants in diagnosing problems and matching solutions to smaller enterprises. The problems of a 6-month-old, 20-person business are rarely addressed by advice based on a 30-year-old, 100-person manufacturing company. For the former, cash-flow planning is paramount; for the latter, strategic planning and budgeting to achieve coordination and operating control are most important.

    Developing a Small Business Framework

    Various researchers over the years have developed models for examining businesses (see Exhibit 1). Each uses business size as one dimension and company maturity or the stage of growth as a second dimension. While useful in many respects, these frameworks are inappropriate for small businesses on at least three counts.

    Exhibit 1 Growth Phases

    First

    they assume that a company must grow and pass through all stages of development or die in the attempt. Second, the models fail to capture the important early stages in a company’s origin and business growth. Third, these frameworks characterize company size largely in terms of annual sales (although some mention number of employees) and ignore other factors such as value added, number of locations, complexity of product line, and rate of change in products or production technology.

    To develop a framework relevant to small and growing businesses, we used a combination of experience, a search of the literature, and empirical research. (See the second insert.) The framework that evolved from this effort delineates the five stages of development shown in Exhibit 2. Each stage is characterized by an index of size, diversity, and complexity and described by five management factors: managerial style, organizational structure, extent of formal systems, major strategic goals, and the owner’s involvement in the business growth. We depict each stage in Exhibit 3 and describe each narratively in this article.

    About the Research

    We started with a concept of business growth stages emanating from the work of Steinmetz and Greiner. We made two initial changes based on our experiences with small companies.

    The first modification was an extension of the independent (vertical) variable of size as it is used in the other stage models—see Exhibit I to include a composite of value-added (sales less outside purchases), geographical diversity, and complexity; the complexity variable involved the number of product lines sold, the extent to which different technologies are involved in the products and the processes that produce them, and the rate of change in these technologies.

    Thus

    a manufacturer with $10 million in sales, whose products are based in a fast-changing technical environment, is farther up the vertical scale (“bigger” in terms of the other models) than a liquor wholesaler with $20 million annual sales. Similarly, a company with two or three operating locations faces more complex management problems, and hence is farther up the scale than an otherwise comparable company with one operating unit.

    The second change was in the stages or horizontal component of the framework. From present research we knew that, at the beginning, the entrepreneur is totally absorbed in the business’s survival and if the business survives it tends to evolve toward a decentralized line and staff organization characterized as a “big business” and the subject of most studies.* The result was a four-stage model: (1) Survival, (2) Break-out, (3) Take-off, (4) Big company.

    To test the model, we obtained 83 responses to a questionnaire distributed to 110 owners and managers of successful small companies in the $1 million to $35 million sales range. These respondents participated in a small company management program and had read Greiner’s article. They were asked to identify as best they could the phases or stages their companies had passed through, to characterize the major changes that took place In each stage, and to describe the events that led up to or caused these changes.

    A preliminary analysis of the questionnaire data revealed three deficiencies in our initial model:

    First

    the grow-or-fail hypothesis implicit in the model, and those of others, was invalid. Some of the enterprises had passed through the survival period and then plateaued—remaining essentially the same size. with some marginally profitable and others very profitable, over a period of between 5 and 80 years.

    Second

    there existed an early stage in the survival period in which the entrepreneur worked hard just to exist- to obtain enough customers to become a true business or to move the product from a pilot stage into quantity production at an adequate level of quality.

    Finally

    several responses dealt with companies that were not started from scratch but purchased while in a steady-state survival or success stage (and were either being mismanaged or managed for profit and not for growth), and then moved into a growth mode.

    Revision

    We used the results of this research to revise our preliminary framework. The resulting framework is shown in Exhibit II. We then applied this revised framework to the questionnaire responses and obtained results which encouraged us to work with the revised model:

    * John A. Welsh and Jerry F. White, “Recognizing and Dealing With the Entrepreneur,” Advanced Management Journal, Summer 1978.

     READ MORE

    Exhibit 2 Growth Stages

    Exhibit 3 Characteristics of Small Business at Each Stage of Development

    Stage I: Existence

    In this stage the main problems of the business are obtaining customers and delivering the product or service contracted for. Among the key questions are the following:

    Can we get enough customers, deliver our products, and provide services well enough to become a viable business?

    Can we expand from that one key customer or pilot production process to a much broader sales base?

    Do we have enough money to cover the considerable cash demands of this start-up phase?

    The organization is a simple one

    The owner does everything and directly supervises subordinates, who should be of at least average competence. Systems and formal planning are minimal to nonexistent. The company’s strategy is simply to remain alive. The owner is the business, performs all the important tasks, and is the major supplier of energy, direction, and, with relatives and friends, capital.

    Companies in the Existence Stage range from newly started restaurants and retail stores to high-technology manufacturers that have yet to stabilize either production or product quality. Many such companies never gain sufficient customer acceptance or product capability to become viable. In these cases, the owners close the business when the start-up capital runs out and, if they’re lucky, sell the business for its asset value. (See endpoint 1 on Exhibit 4). In some cases, the owners cannot accept the demands the business places on their time, finances, and energy, and they quit. Those companies that remain in business become Stage II enterprises.

    Exhibit 4 Evolution of Small Companies

    Stage II: Survival

    In reaching this stage, the business has demonstrated that it is a workable business entity. It has enough customers and satisfies them sufficiently with its products or services to keep them. The key problem thus shifts from mere existence to the relationship between revenues and expenses. The main issues are as follows:

    • In the short run, can we generate enough cash to break even and to cover the repair or replacement of our capital assets as they wear out?
    • Can we, at a minimum, generate enough cash flow to stay in business and to finance growth to a size that is sufficiently large, given our industry and market niche, to earn an economic return on our assets and labor?
    The organization is still simple.

    The company may have a limited number of employees supervised by a sales manager or a general foreman. Neither of them makes major decisions independently, but instead carries out the rather well-defined orders of the owner.

    Systems development is minimal. Formal planning is, at best, cash forecasting. The major goal is still survival, and the owner is still synonymous with the business.

    In the Survival Stage, the enterprise may grow in size and profitability and move on to Stage III. Or it may, as many companies do, remain at the Survival Stage for some time, earning marginal returns on invested time and capital (endpoint 2 on Exhibit 4), and eventually go out of business when the owner gives up or retires. The “mom and pop” stores are in this category, as are manufacturing businesses that cannot get their product or process sold as planned. Some of these marginal businesses have developed enough economic viability to ultimately be sold, usually at a slight loss. Or they may fail completely and drop from sight.

    Stage III: Success

    The decision facing owners at this stage is whether to exploit the company’s accomplishments and expand or keep the company stable and profitable, providing a base for alternative owner activities. Thus, a key issue is whether to use the company as a platform for growth—a substage III-G company—or as a means of support for the owners as they completely or partially disengage from the company—making it a substage III-D company. (See Exhibit 3.) Behind the disengagement might be a wish to start up new enterprises, run for political office, or simply to pursue hobbies and other outside interests while maintaining the business more or less in the status quo.

    Substage III-D.

    In the Success-Disengagement substage, the company has attained true economic health, has sufficient size and product-market penetration to ensure economic success, and earns average or above-average profits. The company can stay at this stage indefinitely, provided environmental change does not destroy its market niche or ineffective management reduce its competitive abilities.

    Organizationally, the company has grown large enough to, in many cases, require functional managers to take over certain duties performed by the owner. The managers should be competent but need not be of the highest caliber, since their upward potential is limited by the corporate goals. Cash is plentiful and the main concern is to avoid a cash drain in prosperous periods to the detriment of the company’s ability to withstand the inevitable rough times.

    In addition

    the first professional staff members come on board, usually a controller in the office and perhaps a production scheduler in the plant. Basic financial, marketing, and production systems are in place. Planning in the form of operational budgets supports functional delegation. The owner and, to a lesser extent, the company’s managers, should be monitoring a strategy to, essentially, maintain the status quo.

    As the business matures, it and the owner increasingly move apart, to some extent because of the owner’s activities elsewhere and to some extent because of the presence of other managers. Many companies continue for long periods in the Success-Disengagement substage. The product-market niche of some does not permit growth; this is the case for many service businesses in small or medium-sized, slowly growing communities and for franchise holders with limited territories.

    Other owners actually choose this route

    If the company can continue to adapt to environmental changes, it can continue as is, be sold or merged at a profit, or subsequently be stimulated into growth (endpoint 3 on Exhibit 4). For franchise holders, this last option would necessitate the purchase of other franchises.

    If the company cannot adapt to changing circumstances, as was the case with many automobile dealers in the late 1970s and early 1980s, it will either fold or drop back to a marginally surviving company (endpoint 4 on Exhibit 4).

    Substage III-G.

    In the Success-Growth substage, the owner consolidates the company and marshals resources for growth. The owner takes the cash and the established borrowing power of the company and risks it all in financing growth.

    Looking Back on Business Development Models

    Business researchers have developed a number of models over the last 20 years that seek to delineate stages of corporate growth.

    Joseph W. McGuire

    Building on the work of W.W. Rostow in economics,* formulated a model that saw companies moving through five stages of economic development:†

    1. Traditional small company.
    2. Planning for growth.
    3. Take-off or departure from existing conditions.
    4. Drive to professional management.
    5. Mass production marked by a “diffusion of objectives and an interest in the welfare of society.”
    Lawrence L. Steinmetz

    Theorized that to survive, small businesses must move through four stages of growth. Steinmetz envisioned each stage ending with a critical phase that must be dealt with before the company could enter the next stage.§ His stages and phases are as follows:

    1. Direct supervision. The simplest stage, at the end of which the owner must become a manager by learning to delegate to others.
    2. Supervised supervision. To move on, the manager must devote attention to growth and expansion, manage increased overhead and complex finances, and learn to become an administrator.
    3. Indirect control. To grow and survive, the company must learn to delegate tasks to key managers and to deal with diminishing absolute rate of return and overstaffing at the middle levels.
    Roland Christensen and Bruce R. Scott

    focused on development of organizational complexity in a business as it evolves in its product-market relationships. They formulated three stages that a company moves through as it grows in overall size, number of products, and market coverage:‡

    1. One-unit management with no specialized organizational parts.
    2. One-unit management with functional parts such as marketing and finance.
    3. Multiple operating units, such as divisions, that act in their own behalf in the marketplace.
    Finally

    Larry E. Greiner proposed a model of corporate evolution in which business organizations move through five phases of growth as they make the transition from small to large (in sales and employees) and from young to mature.|| Each phase is distinguished by an evolution from the prior phase and then by a revolution or crisis, which precipitates a jump into the next phase. Each evolutionary phase is characterized by a particular managerial style and each revolutionary period by a dominant management problem faced by the company. These phases and crises are shown in Exhibit 1.

    *W.W. Rostow, The Stages of Economic Growth(Cambridge, England: Cambridge University Press, 1960).

    †Joseph W. McGuire, Factors Affecting the Growth of Manufacturing Firms (Seattle: Bureau of Business Research, University of Washington, 1963).

    §Lawrence L. Steinmetz, “Critical Stages of Small Business Growth: When They Occur and How to Survive Them,” Business Horizons, February 1969, p. 29.

    ‡C. Roland Christensen and Bruce R. Scott, Review of Course Activities (Lausanne: IMEDE, 1964).

    ||Larry E. Greiner, “Evolution and Revolution as Organizations Growth,” HBR July–August 1972, p. 37.

     READ MORE

    Among the important tasks are to make sure the basic business stays profitable so that it will not outrun its source of cash and to develop managers to meet the needs of the growing business. This second task requires hiring managers with an eye to the company’s future rather than its current condition.

    Systems should also be installed with attention to forthcoming needs. Operational planning is, as in substage III-D, in the form of budgets, but strategic planning is extensive and deeply involves the owner. The owner is thus far more active in all phases of the company’s affairs than in the disengagement aspect of this phase.

    If it is successful, the III-G company proceeds into Stage IV. Indeed, III-G is often the first attempt at growing before commitment to a growth strategy. If the III-G company is unsuccessful, the causes may be detected in time for the company to shift to III-D. If not, retrenchment to the Survival Stage may be possible prior to bankruptcy or a distress sale.

    Stage IV: Take-off

    In this stage the key problems are how to grow rapidly and how to finance that growth. The most important questions, then, are in the following areas:

    Delegation.

    Can the owner delegate responsibility to others to improve the managerial effectiveness of a fast growing and increasingly complex enterprise? Further, will the action be true delegation with controls on performance and a willingness to see mistakes made, or will it be abdication, as is so often the case?

    Cash.

    Will there be enough to satisfy the great demands growth brings (often requiring a willingness on the owner’s part to tolerate a high debt-equity ratio) and a cash flow that is not eroded by inadequate expense controls or ill-advised investments brought about by owner impatience?

    The organization is decentralized and, at least in part, divisionalized—usually in either sales or production. The key managers must be very competent to handle a growing and complex business environment. The systems, strained by growth, are becoming more refined and extensive. Both operational and strategicplanning are being done and involve specific managers. The owner and the business have become reasonably separate, yet the company is still dominated by both the owner’s presence and stock control.

    This is a pivotal period in a company’s life.

    If the owner rises to the challenges of a growing company, both financially and managerially, it can become a big business. If not, it can usually be sold—at a profit—provided the owner recognizes his or her limitations soon enough. Too often, those who bring the business to the Success Stage are unsuccessful in Stage IV. Either because they try to grow too fast and run out of cash (the owner falls victim to the omnipotence syndrome). Or are unable to delegate effectively enough to make the company work (the omniscience syndrome).

    It is, of course, possible for the company to traverse this high-growth stage without the original management. Often the entrepreneur who founded the company and brought it to the Success Stage is replaced. Either voluntarily or involuntarily by the company’s investors or creditors.

    If the company fails to make the big time, it may be able to retrench and continue as a successful and substantial company at a state of equilibrium (endpoint 7 on Exhibit 4). Or it may drop back to Stage III (endpoint 6). Or, if the problems are too extensive, it may drop all the way back to the Survival Stage (endpoint 5) or even fail. (High interest rates and uneven economic conditions have made the latter two possibilities all too real in the early 1980s.)

    Stage V: Resource Maturity

    The greatest concerns of a company entering this stage are, first, to consolidate and control the financial gains brought on by rapid growth. And, second, to retain the advantages of small size, including flexibility of response and the entrepreneurial spirit. The corporation must expand the management force fast enough to eliminate the inefficiencies that growth can produce and professionalize the company by use of such tools as budgets, strategic planning, management by objectives, and standard cost systems—and do this without stifling its entrepreneurial qualities.

    A company in Stage V has the staff and financial resources to engage in detailed operational and strategic planning. The management is decentralized, adequately staffed, and experienced. And systems are extensive and well developed. The owner and the business are quite separate, both financially and operationally.

    The company has now arrived.

    It has the advantages of size, financial resources, and managerial talent. If it can preserve its entrepreneurial spirit, it will be a formidable force in the market. If not, it may enter a sixth stage of sorts: ossification.

    Ossification is characterized by a lack of innovative decision making and the avoidance of risks. It seems most common in large corporations whose sizable market share, buying power, and financial resources keep them viable. Until there is a major change in the environment. Unfortunately for these businesses, it is usually their rapidly growing competitors that notice the environmental change first.

     

    Read the rest of the HBR POST here.

  • Digital companies are leaving the rest behind

    HBR
    Harvard Business Review

    The United States takes pride in being on the cutting edge of all things digital, and rightly so: American innovations and innovators have led the way. Yet according to recent research from the McKinsey Global Institute, the U.S. economy operates at only 18% of its digital potential, and the sort of productivity gains that digital technologies should be enabling are not showing up in the broader economy. Why is that?

    The answer is that a new digital divide has opened up in America. Just about every individual, company and sector of the economy now has access to digital technologies — there are hardly any “have nots” anymore. But a widening gap exists between the “haves” and a group we call the “have-mores”: companies and sectors that are using their digital capabilities far more than the rest to innovate and transform how they operate.

    We compiled a digitization index using dozens of indicators to show where and how companies are building digital assets, expanding digital usage, and creating a more digital workforce. The 18% figure is based on comparing how the economy as a whole stacks up against the performance of the have-mores. The latter are not just coming out on top; they are maintaining a wide and persistent gap. At the sector level, the index shows that the leading sectors have increased their digital intensity four-fold since 1997, with the greatest gains coming in the past decade. Other sectors are barely keeping pace.

    At the sector level, the technology sector itself ranks with the have-mores, of course, as do media, financial services, and professional services, which are surging ahead of the rest of the economy. This does not mean every technology company is leading; there are plenty of tech companies falling behind, too. Laggard sectors in general include government, health care, local services, hospitality, and construction — but again, even within each of these sectors, there are bright-spark companies that are innovating and in some cases disrupting others.

    These sector- and company-level divides have a broader economic significance because the most digitally advanced parts of the economy have increased their productivity and boosted profit margins by two to three times the average rate in other sectors over the past 20 years. Sectors that lag in measures of digitization also post lower productivity performance, and since this group includes some of the heavyweights in terms of GDP contribution and employment, this creates a drag on the broader economy. We calculate that if the U.S. were to capture the full potential of digitization, rather than just 18% of it, this could be worth at least $2 trillion to the economy.

    The digital disparity is not the only reason productivity gains are not showing up in the broader economy; the full reasons are hotly debated by economists. But because digital capabilities are closely linked to innovation, growth, productivity, and even business model disruption, addressing this digital gap should be high on the agenda for both public- and private-sector leaders.

    To be clear, the new digital divide isn’t about a reluctance to invest in equipment and systems; most sectors and companies now spend heavily on IT. The gap is in the degree of digital usage. Digital engagement between companies and their suppliers and customers is five times larger in the leading sectors than in others. This engagement can range from digital payments and advertising to interactions on social media and in virtual marketplaces. The gap is even wider when it comes to digitizing the workplace. In leading sectors, digital and mobile aids help workers do their jobs more efficiently, and routine tasks are digitized at the same time as new digital jobs are created.

    At the company level, the have-mores lead in terms of product, services, business model innovation, and revenue growth — and they are often the ones disrupting their own and other sectors. Digitally enabled innovations often have network effects associated with them, which in turn leads to “winner take most” outcomes; the top-performing companies enjoy far higher profit margins than the rest, and a handful of frontier firms are leaving everyone else in the dust. Our colleagues last year surveyed 150 large companies to measure their digital strategy, capabilities and culture, and found a large gap separating the digital leaders—the top 10% or so—from the rest. Big incumbent firms in particular are struggling to keep up as more agile digital challengers deliver products and services in faster and cheaper ways. But it’s worth noting that not all of the have-mores are young firms that were born digital. Some long-established companies including GE and Nike have successfully revamped their operations and strategies to become digital leaders.

    For the economy as a whole, encouraging the digital haves to close the gap with the have-mores is an issue that belongs on the policy agenda. Their catch-up growth could be an important source of momentum at a time when the global economy lacks dynamism.

    There is reason to be optimistic. Digital innovation has been largely focused on consumers in recent years, but now big data and the Internet of Things are beginning to change the way things are actually produced. Companies in manufacturing, energy, and other traditional industries have been investing to digitize their physical assets, bringing us closer to the era of connected cars, smart buildings, and intelligent oil fields.

    So…

    Innovations launched in the U.S. are rapidly adopted around the world, and the winner-take-most dynamics associated with digitization are appearing in other countries as well. Now the rest of the world will be watching to see if the United States can channel its technology prowess into the next wave of productivity advances, turning its digital lead into a broader economic transformation.

    James Manyika is the San Francisco-based director of the McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company.

    Gary Pinkus is a managing partner for McKinsey in North America.

    Sree Ramaswamy is a senior fellow at the McKinsey Global Institute.

    Original POST

  • What you need to know about outsourcing content creation

    As you start out the new year and put together content plans, here is some very helpful advice from Entrepreneur for those outsourcing their content.

    —

    Richard Branson knows something that propels not only his passenger jets but also his businesses to rapid and ever-increasing success — he embraces letting go and outsourcing.

    And with the rise of the Internet and the need to create consistent content, outsourcing has become incredibly common. In fact, Patricio Robles cites research that shows 79 percent of companies are embracing content marketing, while Statistica recently reported that the global market size of outsourced services in 2014 was $104.6 billion dollars.

    Being at the top of your game with content is essential, as the value of great content drives leads and results in more sales. But before you go jumping into the deep end of outsourcing content creation, there are a few things you’ll want to consider, so that you can not only approach it the right way but also protect you and your business from any negative repercussions down the road.

    Related: 5 Tasks Entrepreneurs Are Better Off Outsourcing

    1. Identify your content needs.

    In order to hire great content creators not to mention put together the kind of contract we’ll discuss shortly, you have to first define what types of content you need.

    For example, you could include:

    • Weekly blog posts
    • Social media updates
    • Guest blogging
    • Email marketing
    • Pay-per-click ad copywriting

    Identifying the specific types of content needed may not appear to be a legal step. However, at the outset, these are incredibly important things to consider, all of which will enable you to outline both your job advertisement and various aspects of your contractual agreement.

    2. Assign copyright.

    The act of simply paying someone does not automatically turn over copyright of that content to the end user. Unless you specifically list the terms of use in your contract, the content creator maintains ownership of that content. In this case, you only have an implied license, therefore, you’ll need express permission to re-purpose any of that content for other things, such as turning a blog post into an ebook or social-media posts.

    It’s also important that you consider protection against indemnification for images or content that may be the property of others. At the end of the day, you will be responsible if the content published on your site or in your materials is found to breach copyright law.

    For text-based copy, using a service such as Copyscape is standard practice. But with image attribution, this is particularly difficult, since there’s no good way to test the copyright short of either buying the rights or waiting for an angry digital millennium copyright act notice from the infringed-upon owner.

    Be smart and understand copyright upfront so you can avoid any negative consequences.

    Related: What I Learned From Being an Accidental Copycat

    3. Clearly outline outsourcing requirements.

    Be as specific as possible when outlining requirements so that freelancers know your expectations, including benchmarking and measuring success or failure. You may also want to include a Service Level Agreement that clearly outlines performance details and standards. Licensed attorney Ruth Carter provides this list of questions to consider, some of which touch on things I’ll cover later on in this article.

    4. Consider legal liabilities in your content.

    You may need to take further precautions if the content you’ll be outsourcing is subject to any regulatory requirements. For instance, if you’re publishing medical content or financial advice, you may need to include relevant disclaimers or ensure materials produced meet certain standards to protect yourself legally.

    If the content you publish on your website is something you could be held legally liable for, be sure your outsourced creators are able to meet any necessary requirements.

    5. Preparing in advance for termination.

    Ideally, you’ll find in a freelancer a long-term partnership for your content creation needs. But since turnover is inevitable, it’s far better to protect yourself up front. As Sion King of Rider University says: “Your termination clause is hugely important, as it sets forth the conditions under which the customer may exit the outsourcing relationship.”

    The termination clause needs to outline the common reasons that give rights to you and your company to exit the clause along with the rights of the contractor. It’s also wise to include both party’s respective rights upon termination with regards to ongoing privacy and protection here as well.

    6. Put it all in a contract.

    Now that you’ve covered all your legal bases, document them in a formal written contract that both you and your freelancers will sign. In most cases, it’s a good idea to consult with an actual lawyer to do this. However, you can get started by finding sample contract agreements to work from. William Engelke provides some great tips and points to consider when outlining your outsourcing contract over here.

    7. Take out an insurance policy.

    Last, but not least — and let’s keep it short and sweet — it’s definitely worth investing in an insurance policy when it comes to protecting your legal rights as a content creator and purchaser. At the end of the day, you need to be prepared for any legal ramifications that could occur from the content you publish — or, at the very least, be fully aware of who’s liable for anything that may occur.

    Though the Internet has blurred the rules and lines of outsourcing somewhat, it’s best to stick to guidelines and follow the rules to protect yourself. If you have any doubts, consult a lawyer.

    What have you done to manage your outsourcing in terms of legal requirements? Share your thoughts and insights in the comments below.

    Related: 3 Key Legal Issues Online Marketers Need to Know About

    Original POST

  • How to get work done (when you don’t feel like it)

    Holidays are over and it’s back-to-work time. Not feeling inspired in the dreary month of January? No worries – I especially appreciated artist Chuck Close’s observation that “Inspiration is for amateurs.  The rest of us just show up and get to work.”

    work inspiration
    HBR

    There’s that project you’ve left on the backburner – the one with the deadline that’s growing uncomfortably near.  And there’s the client whose phone call you really should return – the one that does nothing but complain and eat up your valuable time.  Wait, weren’t you going to try to go to the gym more often this year?

    Can you imagine how much less guilt, stress, and frustration you would feel if you could somehow just make yourself do the things you don’t want to do when you are actually supposed to do them?  Not to mention how much happier and more effective you would be?

    The good news (and its very good news) is that you can get better about not putting things off, if you use the right strategy.  Figuring out which strategy to use depends on why you are procrastinating in the first place:

    Reason #1   You are putting something off because you are afraid you will screw it up.

    Solution:  Adopt a “prevention focus.”

    There are two ways to look at any task.  You can do something because you see it as a way to end up better off than you are now – as an achievement or accomplishment.  As in, if I complete this project successfully I will impress my boss, or if I work out regularly I will look amazing. Psychologists call this a promotion focus – and research shows that when you have one, you are motivated by the thought of making gains, and work best when you feel eager and optimistic.  Sounds good, doesn’t it?  Well, if you are afraid you will screw up on the task in question, this is not the focus for you.  Anxiety and doubt undermine promotion motivation, leaving you less likely to take any action at all.

    What you need is a way of looking at what you need to do that isn’t undermined by doubt – ideally, one that thrives on it.  When you have a prevention focus, instead of thinking about how you can end up better off, you see the task as a way to hang on to what you’ve already got – to avoid loss.   For the prevention-focused, successfully completing a project is a way to keep your boss from being angry or thinking less of you.  Working out regularly is a way to not “let yourself go.”  Decades of research, which I describe in my book Focus, shows that prevention motivation is actually enhanced by anxiety about what might go wrong.  When you are focused on avoiding loss, it becomes clear that the only way to get out of danger is to take immediate action.  The more worried you are, the faster you are out of the gate.

    I know this doesn’t sound like a barrel of laughs, particularly if you are usually more the promotion-minded type, but there is probably no better way to get over your anxiety about screwing up than to give some serious thought to all the dire consequences of doing nothing at all.    Go on, scare the pants off yourself.  It feels awful, but it works.

    Reason #2     You are putting something off because you don’t “feel” like doing it.

    Solution: Make like Spock and ignore your feelings.  They’re getting in your way.

    In his excellent book The Antidote: Happiness for People Who Can’t Stand Positive Thinking, Oliver Burkeman points out that much of the time, when we say things like “I just can’t get out of bed early in the morning, ” or “I just can’t get myself to exercise,” what we really mean is that we can’t get ourselves to feel like doing these things.  After all, no one is tying you to your bed every morning.  Intimidating bouncers aren’t blocking the entrance to your gym.  Physically, nothing is stopping you – you just don’t feel like it.  But as Burkeman asks,  “Who says you need to wait until you ‘feel like’ doing something in order to start doing it?”

    Think about that for a minute, because it’s really important.  Somewhere along the way, we’ve all bought into the idea – without consciously realizing it – that to be motivated and effective we need to feel like we want to take action.  We need to be eager to do so.  I really don’t know why we believe this, because it is 100% nonsense. Yes, on some level you need to be committed to what you are doing – you need to want to see the project finished, or get healthier, or get an earlier start to your day.  But you don’t need to feel like doing it.

    In fact, as Burkeman points out, many of the most prolific artists, writers, and innovators have become so in part because of their reliance on work routines that forced them to put in a certain number of hours a day, no matter how uninspired (or, in many instances, hungover) they might have felt.  Burkeman reminds us of renowned artist Chuck Close’s observation that “Inspiration is for amateurs.  The rest of us just show up and get to work.”

    So if you are sitting there, putting something off because you don’t feel like it, remember that you don’t actually need to feel like it.  There is nothing stopping you.

    Reason #3   You are putting something off because it’s hard, boring, or otherwise unpleasant.

    Solution:  Use if-then planning.

    Too often, we try to solve this particular problem with sheer will:  Next time, I will make myself start working on this sooner.  Of course, if we actually had the willpower to do that, we would never put it off in the first place.   Studies show that people routinely overestimate their capacity for self-control, and rely on it too often to keep them out of hot water.

    Do yourself a favor, and embrace the fact that your willpower is limited, and that it may not always be up to the challenge of getting you to do things you find difficult, tedious, or otherwise awful.  Instead, use if-then planning to get the job done.

    Making an if-then plan is more than just deciding what specific steps you need to take to complete a project – it’s also deciding where and when you will take them.

    If it is 2pm, then I will stop what I’m doing and start work on the report Bob asked for.

    If my boss doesn’t mention my request for a raise at our meeting, then I will bring it up again before the meeting ends.

    By deciding in advance exactly what you’re going to do, and when and where you’re going to do it, there’s no deliberating when the time comes.   No do I really have to do this now?, or can this wait till later? or maybe I should do something else instead.   It’s when we deliberate that willpower becomes necessary to make the tough choice.  But if-then plans dramatically reduce the demands placed on your willpower, by ensuring that you’ve made the right decision way ahead of the critical moment. In fact,  if-then planning has been shown in over 200 studies to increase rates of goal attainment and productivity by 200%-300% on average.

    I realize that the three strategies I’m offering you – thinking about the consequences of failure, ignoring your feelings, and engaging in detailed planning – don’t sound as fun as advice like “Follow your passion!” or “Stay positive!”  But they have the decided advantage of actually being effective – which, as it happens, is exactly what you’ll be if you use them.

    Heidi Grant Halvorson, Ph.D. is associate director for the Motivation Science Center at the Columbia University Business School and author of the bestselling Nine Things Successful People Do Differently. Her latest book is No One Understands You and What to Do About It,which has been featured in national and international media. Dr. Halvorson is available for speaking and training. She’s on Twitter@hghalvorson.

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  • For better creativity, protect your alone time

    In my experience, the office has never been a particularly conducive place for creativity. Instead, it likes to pop out at times when I used to least expect it, such as during runs, or washing dishes (as mentioned in this article by HBR). I am a big proponent of time away from the office but would add that time away from family and friends is important as well. That solitude needs to be in place (as well as that phone shut off) for a complete sense of quiet, solitude and security in knowing that your ideas are yours alone to fuss over.

    creativity at work
    ANDREW NGUYEN/HBR STAFF

    In our contemporary offices and always-busy lives, alone time can be difficult to come by. But successful creative thinkers share a need for solitude. They make a practice of turning away from the distractions of daily life to give their minds space to reflect, make new connections, and find meaning.

    Great thinkers and leaders throughout history — from Virginia Woolf to Marcel Proust to Apple cofounder Steve Wozniak — have lauded the importance of having a metaphorical room of one’s own. But today’s culture overemphasizes the importance of constant social interaction, due in part to social media. We tend to view time spent alone as time wasted or as an indication of an antisocial or melancholy personality. Instead, we should see it as a sign of emotional maturity and healthy psychological development.

    Of course, positive social interactions and collaboration are a critical part of a healthy workplace. But while some people may be inspired by experience and interacting with others, it is often in solitary reflection that ideas are crystallized and insights formed. As author and biochemist Isaac Asimov wrote in his famous essay on the nature of creativity, “Creation is embarrassing. For every new good idea you have, there are a hundred, ten thousand foolish ones, which you naturally do not care to display.”

    Now science has reinforced what countless artists and innovators have known: solitary reflection feeds the creative mind. In recent years, neuroscientists have discovered that we tend to get our best ideas when our attention is not fully engaged in our immediate environment or the task at hand. When we’re not focusing on anything in particular — instead letting the mind wander or dip into our deep storehouse of memories, ideas, and emotions — the brain’s default mode network is activated. Many of our most original insights arise from the activity of this network, or as we like to call it, the “imagination network.”

    Its three main components — personal meaning making, mental simulation, and perspective taking — often work together when we’re reflecting. Using many regions across the brain, the imagination network enables us to remember the past, think about the future, see other perspectives and scenarios, comprehend stories, understand ourselves, and create meaning from our experiences.

    As mentioned above, activating this network requires deep internal reflection — the state that many artists and philosophers refer to when describing how they arrive at their most original ideas. This type of reflection is facilitated by solitude, which is why we often get creative insights when we’re relaxing or doing mundane, habitual tasks like showering or washing the dishes.

    Unfortunately, most people rarely give themselves time for purposeful contemplation. While the modern workplace is often not conducive to this type of alone time, there are things managers and their teams can do to reclaim solitude and improve their creativity — without diminishing collaboration.

    One solution is to give employees the flexibility to work remotely, particularly when they’re focused on creative assignments that require them to generate new and original ideas. Another is to designate an office or conference room for quiet work. But most of all, managers should let employees know that they’ll respect their individual work styles, and that slipping away from their desks to think in solitude is OK. In fact, managers should actively encourage this for improved creativity, as well as urge employees to take all of their vacation days. Having time for periodic rest and reflection will give your team the space to replenish their creative energy.

    It’s time to allow creative workers (and who doesn’t have to solve problems creatively these days?), as Zadie Smith advised, to “protect the time and space” in which they work. Doing so helps lay the foundation for true innovation.

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