What really motivates people to grow and change? A leader’s guide

Harmony Internal - McKinsey

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Edited by Rama Ramaswami
Senior Editor, New York

The theory of self-determination holds that people are motivated to grow and change when three innate psychological needs—autonomy, competence, and relatedness or connection—are fulfilled. Applying this concept in the workplace may be the next frontier for companies seeking to retain talent. Organizations have run employee physical-fitness programs for decades and, in recent years, have begun to pay serious attention to mental-health issues. The stresses of COVID-19—such as workers’ feelings of isolation and burnout—have given rise to a slew of employer-sponsored mental-health programs, as well as to benefits such as flexible work arrangements. But as people continue to leave the workplace in record numbers, leaders may need to improve workers’ job satisfaction by focusing on their psychological well-being. Here are some ideas and strategies to think about.

AN IDEA

**Aim to satisfy all workers’ psychological needs**

That really isn’t as difficult as it sounds. Most people, regardless of their income level or occupation, rate having an “interesting” job at least as important as having a high income. But organizations tend to cater more to the psychological needs of higher earners, who are likely to be managers and professionals. Meeting the psychological needs of employees in lower-paying, routine, or repetitive jobs such as clerical work or machine operation could enhance their job satisfaction, productivity, and loyalty to the organization. This may not work in all cases: for example, it could be challenging to redesign a machine operator’s job to make production line tasks less repetitive. But simple steps such as recognizing mastery of a skill or granting frontline workers discretion to make appropriate decisions can go a long way toward making jobs more psychologically satisfying for lower earners.

A BIG NUMBER

40%

That’s the percentage of American workers who say they are in ‘good’ jobs, as defined by their satisfaction with the job characteristics they value the most. These include not only good wages and benefits but also factors unrelated to pay, such as enjoyment of their day-to-day work, having a sense of purpose at work, and having the power to change things that don’t satisfy them. An attractive pay package does get people in the door. Once they are in, though, leaders will need to provide opportunities for advancement and skill development, as well as restructure jobs wherever possible to avoid employee boredom and job dissatisfaction.

A QUOTE

“Positive psychological well-being is an indicator of psychological functioning that goes beyond the mere absence of disease.”

That’s from psychology professor Julia Boehm, whose research examines the correlation between positive feelings and improved cardiovascular health. Even if people don’t exhibit symptoms of depression, stress, or anxiety in the workplace, they may not be functioning optimally: it’s essential for leaders to proactively enable employees to thrive. The American Psychological Association (APA) suggests several tactics that go beyond minimum mental-health offerings. For example, instill a sense of belonging for employees of all backgrounds, institute unconscious bias training, and make sure that workers take paid time off to recover from stress. According to the APA, “Encouraging employees to carve out time for their well-being not only protects their mental health but can also improve job performance.”

A SPOTLIGHT INTERVIEW

Whether you approach it through mindfulness, meditation, or building a sense of community, psychological well-being has become critical to succeeding in the workplace. In this interview with McKinsey, former Medtronic CEO and Harvard Business School professor Bill George shares his views on how to create, protect, and expand well-being within our teams and in our lives. “As a leader, you want to give encouragement to the people you work with to bring their ideas forth, to be real people, to be authentic and to be mindful and to have their own practices and give them the opportunity to do that,” he says. Take the time to engage with people authentically and with humanity, George advises. “Make everyone at your organization feel like, ‘This is my home. This is where I want to be, and you respect me for who I am.’”

PICK A NUMBER

Does a big paycheck guarantee happiness? Scientists have long debated this question—and the jury’s still out. A well-known study conducted in 2010 found that happiness leveled off once household income topped $75,000 a year. More recent research has upped that number to $95,000, although that’s for overall “life satisfaction”; the price of day-to-day well-being comes in at $60,000 to $75,000. And it is possible to make too much money: happiness levels decline once you earn more than $105,000. To make things more confusing, new research from 2021 suggests that the more money people make, the happier they become. For leaders trying to make sense of it all, the focus should be on developing nonmonetary rewards that motivate workers to look beyond a paycheck.

Lead by supporting well-being.

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 03:46 - 18 Jul 2022

As more companies pursue automation, what new skills will workers need?

McKinsey&Company

On Point | TODAY'S NEWS. TOMORROW'S INSIGHTS

Automate it

In the news

•

Turning to robotics. Booming e-commerce, persistent worker shortages, and a vulnerable supply chain have led to surging investment in automating logistics. Retailers are spending billions on robotic arms, autonomous vehicles, and collaborative robots to speed operations in warehouses across the US. The movements of one humanoid robot, designed to perform warehouse tasks such as unloading boxes, was based on studying walking birds. Businesses are increasingly turning to automation as technology costs have come down. [NYT]

•

Filling in the blanks. Software developers are among the most desired tech workers in the US, with more than 200,000 job openings in May. Much of their work is done manually, but a new tool powered by AI aims to take some of the tedium out of writing long lines of computer code. By predicting and filling in lines of code—similar to the predictive-text function on a smartphone—the coding bot can cut in half the amount of time it takes to develop an app. [WSJ]

Automation technologies are being adopted globally: more than six in ten respondents in each region report at least piloting automation.

On McKinsey.com

•

Growing adoption. In every region of the world, a growing share of companies are adopting automation technologies, find senior partner Rohit Sood and colleagues in our latest McKinsey Global Survey. Seventy percent of respondents say their companies are at least piloting automation in one or more business units or functions, up from 66% in 2020. But few are reaping the full potential of automation: less than one-fifth of respondents report that their organizations have already scaled automation technologies across much of the business.

•

Changing skills. Survey responses show that the most common reasons for automating are to improve business processes’ effectiveness and to create better experiences for customers or employees. Respondents report many benefits from automation, including increased customer satisfaction. But as more tasks are automated, organizations will need workers with more advanced cognitive skills like critical thinking. Learn where successful companies are focusing their automation efforts, and what tools and technologies are most commonly used.

— Edited by Belinda Yu

Succeed at automation

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 12:40 - 18 Jul 2022

What’s next in video entertainment?

McKinsey&Company

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What’s next in video entertainment?

Picture this: You’re at the movies with friends—but the movie is more like a game with a narrative. You feel like you’re in the movie because your seat gets hot when there’s a fire on screen. And everyone can see and hear the movie in whatever language they choose. That scenario could represent the future of video entertainment: immersive, gamified, and diverse. Check out the latest edition of The Next Normal to see what and how you’ll watch tomorrow, and dive deeper with these insights.

The week in charts

the Daily read

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ALL THE WEEK’S DATA THAT'S FIT TO VISUALIZE

Our Charting the path to the next normal series offers a daily chart that helps explain a changing world—as we strive toward sustainable and inclusive growth. In case you missed them, this week’s graphics explored economic pessimism, electric cars, the future of the fashion industry, inflation concerns, and decarbonizing the food system.

FEATURED CHART

Gloomy economic view

This week’s other select charts

Solving for net zero

Fashion doubles down on tech

Shifting concerns for European consumers

Greening grocers

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by "McKinsey Week in Charts" <publishing@email.mckinsey.com> - 03:34 - 16 Jul 2022

How the best organizations manage talent

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McKinsey Classics | July 2022

How the best organizations manage talent

A decade ago, a McKinsey study of R&D laboratories found that many of them didn’t really know if their productivity was good, bad, or indifferent, mainly because researchers tend to overrate themselves—70 percent claimed that their labs were at least in the top quarter for productivity. Don’t work in one? Substitute “organization” for lab and “executive” or “employee” for researcher. Such illusions can develop anywhere, and the path to improvement is essentially the same.

The best labs, our study discovered, know how to manage talent. That may not mean hiring the best—not every organization can—but rather managing researchers effectively through selection, recruitment, development, and rewards. Average labs, for instance, typically hire people with specific technical proficiencies. Top ones want curious scientists who can adapt to new roles. Top labs reward the work of high performers (particularly by giving them better assignments) and explicitly link financial rewards to performance. Many weak labs simply move underperformers to other facilities. The best try to help people improve and encourage those who don’t to move on, which can make room for new researchers and therefore help build diverse, high-performing teams. So does encouraging rotation to other research areas and geographies.

Of the practices that influence an organization’s productivity, talent management is often the one most in need of improvement. Read our 2011 classic “How the best labs manage talent.”

— Roger Draper, editor, New York

Improve your teams’ productivity

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by "Remote" <hello@remote-comms.com> - 08:30 - 15 Jul 2022

The quitting trend just won’t quit. It’s time for companies to update their talent strategy.

The Shortlist

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Our best ideas, quick and curated | JULY 15, 2022

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This week, why companies are still having such a hard time adjusting to the new labor market, and what new research tells us they can do to fill all the open jobs out there. Plus, an interview with Stacey Sher about the future of movies and streaming, and five trends in the luxury-car market.

Illustration of an open bird cage with a bird flying out of it

It’s still quitting time. Much has changed in the business world since early 2020, but one trend has remained constant: people keep leaving their jobs in droves. In fact, 40 percent of workers McKinsey recently surveyed say they’re thinking about leaving their positions in the next three to six months. That widespread disgruntlement is the same as 2021 levels.

But it’s not just about quitting. Workers are also switching jobs and industries, moving from traditional to nontraditional roles, retiring early, or starting their own businesses. They’re taking a time-out to tend to their personal lives or embarking on sabbaticals. Call it the Great Attrition, the Great Resignation, or the Great Reshuffling; any way you slice it, competition for talent remains fierce. At the current and projected pace of hiring, quitting, and job creation, openings likely won’t return to previous levels for some time. Organizations are going to be looking to fill roles for months to come, even if the economic outlook darkens.

New views of work. “The Great Attrition is making hiring harder. Are you searching the right talent pools?” reveals that many workers no longer want a traditional position with traditional pay and perks. This new research—including a survey of more than 13,000 respondents in six countries—shows that many people are reevaluating what they want from a job (and from life), and they’re looking for something more, less, or different. Employees frequently cite the feeling of always being on call, unfair treatment, unreasonable workload, low autonomy, and lack of social support as things undermining their well-being. They want more flexibility, more mental-health support, and more meaningful work. Companies are addressing these problems, to be sure, but they’re still coming up short.

Different talent pools. A central problem is that organizations keep trying to hire “traditionalist” workers using the same tried-and-true methods. Instead, they have to look in different talent pools, including people who have retired but might go back to work for the right situation. McKinsey’s research delves into five different employee profiles, or personas, to offer companies a new way of looking at the workforce. We broke them down into traditionalists, idealists, do-it-yourselfers, and others. These groups show that companies have to get more creative with their employee value proposition to solve this attrition problem for the longer term.

OFF THE CHARTS

Ramping up recycling

As interest in the circular economy grows, emerging recycling technologies are accelerating. Advanced recycling offers one potential solution to the increasing demand for circular polymers by expanding the types of plastics that can be recycled, allowing for the creation of polymers that can be reformed and reused. If existing constraints were resolved, advanced recycling could grow to 20 million to 40 million metric tons, providing investment opportunities of more than $40 billion.

Check out our chart of the day here.

INTERVIEW

Artists and audiences in the streaming era

Stacey Sher, the producer of acclaimed films such as Pulp Fiction and Erin Brockovich, has had a front-row seat to the rise of streaming and its effect on how stories are told and consumed. In a conversation with McKinsey about the evolution of film and TV, she spoke about the postpandemic outlook for the moviegoing experience, the excitement of storytelling opportunities in streaming, and much more. “We’re in a time of flux, in a time of change, and what was on its way toward being broken is being broken in a different way,” she said.

Some companies succeed, while others stagnate. What actions make a difference?

McKinsey&Company

Get growing

In the news

•

Strong headwinds. Businesses around the world are facing strong headwinds: the energy crisis, record-high inflation, rising interest rates, and the return of lockdowns in Asia. Some UK companies are already bracing for a possible recession. As consumers tighten their belts, businesses that depend on discretionary spending (such as travel and leisure) may be especially vulnerable. Households cutting back on discretionary spending could also hurt retailers in the US, where some big-box stores have already warned of falling profits. [FT]

•

US stocks slide. Wall Street wrapped up its worst first half of the year since 1970, with US stocks losing trillions of dollars in value. One major US stock market index has fallen nearly 20% since early 2022. But things could get bumpier still. In a recession, corporate profits usually decline by a quarter, and even a mild downturn could see earnings fall by 15%. If interest rates keep rising, the market could be facing a blow to earnings and higher interest rates later this year. [Bloomberg]

Growth leaders generate 80% more shareholder value than their peers over a ten-year period.

On McKinsey.com

•

Beating the odds. Many leaders aspire to grow their businesses, but for many, that goal may seem difficult to achieve. Only one in eight companies grew their revenues more than 10% in the decade between 2010 and 2019, a McKinsey analysis revealed. Moreover, about 25% of companies don’t grow at all. But delivering sustained, profitable growth—even in a downturn—is possible. In fact, many high-growth companies, including Airbnb, Burger King, Hyatt Hotels, and Microsoft, were founded during an economic downturn.

•

Five mindsets. C-suite leaders who outperform their peers often share common mindsets, exemplified by statements such as “I have a growth story I tell all the time,” “I am willing to fail,” and “I favor timely action over perfection.” In fact, leaders who adopt at least three of five key growth mindsets are more than twice as likely to profitably outgrow their peers, finds McKinsey senior partner Michael Birshan and colleagues. See our blueprint for growth, including examples of companies that have successfully expanded beyond their core businesses.

— Edited by Belinda Yu

Discover five growth mindsets

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 12:38 - 15 Jul 2022

Forward Thinking on people, places, and the revenge of places that don’t matter with Andrés Rodríguez-Pose

McKinsey&Company

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Forward Thinking on people, places, and the revenge of places that don’t matter with Andrés Rodríguez-Pose

A leading economic geographer talks regional growth and inequality, discontent and populism, innovation, migration, and development policies and strategies.

Innovate and grow

Explore this and future episodes of the McKinsey Global Institute’s Forward Thinking podcast on our site, and subscribe to ensure you never miss a new one. Subscribe via Apple Podcasts, Google Podcasts, Spotify, and Stitcher.

How can airlines navigate the latest travel surge?

McKinsey Quarterly

Travel takes off

Air travel is back. Here’s what airline execs need to know to help boost travel industry recovery and navigate the latest influx of fliers.

Get your briefing

While travel is on the rise, so are concerns about sustainability. Industry leaders should keep in mind that younger customers are especially conscious about airline emissions.

Exhibit of younger airline customers conflicted vs carbon nuetral about flying

Get flying

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by "McKinsey Quarterly Five Fifty" <publishing@email.mckinsey.com> - 02:17 - 14 Jul 2022

The Great Attrition is making hiring harder. Are you searching the right talent pools?

McKinsey&Company

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The Great Attrition is making hiring harder. Are you searching the right talent pools?

People keep quitting at record levels, yet companies are still trying to attract and retain them the same old ways. New research identifies five types of workers that employers can reach to fill jobs.

Reassess now

[Online workshop] Do more with dashboards, NRQL and custom visualizations

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by "New Relic" <emeamarketing@newrelic.com> - 04:38 - 14 Jul 2022

As the net-zero transition unfolds, green businesses could see exponential growth.

McKinsey&Company

Big green business

In the news

•

Climate tech boom. Investment in climate technology has been strong in recent years, with climate tech start-ups raising $53.7 billion in 2021. The first part of 2022 has brought signs of a possible shift: in May, environmental, social, and governance (ESG) equity funds saw significant outflows, and venture capital funding in green tech slowed at the start of the year. Nonetheless, some industry experts think the climate tech investing trend could continue. High gas prices, the conflict in Ukraine, and net-zero pledges from corporations and countries could help sustain interest and investment in climate solutions, they say. [Bloomberg]

•

An MBA in climate change? Sustainability has typically been left out of core business school curriculum, but that’s starting to change. Last year, a coalition of European business schools launched a new climate leadership program, and one business school in England now offers a “One Planet MBA.” These programs seek to increase expertise in climate change and integrate sustainability into areas such as accounting, finance, and procurement. [FT]

While it took many years to scale up renewable-electricity generation, broadening support for the net-zero agenda could enable the next wave of green businesses to grow more quickly.

On McKinsey.com

•

Going green. The transition to net zero could create significant opportunities to build green businesses. Growing demand for low-emissions offerings could generate more than $12 trillion of annual sales by 2030 across 11 value pools, including transport, buildings, and power, McKinsey analysis shows. Climate technologies that propel the net-zero transition, particularly ones that are not yet at commercial scale (such as green-hydrogen-based fuels or industrial electrification) could present companies with an opportunity for exponential growth.

•

Lessons learned. Scaling a climate technology isn’t always easy and can require moving at the speed of digital companies. Based on our experience, green business builders often set ambitious growth goals and gain advantages because they move quickly. For example, one Swedish battery manufacturer signed up supply orders from automotive companies before fully ramping up production capacity. See seven key principles to building and expanding a green business.

— Edited by Andrew Simon

Accelerate to net zero

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 10:10 - 13 Jul 2022

How supply chains can become greener

Re:think

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ON SUPPLY CHAINS

Decarbonized supply chains are resilient supply chains

Matt Stone

With supply chain disruptions now a fact of life for many companies, resilience has become the top priority for business leaders. One critical aspect deserves more attention: decarbonization. Juggling cost, resilience, and decarbonization may sound challenging, but these elements can work hand in hand.

Decarbonized supply chains are ultimately more resilient supply chains—and may even unlock the way to cheaper supply chains in the coming years. And shipping, which accounts for around 90 percent of ton-miles covered in global trade, is a good place to start.

Decarbonized shipping won’t fix supply chain bottlenecks such as driver shortages or a lack of warehouse space, but it can help with fuel price volatility. Improving fuel efficiency reduces exposure to wild price swings in fuel costs. Our research shows that between a third and half of decarbonization will come from greater fuel efficiency.

The adoption of zero-carbon and carbon-neutral fuels will close the remaining gap. Clean hydrogen-based fuels (including e-methanol, e-ammonia, e-methane, and hydrogen itself) may become cost competitive in ten to 20 years. Unlike the production of fossil fuels, which is concentrated in specific regions, the manufacture of hydrogen fuels is geographically diverse. After all, solar power and wind are abundant in many places. Such availability should result in a competitive landscape that lowers costs.

What’s more, the trend toward supply chain decarbonization is clear. Across industries, companies are upping their scope-3 decarbonization targets, which include reducing supply chain emissions. Many shipping companies have pledged to reach net zero by 2050. The more gung-ho ones are aiming for 2040.

Setting bold scope-3 targets now can save companies from being forced to make sudden, more expensive adjustments in the future when regulators tighten environmental standards. The International Maritime Organization is targeting, by 2050, a 50 percent reduction in absolute CO₂ emissions from 2008 levels, but many governments are pushing for shipping that is fully carbon neutral by 2050.

“The potential impact of biofuels—representing a reduction in CO₂ emissions of anywhere between 25 and 60 percent—is nothing to scoff at.”

However, more needs to be done. Looking at the current policy landscape, the likely rates of improvement in ship efficiency, and the declining costs of alternative fuels and then projecting forward, we expect the global shipping industry to release about 20 percent more CO₂ between now and 2050—nowhere close to carbon zero.

The first step is for companies to add transparency into their supply chains’ carbon output. This was traditionally hard to do because of market opacity around different vessels’ fuel performance. But solutions now exist that estimate carbon emissions based on the vessels that carry goods, and new Internet of Things innovations are making emissions omniscience a reality.

This visibility allows businesses to identify and seize quick wins. For a cargo owner, for example, choosing a ship that consumes 3 percent less fuel will immediately reduce CO₂ emissions by 3 percent. Plus, the cargo owner can encourage its shipping partners and their fuel providers to experiment with biofuel pilot schemes. The potential impact of biofuels—representing a reduction in CO₂ emissions of anywhere between 25 and 60 percent—is nothing to scoff at.

Naturally, the big question is making the economics work. In sectors such as consumer goods, companies may be able to spread the cost across the value chain. Customers of consumer electronics, fashion, and automobiles are unlikely to balk at miniscule price increases for greener shipping. A 20 or even 50 percent rise in shipping costs may translate to only a few extra dollars for someone buying a pair of sneakers.

What if a business is transporting commodities and can’t offload the extra cost? Even so, the company may be able to enter into arrangements with shipping partners and fuel suppliers that give it the confidence to invest in fuel-efficient technologies or cleaner fuels. Innovative commercial agreements such as buyers’ clubs and long-term take-or-pay contracts will become more common in the coming years.

Despite current supply chain disruptions, many executives haven’t lost sight of the importance of decarbonizing their supply chains. I’m encouraged that they see seismic shifts on the horizon: stricter regulations are coming, and customer demand for cleaner practices is growing. Those who don’t act now may emerge from one maelstrom only to find themselves in the troubled waters of the next one.

ABOUT THE AUTHOR

Matt Stone is a partner in McKinsey’s London office.

MORE FROM THIS AUTHOR

Green corridors: A lane for zero-carbon shipping

Zero-emission fuels and vessels will need to start being deployed at scale over the next decade to achieve full decarbonization of the shipping sector by 2050. This ambitious goal could be catalyzed by green corridors.

More →

More than a mission statement: How the 5Ps embed purpose to deliver value

Your company’s purpose strengthens resilience and creates value—if it’s genuine. A new framework highlights a detailed approach to embedding purpose throughout your organization.

More →

IN TWO WEEKS

Steve Van Kuiken on four tech trends that matter

As innovation moves to the edge of your company, the role of IT shifts dramatically—as does the CEO’s role in managing technology and innovation.

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by "McKinsey Quarterly" <publishing@email.mckinsey.com> - 02:59 - 13 Jul 2022

PRODUCT UPDATE: Organize workflows into projects

Tray Email

Hi Md,

As your team ramps up their automation initiatives, enterprise-grade organization and efficiency will be key to ensuring success. With dozens (or hundreds!) of workflows supporting various functions across departments, teams will need a better way to logically group, categorize, and manage workflows.

Introducing Projects - an easier way to bundle multiple workflows into logical categories based on function or type. With Projects, you can...

Organize large numbers of workflows built by multiple builders and teams
Create shared Projects to collect common workflows
Import/Export all workflows in a Project

Now available for both Tray Platform and Tray Embedded, Projects can improve your day-to-day automation management and governance by grouping together related workflows within a single project, and manage all your team's automated processes for your team-based workspace.

Ready to upgrade your workflow management? Learn more about Projects in our blog.

Cheers,
Bella Renney, Head of Product @Tray.io

by "Bella Renney" <bella@tray.io> - 11:16 - 13 Jul 2022

What do you think is the top risk to economic growth in your country?

McKinsey&Company

As the world (economy) turns

In the news

•

The breakfast indicator. Inflation is at the highest it’s been in decades, with the war in Ukraine fueling increases in energy and food prices. By tracking the wholesale cost of foods such as oats, orange juice, milk, and wheat, the Financial Times’ “breakfast indicator” provides an ongoing snapshot of the price pressures faced by households. Inflationary pressures may be spreading to more parts of the world. Even Asia (which had been earlier spared from the global pattern) is beginning to see increases in consumer prices. [FT]

•

Bubbly housing markets. There’s a new risk for a world economy that’s already confronting high inflation, bumpy stock markets, and ongoing war in Europe: a potential slowdown in global housing markets. A Bloomberg Economics analysis found that 19 OECD countries have overheated property markets that could make them vulnerable to decreasing prices. Interest rate hikes and increasing borrowing costs have stretched consumers to the limit, and sellers are cutting prices on homes that were once in hot destinations. [Bloomberg]

Most respondents in Asia–Pacific and Greater China expect their economies to improve in the second half of 2022, although overall optimism has declined.

On McKinsey.com

•

It’s about inflation. In nearly every part of the world, inflation is now perceived as the leading risk to economic growth in respondents’ home economies, finds the latest McKinsey Global Survey on economic conditions. Even in Europe, where 50% consider geopolitical conflicts and instability to be among the top risks to their countries’ economies, inflation is still the most frequently cited risk. Greater China is the only region in which respondents pointed to the COVID-19 pandemic as the top risk to domestic growth.

•

The home advantage. In the latest survey from June 2022, half of all respondents expect the global economy to worsen over the next six months, while 29% expect it to improve. Executives’ expectations for their home countries are somewhat more optimistic than their outlook on the global economy, with 39% expecting their home economies to improve in the coming months. See what executives view as the biggest threats to the global economy.

— Edited by Belinda Yu

See the economic risks

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 12:35 - 13 Jul 2022

Five themes can help fashion leaders make the most of their tech

McKinsey&Company

Tech is the new fashion

In the news

•

Watch this space. Major players in the luxury and fashion industries, including watchmakers, are experimenting with NFTs (nonfungible tokens). These digital assets, verified through blockchain technology, are becoming ever more popular—and pricey. The creative director of one US-based retailer, for example, recently released an NFT version of a watch complete with a gaming element and various levels. Whether NFTs sustain their worth over time remains to be seen, but this new digital world is creating plenty of new opportunities for customer engagement. [NYT]

•

Got to be real. Luxury brands lost nearly $100 billion dollars’ worth of sales to counterfeits in 2017 alone. These staggering losses—coupled with reputational harm—have turned some brands onto using technology, including blockchain, for protection. Some luxury brands are using blockchain to give their products a unique digital ID that will help consumers verify that what they’re buying is, in fact, a luxury item and not a fake. [CNN]

Fashion companies are expected to double investment in technology by 2030 to keep up with digital natives and to create a competitive edge.

On McKinsey.com

•

More tech. Fashion companies invested between 1.6 and 1.8% of their revenues in technology last year. That figure will likely increase by 2030 to between 3.0 and 3.5%, bolstered by the conviction that tech could provide a competitive edge. Some are already using tech to support their customer-facing activities—such as delivering superb customer experience—while others are using tech to streamline their operations and processes and support sustainability.

•

Evolving tech. Technology’s operational potential is becoming more evident: fashion companies could see a 118% cumulative increase in cash flow by 2030 by embedding AI into business models, while technology laggards could see a 23% relative decline, McKinsey analysis shows. In partnership with the Business of Fashion, we’ve identified five key areas where fashion leaders could make digital investments. Each could not only help the fashion industry tackle critical challenges but also uncover potential opportunities and make a true difference in performance.

— Edited by Justine Jablonska

Explore tech in fashion

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 12:14 - 12 Jul 2022

Do tell? A leader’s guide to transparency

Leading Off

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Organizations know that external stakeholders demand transparency and that it’s good strategy to provide it. Companies that openly share information about their operations are more likely to attract investors, avoid regulatory scrutiny, and face fewer controversies. But sharing information within a company is another matter. While internal transparency certainly helps build employee trust and collaboration across the organization, it can backfire in ways that leaders may not anticipate. This week, let’s explore when it’s advisable to share information internally and when it’s not.

AN IDEA

Image of a transparent blob on black background

Share information on a need-to-know basis

Good leaders know the importance of communicating openly, but they also know when to hold back. Excessive sharing of day-to-day business activities may lead to never-ending debate over executive decisions or too many people weighing in without the relevant knowledge or responsibility. Furthermore, many employees do not want to know all of their organization’s inner workings or be burdened with information that is not pertinent to their jobs. Some companies share employee earnings and feedback on performance, but this practice could be controversial, inciting mistrust of leadership or perceptions of unfairness. In most cases, when deciding who should know what, leaders should consider matching transparency with responsibility and provide privileged access to information only to those who need it to make decisions.

A BIG NUMBER

50%

That’s the percentage of data breaches caused by employee negligence or malicious acts, which can result in substantial losses for organizations. The prevalence of remote-work arrangements only compounds the situation: for example, employees may access sensitive information from home through their personal devices or share data over nonsecure channels. The solution is not to mount an invasive monitoring campaign but rather to restrict access to the information that is most important to protect, identify the groups and individuals most likely to be insider threats, and design targeted interventions such as retention programs for people who may leave the organization and take intellectual property with them.

A QUOTE

“The visibility created by transparency conjures up self-consciousness and inhibitions.”

That’s Harvard Business School professor Ethan Bernstein on how too much transparency can leave employees feeling exposed and vulnerable. In a factory that Bernstein observed during his research, workers went to great lengths to hide rather than share productive ideas for fear of criticism or being misunderstood by managers—a classic example of how being observed distorts behavior instead of improving it. To counter this, Bernstein suggests balancing transparency with boundaries or “zones of privacy.” For instance, information could be shared within teams but not necessarily with other parts of the organization, or certain employees could be given privacy for limited periods of time to experiment and innovate without scrutiny.

A SPOTLIGHT INTERVIEW

Nothing but total transparency from an organization will suffice when it makes mistakes, says Harvard Business School professor Sandra J. Sucher in this McKinsey interview. “The first step of the process is to take responsibility for the harm you’ve created and to apologize for it,” she says. “The second step—and this gets hard—is to fix accountability for what was wrong.” In such situations, it’s important to focus not just on legal matters or placating external shareholders but also on winning back employee trust by addressing the root cause of the problem. “So it’s these three steps: apologize, fix accountability, and manage the long-term foundation issues that created the breach in the first place,” Sucher says.

TMI

Disclosing too much information to the public—especially on social media—can damage reputations and personal relationships. The same warning applies to the workplace. Want to “bring your whole self” to work? Maybe you shouldn’t. At least not in every setting. Many good intentions underlie today’s increasing calls for authenticity at the office—after all, better communication and connectedness can only improve productivity. But authenticity only works if leaders have a realistic view of themselves and know what to reveal and when. Unless you have an accurate read on your audience, context, and motives, it may be best to keep personal information where it belongs—to yourself. One executive’s graphic story of staying up all night with a sick baby elicited discomfort from the audience rather than empathy; another’s revelation about losing a client turned into a cultural faux pas. As psychologist Mike Rucker puts it, “It’s natural to want to develop a relationship with our colleagues, but the workplace is not always a well-suited environment for intimate rapport.”

Lead discreetly.

— Edited by Rama Ramaswami, a senior editor in McKinsey’s Stamford, Connecticut, office

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 02:35 - 11 Jul 2022

Buy now, pay later is catching on fast. Where does that leave credit-card companies?

McKinsey&Company

Competing for cardholders

In the news

•

Roundabout refunds. It’s simple to use buy now, pay later (BNPL) companies to purchase items. Getting a refund, though, can be complicated. Consumers say that after making a return, months can pass before getting the money back, if the funds are paid back at all. Angry shoppers are making their feelings known on social media at a time when BNPL companies are facing their own challenges. Higher interest rates make it costlier for the companies to borrow money, and late payments are also on the rise. [WSJ]

•

Borrowing is big. Consumer borrowing is soaring in the US. In April 2022, total outstanding credit hit $4.5 trillion, a $38.1 billion increase from March, according to government data. So far, US consumers haven’t let rising prices slow down spending, but they are relying on credit cards and dipping into savings to buy basic necessities as well as nonessential goods. From January to March, US consumers opened a record number of credit-card accounts, while the savings rate fell to its lowest point in more than a decade. [Bloomberg]

What is certain is that credit-card holders are adopting BNPL. Among the users of mid-ticket POS financing, almost 95% have credit cards, finds McKinsey.

On McKinsey.com

•

Popular in payments. US consumers love using credit cards. Credit cards accounted for 37% of purchases by dollar value in 2021, with transaction volumes reaching $49 trillion that same year. But the rapid rise of point-of-sale (POS) financing, which combines installment lending with the convenience of making card payments, may be undermining the profitable growth of credit-card businesses. By 2025, US credit-card companies could lose up to 15% of incremental profits to POS borrowing, a simulation run by McKinsey found.

•

Buy now, pay later. Consumers are choosing BNPL for many reasons, including low APR (starting at 0% in some cases), predictable payments, and the ability to use a payment method that works seamlessly with shopping apps. The popularity of BNPL could erode credit-card purchase volumes: nearly 40% of people who used BNPL to make a purchase said that they would otherwise have paid with a credit card, McKinsey research reveals. See four important trends in BNPL and thoughtful ways to respond.

— Edited by Belinda Yu

Reinvent credit cards

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by "McKinsey On Point" <publishing@email.mckinsey.com> - 12:55 - 11 Jul 2022

The week in charts

the Daily read

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ALL THE WEEK’S DATA THAT'S FIT TO VISUALIZE

Our Charting the path to the next normal series offers a daily chart that helps explain a changing world—as we strive toward sustainable and inclusive growth. In case you missed them, this week’s graphics explored grant allocation, quantum-enabled technologies, credit risk exposure for banks, and reducing process-gas emissions.

FEATURED CHART

Make that application shine

Exhibit showing the overview of Bipartisan Infrastructure Law funding

This week’s other select charts

A quantum leap for the planet?

Eyeing an uptick in risk

What goes up, slowly comes down

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by "McKinsey Week in Charts" <publishing@email.mckinsey.com> - 03:10 - 9 Jul 2022

Archives

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ON SUPPLY CHAINSDecarbonized supply chains are resilient supply chains

“The potential impact of biofuels—representing a reduction in CO₂ emissions of anywhere between 25 and 60 percent—is nothing to scoff at.”

Steve Van Kuiken on four tech trends that matter

As innovation moves to the edge of your company, the role of IT shifts dramatically—as does the CEO’s role in managing technology and innovation.

ON SUPPLY CHAINS

Decarbonized supply chains are resilient supply chains