Behavior study Featured

8:00pm EDT March 26, 2008

Nelson Chan loves to play mystery shopper.

Despite his wife’s protests, the president and CEO of Magellan Navigation Inc. frequently poses as a would-be consumer to observe the behavior of customers at retail chains throughout Northern California. It’s not that the GPS-unit manufacturer doesn’t designate enough resources for market research; it’s just that Chan is obsessed with understanding his customers, which he says is the key to success in business.

In a similar vein, the executive also analyzes the behavior of his management staff members by revisiting their personal objectives at employee-led quarterly reviews. The exercise sets a tone of accountability that has helped the company and its 475 employees worldwide push Magellan’s total market share from 1.9 percent in the second quarter of 2006 to 5.7 percent in the second quarter of 2007.

Smart Business spoke with Chan about how to foster such accountability by pushing back on decisions and practicing transparency.

Don’t be afraid to push back. I really like decisions to be made at a different level than always having to be at the CEO level. Decisions made at the lower level are better made.

When decisions are pushed up to me, and I don’t think it’s the right place, I push back.

It’s listening to them and basically saying, ‘Guys, this decision should not be coming to the CEO’s office. This decision should be made by you,’ whether I’m talking to my staff or multiple levels below in the organization.

You’re just encouraging their behavior if you don’t push back. The fact that people come to you and expect you to make decisions all the time, and you do it — well, guess what? That reinforces that.

There are a lot more decisions that really should be made at other levels in the organization. It’s even healthier for the organization — not only is it a scalability issue but also a knowledge-level issue.

There are many people, if you hire smart people, that can make much more intelligent decisions than if they filter all the way up to the CEO. It’s not healthy if employees don’t feel empowered and don’t feel like they’re held accountable.

Hold employees accountable. When people succeed, you reward them. You reward them lavishly, and you reward them publicly.

When people don’t perform, you do the opposite. If they don’t perform consistently, you have to make changes. Those are also made very public.

If you say you hold people accountable, you have to show you hold people accountable, which means you have to fire people, and you have to reward people.

I have a quarterly meeting with my staff where they stand up and they basically review their objectives. They tell me, ‘Here’s what I’m committed to do this quarter.’

Likewise, they spend time reviewing the objectives from the previous quarter that they committed to the organization. They get a chance to grade themselves and say, ‘Based on this objective, I said I would do such and such. This is how I would grade myself whether I did or didn’t do it and why.’

The whole idea there is having very specific, measurable, achievable objectives that are black or white, whether you did them or not. There are no shades of gray. You’re standing up there and holding yourself accountable to your peers and the company on whether you achieved them or not.

They are doing that not just for me as their direct management but also to their peers, which I think is even more important. When you commit, it’s not just committing to your boss but to your organization and your peers.

This is a team sport. That peer pressure is very important. Sometimes, it’s even more important than any other pressure you can get.

Practice transparency. When I talk about transparency, it’s really no hidden agendas. We don’t come into a room and try to have a strategic decision and people are having different agendas. We’re all trying to achieve the same goal.

A lot of it has to be basically aligning your goals and objectives. You want to make sure that the management team as well as the employee base all understand what your goals and objectives are and also what your values are.

[It’s also] communicating to employees the status of the company. Be open and forward with them with both the good and the bad. Not everything’s rosy.

It makes life a lot easier. It makes a lot less politics. Everybody knows where they stand. It makes getting to the point much quicker and much easier.

Keep moving. A lot of people get into an analysis-paralysis issue, where they feel like they need to have all of the information before they make a decision.

In life, unfortunately, you don’t have all of the information, and you’ve got to know when you’ve got to make a decision. At the end of the day, if you don’t make a decision, a decision’s actually made for you, whether you like it or not.

I like to sail. If you’re moving [in a sailboat], it’s much easier to change course and change direction than when you’re sitting still.

The same goes for business. Even though you may be making the wrong decisions, you get a lot of feedback, and you get a lot of data that says, ‘Hey, this is wrong. You need to change course.’

If you’re moving in the wrong direction, it’s much easier to turn because you’ve got momentum that allows you to change course.

HOW TO REACH: Magellan Navigation Inc., (408) 615-5100 or www.magellangps.com