It's hard to rally around a metric

About a thousand years ago I worked for a large, extremely well-known organization that for a myriad of reasons was going through some tough times. Sales were still good, but expenses were out of control, there were growing quality concerns with some of the most profitable products, and after decades of predictable and recognizable market conditions, changes in the regulatory environment had given rise to a new kind of competitor - smaller, faster, better able to adapt to a much more dynamic market than had previously existed.Got it?

Like many large companies that were entrenched and in some ways held captive by their size, history, amount of process and technical debt, there did not seem to be easy solutions, (or at least obvious ones), that the organization could pursue, and more importantly get everyone in the vast value creation ecosystem behind and pulling in the same direction towards, in order to improve results, better position the company for a much different looking future, while continuing to support thousands of customers and employees. As a low-level functionary at the time, I certainly was not privy to all the strategic options our company leaders were discussing to attempt to right the ship, reverse course, clear the anchor, (insert your favorite nautical metaphor here), but I remember well one of the major initiatives that did break free from the board room and impact all of us in the organization.

It was that from that point forward, everyone in the company was directed to be focused on a financial measurement called Economic Value Added, or EVA. EVA attempts to estimate a firm's profit, expressed as the value created in excess of the require return of the company investors. EVA is basically the profit earned by the firm less the cost of financing the firm's capital. Confused by what focusing on EVA might mean for the actual people in the organization? Perhaps a quick look at the EVA equation will clear things up:

Ok got it now?

I won't bother listing out what all the variables mean, (check Wikipedia if you are a glutton for punishment). The real point is not that folks in HR or in Talent management need to better understand the real economic drivers of the organization, and the real cause and effect cycles that keep the doors open, the payroll met, and the shareholders happy. There have been oceans of books, articles, blogs, presentations, etc. that all make that same (valid) point. There is general consensus that HR needs to understand the actual business. 

But here, and as the little EVA story seems to illustrate, (at least to me), is that in this example HR (and management) needed to understand a lot more than the business metrics. They needed to understand how to connect these metrics, business drivers, and silly-looking equations with what actually would resonate with people, and help them to see the value of the strategy, and help motivate them towards execution of these plans. No one I worked with, for, or near could even really understand at a personal level what focusing on EVA meant to us, or at least was supposed to mean. 

Was it cutting costs and expenses? Was it shaving a day or two off a process cycle time? Was it making sure we answered customer complaints in less than 24 hours? Because if those were the things we needed to think about, well, then just tell us that. We could have rallied around saving money, serving our customers better and faster, reducing the energy consumption in the building, or a million other things that were actually real and we could understand and impact.

What we could not do was get excited about an equation, or rally around a flag bearing a formula.

Even if it was the right formula.

Take the month off. Just report back with what you did

In a new spin of Google's famous '20% time' or the now commonplace 'hackdays' in many technology companies that both, (in different ways), provide free and unstructured or loosely structured time for employees to devise, experiment, imagine, and build new things, the software company 37Signals announced via a blog post last week that it is giving most of its employees, in June, an entire 'hack month'. What's a 'hack month'? Details here:

From the 37Signals blog post announcing the project:

This June will be a full month of free time to think, explore, mock up, prototype, whatever. People can go solo or put together a team – it’s entirely up to them. This is a month to unwind and create without the external pressures of other ongoing projects or expectations. We’re effectively taking a month off from non-essential scheduled/assigned work to see what we can do with no schedule/assignments whatsoever.

The culmination of this month of free work time is Pitchday – the first Thursday in July. That’s when everyone will get a chance to pitch their idea, mockup, prototype, or proof of concept to the whole company. The better the pitch, the more likely the project will happen.

Some people have already paired up and recruited others to work on an idea together. Some are going solo. And some are taking the time to work on a combination of smaller things they’ve been meaning to work on for a while.

I love the idea of companies letting go, even if it is for one day a quarter like many hack days, one day per week like the 20% time scheme, or even something more bold and potentially impactful as 37Signals' month-long experiment.  The key to these programs being more than just nice perks for an overworked and over stressed staff is the 'pitch' that happens at the end of the hack time. The pitch, since it typically has to be delivered in front of all their peers as well as company leadership places extra responsibility in the employee's and can serve to illustrate some really useful elements for company leadership in both staff skills and capabilities, as well as motivation and engagement.

Some of the benefits for company leadership of these kind of hack day programs that are often harder to come by during the course of 'normal' business:

Figure out who is all in - some people and teams will push really hard in these programs, will exert extra time and effort to make something great, to 'win', and to be recognized. Others, well, not so much. And the good thing is in the pitch meetings, all this plays out in public.

Figure out the untapped or unrealized talents in the organization - the inherent freedom to choose your project allows staff to experiment with skills and technology that they might enjoy, or at least be very talented with, but for some reason the 'real job' does not utilize. You will almost always be surprised what someone is really good at.

Find out which people are willing to learn new things - the jury may be out on so-called stretch goals, but observing which employees seem to embrace new things, to try and take advantage of the free time to learn new skills can be an important and illustrative predictor of who might be ready for a new project or a more challenging type of 'real' assignment. 

Sense where natural teams form and whether or not they work - A great aspect of hack day programs is that they allow and encourage teams to form across the organization often where the normal course of business does not require. Seeing where teams and groups form, and also who decides to work solo, can give leaders some clues towards project team composition, and creates opportunities for people from different functions to offer different insights in areas they usually would not see.

You can probably tell I am a huge fan of the hack day idea. Maybe extreme examples like the 37Signals hack month are not reasonable, or even wise, for most organizations, but certainly just about every organization could benefit from taking at least some time every few months to open up, let go of the reins, and see what the employees can really do. And the pitch day with the entire team assembled? That is money all day.

What do you think - does your organization have similar hack days? And if not, why not?

Happy Monday!

People, Process, and Productivity Killers

Last week an interesting piece called '5 Ways Process is Killing Your Productivity', ran on Fast Company, a look and take on how overly rigid productivity systems, (like Six Sigma or TQM), can potentially have a detrimental effect on organization productivity and potential for innovation. As someone that has always balked or at least held a cynical point of view when productivity systems based in traditional manufacturing models were attempted in non-manufacturing environments, I thought the piece raised some excellent arguments, particularly when we think about the application of soft or people processes inside organizations, whether for performance management, development, or even for methods of collaboration.

I won't re-cast the author's entire point of view here, I'd recommend reading the full piece on Fast Company, but I do want to pull out the five productivity reducing ways that over-reliance on process methodology can have on performance and productivity, and ask you to think about them in the context of your organization and your initiatives, challenges, and opportunities as a talent or human resources professional.

1. Empowering with permission, but not action

HR example: Tell employees 'they own their career development', but offer no support at all, (time off, funding, guidance, suggestions), as to how they might pursue development opportunities

2. Focus on process instead of people

HR example: Did all the mid-year performance reviews get done? 100% in? Success!

3. Overdependence on meetings

HR example: Actually this is not limited to HR, most organizations still rely on the formal meeting, with way more than necessary attendees, to move along projects and initiatives. Just look at it this way, how do you typical react when a meeting suddenly gets cancelled? If you are like most, you revel in the 'found' hour or two back in your day. Meeting cancellation is like a mini-Christmas.

4. Lack of (clear) vision

HR example: Sort of a larger point to try and cover here, but certainly you can relate to being buried in the process or function of people management, legally required and self-imposed, that we simply miss or fail to articulate, (and then act upon), a bigger vision for how we can enable people to succeed and execute business strategy. This is the 'in the weeds' feeling you might be experiencing since it is Monday. But does it really ever go away?

5. Management acts as judge, not jury

HR example: Obviously, earned or just unfairly ascribed, the position of HR as police or judge has a long and not easily remedied place in many organizations. HR can't and shouldn't always be an advocate for the individual employee at the expense of the needs of the organization, but when the function is viewed as simply punitive, or even just indifferent, the chances for HR to effect meaningful and positive impact on people is certainly diminished.

I think one of the essential conflicts that arise in interpersonal relationships is the conflict between people that prefer or need strict rules and order, and the more free-spirited folk that see rules and strictures at best as more like broad guidelines, and at worst as mandates set by people that lack their own creativity and vision and can be safely ignored.  Or said differently, between people that have to clean all the dinner dishes before bed and those that are happy to let them sit in the sink overnight. Both are 'right' of course, which leads to many of these kinds of 'process vs. freedom' kinds of arguments. 

What do you think?

Have processes or set-in-stone rules you may have imposed in your organization helped?

Have they allowed people the room they need for creativity and innovation?

Do they keep you in the role of HR police far too much?

Happy Monday!

Regretful Turnover and Saying Goodbye to the NJ Nets

Yesterday the NBA's New Jersey Nets played their final game in their soon to be former home court in Newark, New Jersey. Next season the team moves to its latest new home, this one a brand new arena in Brooklyn, NY, where they hope their fortunes will improve, the basketball hotbed of New York City will embrace them as the 'other' NYC team, (NYC will always be the Knicks town), and more highly prized free agent stars will be more likely to want to play for the team.

In the USA, professional sports franchises are usually seen as community assets, and when new franchises become available, either through league expansion or the occasional team relocation as in the Nets' case, you typically see cities trying to one-up each other for the chance to have one of these pro teams call their city 'home'. While the long-term economic benefits that accrue to a city or even a neighborhood from having local professional sports are certainly debatable, that usually has not stopped cities from making concessions, raising local taxes, funding arena construction and committing to infrastructure improvements and the like, in order to attract or in some cases retain a pro sports team for their city.

But not all locals or more specifically local government officials feel the same way about pro sports teams, at least not every sports team. In the case of the Nets' exodus from New Jersey, Garden State Governor Chris Christie offered these remarks among others (emphasis mine) :

''My message to them is, goodbye,'' Christie said at an afternoon news conference at Newark Beth Israel Hospital where he signed a bill to promote organ and tissue donation. ''You don't want to stay, we don't want you.''

''That's one of the most beautiful arenas in America they have a chance to play in, it's in one of the country's most vibrant cities, and they want to leave here and go to Brooklyn?'' he asked. ''Good riddance, see you later. I think there'll be some other NBA team who may be looking to relocate and they might look at that arena and the fan base in the New Jersey and New York area and say, 'This is an opportunity to increase our fan base and try something different.'''

Christie could be forgiven for not expressing any sadness or disappointment at the loss of the Nets, given their 35-year history playing in New Jersey has been mostly unsuccessful, uninspiring, and uninteresting. Apart from 2 appearances in the NBA finals in the early 2000's, the Nets have largely been a forgettable bunch, (this player being the exception).

But even still, Christie's ripping of the Nets and their decision to leave New Jersey offers us a chance to think about what we do and say in our own organizations when faced with a dissapointing resignation of an employee that we truly need, one that we fought hard to land, and that for we perhaps even made some concessions in our own hiring and business processes to secure.

Big giant flame-out resignation letters (or blog posts or videos), on the employee side often make the news. It is always fun to read about the dirt and dysfunction of organizations we know and sometimes admire. Usually, unlike our pal Christie, employers take the high road, refrain from commenting publicly, and go on with their business hopefully addressing any truths or lessons learned as needed.

Bashing someone on the way out, for making the best career decision for them, seems like an incredibly petty and short-sighted approach to handling regretful turnover. Unless you can honestly say you were deceived or can prove you have been played, (neither true in the Nets' case), then I think you'd be much better off wishing the departing employee well, taking actions to stay in touch, and working your angle as 'This is still a great place to work' as you walk the person out the door.

Sure sometimes that can be really tough. And sure it is much, much easier to bark 'good riddance', but aside from giving you about 30 seconds of hollow satisfaction, how does that really help your cause?

And all this spoken as a New Jersey native who never cared one bit about the Nets!

Your latest new hire: Are you paying more for less?

A quick post today, and in a similar vein to yesterday's post on value pricing of jobs as evidenced by an NFL player's decision to retire fairly young, and the overall maturity in how NFL teams evaluate, compensate, and differentiate talent.  The net-net: in the NFL for some positions, (like running back), it is really easy to cut experienced talent loose as their skills begin to diminish and the compensation they demand rises. There is always another running back available, either one of the reserve players on the team, or a new hire that can be drafted or signed that can offer almost as good, (and sometimes better), production, usually at a significantly lower cost.

However, for other positions on the team, the differentiation in performance is more significant, and often teams find that bringing in a new Quarterback, (the most important spot on the team), or even a new offensive lineman, doesn't result in a similar blend of performance gain and cost reduction. Often, teams seem to pay more to lure veteran free agents to the team, only to see their performance decline, at least in the short term, as the new player has to assimilate, learn new schemes, adapt to and partner with a new set of coaches and teammates. 

But as always that might be the case in football, but none of us has the job of managing the talent for an NFL team, (yet). What about in the real world - do 'regular' organizations see this same phenomenon when bringing in higher priced talent from outside the organization?

Turns out it happens in the real world too, at least according to the results of a recent study by Wharton School Professor Matthew Bidwell titled, "Paying More to Get Less: The Effects of External Hiring versus Internal Mobility."

The net-net of this study's findings?

According Bidwell, "external hires" get significantly lower performance evaluations for their first two years on the job than do internal workers who are promoted into similar jobs. They also have higher exit rates, and they are paid "substantially more." About 18% to 20% more. On the plus side for these external hires, if they stay beyond two years, they get promoted faster than do those who are promoted internally.

The study looked at a data set of external hiring and internal promotions and transfers over a several year period in one large financial services firm, so it's conclusions might not be able to be applied with confidence too broadly, and as we have seen in the NFL examples, even within a company or industry the 'switching costs' vary widely across jobs and job families.  But taken more generally, the study documents "some quite substantial costs to external hires and some substantial benefits to internal mobility."

The study is fascinating, and I'd encourage you to take a few minutes to dig through it in more detail, there is even some interesting data in their about the effectiveness and performance of new hires based on source of hire that I will have to post about another time, but even if you can't spare the time to read the paper you can at least take a few minutes to think about the implications of the findings.

Unlike NFL running backs, most of the high-tech, high-touch, high-interaction types of jobs that we need to fill in our organizations carry with them some pretty significant transfer costs. It can often take more than a year, even two in large organizations for external hires to sort out the politics, build the relationships, and simply 'learn' how to succeed in the new gig. And all that time an energy comes with a price, and that isn't even the 'extra' salary costs that you had to pay to lure the new talent out of their old jobs.

What do you think - what has been your experience when faced with the 'Hire from outside vs. Promote from within' choice?