Stack Ranking is somehow still a thing in Corporate America

This week over on CNBC.com a pretty major piece dropped on the workplace culture at Facebook, for years one of America's Top/Best/Greatest places to work, but after a really tough 2018 on a number of fronts, has seen both its market value and its employee morale decline.

There is a ton of detail in the report, but one of the primary contributing factors that led CNBC to describe the workplace culture as 'cult-like', was the company's approach to managing employee performance. Two specific performance management practices were called out for having potentially negative or detrimental impacts on culture and engagement.

The first practice is Facebook's requirement that employees solicit 5 peers at the company to provide feedback on their performance two times a year. This feedback can be given to the employee or to the employee's manager and is kept confidential and importantly, cannot be questioned or challenged. Critics of the process claimed it leads to employees having to make sure they buddy up to a number of colleagues in order to ensure positive feedback only is given, and serves to hide or ignore negative feedback or even just honest and open dialogue.

But the second, and probably more important performance management practice in place at the company is a familiar one - the now infamous 'Stack Ranking' of GE and Microsoft fame. Under Facebook's Stack Ranking process, employees are placed (after a lengthy talent calibration exercise), into one of 7 performance categories, with semi-strict percentage quotas and limits for each category being enforced by management.

For example, the top category or highest grade is given to fewer than 5% of employees, while a grade of 'Exceeds' is said to not to exceed about 35% of staff. The CNBC piece cites several anonymous former Facebook employees who indicated that they felt like they had to invent or stress overly negative feedback and comments for employees in order to avoid having too many of their teams in a given performance category - a common problem with just about all Stack Ranking systems.

While in some circumstances and companies (heavy, sales driven ones for example), Stack Ranking can and does work fairly well in setting expectations and managing employee performance. But in complex, creative, technical companies like Facebook, the practice almost always leads to infighting, politics, favor trading, and ultimately, unhappy teams. GE and Microsoft both eventually shifted away from Stack Ranking, it will be interesting to see if this piece and other problems at Facebook will lead them to do the same.

Really interesting stuff and a fascinating look at how a fundamental HR/Talent Management practice is impacting a major organization. It will be interesting to see how it plays out.

Have a great day!

Knowing where to optimize your talent

Over the weekend I caught this pretty interesting discussion on the Marginal Revolution site, 'Where is talent opimized?', a discussion of what industries (or more accurately job roles), have the ideal or 'best' talent suited for their roles actually doing those roles.

It makes more sense to think about this idea of talent optimization, a state where the very best people who could perform a job are actually in that job by looking at a couple of examples where the difference is pretty clear. For example, professional basketball players, who are subject to years or training, competition, evaluation, and measurable performance metrics are probably the 'optimal' group of folks to actually be playing pro basketball. Said differently, it isn't likely there is a large untapped, undiscovered group of people who really should be playing pro basketball, but for some reason (or some labor market inefficiency), they are doing some other job instead.

Compare that to a job like mid-level management or perhaps many governmental jobs. In many of these roles performance is harder to quantify and measure, compensation levels are either opaque or set on criteria other than performance, barriers to entry to the profession exist, (lots of 'referral' hiring for example), and finally many of these jobs have been closed off to under represented groups for a long time. When you think about it, it seems really unlikely that talent in these kinds of roles, in any organization, will be the 'best' or 'optimal'. It is just too hard to even figure out what 'optimal' even means I would argue. Finally, roles that once you 'get in' it is almost impossible to get removed from for poor performance or incompetence should also be added to this group of sub-optimized talent profiles.

Why is this interesting (at least to me?)

Because I think often while we know that some roles in the organization are more important/strategic to the organization than other roles, we don't always acknowledge that there also exists this difference in the ability to 'optimize' talent across different roles as well. Although the distinction may be subtle, these two are not actually the same thing.

Finally, understanding how (or I suppose if), an organization can exploit these kinds of selection/sorting inefficiencies and get 'better' or more optimal talent attracted to roles that typically are less likely to be optimized, could result in a competitive advantage through talent that is usually unrealized.

In other words, if your organization could truly have the 'best' front-line managers wouldn't that make a huge difference in business and talent outcomes?

I will leave you with this one link to think about this more - In-N-Out Managers make $160,000 annually.

Have a great week!

Five HR and Talent lessons from the first five days of NBA free agency season

Basketball is the world's greatest sport and the National Basketball Association provides the marquee platform and competition for the world's best basketball players. Being an NBA-level player is incredibly difficult and rare. There are about 450 people in the world at any given time who can call themselves active NBA players.

And so it is that the competition among the 30 NBA teams for this batch of rare talents is fierce. Since there can be only five players on the basketball court at any one time, (and ofter, in important playoff games teams may only use on 7 or 8 players total in a game - side note, that is where the phrase '8 Man Rotation' is derived), identifying, attracting, and signing the very best NBA talent possible for your team is absolutely essential to have any chance at success. I can't really think of another business, (maybe the movie business), where talent acquisition and talent management is more important than in the NBA.

In case you don't know, the NBA's annual 'Free agent season' started on July 1. This kicks off the period of time following the end of the season when players whose contracts have expired are free to negotiate with all teams for a new deal. There's tons of process/rules/labor agreement minutiae too, but none of that matters to this post. All we care about is the talent/team/agent/press/media dance that culminates in many of the NBA's stars signing new contracts.

And lucky for us HR/sports nerds - much of the talent marketplace dynamics in the NBA play out in public with hundreds of basketball blogs, thousands of NBA geeks obsessively refreshing their Twitter feeds, and NBAtv spending literally hours upon hours discussion individual player moves. And really lucky for us, is that many of these NBA player/team contracts offer up valuable lessons and reminders for our own HR and Talent Management work - particularly when we are dealing with hard to find talent that are in high demand.

Ok, enough preamble. Here are five of the more interesting NBA feee agent signings so far this year, and what we can take from them.

1. Gordon Hayward to the Boston Celtics - 4 years / $127M

Why interesting? Hayward, an emerging star and the face of the franchise for an up and coming Utah Jazz team, leaves the only team he knows (and a bunch of guaranteed $$ on the table due to the NBA's labor rules that allow current teams to offer higher compensation to retain a player than new teams can offer them to switch), to join the Celtics, shocking many Utah fans.

HR/Talent angle: After stripping away team competitiveness, compensation, and potential, (kind of a toss up between Utah and Boston), Hayward elected to sign with Boston largely because the Celtics' coach Brad Stevens was Hayward's coach back in college at Butler University. The two formed a tight bond a decade ago that has lasted to this day. The HR lesson here? Make sure you know and leverage the relationships between people in your organization and the hot candidates you are trying to lure away from the competition. In this case, that one relationship likely swung the near-term futures of two franchises.

2. Kevin Durant resigned with the Golden State Warriors - 2 years / $53M

Why interesting? Durant, arguably the best player in the league and playing for the best team, signed a significantly smaller and below market deal than he could have demanded, (and received). Why? He wanted to allow the team more flexibility and salary cap space to try and retain as many of his Warriors teammates as possible, in order to strengthen their title defense chances next season.

HR/Talent angle: I know we are talking about multi-millionaires here, but even for them, not everyone is completely motivated by money. Durant is so happy to be playing on the best team, in a fun location, and in a winning culture that those things possess value, at least to him, beyond just the $$. If you can get a lot of the 'not money' things right in the organization, you may be able to have a chance at competing for talent against your better-funded rivals.

3. Steph Curry resigned with the Golden State Warriors - 5 years / $201M

Why interesting? Remember the bit above about Durant accepting a below market contract for the good of the overall team? Well, two-time league MVP and champion Curry has been playing on a significantly below market deal based on his performance for the last several year. This was driven in large part by Curry's early career injury problems that for a time cast some doubt on his long-term potential. But since then, he has emerged as the leader of the Warriors, and probably no worse than the 3rd best player in the league overall. This new deal, for the maximum money allowed, will serve to 'make good' on his out performance of his last contract.

HR/Talent angle: Really excellent talent might be able to be persuaded to work for less than market rates for a time, if the other things your company can offer them are attractive enough. But they won't/can't do that forever. At some point super-talented people need to be paid fairly, maybe even a little bit better than fairly, in order to 'make good' to them as well. All the company culture in the world won't pay someone's rent, and we should all keep that in mind.

4. Joe Ingles resigned with the Utah Jazz - 4 years / $52m

Why interesting? You might not have heard of Joe Ingles, but he has quietly emerged after a late start to his NBA career as an extremely versatile and productive player for a developing Utah Jazz team. He's also friendly with (now former), Jazz star Gordon Hayward, (see above), and by signing Ingles early, (and paying him really well), the Jazz hoped that would be another chip they could leverage in their efforts to retain Hayward. 

HR/Talent angle: As we know now, the Jazz management couldn't convince Hayward to stay, so let's hope for their sakes (and jobs), that the $52M investment in Ingles works out. There is always a lot of chatter and talk about the importance of having friends at work, but I wonder if this example makes us pause a little bit on that, at least in terms of elite talent. I am not sure the very best performers at any line of work get all that worked up about having friends at the workplace. The best talent makes its own friends, if you get my meaning. If you do, you are smarter than me. 

5. Jeff Teague to the Minnesota Timberwolves - 3 years / $57M

Why interesting? This move, signing a veteran point guard in Teague, combined with a prior trade for All-star Jimmy Butler is sending a signal to the league that the Timberwolves want to compete for playoff places and championships now, and not in 5 years. Last year the team failed to live up to its pre-season hype, and part of the reason is that its primary star players (Towns and Wiggins) are so young and inexperienced. Bringing vets like Butler and Teague signals a different, 'win-now' approach.

HR/Talent angle: This is kind of the NBA version of the startup company that needs to bring in some pro managers to help run things arc. The young talent or founders have all the great ideas, can generate a ton of excitement and buzz, maybe can secure the first couple of funding rounds, but when things start to get a little dicey, (and they almost always do), the inexperience of the leaders starts to hurt. It's important for HR leaders to take that kind of measure of leadership groups, particularly in new companies, and think hard about when, where, and how to get more experienced voices at the table before things go sideways. See Uber in case you want to read up.

There will be more to come from NBA free agency in the next couple of weeks. Even though I am really depressed that their are no more 'real' NBA games on for a bit, I am looking forward to heading out to Las Vegas in a week or so for the annual 8 Man Rotation trip to catch some live NBA Summer League action.

The NBA - there's nothing like it, and for HR/Talent pros, there's plenty we can learn from it too. 

15 Years Later, Still Talkin' About Practice

This week was the 15th Anniversary of NBA legend Allen Iverson's classic 'talkin' about practice' press conference, where the Philadelphia 76ers star, just a few days after seeing his Sixers team eliminated in the first round of the playoffs by the Boston Celtics addressed the media and was confronted with questions about his (allegedly poor) practice habits. Iverson had a tempestuous relationship with 76er coach Larry Brown, himself no stranger to controversy, and the 'practice' rant stemmed largely from Brown's comments to the media about Iverson's casual attitude towards practice and preparation.

Some video exists from the 2002 press conference, (embedded below, email and RSS subscribers will need to click through), that shows Iverson in full on 'practice' rant, mentioning about 20 times in two and a half minutes that he saw it as being ridiculous as a the franchise player, and league MVP just one season prior, and a legendary fierce and fearless competitor, that he had to spend time well, talking about practice.

Video below and some more comments from me after the jump...

A few things about Iverson's comments and the 'practice' issue overall.

One, the video, and most of what everyone remembers from the press conference was the two minutes of so of Iverson repeating, 'we're talking about practice, not a game' over and over, which makes it very easy to call into question Iverson's dedication and commitment. What is missing from the video, and can be found in the full transcript of the press conference here, is that before and after the 'practice' rant, Iverson talked openly about being hurt, confused, and disappointed in trade rumors that were floating around at that time. Iverson, rightly so, considered himself and was recognized by the league, as one of the very best players in the game. In 2002, he was in the middle of an 8 or 9 year run where he'd be named to the All-NBA 1st, 2nd, or 3rd team each year. In our workplace parlance, he was 'top talent' an 'A player' or a purple squirrel if you will. So naturally Iverson would have to be surprised and insulted that the team he had performed so well for, including dragging on his back to the NBA finals just one year prior, would even consider shopping him around the league.

Two, the rant, and the 'practice' context raise really interesting and ongoing questions about talent and more specifically how hard it can be to 'manage' the best talent. Iverson was a former league MVP, the league's leading scorer, and had an unquestionably ferocious style of play, notable for a guy just 6 feet tall and thin-framed. No one who watched Iverson play consistently ever came away from recognizing his commitment and intensity to winning basketball games.  At the time of the 'practice' press conference, he was 26, had just completed his 6th year in the league, and won his third league scoring title. Was he a perfect player? No. But he was one of the very best in the game and it can be argued he knew how to best prepare himself and his body to stand up to the rigors of a long season and playoffs.

Should Iverson have been more attentive and subservient to the wishes of the coach, and tried to be a more dedicated 'practice' player?

Probably.

Did Brown know the right way how to get the best out of Iverson, his star player?

Probably not.

I guess I am coming off as a bit of an Iverson apologist here, especially when most of the people that have seen or heard about the 'practice' rant come to the quick conclusion that Iverson was selfish, pampered, and in the wrong. I guess all I will say to that is as a manager or leader you eventually sink or swim largely by your ability to get the best performance out of your star performers.

Iverson has some blame here for sure, but definitely not all of it.

Probably too much of it.

Creating a Narrative for Talent

Long flight last night out to Vegas and to pass the time (and I needed to since this flight was not equipped with Satellite TV and thus I was not able to watch the NBA playoffs), I was multi-tasking with Jason Bourne on the screen and the SI.com Media Podcast in the ear.

On the podcast host Richard Deitsch asked guest James Andrew Miller (author of books on ESPN, CAA, and Saturday Night Live), about an ongoing negotiation between cable sports channel Fox Sports 1 and personality Katie Nolan. When discussing how Fox Sports 1 might look to retail Nolan (who apparently will have other options), Miller said something really, really interesting. Check this out...

Miller: She is a real talent. I think she knows it. I think Fox Sports 1 knows it. And so I would expect if she does stay, they will have to come up with not only something that is more than what she is doing now, they will have to come up with more money, and so it is probably one of those things where she tests the marketplace.

But this whole idea about testing the marketplace isn't just about dollars sometimes, it's about other opportunities. She might not know what she wants to do yet. She might not even know what she can do elsewhere. 

Fox Sports 1 has to realize that this is all about creating a narrative for talent, this is about saying, "Look we want to remain your home, and this is what we can put together for you", and then maybe you even have to go beyond that and start to look more broadly about what they can do in their larger Murdoch empire.

On the pod Deitsch and Miller went on to debate Nolan's ratings, other shows, and other things, but the important thing to me, and the part of the conversation I replayed three or four times was Miller's concept of creating the 'narrative for talent.' Leave it to a writer to come up with such an elegant and evocative description of a standard employee compensation/development/retention conversation.

Think about what a 'narrative' implies. A story. A beginning, a middle, maybe some twists and turns. Maybe some conflict or challenges. Maybe a hero on some kind of a journey. Maybe a fantastic and delightful surprise. And then, hopefully, a happy ending.

A 'narrative' just seems cool, fun, compelling, interesting.

It makes you want to listen. It makes you want to learn more. It makes you want to keep turning the page.

A comp discussion? Where you talk about ranges and midpoints? Or a review of goal completion? Where you debate whether or not a goal was 25% or 35% complete? Or a look at next quarter's corporate university training offerings to look for some development opportunities? Ugh.

Those all seem dull. Rote. Required even by the HR police.

None of those really want to make a talented person want to hear more of your story.

So that's what I thought was interesting about Miller's way of describing the way that a company needs to approach a conversation with a talented employee that might be on the verge of something big, but also has a ton of options.

It's all about creating a narrative.