Accountability, Fear, and Changing a Culture

Uber finds itself in the news for lots of reasons, not all of them good.  The most recent story concerns the firing of 20 employees for a variety of bad behaviors to show that they were being held accountable for their actions.  I am not so concerned with whether this was a good move as much as if it will lead to change.

Certainly, the publicness of the firings meant that they were done as a message to Uber employees and the investment community.  It says, “Yes, we hear you about our culture and we are doing something about it.”  What it doesn’t say is, “You have been rewarding our CEO who does the same things, but we are not so sure what to do about that.”

Firing a bunch of people does not improve a company’s culture, even if it was the right decision.  Rather, it instills fear.  And while it may convey a message of what will not be tolerated, the action does not reinforce any positive behaviors that senior management would like to see.  It is almost like sentencing people to hang by the neck until they cheer up.

Uber has grown their business by the asking for forgiveness rather than permission.  That type of a model, by definition, rewards people for bending the rules to the extreme.  Their challenge is how to continue with a culture based on disrupting the status quo but respects the people who support it.  That will require threading a pretty small needle.

Changing a culture requires time and consistency.  Management needs to look at every aspect of its people processes (recruiting, hiring, onboarding, training, compensation, performance management, and succession planning) and ask, “Have we put in the right incentives and are we modeling the correct behaviors for a sustainable culture?”  Cultures do not happen overnight and they do not change after a few heads roll.

Another Step Towards Engaging Millennials

When writing previously about employee engagement, I discussed how companies can encourage employees to be engaged by taking steps to connect them with the organization.  We also know that, as a group, millennials tend to look for ways to connect with their employers and co-workers in ways that go beyond whatever product or service they are delivering at work.

This article describes a start-up that provides experiences for groups of employees to help encourage engagement in a way that is enticing to millennials.  This includes unique experiences they can together and being involved in community service.

Of course, this type of thing is not brand new.  Companies have been involved with stalwart social service organizations like United Way and Red Cross for many years.  But, I think it is fair to say that millennials are looking for something a bit more active than fundraising and giving blood (both worthy endeavors, by the way).

Companies do not need to outsource their engagement activities and management can brainstorm things that would appeal to their employees and fit with their culture.  But, this does show how companies are trying to get younger workers more engaged by experiencing intrinsic rewards (feelings of accomplishment) rather than extrinsic ones (here is a thing for doing well).  It also underlines how it is important to proactively create engagement you want to improve teamwork and reduce turnover.

Higher Minimum Wages and Success in the Hospitality Industry

The state of California and several of its cities have been on the forefront of raising the minimum wage.  The arguments for (people cannot live on the current minimum wage) and against (it will cost jobs because business will need to lay people off) it are familiar.  But now there is some data that makes a very interesting link between quality and the impact of raising wages.

This study looks at the impact of raises in the minimum wage and restaurant employment in the San Francisco Bay Area.  Don’t be fooled by the academic nature of the paper—the authors do a good job of explaining things in English before digging into the math (though you can get another explanation here with an eye towards the political).  The main takeaway from the article is that well run restaurants (in this case, defined by high Yelp ratings) are not impacted by minimum wage hikes.  Crappy restaurants (based on quality, not menu price) saw their already higher closure rate go up with the increases.  So, what does this mean for HR?

  • Well run businesses can absorb higher wages when their competitors cannot. This may mean higher prices (in some instances people will pay for quality) or that these businesses can survive on lower profit margins.  HR can contribute to this through good hiring (brining in people who can deliver high levels of customer service) and training (developing a learning culture) practices.
  • Use data to improve quality. The study shows that online feedback (in this case, Yelp reviews) is strongly correlated with business success.  This customer input should be used to improve service and quality.
  • If we presume that the vast majority of the workers at the restaurants are at minimum wage (as the paper does), this research tells us that paying more is not an indicator of quality or success. If restaurant A is getting a rating of 5 and restaurant B is getting a rating of 3, it is not due to wage differentials.  Rather, it is likely based on the quality of the product and the level of service.  HR may not have much impact on the former, but it certainly does on the latter.

What the paper really tells is that that business can succeed without necessarily being the one that pays the highest wages.  When wages are held constant, hiring the best people from the available labor pool may lead to higher service delivery.  This, in addition to a good product, can keep a business successful, even if wages are forced to go up.

When Even Tech Job Training Lags Behind Need

In any employment market there are going to be jobs in high demand and those that go unfilled.  In our tech driven economy, the jobs that are hard to recruit for range from utility lineman (long hours, hard work, and fabulous pay) and, strangely enough, cyber security.  With all of the hype and news around hacking, I was surprised to learn that these $80k/year jobs are readily available.  But why?

From a selection standpoint, good cyber security engineers need an odd combination of skills.  Of course they need to be great programmers with high levels of critical thinking.  However, they often need to have a criminal’s mindset (“How would I get into this system without someone knowing?”), which makes them a risky hire given their access to sensitive data.  And makes them attractive on the black market.

The incentives for prevention jobs are also difficult.  After all, they are performing well when nothing goes wrong.  But, when someone breaks into the system…

This is an opportunity for industry and universities to work together.  College students want tech jobs (sorry to those of you who recruit linemen), but they tend to want to work in the sexier product/app development area. Tech companies can show higher education how to make the field more “fun,” perhaps through gamification and appealing to the cat-and-mouse aspect of the work.

My sense is that they pay for these jobs will also need to rise to fill them.  If it is true that good cyber security engineers have good hacking skills, there needs to be a sense of doing the right thing pays at least almost as well as breaking into systems.

What we see is that even tech companies need to be thinking about how to get future workers trained and recruited for jobs that are not that appealing.  As our economy constantly evolves, companies will still need “legacy” employees (yes, some day, app development will be boring compared to what is hot then).  And it is possible that the cycle of job obsolescence will become shorter.  This makes the challenge for schools to provide the skills to future employees even greater.  Industry and education will both benefit if they work together in that venture.  I just hope in the meantime no one has hacked my blog.

He Knows When You Are Working, He Knows When Are Logged Out

As long as there have been workers, management has looked for ways to manage performance.  In the case of piece work, it was mostly used to provide incentives for productivity.  As the economy became more service oriented, performance was also measured so that throughput could be forecasted more accurately (think about a telephone center predicting the number of call to be handled on a certain day).

The use of this data has traditionally been used to “gamify” work as well.  That is, make reaching certain performance level an incentive in and of itself.  Sales competitions are a great example of this.  The logic being that if something is like playing a game it will be more fun (read: motivating) than something that seems like work.

Big data gives companies more ammunition to gamify work.  It also provides opportunities for the application of it to go beyond making or selling widgets.  As this article points out, Uber is at the forefront of this (though, make no mistake, they are not the only ones doing it).

Uber really has a love/hate relationship with its drivers.  Right now it needs them, but they foresee a day where they will need fewer people behind the wheel due to the automation of cars.  Uber needs a lot of drivers to provide high levels of service, but a glut of them leads to fewer occurrences of surge pricing (Uber’s version of raising prices and being more profitable when demand is high compared to the supply of drivers), which leads to fewer people being available since they will not make as much money.

Forecasting labor availability is key for the company in order to maintain service levels.  But, since Uber insists that the drivers are independent contractors who can work whenever they want, they cannot schedule the appropriate number of drivers to match anticipated demand.  So, to keep drivers logged in the app and behind the wheel, they have employed the same techniques that video game designers use to keep people playing.

In the article, the author clearly thinks that tapping into these motivations is “tricking” drivers into spending more time behind the wheel than they may want to.  But, is this really any different than traditional motivation techniques used by leaders such as providing intrinsic motivators like praise (“I appreciate the hard work you put into that presentation”) to reward and encourage future efforts?  Is it more coercive than, “You need to work at the store on Thanksgiving or your fired.”?

The answers really depend on whether the goals that Uber wants to achieve are aligned with those of the drivers.  If keeping more people in the app leads to more idle time (time spent without making any money), then I have a real problem with it.  If it helps manage the drivers’ time in a way that allows them to be more efficient and them and Uber to be more profitable, then I am good with it.

Worker performance has always been managed to help achieve organizational goals.  New technologies allow companies to look at these issues more closely than ever before.  HR should examine closely whether these efforts enhance engagement and, in the case of independent contractors, financial viability.

When the People in High Potential Programs Aren’t

At a recent professional conference I attended there was a lot of talk about high potentials.  Specifically, how to best measure potential versus actual performance (good luck getting managers to understand the difference).  The idea of identifying high potentials (HiPos) is critical for a couple of reasons:

  • If you are going to do good succession planning, you need to look at people based on their potential to be leaders at the next level (or for the first time) and not just how well they are doing in the current position.
  • Investing training dollars in HiPos will give you a much better return than the investment in lower performers. High performers got that way because they are continuous learners who welcome feedback.

But, do companies really do a good job of identifying HiPos?  This article suggests that they do not.  Using 360 feedback as a metric, the authors conclude that many of those selected into HiPo programs are not rated well on important leadership dimensions.  How does this happen?

  • Companies use the wrong data to identify HiPos. Our tendency is to use current performance to determine future performance.  And, if looking at a person’s potential in that job, this would be the best predictor.  But, it is not a good predictor if you’re trying to determine if a great individual contributor will be a good manager, or if a good manager will be a good executive.  The skill sets are too different.
  • I allude to it above, but companies place too much weight on factors that are not related to potential. I understand that it is hard to put blinders on and only focus on those attributes that would indicate success in another role (e.g., strategic thinking), but it is critical to do so in identifying HiPos.

The best way to combat this is to identify future success factors, such as strategic thinking and developing effective followers, in your organization.  If succession planners are presented with only this type of relevant data (as opposed to everything that might come out of a 360 or assessment center), it is more likely that those with the highest potential will be put into the HiPo pool.

Does Your Vacation Policy Work?

I’m always curious to hear of innovative (or, crazy, depending on one’s viewpoint) methods of increasing employee engagement and productivity.  I wrote about a year ago about a company in Seattle where the CEO increased the minimum wage to $70,000 (and they are still doing just fine).  And there are some companies that provide a time-and-a-half incentive to employees to take vacation.  One company upped the vacation incentive ante with paid for trips for up to one week.

What is with bribing people to go on vacation?  And, besides getting people to take some time off, do these ideas even work?
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There is some data that suggests that more vacation time makes executives more efficient.  Though, this might be because they have to get the same amount of work done in less time.  And there is plenty of studies that show that work breaks during the day help productivity.

My feeling (and I have zero data to back this up) is that another benefit of vacation time is that is allows us to come back with, if not a new perspective, at least a chance to look at a problem fresh, without only looking at previous solutions.  Think about how a crossword puzzle clue may have had you baffled at first, but then becomes easy after you spent time away from it.

Assuming that the above is at least partially true, it seems to me that having frequent time away may be as beneficial as long vacations.  Regardless, the key idea that in the long run we are more engaged and productive when we do not stare at the same problems.

Sure, at the end of January people are not spending that much time planning vacations (well, maybe skiers are).  But, this is when HR should be considering the impact of current paid time off policies, such as:

  • Does management support people taking time off by altering their workload pre-post vacation?
  • If you are in a work culture that does not support taking time off, do you understand why they are not?  Are you offering incentives for people to do so?
  • Are employees who are not taking their time off counseled so that they do so?

Yes, it seems odd to have to manage the vacation process.  But, like any other engagement and productivity tool, it does need to be monitored and cared for.

Is Seeing Really Believing?

Something I hear frequently from clients is, “I wish I had a day/week/month to see my candidates do the job.  Then I would make fewer hiring mistakes.”  It is, of course, an intriguing idea.  We test drive cars before we buy them.  Why not try out people before we hire them?

There is a long history of sampling work behavior in selection systems, whether it be using Assessment Centers to hire/promote managers and executives or having people make things for craft positions.  The accuracy of these types of assessments is good, falling somewhere between cognitive ability tests and interviews.  For candidates, the appeal is that they feel that they can really show what they can do rather than have their job related skills or personality inferred from a multiple choice test.

The issues in using a job tryout would include:

  • Paying the person for their time. There is an ethical, in some cases legal, issue in having a person work for free.  So, be prepared for your cost per hire to go up significantly.
  • Candidates would either need flexible schedules or plenty of PTO to participate in such a program.
  • Having meaningful work for the candidates to do. If you are going to narrow the gap between what the assessment and the job look like, then you would have to have projects that impact process, customers, etc that you would be willing to have a short-term contractor do.  Or, that you already have them doing.
  • Determining how to score the job tryout. Most organizations do a pretty poor job of measuring job performance over a full year, let a lone a couple of days.  Developing scoring criteria would be key for making good decisions and avoiding bias.
  • Having someone who is not your employee perform work that could affect your customers or the safety of others will make your attorney break out in a cold sweat.  This is should convince you not to do job tryouts, but you will have to sell that person on the idea.

What got me thinking about job tryouts was this article.  I was impressed that the company had thought through the problems in their selection process and came up with a creative way to address them. They certainly handle the pay issue well and they currently have the growth and profitability to make the program worthwhile. What is left unsaid, but communicated through some derisive comments about multiple-choice tests, is that they feel that using tests would not fit their culture well.

My concerns were that they are more worried about “fit” than skills.  This also translates into not having an objective way to evaluate how well a person did.  This leads me to believe that they would run into the problem of only hiring people who are just like them.

Lastly, they have a pretty high pass rate that “feels right.”  If I worked for them, I would be concerned that a lot of time and effort is being spent confirming what was seen in the less valid interview.  This is particularly true in a company where metrics are important for everything else.  Having people work for you for a few days and not having an objective way to measure how well they did is not going to lead to better candidates than a series of interviews.

Advances in selection tools will likely come from start-up companies who are not bound by tradition when it comes to hiring.  The tech sector presents a lot of opportunities to improve valid selection systems by their nature:  They are setup to disrupt and they gather a lot of data.  This presents a great platform for seeing what people do before you hire them to do it.

CEO Accountability…Really!

I could fill up this post with examples of CEOs that got raises when the performance of the company they were running got worse.  But, that’s too depressing.

Rather, here’s a story about Tim Cook and other Apple executives getting their pay cut because the company did not hit its numbers.  Sure, Cook and the others are not going to start clipping coupons any time soon, but it is an all-too-rare example of executive compensation being linked to actual company performance.  In this instance, profit was down 16%, so pay got cut 15% (though I doubt whatever formula was used was quite that simple).  In this case, the cut is not receiving 100% of a cash incentive, which had been paid out in full previously.

Cynics will say that the cut amounts to change in the cushions for the Apple executive team, which I guess is true.  However, it does send a message to employees (and shareholders) that if executives are accountable for the overall performance of the company.  And this type of message is important in establishing a culture of accountability.

What this step also does is establish the purpose of executive variable compensation—to reward provide a reward based on recent company performance.  This is separate from any gains/losses in the stock price, which is supposed to be a forward looking metric.  Is this going to make Tim Cook work any harder?  Probably not.  Does it tell Apple employees that senior executives are accountable for the development and execution of business strategies?  Absolutely.

Why Clarity in Family Succession Planning Matters

I have some family owned businesses as clients.  They do have an extra critical dynamic which makes them different from other businesses.  As one owner said to me when trying to make a difficult retain/fire decision about a family member, “If Pat goes and then works for a competitor that would make Thanksgivings very awkward.”

showbox iosThough the extra layer of family issues can be seen as a detriment, businesses that want to stay family owned and/or operated have the advantage of being able to plan succession well into the future (assuming commitment by younger family members).  This can include education, cross-training assignments, and working for other companies.  The important point is that family owned businesses should focus on succession planning in management as part of the ownership transition.gmail Login  Sure, deciding what it takes to be the next Director of Midwest Regional Sales isn’t as sexy as the next CEO, but it is a necessary step.

When I read about how family businesses conduct succession planning well, what strikes me is that additional role definition is a key.  This article provides some good examples.  The lesson is that governance and individual responsibilities need to be even clearer for family members in the succession path than for employees.  Besides giving confidence to investors and other stakeholders, this really tells brothers, sisters, nieces, nephews, etc. not to make assumptions about when they get to run the business, but rather what milestones to hit so they can earn the opportunity to run the business.

Of course, clear role definition and long term succession planning are great tools for any business.  Being clear about selection criteria, knowledge and skill acquisition, and experience set standards for all employees who want to advance in a company.  But, for family-owned businesses, they can mean the difference between transitioning a business to future generations or having them stop with the founder.

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