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.

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.

While I am Likely to be Wrong, Allow me to Continue

Interviews are worse predictors of job success than you think.  And I do not care if you don’t think very highly of them as you read this, it’s still lower.  Yet, there is an insistence that they are better than they are and no company I know of is willing to give them up.  Why is this?

Of course, it’s because doing them is ingrained in our corporate cultures.  Thomas Edison (supposedly) conducted the first one.  However, note in the example that it was a test and not an interview, which ensured that it could not be less valid, even with the ridiculous questions cited.  Obviously, if a guy as smart as Thomas Edison was doing it, it must be right.  Then again, he was not trained in understanding human behavior.

The problem with interviews (besides just these) is that they are fraught with noise.  As I’ve written about before, interviewers (which are all of us) are loaded with biases which skew a good deal of information that we get from the person being interviewed.  Of course, the person being interviewed is likely to have prepared for the questions.  In fact some millennial job seekers I know informed me about how they are rarely asked a question they haven’t seen online and when they do get one they post it immediately.  From all of this pre-work, the interviewer is getting canned answers that may not reflect the person.  Of course, this may be a fine attribute if hiring someone who is not supposed to give his/her opinion on anything.  However, it does hurt the validity of even the best structured interviews.  As an aside, if you MUST interview, please make it highly structured and use it as a lever to find out about the person’s job related skills.

So, what is a company to do?  Go on a blind date with candidates?

I would suggest making your hiring decision BEFORE you interview.  Let the interview be the last bit of data that might break ties.  For instance, be sure that someone you are hiring for a customer facing position can actually make eye contact and put a few sentences together.  Or, use it to double-check the person’s availability for your work hours, give them a tour/realistic job preview, etc.  This allows HR or the hiring manager the last look without adding unpredictive noise to the process.  And think about how much time you will save!

It is not your fault that interviews do not predict performance.  The question is what are you going to do to prevent them from messing up your hiring process?

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.

Recruiting and Customers

When a consumer brand, especially a national one, looks for new hires, they are doing more than acquiring talent. They are making an impression on their customer base as much as any other piece of advertising.  That in and of itself is not a revelation (or, at least it shouldn’t be).  Rather, consider how much that information has been used in designing recruiting tools or assessments.

This is important because some of these companies will come in contact with a million or more potential candidates and customers.  While HR may loathe the idea of working with marketing (data vs. feelings) on recruitment and selection, there are some inherent advantages, including:

  1. Using language that will attract the target audience.  The marketing department probably knows more about reaching those who are attracted to the company than HR does. This can increase the effectiveness or your recruitment outreach.
  2. Making Awesome Realistic Job Previews.  At the risk of over-generalizing, most HR departments are much better at describing a job than getting people excited about one.  Sure, an RJP should discourage those who would not be a good fit, but it should also grab the attention of those who maybe would not have considered the job to increase the talent pool from which you are drawing. A marketing perspective is likely to help design RJPs to attract job seekers.
  3. Following-up With Non-Selected Candidates.  Let’s face it, you are likely to reject more candidates than you hire.  Not following up with them hurts your brand. And you want to keep them as (potential) customers, right?  Marketing can likely help you craft messages in a way that leave the person with a positive feeling about the brand so that they will become customers (or stay that way).

 

HR has an important job to do when recruiting and selecting talent.  Yet, it should be mindful that its messaging can have as much impact on customers as anything that comes out of the marketing department.  Reaching across departments can add some expertise that will make recruitment and selection more effective.  And, who knows, maybe they will ask for your advice in the future.

Putting Tech Diversity Puzzle Pieces Together

I am going to write about an issue with political ramifications while doing my best not to be political, so please accept these thoughts in that light.

One thread going through the proposed ban on legal immigration to the U.S. is the effect it will have on the tech industry.  Those companies are concerned that some of the talent they need from other countries will be unable to either enter the U.S. on an H-1 visa or be allowed to immigrate here.

Another issue that the tech industry has struggled with is hiring a diverse workforce in the U.S.  Much has been made of the lack of women and (domestic) minorities in the tech field.

However, there are more programs to teach tech skills to minorities and girls than you can shake a stick at.  A Google search of “minority tech training” garnered almost 18 million hits and “girls tech training” got 198 million. So, there is not a shortage of opportunities to obtain coding or other tech skills in the U.S. and these programs have created a pipeline of talent.  Likewise, there are specific tech incubator programs for women and minorities who want to start their own companies.

Why is all of this important?  Primarily because for a company to be innovative it needs to look at the world through a window and not a straw.  There are more tech users outside of the U.S. than inside, so to be successful internationally companies need foreign talent.  Shutting our borders and wanting our companies to compete overseas is a difficult problem to solve.  Women and minorities outnumber white males in the U.S., so the companies that harness those perspectives are likely to be the most successful ones.

So, what might be the barriers to connecting talent to opportunity?

  • Hiring like us. I’ve written before about the built in bias we all have of wanting to be with others who have a similar background.  This is very prevalent when it comes to which schools the person attended, which sports s/he played, etc.  This can be alleviated by:
    1. Removing names from resumes.
    2. Removing schools and extra-curricular activities from resumes, unless you have data supporting their use (and the literature on the validity of training and experience measures is not encouraging).
    3. Recruiting where you have never recruited before. For instance, go to schools that are not currently represented in your workforce.
  • Candidates being unfamiliar with the hiring process. In our bubbles we think that every step of the hiring process is normal.  But, to use a tech example, if I come from an area without many tech companies, I might not be familiar with “whiteboarding” code problems as part of an interview.  Being transparent about the steps and letting people know what to expect removes a potential barrier between you and a qualified candidate.
  • Hiring processes that invite bias. Whether it is how you score your interviews or evaluate resumes, having an evaluation rubric will reduce bias.
  • Echo chambers on interview panels. Have diverse points of view (e.g., people from different departments) on your interview panel.  This is likely to encourage meaningful follow-up questions, even within a structured interview.

I do not think that lowering standards is an appropriate response to creating a more diverse and innovative workforce.  Building walls (metaphorical or otherwise) makes the problem worse.  Rather, companies need to build more bridges to find qualified candidates to bring different perspectives to their organizations.  Yeah, I get that it is more work, but a competitive marketplace demands it.

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.

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