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The Path to A Players … Topgrading?

Introduction

Peter Drucker once said …

“The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage, since very few organizations are very good at it.”

Most companies would agree that the single most important driver of organizational performance and individual managerial success is human capital or talent. Yet most companies still leave their talent acquisition process to chance using outdated interview techniques that lead to poor long-term results.

In June of last year, I read Topgrading by Bradford D. Smart as I geared up to hire a Director of HR. And like “every important business book” out there, Topgrading has been recommended by every who’s who in the business world. I honestly must say that the book is chalked full of strategies that promise to improve your talent acquisition process. I could spend 30+ days trying to unpack all the different tidbits I obtained by finishing this read, but I won’t. Instead, I want to share how my approach to talent acquisition has changed as a result of reading this book.

The Current Reality

The cold reality is that the average company suffers a 75% failure rate hiring people. 75% of managers hired externally without Topgrading methods are mistakes, underperformers, or miss-hires. The following chart shows the reality of talent dispersion:

The Current Reality of Most Organizations by Brian Nwokedi

The Goal

The directly stated goal of Topgrading is to fill at least 75% of positions in an organization with high performers (A Players) by hiring and promoting people who turn out to be high performers at least 75% of the time.

Topgrading companies, in contrast to their competitors, get disproportionately better talent for the total compensation dollars they spend. As ruthless as it may sound, Topgrading is all about increasing the percentage of high performers, A Players, and not being satisfied with B Players who never are worthy of a Very Good or Excellent rating.

The How and What

When you finish reading Topgrading, you are introduced to the Topgrading Interview process where you spend close to a full day accessing your potential hire. You take a chronological approach starting with school years and progressing through many questions about every job starting with the first job and moving forward to the present. The proven magic of Topgrading interviewing is to learn how the candidate has evolved across the education years and full career history.

During this tenacious interview process, you will spend hours accessing 50 separate competencies across five domains:

  1. Intellectual
  2. Personal
  3. Interpersonal
  4. Management
  5. Leadership

The following chart details the 50 competencies and ranks each competency across three dimensions of people’s ability to change their behaviors related to each competency.

50 Specific Competencies For Managers
50 Specific Competencies For Managers

Most companies have 5 to 10 competencies for most jobs, but the Topgrading method believes that for management jobs these 50 competencies are all important. This means that if a new hire is only Fair or Poor on even one of the above competencies, that new hire is apt to be considered a miss-hire. How tenacious is that?

Resourcefulness is the Most Important Competency

Early in the book (Smart, 2005, p. 36), Bradford D. Smart unequivocally states that resourcefulness is the most important competency to hire for. Resourcefulness (Initiative) is defined as:

“Passionately finding ways over, around, or through barriers to success. Working to achieve results despite lack of resources. A willingness to go beyond the call of duty and a bias for action. A results-oriented “doer.”

Resourcefulness is a composite of several competencies. It’s proactivity, energy, passion, analytical skills, and persistence wrapped into one. In common terms, resourcefulness is the brains and drive to figure out how to get over, around, or through barriers to success.  A Players all exude resourcefulness in spades. C Players never seem to develop it.

Resourcefulness is a crucial leadership skill for today’s generation of leaders. A resourceful person is one that is able to quickly adapt to new or different situations, is able to find solutions, think creatively, and sometimes manage with what they have available to them. Given today’s challenges leading during the COVID-19 pandemic, everyone is having to learn how to make do with what they have and develop a skill in doing more with less (Hardwick-Smith, 2020).

A Players Do The Following Really Well…

Summary of Critical Competencies for Upper-Level Managers

What I Will Do Differently

As a knowledge-work leader, the key to my success, in the simplest terms, is to hire the best employees, create an empowering environment, provide the necessary tools and guidance, and then get out of the way. I must continuously align individuals’ responsibilities to be consistent with their strengths, weaknesses, and interests.

“At the end of the day, you bet on people, no strategies”

—Larry Bossidy

As a result of finishing this book, I will do some things differently in my talent acquisition approach. Specifically:

  • I will look harder to find talent at all salary ranges. The focus will be on hiring A Players at the right salary level. Regardless of what we pay people, we should be sure to get top talent for the salary we can afford.
  • I will screen harder on the front end to select the right people. Time is a precious resource but more time needs to be spent in the phone screening process to eliminate B and C Players upfront.
  • I will act more quickly to confront nonperformance and redeploy chronic B and C Players.
  • I will use 360 email surveys and skip-level meetings to gain deeper insights into every manager’s strengths and weaker points, including myself!

In closing, the name of the game is to create talented teams that drive towards better results over the long term. As Peter Drucker so eloquently put it, “Culture eats strategy for breakfast & lunch.” Topgrading will help me prevent the 75% failure rate in hiring and promotions that are so commonplace in most companies. But almost more importantly, it will help me solve the three biggest hiring problems:

  1. Rampant dishonesty by weak candidates who easily get away with fudging their resumes and faking their interviews,
  2. Insufficient information, because most companies use superficial hiring methods that enable candidates to control and hide what they share about themselves,
  3. Lack of verifiability, as most reference checks are practically useless.

The Extras…

My Book Review on Goodreads

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Capital in the Twenty-First Century

Introduction

Having finished the 750+ page tome to Capital by Thomas Piketty well over a year ago, I have just gotten around to writing up what I learned. In attempting to summarize this book, I realize that there is no way I can cover everything I learned. Quite simply, Piketty has blown my mind with the depths of his research. This book is the deepest source I have ever read on how capital behaves and why wealth and income inequality are two sides of different coins.

I figure that the best approach with this write-up is to break it down into manageable chunks. What follows below is a summary of the theoretical characteristics of Capital and how it behaves in the world today as well as in the past. I’ll unpack the features of income, capital, and output and how each of these dynamics interplay with one another.

The next write-up at a later date yet to be determined, will delve into the impacts that Capital has had on inequality. I’ll unpack the structure of inequality and some potential solutions that Piketty mentions. This review is by no means a political or opinion piece. I am simply sharing some of the learnings I received from diving into this book.

With that, let’s dive in…

Is r > g the Central Contradiction of Capitalism?

The first concept that Piketty spends time unpacking is the relationship between returns on capital and the overall growth rate of the economy. Piketty boldly states that growth in the future will slow and capital will be that much more important. As economic growth slows and falls below the average rate of return on capital, past wealth naturally takes on a larger importance. This is simply because it takes only a small flow of new savings to increase the stock of wealth steadily.

Summary of the Central Contradiction of Capitalism by Brian Nwokedi

Thomas Piketty’s First Fundamental Law of Capitalism

The second concept that Piketty spends time unpacking is what he calls his First Fundamental Law of Capitalism. This law shows how important capital is in relation to the national income of a country. As the nature of wealth over the long run continues to transform (i.e., capital used to be agricultural and has since been replaced by industrial, financial capital, and urban real estate), its importance as measured by the capital/income ratio has remained steady and unchanged.

Summary of the First Fundamental Law of Capitalism by Brian Nwokedi

Thomas Piketty’s Second Fundamental Law of Capitalism

The third concept that Piketty spends time unpacking is what he calls his Second Fundamental Law of Capitalism. This law shows that countries with high savings rates and low growth rates accumulate enormous stocks of capital relative to their incomes over the long run. This can have significant effects on the social structure and distribution of wealth in a country. Piketty emphasizes that the impacts of this law are gradual and take decades to manifest. Boldly, Piketty predicts that by 2100 the entire planet could look like Europe at the turn of the 20th century with a capital/income ratio of 6-7 years.

Summary of the Second Fundamental Law of Capitalism by Brian Nwokedi

The Dynamics of the Capital/Income Ratio in Europe and the U.S.

By investigating the dynamics of the capital/income ratio of Britain, France, Germany, and the United States, Piketty uncovers that the nature of capital in these rich countries has changed: capital was once mainly land but has now primarily become housing, industrial, and financial assets. But capital’s importance remains the same.

Summary of the Dynamics of the Capital-Income Ratio by Brian Nwokedi

The Dynamics of the Capital/Income Ratio in Britain

In Britain, private wealth in 2010 accounted for 99% of national wealth and the bulk of the pubic debt in practice was owned by a minority of the population. Britain in summary is a country with accumulated capital based on public debt and the reinforcement of private capital.

Summary of the Dynamics of the Capital-Income Ratio in Britan by Brian Nwokedi

The Dynamics of the Capital/Income Ratio in France

In France, private wealth in 2010 accounted for 95% of national wealth and the bulk of wealth in France was driven by accumulations of significant public assets in the industrial and financial sectors followed by major waves of privatization of these same assets. In a sense, France is a country with a model of Capitalism without Capitalists.

Summary of the Dynamics of the Capital-Income Ratio in France by Brian Nwokedi

The Dynamics of the Capital/Income Ratio in Germany

In Germany, capitalism takes on a more social ownership point of view. Prevalent in the German marketplace is the stakeholder model of business where firms are owned not only by shareholders but also by certain other interested parties like the firms’ workers themselves. This Rhenish Capitalism has resulted in lower stock market valuations for German firms when compared to British & French firms.

Summary of the Dynamics of the Capital-Income Ratio in Germany by Brian Nwokedi

The Dynamics of the Capital/Income Ratio in the United States

In the United States, more than 95% of the assets are American-owned but the influence of landlords and historically accumulated wealth was less important in the U.S. than in Europe. However, the structure of capital in the United States took on a different form. Specifically in the South, slave capital largely supplanted and surpassed landed capital. So much so, that the total market value of slaves represented nearly a year and a half of U.S. national income in the late 18th and first half of the 19th century.

Summary of the Dynamics of the Capital-Income Ratio in US by Brian Nwokedi
Summary of the Dynamics of the Capital-Income Ratio in the South by Brian Nwokedi

Conclusion

A market economy based on private property, if left to itself, contains power forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based. My next write-up on Capital in the Twenty-First Century by Thomas Piketty will dive into the immense inequalities of wealth that have occurred as a result of the natural dynamics of capital.

Downloadable Content

Raw Notes on Thomas Piketty Capital by Brian NwokediDownload

Combined PowerPoint Presentation on Capital by Brian NwokediDownload

Extras

Brian Nwokedi’s Book Review on Goodreads

Brian Nwokedi’s Twitter Thread on Capital and Thread on the Structure of Inequality

Brian Nwokedi’s Booknotes on Youtube and The Structure of Inequality

Author’s Twitter: @PikettyLeMonde

Author’s Website: Thomas Piketty

Video: New thoughts on capital in the twenty-first century

Netflix Documentary Here

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HBR’s 10 Must Reads: On Reinventing HR

Introduction

Traditionally HR has been more about compliance than it has been about developing and managing talent, and changes in HR have been a long time coming.

After World War II, when manufacturing dominated the industrial landscape, planning was at the heart of human resources. Simply put, companies recruited lifers, gave them rotational assignments to support their development, groomed them years in advance to take on bigger and bigger roles, and tied their raises directly to each incremental move up the ladder.

But business today is far less predictable, and these “15-year plans” are no longer sustainable practices in today’s game of talent management. HR must become more agile to properly support the rest of the organization, and take its rightful place as a strategic partner to the C-Suite.

Every CEO in the world would say that employees are their greatest asset. Some would even go as far as to say that their companies are nothing without their employees. Yet traditional HR departments in most companies spend endless amounts of time, effort, and money writing and enforcing policies to deal with problems that a small subset of employees might cause.

On Reinventing HR is a collection of eleven essays originally published in the Harvard Business Review. Each of these eleven articles has been hand-selected to create a collection of impactful readings on transforming and reinventing HR in your businesses.

Outdated HR Model

Many current HR tasks, such as traditional approaches to recruitment, onboarding, and program coordination, will become obsolete, as will expertise in those areas.  The problem with Traditional HR typically is that most companies spend endless time and money writing and enforcing policies to deal with problems 3% of their workforce might cause.

As a result of these outdated HR models, companies are not properly developing their pipeline of future leaders, and the battle for talent means that companies are facing a real scarcity of top talent. Globalization compels companies to have to reach beyond their home markets and compete for the people who can help them drive their companies forward. These changing business dynamics are forcing business leaders to take a hard look at our HR functions and re-skill as necessary.

After reading On Reinventing HR two companies (Netflix and Deloitte) have undertaken some radical changes to their HR processes that I would like to take some time to unpack below.

Recruit and Chill the Netflix Way

Don’t look now but Netflix isn’t just disrupting the way we consume content these days. They are also reinventing the HR function itself. At Netflix, it starts with how they define and structure HR. Traditional HR processes and routines are organized under the finance function, while HR serves only as a talent scout and coach.

Next, Netflix spends all of their efforts hiring people that will put the company’s interests first and who will support their desire for creating a high-performance workplace. They believe in their heart of hearts that if you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing.

To accomplish this, Netflix sticks to the following tenets of talent management:

Lastly for Netflix, the best thing you can do for employees is hire only “A” players to work alongside them because excellent colleagues trump everything else. If you want only “A” players on your team, you have to be willing to let go of people whose skills no longer fit, no matter how valuable their contribution had once been. As a result, at Netflix, adequate performance gets a generous severance package when performance no longer keeps up with the job requirements.

Deloitte Redesigns Performance Evaluations

We have all worked for companies that have quarterly evaluation processes, and if you are like me, you probably dread them slightly. Partly because giving and receiving honest feedback is very hard, and partly because most performance evaluation processes are poorly designed.

Since 2015, Deloitte has been working hard to redesign its performance management system and process of evaluations. Not surprisingly, when Deloitte polled their employees, more than 58% believed that the company’s current performance management approach drove neither employee engagement nor high performance.

To improve this flawed process, Deloitte went deep into the “Science of Ratings.” What Deloitte found is that on average ratings of employees reveal more about the raters than they do the ratee’s performance. So much so, that 62% of the variance in the ratings of employee performance could be attributed to the individual rater’s peculiarities and/or biases. Actual performance only accounted for 21% of the variance. These abysmal stats forced Deloitte to radically redesign its performance evaluation process.

Now, Deloitte asks managers and team leaders four future-focused statements about each of their team members:

1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [measures overall performance and unique value to the organization on a five-point scale from “strongly agree” to “strongly disagree”].

2. Given what I know of this person’s performance, I would always want him or her on my team [measures ability to work well with others on a five-point scale from “strongly agree” to “strongly disagree”].

3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis].

4. This person is ready for promotion today [measures potential on a yes-or-no basis].

In effect, this radical redesign asks each of Deloitte’s team leaders what they would do with each team member rather than what they think of that individual, and is thus their new approach has become a much fairer system for “rating” employee performance.

My Key Takeaways

The goal of On Reinventing HR is to help people become more adept with HR strategies that will move their companies forward and raise the HR department to its rightful place as a strategic partner to the organization. Finishing this book has motivated me to spend all my time and effort carefully hiring people who will put the company’s interests first, and who ultimately understand and support the company’s desires to build a high-performance workplace. Some other key strategies I would like to employ going forward:

  • Be on the lookout for the employees who are energy creators and develop them because these are the people who get to the heart of issues, reframe ideas, create informal bonds that encourage collaboration, and in general make the organization healthier and more productive
  • Increase the number of check-ins with my people. The book has a phrase that I love: “Radically frequent check-ins.”
  • Continue to work hard to separate compensation decisions from day-to-day performance management.
  • Reconsider how we do our annual merit-based raises. Traditional one-time-a-year merit raises are less effective because too much time goes by. Radical solution: make salary adjustments twice a year.
  • Curiosity and potential are oftentimes better indicators of future success. Interview and promote those who show:

(1) The right motivation and commitment to excel in the pursuit of unselfish goals

(2) A penchant for seeking out new experiences

(3) The ability to gather and make sense of information

(4) A knack for using emotion and logic to communicate and connect with people

(5) The wherewithal to fight for difficult goals despite the challenges they face.

To close off, if you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. The problem with HR typically is that most companies spend endless time and money writing and enforcing policies to deal with problems the other 3% might cause.

You should read On Reinventing HR if you are interested in learning some tactical strategies to build your people-focused organization of the present and future. When it comes right down to it, your business is simply a collection of different people. Management and nurturing of people eat business strategies for lunch.

The Extras…

My Book Review on Goodreads

TED Talks on Human Resources

This book will inspire you to:

(1) Overhaul performance management practices to jump-start motivation and engagement; (2) Use agile processes to transform how you hire, develop, and manage people; (3) Establish diversity programs that increase innovation and competitiveness as well as inclusion; (4) Use people analytics to bring unprecedented insight to hiring and talent management; (5) Prepare your company for the double waves of artificial intelligence and an older workforce; (6) Close the gap between HR and strategy

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Measure What Matters Using Objectives and Key Results (OKRs)

Introduction

Measure What Matters is a business book by John Doerr based on the fact that ideas are easy but execution is hard. When it comes down to it the core model of execution (Objectives and Key Results – OKRs) in this book sets out to help organizations in there major ways:

·         Companies that use OKRs will focus and commit their teams to better priorities
·         Companies that use OKRs will align and connect their teams with better teamwork
·         Companies that use OKRs will better track accountability and force their teams to stretch for amazing results
The intrinsic value in attempting to use an operational model like OKR is the fact that it will focus and align your business on the most important goals that really move the needle. As an organization, consistently creating aligned goals and measuring outcomes undoubtedly leads to more clarity and job satisfaction for employees. OKRs keep you from trying to do everything.
 

What’s an Objective and What’s a Key Result?

The challenge with business books like Measure What Matters is to really define in detail the principles that book is covering. And when push comes to shove, you pick up a book like this to learn something new that can be implemented in your day to day business life. 

At the most basic level, Objectives are the “what” you are trying to accomplish. Objectives express goals, intentions, are aggressive, and realistic. Above all though, they are tangible and must provide clear value to your organization. At the most basic level, Key Results are the “hows.” Key Results express measurable milestones that advance forward the objectives. Together, Objectives and Key Results form the framework of Doerr’s operational model within Measure What Matters.

A Typical OKR Cycle

The typical OKR cycle for setting OKRs at the company, team, and contributor levels looks something like this:

 
 
 

Great. I Understand OKRs at a High Level. How Do I Actually Use Them?

The hard part with any business book that details an operational model or business process is implementation back into your own day to day business life. I am by no means an expert on any of the principles detailed within this book. But having finished reading it I will give my best attempt at detailing how to use this process in your day to day.
On page 84, Doerr gives a very simple example of how to create impactful OKRs. Using a fictional NFL team, Doerr walks the reader through the following picture:

(1) As you can see from the example the Objectives are straight forward and the Key Results are simple and measurable. 



(2) There is zero doubt what the organization (in this case an NFL team) is focusing on accomplishing this year.



(3) Poorly defined OKRs are a waste of time. Well defined and aspirational OKRs are motivational management tools that help your company execute.


(4) The very nature of the OKR process is to think big but focus and this hypothetical OKR does exactly that.

Is It Really That Simple?

The short answer is yes and no. The principles within Objectives and Key Results are easy to understand. The complexity lies in writing really good Objectives and really good Key Results. As Measure What Matters details within the appendix on Google, it can be very hard to consistently write good OKRs when you first start out. Like any new process, it takes time to get really good at it.

 
No operational system is perfect. But having a defined process in business is key to executing over the long-run. The Objective and Key Results model of operating will undoubtedly help focus your business on the objectives and goals that matter most to your organization. 
 

Extras

Brian Nwokedi’s Book Review on Goodreads
 
Direct Link to Book: Measure What Matters
 
Author’s Website: Measure What Matters
 
Author’s Twitter: @johndoerr
 
Video: TED Talk
 
 
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The Amazon Way

The Simplicity of the Amazon Way

 
The Amazon Way is a book by a former executive on the 14 leadership principles that drive their success. Above all though, it is clear the only thing that really matters is the customer. At the core of everything Amazon does from systems to the way in which they compensate their employees is this obsession over the customer. The Amazon Way is your guide into how Jeff Bezos built the Everything Store that now dominates.

14 Principles of Leadership Determine it All for Amazon

At the core of everything they do lies 14 leadership principles:
1.      Obsess Over the Customer
2.     Take Ownership of Results
3.     Invent and Simplify
4.     Leaders Are Right-A lot
5.     Learn and Be Curios
6.     Hire and Develop the Best
7.      Insist on the Highest Standards
8.     Think Big
9.     Have a Bias for Action
10.  Practice Frugality
11.   Earn the Trust of Others
12.   Deep Dive
13.   Have a Backbone – Disagree and Commit
14.   Deliver Results
These 14 leadership principles make up The Amazon Way. The following picture is my visual representation of what the Amazon Way represents to me.
The 14 Leadership Principles that make up the Amazon Way exist solely to put the customer first above all else. By obsessing over the customerfirst and working backwards from what they need, Amazon has built a rocket-ship of a company that is light years ahead of the competition.
Outsiders to the organization usually focus their attention on Amazon’s holy trinity of (1) pricing of products (2) selection of products and (3) availability of products. And while this trinity of competencies is formidable, Amazon’s true strength lies in the fact that they have built a frictionless, highly intuitive, and completely self-service platform that drives customer trust and loyalty.
As an owner of the business, each Amazon employee is expected to fully master their domain, and tenaciously manage every potential business-derailing dependency. And since they hire and develop the best, Amazon has created an organization of A-players that take complete ownership of their results.
In closing, the real scary proposition for anyone competing with Amazon is that fact that at its core, is an organization that has a pervasive fear of turning into a Day 2 company. As a result, no one is ever satisfied with what they have accomplished, and no one there seems to willingly rest on their laurels. At Amazon, it’s always Day 1 and everyone there seems to embrace this mentality. Most organizations can’t instill this relentless desire to keep learning, and this is the real challenge when it comes to competing with them head on.


Extras…

Brian Nwokedi’s Book Review on Goodreads
Brian Nwokedi’s Twitter
Direct Link to Book: The Amazon Way
Author’s Website: THE AMAZON WAY
Author’s Twitter:@johnerossman


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Plain Talk: Lessons From A Business Maverick

There are nine principles of management that Ken Iverson holds himself to. These nine areas of focus helped him build a strong and long-term oriented company at Nucor:

1. Establish a higher cause
2. Empower your employees to trust their instincts
3. Destroy the hierarchy
4. Employees are the engine of progress
5. Give your people a stake in the business
6. Stay small
7. Take smart risk
8. Ethics > Politics
9. Cash performance = long-term survival

 









Establish a higher cause within your organization that employees and managers can rally around.

 













Give your employees a consistent set of tools that will empower them to trust their instincts and intuition.

 












Destroy the hierarchy and focus on establishing an egalitarian business culture that can sustain employee motivation.














Dedicate your management career to creating an environment in which employees can stretch for higher levels of performance because they are the true engines of progress.

 










Give your employees a simple stake in the business. The more they produce, the more they should earn.

 













Small businesses allow for things to really get done. That’s the virtue of smallness.


 













Aversion to risk can be deadly in business. Managers who avoid risk and fear failure spend a lot of time cheating themselves, their people, and their companies from good risks and adventures.
 
 












Place ethics over politics… simple enough








What really matters in a business is bottom-line performance and long-term survival. Focus your efforts there.