Thoughts, reflections, and first-hand encounters in finance, operations, human behavior, and the economics of sports.
Category: Human Resources
The Human Resources (HR) department in a business functions similarly to the nervous system in the human body.
Like the nervous system coordinates and regulates bodily functions, HR manages various aspects of employee-related activities such as recruitment, training, employee relations, and organizational development.
HR serves as the communication hub between management and employees, ensuring smooth interactions and responses to workforce needs and challenges.
Just as the nervous system integrates information from different body parts, HR integrates workforce management to optimize organizational performance and employee satisfaction, contributing to the overall health and functioning of the organization.
"The Smart Machine Age will usher in an era where the smartest humans are not those that have the deepest knowledge"
--- Edward Hess & Katherine Ludwig, Humility is the New Smart (2017)
Summary
With the dawn of the Smart Machine Age, humans need a new playbook to thrive. That playbook is laid out in detail by Edward Hess and Katherine Ludwig in Humility is the New Smart. In order to reach “New Smart” you need to:
(1) Quiet your ego
(2) Manage yourself (emotions & thinking)
(3) Reflectively listen
(4) Emotionally connect & relate to others (otherness).
“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 Yet most companies still leave their talent acquisition process to chance using outdated interview techniques that lead to poor long-term results.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 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:
Intellectual
Personal
Interpersonal
Management
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
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…
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:
Rampant dishonesty by weak candidates who easily get away with fudging their resumes and faking their interviews,
Insufficient information, because most companies use superficial hiring methods that enable candidates to control and hide what they share about themselves,
Lack of verifiability, as most reference checks are practically useless.
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.
(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
