Category Archives: Organization Design

Leaders Are Made, Not Born

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Image credit: Steelforge.com

 

(A.K.A. The 1% Investor Challenge)

I often hear from CEO’s and Investors that one of their strategic guidelines is to “invest in the team” and that talent and culture are strategic differentiators. Based on my experience, I think they mean to find “ready-made” leaders and executive teams and give them money to succeed in their plans. In the past 25 years, I’ve worked with thousands of leaders from front line supervisors to middle managers, and from senior executives to entrepreneurs, founders and board members. Not one of them was a “born” leader.

Successful leaders have many stories about how their experience has shaped their approach to business, people, and customers. Many are “self-made” leaders, having learned quickly from their mistakes, adapted to unforeseen circumstances, or demonstrated relentless curiosity. All great leaders are made over time, with dedicated focus and effort toward personal and professional effectiveness. If you look closely, there is sufficient evidence in someone’s life to inspect and evaluate if he or she is effective in key aspects of “scalable” leadership, but this is too often left unexamined by investors.

Having worked side-by-side with founders at dozens of start-ups, I can tell you the demands on company executives are tremendous. They face high speed, complex, ambiguous, uncertain conditions all day, every day. It strikes me as odd that investors don’t actually “invest” in the leaders of their companies. They hand over millions of dollars to the Founder/CEO to build a company, but they rarely spend any of it on the leaders themselves. I think this is an incredible oversight in diligence, and a gaping hole in fiduciary responsibility. Hope is not a strategy.

It seems unreasonable to assume a CEO (even a serial entrepreneur) will be successful leading a fast-growing, 100+ person organization with no attention to his or her personal effectiveness. Their very nature makes it more likely they will end up like Travis Kalanick than Sheryl Sandberg. Leading a complex organization (anything over 40 people) requires a well-honed set of interpersonal skills, professional presence and strategic talent planning (see Facebook and Google) to be successful. Yet most investors stand by passively while CEO’s and executive teams struggle with leadership basics and burn their money. The failure rate of start-ups is very high… conventional wisdom says 9 out of 10 don’t make it. There is much agreement that leadership and management mistakes are often the main cause of failure.

Recently I’ve approached dozens of venture capitalists and private equity investors with a proposal to invest in their executives through proven leadership tools and programs. Nearly all of them have responded with some form of “that’s nice to consider some day, but we don’t have enough money right now.”

Huh?

What they’re really saying is, we don’t care about the actual people in the company. We make a bunch of investments and hope like hell at least 1 pays back enough to carry the fund. This is called spreading the risk, but is essentially gambling. All that people stuff is too messy and soft to address so they just ignore it.

I think it’s time for investors to start owning the outcomes of their lack of attention to leadership and talent. If you want to make a difference in the world by building companies, you should conduct diligence on your executives, not just the company finances, addressable market and customer traction. If you think talent and culture are strategic differentiators, ensure that proper efforts are being made to develop the CEO and the executive team. Otherwise you’re just hoping some whip-smart founder will somehow figure out how to transfer zero experience working in groups to high impact organizational leadership.

I’m here to tell you that execution matters,
and execution is all about people.

The average Series A deal size in 2016 was $5M. Series B average was $12M, and later stage deals average over $25M. I’ve heard more than one CEO say they put their money on advertising and engineers, not HR. That might get you traction, but it won’t get you sustainable high performance. If you are in the game for a quick flip, I get it. But if you are really trying to build a high performing company, leadership is not “nice to do,” it’s an essential catalyst that unlocks sustainable growth.

Here’s my challenge to any investor willing to test it:

Earmark 1% of your next investment for executive development. If you’re putting in $1M make sure $10K is spent on development for the CEO and the leadership team. If you lay down $10M, certainly a $100K investment in the top team will improve your chances of success. Even better, consider investing 1% of your total fund in the proper resources to support leadership development in the full portfolio. You can achieve much better economies of scale and cross pollination in that approach. You can even develop a unique portfolio advantage by doing this better than other investors. It’s a true value add for your money. And it will pay you back with better performing companies and a pool of talent you can tap over the long haul.

I understand that not all development is worth it, and that some efforts are a complete waste of time. Run your 1% investment like any other A/B test. Identify the intervention and track the progress. If you have any questions about what kind of leadership development works best, feel free to contact me or check in with an executive development specialist you already know.

If just one more of the companies in your portfolio steers clear of the failures of executive leadership your fund will be twice as good. That’s smart money.

Customer Centered Leadership

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Ladies and Gentleman, The Beatles!

If ever there was one best Business Guru, it would have to be Peter Drucker. His work emerged during the height of the Industrial Age and serves as the foundation of management practice in most businesses today. Just like picking your favorite Beatles song (A Day In The Life), it’s kind of hard to boil his work down to one statement. But here’s mine:

Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business (The Practice of Management, 1954).

There is one word in this quote that might need to be modernized, but only because we can assume Mr. Drucker was naturally influenced by his era, and not yet hip to the power of design and the more recent practices of customer empathy. To make the most sense in today’s world, I propose we change the word “create” to “discover” as it better underscores the idea of providing something for a customer versus selling them some new widget. We’ve certainly learned by now that the world will NOT beat a path to your door if you build a better mousetrap (Ralph Waldo Emerson). Customers will flock to your company only if you are solving a problem or fulfilling a need, even if they aren’t aware they have it yet.

Marketing is responsible for discovering customer needs and innovation is responsible for solving them. Hand and glove. Many innovators have an initial customer insight and design a solution for that. Often this is “design for self” where the solution feels right to the one inventing it. I’d say most early stage businesses created only a minimum viable product or have no sustainable advantage, so quickly burn through early stage growth and stall. In today’s Internet fueled, flat world, companies can go through this initial growth stage in a matter of months. In the good ‘ol days of Henry Ford, it could take years to run out of the initial growth stage (perhaps 125, if they don’t get busy quickly at Ford).

The only way out of this problem is to understand your customer intimately, and adapt to the continual pace of change around you. This requires a new kind of corporate framework. The pace of business technology is moving so fast that people are now able to see the real impact of robots, machine learning, and computing power as human jobs are replaced by automation and artificial intelligence. Left to the Industrial model of organization, people are essentially machines who can be replaced with technological advancement. To function in our high tech, rapid change world companies need to build human centered organizations or risk losing all ability to market and innovate. This would be a very bad state for businesses because they would soon be without customers with no human insight, synthesis, or creativity operating within their organization.

Human Centered Organizations

Traditional businesses are built in a hierarchical model that works well in a predictable, stable business environment. In the past several decades, as uncertainty and change increase, there have been plenty of replacement designs proposed (e.g. Holacracy, Heterarchy, etc.). But these distinctions are missing the point, and therefore don’t solve the problem. A human centered organization isn’t a different way to decide or control, it’s purpose-built to enable creativity and collaboration. These are the two essential capabilities underlying the best marketing and innovation functions. Under the dominant hierarchical world, we’re stuck searching for Purple Squirrels to build Unicorns. Wait, What? We’ve designed companies that need extremely rare people to achieve what is now the expected standard of venture capital investments. Sorry, but I can’t help myself, here’s my other favorite Druckerism as it relates to organization design: (Beatles #2=Love Me Do)

No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings.

To be successful in today’s world, and achieve the purpose described by Drucker, businesses must enable average human beings to perform at their best. To perform at their best, people need to be well. I’ve covered this part before so I won’t re-hash it here. I will suggest a new label for human-centered organization design for those seeking a simple way to net this out: reciprocity.

Reciprocity

Reciprocity is the organizing principle of a human-centered organization. It is built on the seminal economic insight from the Prisoner’s Dilemma. The essence is that cooperation is natural for humans and better than the rational choice of selfishness. In common terms, we’re talking about “win-win” here. Most traditional organizations are designed to control for selfish/rational behavior and become disengaging as they dehumanize and under value collaboration. A reciprocal organization empathizes with human failings and has support and resources designed into the system to encourage higher order behavior in three ways:

1. Growth Mindset
2. Personal Effectiveness
3. Everyday Presence

When organizations are designed to support employees in these three areas they are far more creative and collaborative. Therefore, they are better able to market and innovate, which is to discover and solve customer problems.

Moving from Performance Management to Performance Dialogue

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I just finished reading Let’s Not Kill Performance Evaluations Yet by Lori Goler, Janelle Gale and Adam Grant. I am in full agreement with the premise of their article: that performance evaluations can have real value to employees. I think it’s clear that understanding “where you stand” is better than having judgments hidden in a black box, only to surprise you when it’s time to discuss a salary increase. After all, open sharing is a natural aspect of constructive human relationships, so it’s destructive to have a secret evaluation going on behind your back.

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Throughout the article they made excellent points, using research to show how most employees would rather have an evaluation than not. I’m not a fan of “killing” reviews, so I am happy to have a solid piece of writing to show that’s not a great idea. Most people would agree that something is better than nothing, and if you’re going to do traditional performance management, I think the approach described at Facebook would be called “best practice.” Best as they point out (among others like Jeffrey Pfeffer) means you gather input from multiple perspectives, evaluate performance over time, and attempt to remove bias from the written discourse (BTW, I love that they are so committed to removing bias, but have to say that most companies I know simply don’t have a “team of analysts” available to conduct that step). Best also includes translating performance ratings into compensation.

Despite the clarity of their points, I still don’t think “best practice” is good enough to make traditional performance reviews worthwhile. Even when done with as much care and diligence as described by Facebook, it’s still a very time consuming, expensive, and unsatisfying process for most participants. It’s still a dreaded, necessary evil that people must suffer through in order to be considered for a raise. I’m not sure how satisfied Facebook employees are with the reviews process, but other research on performance appraisals shows satisfaction levels are well below an acceptable level we’d apply to any other business process. Can you imagine if you accepted a 65% CSAT score as “good enough” in your customer contact center or any kind of product quality standard?

So while something is better than nothing, I think it’s unacceptable that such an expensive investment would be “okay” at anything less than 90% satisfaction for participants.
The trend to “kill reviews” is misguided, but understandable. I think the real problem with performance reviews is more fundamental than the issues of transparency, perspective, and bias. Fixing these issues assumes a paradigm about people and work that is functionally out of date and misaligned with what high performance people need to be successful. Ask one successful entrepreneur when a performance review helped them improve (actually ask them all!). I think that’s um, never. That persona couldn’t even stand getting through school, let alone have a boss give them a rating. Isn’t that a really interesting conundrum? It makes me wonder if there might be other dynamics underlying high performance that we don’t fully understand in the HR and OD bubble.

original-faxTo me, using performance reviews is like using a fax to send information to your insurance company. They need paperwork to justify their actions because their processes and tools are built around audits that review PAPER. Their well-designed controls don’t allow their agents to have email addresses or a printer, so you can’t send an attachment for them to print and file. Because of their sunk costs in legacy systems, customers have to print, sign, scan and fax so their agents have something physical to file. Despite the fact the paper actually originated in some “newfangled” digital transaction. Pretty crazy, huh?
Solving the problems with performance reviews is not about how to deliver them better, it’s about taking a step back to wonder, “What’s the best way to help people perform at their best?”

This might seem like a tangent, but in order to truly fix performance reviews, we need to dig deeper into today’s relevant human performance dynamics and create an entirely new design paradigm. Here are some warm up questions to stretch your thinking and start looking at this problem from other angles:

How do we know if people are doing good work?
How do we know if people are doing the right work?
Why do we care about the answers to those questions?
Why do entrepreneurs achieve so much without getting reviewed?
Why do entrepreneurs succeed without having a boss?
Why do some sports teams overachieve while others don’t?
Outside of business, what are other situations where work quality matters?
What do we know about evaluation in school versus evaluation at work?
What do we know about evaluation in families?
What motivates people to do good work?
How do you measure human output?
Who should measure human output?
What information do people need to perform at their best?
How do salaries get set?
Do bonuses motivate people?
What is performance? How do you know when it’s effective?
When have you experienced a performance insight? How did you get it?
When you have you done your best work?
What makes you call that “your best work”?
Why is the sky blue? (Just kidding!)
What’s the difference between effort and output? Do both matter?
Where have you observed “high performance” in action?
What are the conditions that create high performance?
What kinds of relationships exist in high performance situations?
What kinds of relationships exist in low performance situations?
Are relationships an important factor in high performance?
How does the human brain react to threats? What does it do to our body?
How does the human brain react to challenges? To rewards? To compliments?
What is the language of high performance? Are some words better than others?
Where did the term feedback originate?
What’s different about work today versus work 25–50–100–1000 years ago?

I’m sure you could come up with dozens more questions as you pick apart the situation and begin to wonder with a “beginner’s mind” what performance reviews are all about. The next step is to define a clear problem statement that motivates us to persist in this now completely messy process. This is about finding satisfying answers to these questions:

What problem are you trying to solve?
How do you know you have this problem?

To move us forward more quickly here, I’ll share some of the work I’ve been doing over the past decade while struggling with this persistent and complex challenge so many companies face. It took me several attempts at making performance reviews better before I decided to zoom out and rethink the whole concept. I built “best practice” processes at Citibank, Levi Strauss, and Mercury Interactive before arriving at IDEO, where implementing a best practice review system was abhorrent to even consider. Since I was forced into finding a different way, I adopted IDEO design thinking techniques (When in Rome…) to help me create something that would work there.

I interviewed dozens of IDEO designers and support staff to hear their stories about performance reviews, feedback, and other related topics. I did a review of the literature and conducted benchmarking conversations. Not surprisingly my anecdotal discovery netted strong negative feelings about “being reviewed” but thankfully provided all kinds of cool ideas for making improvements.

Well into the process, I asked a sharp young designer in Boston what he thought of 360 reviews. Instead of answering about his experience receiving a review, he flipped the question and answered about giving them saying, “I don’t have time to give feedback to others!”

Given the supportive and collaborative nature of IDEO folk in general, I was taken aback. I asked him to explain a little more, and he gave me the spark that would fuel my approach from then until today. He described how he didn’t think it fair to give someone half-assed, quick snippets of feedback, and that doing a good job of giving helpful, high quality suggestions is a huge burden in addition to his regular work. In his opinion, it was an extreme disservice to provide feedback that was not well thought out and thorough. People would be counting on that information to learn and grow, and providing anything less than would be damaging and wrong.

I had to steep in those comments among the hundreds of other Post-its I had gathered until I found a pattern to guide my design process. The big insight is to recognize that the person who benefits most from feedback is the person receiving it. Sounds simple, but with closer consideration, it reverses the feedback dynamic from giving to gathering. In my experience, most performance management systems are designed from the perspective of the manager or the company. Seeking to “manage” limited financial resources by differentiating people based on their performance is a controlling paradigm that negates the value of feedback from the git-go.

If instead, we start from the perspective of the individual, the problem statement becomes How can I find out if I’m doing my work properly? and a separate issue of Am I getting paid fairly for the work I produce?

So while performance management is about evaluating performance over time, performance dialogue is about discussing the focus and quality of work.
Over time, I’ve clarified this into to 2 separate conversations people need to conduct at work, each with 2 driving questions:

Conversation 1: Evaluating my performance:
Is this the right work for me to do?
Is this work I’m doing good enough?

Conversation 2: Navigating my career:
Do I have the capabilities necessary to succeed in this job?
What capabilities do I need to progress in my career?

Once divided into these 2 conversations and 4 questions, building a process, tools, and procedures to help answer them looks much different than the performance review we all know and hate today. The associated design questions in the new paradigm might look like this:

Who can help me answer this question?
(Satisfies a need to identify key stakeholders like manager, peers, clients)
What are good ways to gather input from others?
(Based on deep understanding of predictable human dynamics)
How can I make giving input/perspective easy for my stakeholders?
(Places the burden on me not them)
How do a make sense of their answers?
(Leads to tools like a survey I can use to increase my skill/efficiency)
How often should I ask these questions?
(Helps me define the nature of my work)

In its most recent iteration at Thrive Market, I’ve started using a technology platform called 15Five to enable Performance Dialogue and make it scalable and efficient. 15Five provides the organizational reporting framework, a bundle of great question-building tools, and modern ways (like social media) to engage others in collaborative discussions about the focus and quality of work. But technology alone is not sufficient to make this fly. The “self-directing, self-correcting” behaviors we need to achieve personal and professional growth require refined interpersonal skills and attitudes, so we provide a basic training workshop and coaching to help people understand and engage in the process effectively.

So, How Do I Get a Raise?

Compensation is an agreement between an organization and an individual to pay a certain amount of money for a certain amount/type/scope of work. Performance Dialogue has no direct connection to compensation. Zero. Zilch. Nada.

Performance Dialogue ensures work focus and work quality because it is a discussion about work not an evaluation of it.

If you want to have high performance, creativity or innovation in your organization then people need to take risks. If you tie performance conversations to compensation they get corrupted because nobody will share a mistake or challenge under the fear they will get dinged in their rating.

To determine someone’s compensation, you need to evaluate her capabilities against the market. It is a completely different conversation that you have once or twice a year, and is essentially the same process you use when you interview someone for a job in the first place. What does their experience indicate they are the able to do? What job responsibilities can they reliable accomplish? What is the evidence that they are capable of doing the job (and at what level of scope/responsibility/impact)? People with more capabilities generally earn more, so if someone grows in her capabilities, she should get a raise in accordance with what the market would pay her. The fundamental switch here is moving from evaluating performance against goals to evaluating capabilities growth. To clearly distinguish it from Performance Dialogue, I call this process Career Navigation.

Wait, what about poor performers?

Basic performance is a binary problem. Either someone is putting in the effort and making progress or she/he is not. If you determine that someone is no longer interested in putting in the effort, or is substantially unable to do the work, it’s time to part ways. This should be discovered over time via Performance Dialogue and handled long before you engage in Career Navigation discussions. Keeping someone on your team who is not able to do the work is a disservice to everyone involved. Act with care and compassion, but follow through nonetheless.

This is really different

The paradigm shift from manager-led to individual-driven, should not be underestimated as a radical change for most people. In order to engage in Performance Dialogue and Career Navigation successfully, people involved have to operate from a growth mindset, not a fixed one and use inquiry and curiosity (not fear) as the motivation to participate. They also must interact with colleagues, supervisors and clients in a reciprocal partnership and avoid the paternalistic tendencies in most manager-employee relationships.

Behaving with reciprocity does not mean turning the dialogue into a consensus or compromised endeavor that makes everybody feel good. Managers still maintain decision making authority and have the responsibility to ensure goals and standards are met. Employees gain more explicit control over their career options.

The big difference in a reciprocal relationship is the use of questions and agreements, not directives and mandates. It rests on the power of an unconditional, positive question not a passive-aggressive statement disguised as a question. In a Performance Dialogue world, nobody should walk away feeling “tasked” to do something… that’s the old paradigm creeping back. It might take more time up front, but I think it’s better to invest in core development and enable people to become self-directing and self-correcting “creators” over designing a high control system that assumes people are pawns.

Culture is a capability

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A culture defines the normal way people behave in a particular group. It provides the cues, boundaries, guidelines and encouragement that help individual members of a group know what is right and what is wrong. Culture guides decisions that result in actions. The best way to understand a culture is to pay attention to actual behavior and study evidence created by the people of a particular group. It’s also great to compare groups in order to discover similarities and differences in their cultures, which is what the field of Anthropology is all about.

Image by David Rowan

Image by David Rowan

Get Specific

In the context of a company, I often hear people say things like, “We have a winning culture here,” or “We’re building a culture of innovation,” or “Our culture is defined by our values,” etc. These could all be true statements, but they are not very useful as descriptions of their particular cultures.

To describe a culture you need to identify specific, notable ways that people interact and find evidence that these ways are useful by the members of that particular group. If a company has a culture of innovation, we should be able to observe characteristics and behaviors by the people there that result in innovative outcomes. We should find artifacts of that behavior that are cherished and celebrated as the great examples of what the call innovation.

If the culture is strong there should be stories about how a certain leader did something unusual or even strange to other companies that resulted in a great outcome. This is why “founder stories” are so important to young companies. They describe the key insight or heroic behavior of the people who start a company and allow others to act in similar ways to get similar outcomes… resulting in a consistent pattern of behavior (culture!).

There is no “best” culture

I’ve had the great privilege of working in some of the world’s most innovative companies (as defined by Fast Company magazine) including IDEO, Charles Schwab, Levi Strauss, and Hulu. One thing I can say about all of them is that leaders there believe their cultures are a significant reason for their success. Another thing I can say, having been up close and personal in all of them, is that they are each distinctly different from the others. So while they may all have “winning” or “innovative” cultures, there is not a common culture across them. Behaving one way at Levi Strauss could actually get you fired at Hulu and vice-versa.

To understand what is innovative at IDEO, you just have to listen to the stories they tell each other about great moments in the company’s history. In fact, so many people ask IDEO about their culture, nearly any person who works there can point to examples of their innovative behavior that resulted in breakthrough product designs like the first Apple mouse or the Crest Neat Squeeze toothpaste tube.

What every leader should know about culture is that it has to be defined, built and actively managed if you want it to help your business succeed. In most cases, culture should be defined in response to a business problem, not in advance of one. I don’t believe there’s such a thing as “the best” culture that could be built first and then applied to any business problem. So just like a supply chain for making shoes would be different than a supply chain for making cars, each culture should be constructed to address the unique challenges of the business at hand.

Culture is not a statement of ideals

Culture should not necessarily be a reflection of the founder, CEO or executive team—although leaders must behave in accordance with the culture or it is unlikely that others will follow. Lip service to a value like customer service, followed by actions that don’t treat customers well will not build a customer-centered culture. All of the advertising dollars in the world will not make airline customers feel treated with respect if they are dumped from flights for unexplained reasons even if there’s a video of the CEO pronouncing that he personally cares for every customer who flies with them. A founder is often an architect of the cultural blueprint, but cultures are dynamic and change over time. What worked for the original 20 team members may not scale and should be adjusted to the demands of the business over time. Retain the essence but refine the whole.

Culture is not simply a values statement or a manifesto. Culture is a capability that provides direction and support to every member of an organization in order to achieve a strategic objective. Great leaders understand that culture  should be carefully managed to achieve their organization’s full potential.

[This post also appears in the Bulldog Drummond blog Uncommon Sense]

Working Human

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[In case you didn’t catch it… this is a re-post from my guest blogger contribution to the Bulldog Drummond blog on June 19, 2012]

Does this look engaging? (photo by jurvetson via Flickr)

For far too long, we’ve been operating under management philosophies that undervalue being human. The Industrial Revolution did a lot of good things for the world, but the organizations designed to support manufacturing businesses common in that era are not one of them. They are hierarchical and rigid and have little allowance for human variation. Even in their friendliest form, they are paternalistic, placing the burden of responsibility on a select few in positions of authority.

Mechanistic terms and phrases used to describe people and how they work together like: creative engine, mental horsepower, well-oiled machine, weakest link, and human capital are woven through our everyday language. I’m all for the creative use of metaphor, but I think in linguistic terms, the ubiquity of these terms points to an underlying framework that is decidedly not human. At the heart of the industrial view of the world is a reductionist philosophy that leads people to break everything down to the component parts and attempt to optimize the fit and performance of each item in isolation. The problem is humans are not that simple. We can understand how molecules stick together and how synapses fire, but they don’t actually work in isolation of each other. The whole is greater than the sum of its parts. People have soul, and heart, and passion.

The effect of not having a human-centered framework for workplace design is decidedly negative. According to the Gallup Management Journal, only 29% of U.S. workers are engaged, while 56% are not engaged, and 15% are actively disengaged. That is, when people are treated (even subconsciously) as machines, they don’t perform at their best. They might do what they are told until they no longer have to, but they are not inspired to create, build, or serve in ways that leverage their full potential and deliver great value.

Join the Human Revolution

Most organizations we know today are built to be stable and predictable, using rigid specifications honed by financial metrics. But there is increasing evidence that this type of organization doesn’t do well in environments that are transforming, ambiguous, or complex (Think: Dinosaurs). See more on this comparison in The Connected Company by Dave Gray. So this is a call for organizations of all types, whether they are businesses, governmental agencies, community groups, schools, or sports teams, to rethink their fundamental principles of organization and shift from industrial age thinking to a human-centered design that helps people thrive.

This shift is intimidating. It’s about losing control and building trust. It’s about helping people grow versus boxing them in with rules and boundaries. It requires a belief in the innate greatness of human kind versus a bureaucratic defense against slackers and cheats.

But the rewards are substantial. Organizations of all types struggle with low creative output, poor service, and declining productivity. Optimization and consolidation can only squeeze performance on the margin so much. For sustainable high performance in service, innovation, invention, or productivity, people must be at their best. And to be at their best, they must be well.

Even in stable environments, where companies make big investments in predictable consumer patterns (like retail or automotive), people perform better when they are treated like people, not cogs in the machine. The Gallup/Healthways Well-Being study demonstrates a very clear economic advantage of employee well-being when you understand the impact of absenteeism, illness, and low engagement on a company’s bottom line.

Before Engagement

Progressive organizations are already committed to the idea that employee engagement drives high performance. But many of these companies still approach engagement with command and control tactics. In response to a slippery company culture concern, I recently heard a very successful business leader say, “Give me 120 minutes with our managers and I’ll tell them how this is supposed to work.” Sorry, but you can’t order people to be good leaders. Or be creative. Or give good service. Or invent a new technology. They have to want to do it themselves and make very difficult emotional, social, and intellectual trade-offs to get there. See a comprehensive view on this point by Daniel Pink in his book Drive.

So while engagement is a great leading indicator for high performance, it’s a lagging indicator of wellness. That is the capacity to give discretionary effort and highly valuable contributions depends on individual wellness. If you are not well, it’s very difficult to be fully engaged.

Viewing wellness as a foundation for high performance makes it more clear what things an organization should have in place to help people perform at extraordinary levels. This is where things start to get messy, because in the traditional relationship of employee and employer many of the requirements for wellness are considered private or “none of your business.” But if learned one thing in graduate school, it came from professor Charles F. Luna: Things that matter are messy.

photo by sanchom via Flickr

Being Fully Human

Many people associate the term wellness with physical health. It’s not hard to understand that proper nutrition, rest, and exercise lead to higher levels of energy. So let’s just start there: What is your organization doing to help your people in these areas? Do you have recess? Do you make people take time off? Do you provide healthy food options as snacks?

But don’t forget that physical health is only one piece of the wellness puzzle. Well-being is about being fully human, which also includes dimensions of mental, social, spiritual, and emotional health. Philosophers have worked on the definition of “being human” since the beginning of recorded history, and probably before then. Aristotle, Maslow, and more recently a slew of companies like Daily Feats, Me You Health, and Kairos Labs have outlined broad models for well-being.

The desire for wellness is not a new phenomenon for us humans. Conventional wisdom is dripping with advice for how to live a good life. Phrases like an apple a day keeps the doctor away; peace (complete with two finger gesture); never go to bed angry; early to bed early to rise makes a man healthy, wealthy, and wise; etc. are “rules of thumb” developed over generations to show the way to balance, fulfillment, and happiness. Research on happiness has boomed recently. I’ve even seen it stated that happiness is the new currency.

So wellness is not new, but it’s very elusive. For many of us it’s very hard to pay attention to all aspects of wellness simultaneously and adjust our habits to get there. Worse, much of the conventional wisdom or common sense tactics for living well are not tested, and some are quite simply wrong. See more on positive habit formation by Timothy Wilson in his book Redirect.

Work is Life

I think the biggest failure by organizations in this regard is the separation of “work” and “life”. Work, as we’ve defined it for centuries, is a burden to bear, not a form of pleasure. And Life is something you do when you are not working. So we “work for the weekends” and then “live it up” only to “get back to the grind” on Mondays. Shoot me now.

Certainly many people along the way have enjoyed their careers and found joy in their efforts. But the dominant mindset of corporations and institutions is to root out all “softer” elements of working under the banners of focus, optimization, and efficiency. Office cubes, assembly lines, warehouses, and even schools and hospitals have been designed to remove critical human needs like friendship, beauty, and laughter, so workers can focus and get shit done. Most corporate policies, procedures, practices, and routines are built on the same blueprint of efficiency and optimization. But all work and no play, makes Jack a very dull boy (Check out this great scene from The Shining to see what I mean!).

There is hope in world of work. Companies like 3M, IDEO, and Google are famous for their humanistic values and have great results to show for it. Zoom out and this transformation seems overwhelming. So you’ll probably just stay the course and ride this out until retirement sets you free.

Zoom in and focus on just one thing you can do tomorrow to start working like a human. Take a walk in the middle of the day. Eat grapes instead of a bag of chips. Personalize your desk with a plant or drawing from your favorite 5 year old. Every little thing counts, but you can’t count unless you do something.

Okay, get moving!

 

Innovation is a competitive capability

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Companies are forever talking about how they need a culture of innovation, or that innovation is a global initiative for the next important phase of the business, or that innovation will be the engine to drive the company to new levels, etc. I’m sure you’ve seen the word innovation thousands of times in business media in only the past month.

Innovation is nurturing growth

But, really, what is innovation? It seems to be an exciting concept with a lot of fuzzy edges and an elusive magical aura. Few companies could say they have a handle on innovation as a capability they manage like other aspects of their business.  Those that do are amazing and powerful (check out this growth chart for Apple). Innovation makes an organization competitive because it is measured by growth in new products and services or growth in new users (or both).

More often than not, the World’s Most Innovative Companies are a flash in the pan (Groupon?), or have a short tenure at the top of the list and then gradually fade into normalcy. This makes innovation seem even more mysterious and slippery… something to admire, but too vague to manage.  Something based on size or timing, not a sustained advantage directed at a market.

So how can organizations get this capability and why is it so elusive? Let’s start with the elusiveness first. Roger Martin, Dean of the Rotman School of Management, explains that many businesses have a hard time with innovation because it requires a different mindset than the way most business people approach problems. In his book, The Design of Business, he identifies three types of logic necessary for effective problem solving: deductive, inductive, and abductive. 

The problem is, most of our schools and businesses teach and practice only inductive and deductive reasoning (abductive isn’t even in my spell checker). Frankly, most of us don’t chat about formal logic over coffee and donuts, so you can see why this makes innovation slippery. The less formal version of this logic is often called design thinking and was pioneered by IDEO. But that term is awkward because design is associated with fashion, graphics and art, while innovation is more about doing than thinking. So, I just call it the capability of innovation.  I don’t disagree with Bruce Nussbaum’s focus on creativity, but that still feels incomplete to me.

The capability of innovation is a compound set of three skills that enable you to solve problems for your customers: rigorous observation, creative wonderment, and risk management. Whoa. Did you say wonderment? Yes, yes I did. (see Phineus and Ferb) Innovation is about coping with ambiguity and uncertainty while constantly moving forward to discover new opportunities. Since most business people haven’t developed these skills in their formal training, not knowing the best path forward makes them uncomfortable. So they stick with what they know, which keeps them locked in the present.

Three core skills of innovation

1. Rigorous observation. This is about being obsessed with your customers in action. This obsession involves asking questions, taking photos, and simply watching what they do (and don’t do) when interacting with a product or service. Ironically, many product managers defend their product deficiencies by saying customers didn’t behave as they should (at least they notice the gap!).

2. Imaginative wonderment. Instead of defending them with deductive reasoning, an innovative product manager would ask, “I wonder why that happened?” This is a moment of truth where innovation will live or die. If the leader shifts reasoning modes and becomes curious, the next step is to explore what could be happening instead of defending what is happening. This is not magical or fluffy, it’s a rational leap based on an observed pattern.

The exploration process that underpins imaginative wonderment is essentially the scientific method. It is the rapid iteration of possibilities that are tested against audacious goals (Like Thomas Edison and the light bulb). An emerging solution to a customer problem is driven by simple questions like, “Why not?” but is also constrained by feasibility (can it be built?) and viability (does it make business sense?). This exploration is both serious and fun. Systematic testing and elimination of ideas and options requires discipline, tenacity, and rigor. Generating an endless array of possibilities to test is playful, energizing, and empowering.

3. Risk Management. Overcoming the challenge of risk in innovation starts with a better understanding of the difference between innovation and invention. The dominant (but false) understanding that innovation comes from a blinding flash of insight, or from a lone genius that sees the world from a different angle, makes innovation seem untenable. How is a company supposed to plan for genius to occur? What’s the timeline? No wonder it’s not supported.

Innovation is not driven by breakthroughs in technology… it’s the opposite. Innovation is driven by commitment to satisfying customer’s needs and keen observations about what is and what is not working. These observations push the limits of technology and force the breakthroughs. Innovation in practice couldn’t be farther from being a lone inventor in a lab. Innovation is a collaborative, hands-on experience, taking place on the front lines with customers.

So the way to manage risk in innovation is first to stay very close to your customers, second to create a portfolio of innovation projects designed to solve their problems, and third to move very quickly to determine what doesn’t work so you don’t waste time and resources on unacceptable solutions.

Not every idea will evolve into an innovative solution (either attracts new customers or more engagement from current customers). An effective innovation portfolio should work much like an effective stock portfolio. There should be a mixture of incremental improvement ideas, evolutionary ideas, and revolutionary ideas. Investing in a balanced portfolio of several ideas mitigates the risk across all of them instead of placing “all of your eggs in one basket.”

Innovation is not whimsical, magical, or fluffy. It’s not accidental or even unpredictable. The problem with innovation for some companies could be that it’s more about nurturing than managing, a human-centered style not often associated with the titans of business.

 

Be well. Work better.

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When I think of wellness, I get images of Richard Simmons and Japanese workers in matching sweats during corporate exercise programs. Too bad. Unfortunately, wellness wound up marginalized as a silly fad in its first big corporate movement during the 70’s and hasn’t really recovered.

Not an inspiring image of wellness for most people!

Sure, there are lots of companies touting the value of perks in today’s world (my favorite is BetterWorks). But most people still shy away from the term wellness.   Well I think it’s the best word to define this successful human condition, so as Bono says, “I’m stealing it back.”

Physical health is only part of the equation

One of the big problems with wellness is that it’s so closely associated with physical health. But true wellness is a multidimensional issue involving your whole self, not just your body.  This is of course, not MY idea, but I’m focusing on it here because it’s such a misapplied aspect of being human by so many of us, and it’s so critical to sustainable high performance.

Abraham Maslow was on the right track with his Hierarchy of Needs, showing us that some needs are more fundamental than others, and that humans are motivated to get beyond the basics and become creators of good things in the world.  And it’s likely that people have explored the holy trinity of mind, body, and spirit from the beginning of time, but even that extension beyond “body” is incomplete.

Somehow in modern America we commonly reduce wellness to physical health, and make that a personal responsibility to take care of in isolation of work and family.  You go to a doctor when you are “sick” and he/she tells you what you should do to fix your body to regain health.  I don’t think many doctors prescribe social remedies, but the now famous Framingham Heart Study, effectively shows that health is highly dependent on social interactions.

A complete model of wellness

Based on discussions with thousands of people via research at IDEO and the YMCA, I’ve developed a simple way to evaluate wellness in a holistic way.  The model was developed from patterns that emerged when people were asked, “What makes you feel well?” Their responses were captured, and then categorized into these dimensions of wellness.  For another complete view of well being check out the Gallup model.

User defined dimensions of wellness

  • Wellness is individually defined (there is no prescribed “best state” for everyone).
  • Wellness has rhythm (sometimes you feel more well than others).
  • Wellness is about balancing choices (not applying a routine or formula).
  • Wellness is about control (for some it’s “in” and others it’s “out”).

A first principle of human centered organizations

From a business standpoint, employees with low levels of well being are far more expensive than those with high levels of well being.  But this “loss of work” cost based approach doesn’t even consider the “opportunity costs” of not being on top of your game on a regular basis.

Gary Hamel is leading the world to reconsider their fundamental models for organizing and leading people with his Business 2.0 Challenge.  He suggests that this process starts with rethinking principles, and I fully agree.  Furthermore, I’m suggesting that a fundamental principle of business success is individual well being, and it is a primary element of successful leadership to be well and to lead others to wellness.

So my call to action here is that businesses need to rethink their fundamental relationships with the people who work there.  If a holistic model of wellness is critical to high performance, then issues that are often considered “private” or “personal” in our traditional models of management become essential in employment relationships.  Much of this will be discounted as “coddling” employees with yet more benefits and perks, but in today’s world of business where creative thinking and critical problem solving are often the source of competitive advantage, I’ll bet on wellness as a strategy.

Hello Hulu!

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I’m getting my feet on the ground in my new role at Hulu, and after meeting dozens of people in my “getting started” process, I’m noticing some interesting things about the place.  Watch this space over time… I’ll take stock along the way and see if these patterns bear out and I still see them as important.

Here’s what I’m noticing so far:

1. Focused, like a laser. Maybe this is obvious in any start-up environment, but it’s very clear that people know why they are here and what they are supposed to be doing.  With this focus comes clarity of purpose and unity of efforts.  This is not heads-down, buried in my work kind of focus… rather, it’s a collaborative, prioritized list of action items getting checked off without distraction.

2. Urgent, like I’m late. This is fast motion, high energy urgency like you see in professional sports.   If you like my “Hockey is Life” series, my experience so far reminds me of the lesson about winning the short races.  And, this is not a panicky running around like chickens, this is a confident and relentless pressure to move forward quickly.  There’s no time like the present to get stuff done… now (is that redundant? Doesn’t matter, get it done)

3. Eyes on the horizon.  It seems everyone is scanning the world at all times.  There is a continuous thread about user needs, client needs, technology trends, and industry subtleties woven into everyone’s work dialogue.  This external orientation keeps things simple, and allows for a cultural value called “frugality” to thrive.  This means invest in the things that matter the most and avoid those that build comfort or create distractions.

4. Dig in with both hands. There is an action orientation that people at Hulu call “building”.  This is a place where builders build.  That means everyone gets their hands on something and makes it come alive or makes it better… and this is professional building, not “let’s see if we can make this work” experimentation.  There’s an “over the moon” quality standard that starts with a desire for a “pixel perfect” viewing experience for Hulu users, and translates into a “bring your A-game” expectation for every encounter.  Building can happen in any function on any task.  There’s no supervising or managing, it’s all building.  I saw a post earlier this week from Ben Horowitz that underscores this point.  Leaders here are pulling the rope with everyone else… they’re not coaching from the sidelines.  Their skill, content, and experience are applied directly to the tasks at hand.

It’s really fun to be part of the crackling energy and rocking vibe of Hulu.  I’ll keep you posted as things unfold.

Thanks IDEO!!!!

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The time has come for me to leave the amazing atmosphere of IDEO and jump into the bold, new world of start-ups.  Next week I will head south to Los Angeles and begin work at hulu, leaving behind the coolest place I’ve ever worked, a ton of fond memories, a pack of great friends, and a transformational experience in my professional development.  To all of the great people of IDEO who have helped me push the envelope of organization design, think crazy thoughts, and test the limits of prototyping on real people in real time:  THANK YOU.

I am forever a changed person and will always count my IDEO experience in the “best of times” category of my life.  I hope to do you proud and take design thinking to even further heights at hulu.

As you might imagine, the place where I’m heading must be pretty amazing for me to consider moving on, and well, it is pretty compelling!  There’s a lot of buzz in the world of technology and media as the new era of video distribution comes of age, and hulu is right in the middle of it.  This will be a whole new education for me as I join Jason Kilar and company in the building of a great new organization.

I’ll keep you posted on things at hulu as I get my feet wet.

The (new) wisdom of teams

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The Wisdom of Teams by Jon Katzenbach and Doug Smith is one of the most useful books I have ever read.  It provides a clear framework for team success based on sound research. That plus the memorable: Form, Storm, Norm, Perform stages of team development by Bruce Tuckman helped me diagnose and facilitate teams for over 20 years.

Key to these models is the distinction between a “real team” and other small working groups that don’t exhibit complementary skills, commitment to a common purpose, shared performance goals, and mutual accountability for their approach to the work at hand.

Over the years, I’ve come to find that team development as Katzenbach, Smith, and Tuckman observed it depends on a stable surrounding environment, which is becoming less and less common.  Today’s work place is fraught with complexity, ambiguity, and overlapping priorities.  Speed and confusion are facts of life, not the result of a poorly run organization.

photo from blog.jaciclark.com

Often teams have a hard time functioning as suggested in The Original Wisdom (choirs sing here) because the demands to perform start immediately, and there’s no time to go through the team development stages.  And I have to admit that many business leaders in my career have argued that the time it takes for team building is unnecessary.

Today’s successful teams seem to skip some of the stages and get right to work, much as people can jump up and start dancing together at a wedding with little planning or communication.  They just know what to do when the music starts. I’ve shared some of the insights about this “new” kind of team in an earlier post on teams, and it was so popular I thought I’d add some more on the topic.

Here’s some of the new wisdom emerging from my observations conducted at IDEO with my research partner Daniel Wilson:

3 Degrees of Team: we’ve noticed performance differences in teams can be correlated to various “degrees” of team complexity.  A “client-embedded, extended team” seems to out perform the other types.

1. A “core team” has 3-5 people with different skills working closely on a project.

2. An “extended team” can have 20 or 30 people who identify themselves as members of the team, but do not participate fully in all team activities.  Sometimes they offer a quick assessment of the work, while other times they make a specialized contribution to the overall work product.

2. A “client embedded” team has representatives of the sponsoring agency actually on the team versus reviewing or supporting the work from afar.

Team fluidity: one commonly held belief of a team is that it forms with an original set of members (like a rock band) and keeps those same members for the life of its work.  We’ve seen that successful teams are more fluid and can easily accommodate the arrival and departure of members over the life of their work.  This is managed with the use of project artifacts, boundary objects, and a continuing project narrative that keeps everyone up-to-date and connected to the current state of the team and work.