Episode Transcript
[00:00:00] Hello, everyone. I'm still in Asia this week and have had a lot of opportunity to meet with many different kinds of companies over here. We did a big workshop in Hong Kong and now we're in Tokyo. There's a lot of interest in AI, of course, and Galileo and human resources, and the future of human resources. But I want to talk about something a little bit different that's philosophical and it's come up in most of the meetings and that is how we think about individual performance and performance management and performance in general in a world where we have increasingly intelligently AI assisted work. Because you could make an argument that if the AI is smart enough, the performance of individuals may become either commoditized or changed entirely because of the intelligence behind it.
[00:00:55] And one of the other reasons I want to bring up this sort of philosophical topic is I want to talk about the difference between competition and performance, and particularly in this political realm, because we're witnessing in the United States a growth or increase in the focus on retribution, not competition. So I know that these are sort of big words and sort of complicated concepts, but, you know, I've been around long enough to think about this a lot. So I want to give you some things that I think will help. Okay, so in the political environment at the moment, you know, and I'm talking about the United States, but you could look at Russia, you could look at Israel, you could look at a lot of other countries, there's a form of sort of domination going on where countries are trying to control their environments by dominating or in some way hurting the population or the enemies that they have. It's going on inside of the United States, between the two political parties. It's going on in, to some degree between Israel, Israel and Palestine. It's going on in Russia, with Ukraine. And the global political military strategy here is we win, you lose. So if we overpower you, we gain more power, more money, more influence, more land, more resources. And therefore our population or our organization or our country flourishes at your expense. Now, in the economic world of capitalism, there's a very similar situation. When I worked in a very competitive industry in the 1980s, in the database industry, it was dog eat dog, it was a war. And I think war is the analogy used in business frequently when there are competitors. We can't win unless you lose. So we are going to stop spend our time putting you out of business by capturing your customers, capturing your people directly, undermining your brand or your messaging or your technology to the degree that, you know, we might even have sabotage of a competitor. And that has gone on a lot, you know, in the business community. And that approach is based on the concept that there's a limited market, there's only so much money or customer value to go around, and so we have to get rid of you in order to gain our fair share. This whole idea of market share, well, I would argue that that's actually a flawed concept because that is all built around the idea. And this is true. I think to some degree. I could say this about politics, that markets are fixed so there's only so much money or land or assets or wealth to go around. So. So if we don't get it, we're not going to grow. But actually, that's not really how the world works. At least my experience. The way value is created in companies is by creating value, not taking value away from someone else. And that's true in the political sphere, too. The countries that thrive over longest periods of time don't just own the most land or the most resources.
[00:04:10] They have education, they have commitment, they have teamwork, they have citizenship, they have political strength. They have a country that works together in an integrated way. And when that happens, the energy and creativity and sustainability of the companies of the country is increased at orders of magnitude more than if you take over more land.
[00:04:38] And you know, this is the old culture eats strategy for lunch story, that it doesn't really matter how much land you have or how much money you have or how much market share you have. If your culture is dysfunctional, you'll lose it, it'll slip away from you. And I really, really believe this is true. And it's somehow to me, not being honored correctly in the United States at the moment. And it certainly hurts businesses. Lots of companies I've worked with in the past, and I've worked in the tech industry where it's very competitive, have been hyper successful in their early days with a scorched earth policy of hypergrowth. And there's books written on hypergrowth. And a lot of those books, including people like Reid Hoffman, sort of posit that if you don't get big fast, somebody else will take your market away from you. And I think there's experience that shows that that does happen.
[00:05:32] But those companies don't get big by being big. They get big by being innovative and creative and adding more value and building more skills and capabilities and inventing things that their competitors didn't invent. Intel got big, but it didn't help them in the AI era at all. Their size hasn't Helped them a bit. Boeing got big, but it didn't help them when they lost their engineering prowess. There's lots of companies that get big and then fall apart for a whole variety of reasons. So what makes a company successful is the internal strength and capabilities and ongoing innovation and culture and management and understanding of the market and focus on the real customer, not on the competition to grow. If you look at, you know, a pick whatever company you love, whether it's Starbucks or Porsche or your favorite clothing company or your favorite food company or whatever it is, there's something going on in that company that is making it build and deliver products and services that you find exceptional. The size of that company or the market share of that company tends to not make that much difference. Now it does affect their pricing power and their control over channels of distribution. So size definitely matters in some cases.
[00:06:52] But you know, you can get too big and it doesn't help. The British Empire was very, very big at one point in time, but they got spread too thin. So this happens all the time where a company buys a whole bunch of other company and gets into all sorts of businesses. GE is a good example of this and they can't keep up with it all and they lose market share to all sorts of focused competitors. So, you know, as I talked a lot about in my book, Irresistible companies are high performing companies because of their focus on mission and culture and management and skills and capabilities and innovation and dynamic growth. Which means that when we're looking at something like individual performance and performance evaluation and performance management, we don't want to be too cavalier about how we measure it. We have to decide, and I mean this at the C level, what are the behaviors and capabilities that that make us who we are and make us successful. Hitting the numbers is not a capability. Hitting the numbers is a performance metric. But it doesn't really tell you as a manager or leader whether this person is contributing high value over the long run. It tells you what they're doing at the moment. So I am not a huge fan of QBRs and OKRs and goals and goals and goals and goals and goals and evaluating people entirely based on their goals. Now that's not to say we don't want to hold people accountable for their goals. We do for two reasons. One is it's a way to differentiate performance. But the other is it's a way to keep people focused on what it is they should be doing. Because we all have 10,000 distractions every single minute of every day. And if we have goals and they're agreed to. We know where to focus and it helps people pay attention to the things that are the most important.
[00:08:43] But that can't be the only way you measure performance. You have to measure performance based on skills, on teamwork, on alignment with mission, on innovation, on, on creativity, on other things, whatever they may be in your company. You don't have to take the ones that I give you. And those things are going to exist regardless of AI. Now, you know, I've done a lot of work with AI and we've been implementing Galileo now in a lot of companies. And we know what it's like to give somebody a super power tool. It does change somebody's performance profile. There will be people that will exceptionally outperform others with AI because they know how to use it. And they may change their performance profile relative to what they were doing before AI. But. And you want to reward that, but you want to reward it based on the values and results and goals and things that, that make your company successful, not on tenure, job level, reputation. Because what's going to happen in AI is we're going to, the performance metrics are going to vary. There are going to be people in the company, there already are, who get AI in a hurry and they're going to be very valuable people for a lot of reasons, just like they're data scientists and software engineers and salespeople that are just way, way outperform their peers.
[00:10:04] So we're going to have to sort of continuously look at this performance process that we have and make sure that it is not only taking care of goals and okrs and financial results and the soft skills I mentioned earlier, but also honors the development of new skills needed for AI. Now, I can't tell you all the skills that are needed for AI, but I'll tell you the two families of skills that we're finding. Number one, there is a very complex set of skills needed to learn how to use these AI tools and generate prompts and talk to them and interpret results. So there's AI usage skills and then there's systemic thinking or complex problem solving skills. Because what happens when you get access to an AI platform is a lot of the routine work that you used to spend a lot of time doing the machine is doing for you. So you have more hours per week to think about the context of whatever it is you're trying to accomplish. You operate at a higher level. This just naturally happens with AI.
[00:11:05] So if you were an accounting clerk and that clerical part of your job went away, now maybe you're analyzing accounts receivable or you're analyzing cash flow, you're looking at things that are more business oriented and maybe cross functional than you were before because you're not just writing emails or sorting through incoming leads or you know, telling people how to change their password or whatever it was before. So there's, there's these new families of skills. Generally speaking, performance management has been a debatable, ongoing, interesting area of HR for as long as I've remembered. It's moved from a rigorous up or out process in the 80s and 90s to a much more developmental process now because we have much more of a shortage of skills than we used to have. And if the super worker thing continues. And by the way, there's a really good article in the Wall Street Journal today from the CEO of Walmart, basically saying that every single job in Walmart is being affected by AI. So you don't have to believe me, you can listen to him. Then we're going to have to think about where does our performance process fit in our transformation to a super worker and super manager company. And so that's the reason I brought this up. But I want to go back to the beginning, which is the more philosophical issue of competition versus value creation. I think it's dangerously easy to fall into this zero sum game thinking where if we don't get there first and we don't, you know, scratch the earth to get these customers faster than everybody else, there won't be anything left for us. Because that's not actually how it works in every market I've ever worked in. Regardless of the market share of your competition or how fast they're moving or how big they are, how many people they are, or whatever you might want to say, the customers that they win or the customers that they take over or the customers that do business with them are not beholden to them. They may have a contract and it may go on for a period of time and there may be some barriers to entry. But if you define yourself purely as a predatory operation going after those customers one customer at a time, you're missing the opportunity to out innovate them. I don't think Nvidia spent that much time worrying about intel ever. They went off and they built graphic chips and AI chips and advanced mathematics and now they're building cloud based systems and all sorts of other things. And they were not worried about Intel's market share or Micron's market share or anybody else's, or AMD's or anybody else's. They decided to build something that they felt was needed and add value in a new and different way and look at how big they are now. And I think that's true of countries.
[00:13:52] One of the reasons that I do believe the education system and the sense of social justice and income inequality issues are important is because they create a growth and development and innovation and pioneering culture in countries that helps them thrive over time. Just as the business environment is changing at a light speed, so is the economic environment of countries. Who wins, quote, unquote, the war of AI. By the way, I don't like this idea of wars. There's no winner or loser in AI because everybody's inventing it as fast as we can. If we get great AI engineers in the United States, we'll build great stuff. But we still have to take it to market, we still have to sell it, we still have to improve it. And those are not just educational issues. Those are issues of do people want to live here? Does our economy support innovation and growth? Do we have a culture that supports new ideas? Are we diverse enough? By the way, I'm not a fan of killing off diversity, even though I know why that's been going on. Are we diverse enough to attract smart people from different backgrounds?
[00:15:00] Same thing's true inside of companies.
[00:15:02] So thinking about performance as how many widgets you kind of produced and how much market share you created is a limited view of performance and success over a long period of time. So I don't have an answer to the problem of how we think about performance in the world of AI, but I can see the symptoms of change all over the place. We also got a lot of questions from many people the last week about how do I keep up, how do I reinvent myself, how do I help my employees reinvent themselves at an individual level? And I think this is true in the country too. As a whole, we're all a little bit nervous about what's going to happen to our jobs. Some people are very good at reskilling themselves, especially technical areas. Some people are not used to this. They don't have the time, they don't have the money, they don't have the physical energy because they may have kids at home or other issues going on in their life. And so I do believe that super worker companies are not only going to have a complete and sort of holistic view of performance and performance management, they're going to respect the fact that helping people, supporting people, inspiring people, energizing people is the key to AI transformation. You know, Walmart talks about it a bit in the Wall Street Journal article. But the, the companies that are going to move the fastest to implement, or really maybe exploit is a better word, AI are not just going to be the ones that have the largest IT departments. They're going to be the ones that learn and experiment and innovate and create and push the envelope on their business models to use this stuff. That's what Amazon's been doing. That's what, you know, these big banks, all these companies that use AI already, they've been doing this without thinking about AI as a product or a technology because they've been creative in solving problems. And as you become better at the business you're in, you win market share, you win customers, you win employees, you win brand, naturally. And so you know, I, I don't believe the AI war, if there is such a thing, is going to be a market share issue. I think it's going to be skills, culture, leadership, flexibility, development and all of those touchy feely things that we talk about in hr. Mark my words. We can replay this podcast two years from now when we know who the giant winners and the giant losers are in AI and we'll see. Did the companies who bought a bunch of AI tools succeed or did the companies that really learned how to reinvent themselves succeed? I think the latter will be the ones that have the greatest market cap, the greatest brand and the greatest admiration two or three years from now. So anyway, the reason I bring this up is I've got a chance. I've had a chance to meet a lot of new people, get a lot of interesting questions and reflect on the culture of at least China and Hong Kong and Japan in the last two weeks. And then we'll spend a little more time here and I'll be home next weekend and tell you a little bit more about how this all went. We're going to be at the SAP Connect conference in one week in Vegas. If you're an SAP customer, we have a big announcement that will maybe there with SAP. I'll be doing a kickoff of the Chro forum there, so I hope to see many of you there. We'll be at the Unleashed conference in Paris in October and lots of other things going on around here. We have some interesting things coming out on supermanager I mentioned earlier. We're also going to be launching and introducing our research on work redesign which has been going on for six months. You'll see that come out. I think that's member only and if you want to get your hands on any of this stuff we're talking about. Just get Galileo. Galileo has everything. All of our IP is in Galileo. You can buy it as an individual, you can buy it as a team. And if you get Galileo and Galileo learn, you get all of our content and all of the development and support and coaching and our AI assistants all built in. Okay, that's it for now. And I hope you guys are all having a great weekend and talk to everybody next week.
