Episode Transcript
[00:00:07] Hello, everyone. This week I'm going to talk about accountability and performance management and some conversations I've had with a bunch of HR execs. This week I spent a couple days in San Diego at a CHRO conference, and then I went to the National Academy of HR and met all sorts of amazing people, very senior people in the HR community. And then I've been reading a book about a guy named Ray Dalio, who is a fairly well known investor. And the book is really a discussion. It's called the Fund and it's a discussion about accountability. And let me also say something else really important. This Wednesday coming up, we're going to be introducing an offering that is, I think, the most exciting thing I have worked on in my entire career.
[00:00:54] So I am not going to give away the secret at this podcast, but stay tuned. On Wednesday, you will hear all about it. There'll be all sorts of information. I'll put together a video, there'll be an audio. There's going to be a bunch of stuff on the web. Going to be a big announcement from us relative to AI. Okay? So accountability, the big thing that we all know goes on in Business day after day, year after year, decade after decade, is this whole issue of driving or measuring or evaluating the performance of individuals. And when I got into HR 25 years ago, we were living in a world of cascading goals and upper out kinds of mentalities. And Jack Welch and GE had really sort of defined the market with stacked ranking and the concept that many companies used, including Microsoft at the time, GE, many, many others, was, let's just lop off the bottom ten or 15% of our workforce every year to keep us accountable. By the way, this is the philosophy that I've heard discussed at Amazon, where they have very high levels of turnover, and they like that because they can evaluate people and replace them quickly. And that was a philosophy that was born in the industrial age and was somewhat dependent on the fact that we have a surplus of labor. So that if we let people go, first of all, we have to figure out whether it's fair. But they'll talk about that in a minute. We can replace them. Well, that's not true anymore. We have a very low unemployment rate. The unemployment rate is going to be low for a long time. We have a shortage of workers. It's much easier to change jobs. People are working part time. Employees have a lot of autonomy, a lot of power. Labor unions are very strong all over the world, and we want employees to be engaged because they add more value so this idea that we're going to evaluate them and rate them against each other and then kick them out if they're not doing well doesn't really work at scale. Now, it obviously works in special situations. There's all sorts of situations where somebody doesn't work in your company. And we want to find a way to weed out or let those people go or give them a package so that we can keep the company going. But there's some philosophical things that have changed, and the book about Ray Dalio is an interesting read. Now, let me go back to the book for a minute. Ray Dalio is an investor. He's a money guy. He spent most of his career trying to make money. He's put together this book called Principles and talks a lot about the economy. And he's a big fan of telling people that the economy is going to crash so they'll invest more money in him. He's been a very successful investor. And he actually called me, their company called me about five years ago, because what they had done is they had, over the many, many years that he was running this investment fund, he had developed this philosophy of high degrees of transparency and high degrees of accountability. And the way it works there, based on the book and based on other stories that have been printed, I know this pretty much true because I've talked to them, is that at his company, Bridgewater, people are expected to evaluate each other all the time, all day, every day. And they have a piece of software they call the dot collector. And in this software, you are essentially clicking buttons to evaluate everybody you're interacting with all the time. And this data goes into a database, and they manage it, they manipulate it, and they try to figure out who the most credible, trusted people are in the company and who are not. And it's funny, in the book, they talk about this story. When they first turned this thing on, the most credible person was somebody in it. And Dalio got upset, and he said, well, how can the IT guy be more credible than me? Let's redo the system so that everybody gets compared to me. So that gives you a sense of what this is all about. But anyway, the idea of accountability and feedback is a huge idea. We've all worked on it a lot. It's been the philosophy of continuous performance management. It's the philosophy behind agile. It's the philosophy behind OKRs. It's philosophy behind many, many of the psychological and business initiatives that have developed in performance management. In fact, when I was at Deloitte, we were implementing a model that had been architected at the time by Marcus Buckingham to evaluate people at the end of every project and ask the people in the project, if you had the choice, would you always hire this person again? And there were a series of questions like that to help you evaluate people. And what you find out when you look at the book and you talk about what happened at Bridgewater. Evaluating people is important, but it's tricky because it's very easy to get into personalities, it's very easy to get into judgment. And what they used to talk about in GE was, we don't want people who make their numbers but hurt the culture. So when we evaluate people, we don't want to evaluate them just on their performance. We also want to evaluate them on how they achieve those numbers and if they achieve those numbers, through the practices and principles and values and strategies that we adopt as a company. Are we a collaborative culture? Are we a competitive culture? Are we a quality culture? Are we a culture focused on value? Are we a culture focused on reducing costs? Are we a culture focused on innovation or a culture focused on customer solutions, customer intimacy? And we want to evaluate people based on their alignment with those values that we decide, each company decides on their own. And of course, the results they achieved. And most people in most companies who achieve good results do that because they're abiding by those values, because the values are in most cases, representative, how the company actually operates. But every now and then, there's people that go outside of the value system and make a lot of money for the company. And anyway, Jack Welch's position was, we don't want them around because they hurt everybody else's performance. Well. So this dot collector thing that they developed at Bridgewater kind of takes that to three orders of magnitude further, where everybody's evaluating everybody all the time. It's like 360 evaluations happening every minute based on a lot of criteria that Ray Dalio came up with. And what you find when you read the book is that it hurt a lot of people. It was very damaging and very destructive to their self confidence. He had public shaming. He would put a lot of stuff online and be very transparent about these dots. And from the stories I've heard, and I just had lunch this week in New York with somebody who actually worked with them, it's a very political company as a result. So what I would like to talk about, just to give you some thoughts, is you're going to go through this debate. You're going to have this. I mean, every company goes through this. How do we evaluate performance. Who gives people feedback? What is appropriate feedback, what is not appropriate feedback, and how and when do we give it? And what's been happening is we don't do it once a year anymore. And the reason we don't do it once a year anymore. First of all, what it used to be is it used to be your manager did this. It was once a year, it was the end of the year. And your manager was expected to do a good job of evaluating your performance by talking all the people you work with and not just making it up and giving you developmental feedback in a positive but constructive way. And we held managers accountable for that. And managers who weren't good at that weren't good managers. And that was kind of the way it worked. Well, that was a long time ago. Even though that still happens now, most people work with many, many other managers and many other people in the company. And the line manager they have may or may not be familiar with the intricacies of what they're doing all day. And so we want to give feedback from multiple sources and many, many performance management tools, betterworks 15, five, lattice, many, many others have been designed to allow people to get feedback regularly. So if I'm in a meeting with you and you interrupt me 15 times and the meeting goes sideways and it doesn't come to be a very successful meeting, it would be incomingo on me to say to you, I want you to know that it was a difficult meeting because you kept interrupting people and I would encourage you not to do that again because it really is hard on everybody else and say that in a positive way so that people get feedback constantly. And actually that is the sign of a strong company. However, as Sachin Adela talks about in his book hit reset, it has to be done with a growth mindset. And this gets down to a very important philosophical decision or finding that you have to come to in your company. One of the meetings I was at this week, I was at lunch with a bunch of executives talking about talent marketplaces and talent mobility. We had a long talk about it. We had one of the executives at Walmart, we had an executive from S P. We had an executive from travelers and a couple of other big companies. And we were talking about mobility and talent marketplaces and gig work and project work and Agile and systemic HR and all those things that I talk about all the time. And the question came up on skills. How do we evaluate people's skills? Because the idea of a skills based organization is we're going to start making decisions based on skills. If you have the right skills, then you get the job. If you don't have the right skills, you don't get the job. Now, usually the word skill meets a hard skills. Well, there's soft skills, like interrupting somebody in a meeting or not interrupting somebody in a meeting is a skill. If you do interrupt them in a meeting, it's not a skill or it's a skill that needs to be developed. So nobody had a good answer for how we evaluate skills in an agile, dynamic organization, because it's difficult. And let me tell you what I've learned, and I talked about this at the lunch. First of all, once your company becomes dynamic and people start moving around and you're more formal about this idea of projects and teams, it's very clear that the only way to evaluate somebody's performance is to look at the contribution they made to the project or projects that they were a part of.
[00:10:58] And some projects fail, and sometimes it's clear why they failed and sometimes it's not. And sometimes it's clear that one or two people caused it to fail, but usually it's not. So we need a process for discussing people's behaviors and successes and failures relative to the projects they've had. Now, in the old days, that's what managers did. They were supposed to go back over the entire year and come back and tell you based on this, this and this and this, here's what you're going to be rated. But when we did it once a year, that was almost impossible because nobody remembered all the things you worked on. And managers didn't really have the time to write that all down. Now that it's happening more frequently, it can happen all the time. And one of the great examples of that, by the way, the military does this. So in the military, if you're on an exercise and your gun is jammed because you didn't clean it, you're going to get evaluated at that exercise. You're not going to get evaluated at the end of the year because their entire safety and success is based on quick, immediate feedback. And you're trained in the military that you take the feedback and you act on it, because these are life or death situations. And that is actually a good model for business. I remember interviewing several companies about this. One of the ones that sticks with me the most was actually the Federal Reserve. When the Federal Reserve goes in and audits a bank, what they do is they take a team of financial professionals, accountants and others, and they go into a bank and they quietly show up and they audit it, and at the end of the day or the week, they either shut it down or they keep it in operation. And they don't tell everybody they're doing this, but they have to know what they're doing, because the ramifications of a mistake are very high. So what the woman who was running L. D. At the time told me she did, because they had such a shortage of accountants, and they were trying to develop more accountants, is what they did, is that the Friday afternoon, after they finished an evaluation of a bank, they would write essentially an action plan of everything. They learned, what went well, what didn't go well, and give and associate that with the people that worked on that project. So if you wanted to start another project and recruit a bunch of people in the Federal Reserve, you could very quickly see what projects those individuals worked on and the success and failure of the activities that took place on those projects. There was no technology. This was basically using paper. I think maybe she had some system. It wasn't very fancy. Now we can do that really electronically. You can use gloat, you can use full 50. Maybe you could use workday. I don't think so, because I don't think workday has a gig project function in workday itself, but you can do it in the success factors they do or the performance management product that you use. And that's not a bad way to kind of take care of people, because at the end of a project, people want to know what they could have done better. They're in a developmental frame of mind. They're not thinking about evaluation. They're thinking, what could we have done to make that go better? And they'll listen, and they'll pay attention, and they'll learn it, and then they'll remember it. So rather than using the dot collector, where you have random people evaluating you for random things all day, one way to create this more accountable performance process is to do it at the end of a project or an activity.
[00:14:16] But that goes back to this idea of the growth mindset we did several times. I did this research on performance management, where I would ask a lot of companies to categorize their performance management process as one of two things. Either a a competitive assessment, where you are competing or compared to other people, or B A coaching and evaluation process to improve your performance. In the early 2000s, when I was first starting as an analyst, 70% to 80% of them were in the first category. Later, a decade later, when I did it, and then a third time after that, 70% to 80% of the people said that their process was developmental and that the reason they were doing performance management was to develop people, in other words, to improve performance, not just to evaluate performance. And some companies, some investment banks and others are still in the first category. Some are in the second category. What Sacha Nadella talked about at Microsoft was that one of the biggest things he did was bring the growth mindset concepts into Microsoft and stop this shooting people figuratively for making mistakes and talk about mistakes and learn from their mistakes. Because when you don't have a growth mindset, all sorts of negative things can happen. Yes, you will attract very hardworking, ambitious, competitive people. Yes, they may or may not achieve outstanding, incredible things, but you will not have a learning culture. You will not have a culture of change. People will not want to contribute to other people's projects if they think it won't advance their own personal agendas. Your company will not be very collaborative, and you're going to have a hard time getting into a new business area. By the way, investment banks are very good at doing this. Most of them, I think some of the more sophisticated ones, are a little bit better at development. And they don't tend to become very good at other things because they're very, very competitive businesses. And you know that the only way you're going to really succeed is to hit your numbers at all costs. Not all of them are like that, but a lot of them are. But the second thing that happens when you do this is you really hurt the culture. And what I mean by the culture is, in most the companies that I know, and I talk to a lot of companies, there is some uncertain change, new initiative disruption going on. The exact decision as to what to do in that situation is not clear. We are expecting line people, mid level people, senior people, to figure out what will work. If they are afraid that being evaluated will hurt them, they won't be good at figuring out what's next. They won't have an open mind. And so by not having a growth mindset, by focusing on evaluation like the dot collector, you do lose a fair amount of innovation. And in the case of Ray Dalio's company, I don't know much about it, but it appears to be true that although they're very successful financially, it's not clear how much innovation takes place there. And this leads me, and the growth mindset leads me to another idea that I think is bigger, that I believe may be the biggest philosophical issue in this whole topic. And that is, do you as a management team and does your CEO and the rest of your executives believe that people are capable of doing more and that under the correct circumstances and in the right environment, anyone and everyone is capable of doing more. I certainly believe that. In fact, as I oftentimes talk about my book, what my book is really about is what I call the unquenchable power of the human spirit. And my experience shows working with many, many people in many companies and many walks of life, I guess I should say, is that people are capable of doing incredible things under the right conditions. And when somebody is underperforming, it is probably not because they're stupid or not capable of doing the work. It is most likely, and I mean 99% because they're in the wrong role, they're not getting the right support. Maybe they're in the wrong company because it isn't the right environment for them. Maybe they're untrained or they were undereducated and they need some education. Now I'm not saying every company has to educate every employee in every possible way because we can't afford to do that. But if you don't have this belief system that people can reinvent themselves, that people can learn new things, that people can adapt to new roles because they have adjacent skills, then you will end up with a dot collector and you will end up with a very dysfunctional company. I don't know what's going to happen to Bridgewater. Maybe it's going to be a great company for many years to come. Maybe there's a lot of great things going on there. But the dot collector that I heard about when I was briefed by them many years ago, maybe six or seven years ago, I don't think most companies would ever do this. And the reason is simply that it doesn't embrace the idea of growth. So if you think about the post industrial age and all the things going on in the tight labor market and the issues of transformation and AI and new jobs and new roles and skills and skills based organization, fundamental to all of that work and the agility and mobility and redevelopment and career pathways that we're investing in, fundamental to that is this idea that people can reinvent themselves and that they can always do more. And if you believe that, I think everything you do in HR is going to be joyful and positive. If you don't believe that, you're probably going to go back to the industrial model of HR and ultimately I just personal opinion, your company will probably underperform. Okay, stay tuned for the big announcemEnt. I'm going to stop here and tell you about it in the next couple of days. Bye for nowhere.
