Two clients of mine have posed the question to me about how HR can operate successfully in the emerging environment of complexity and Gen Y employees challenging companies today. The question is surprisingly difficult to answer, as a scan of the web turned up no approaches which I could in good conscience recommend, but much which represents the ordered systems paradigm of old style management.
My first client is responsible for HR in a family company operating world-wide, with a decentralized organization coordinating performance in largely independent country organizations, which are very successful and fiercely autonomous. His first attempt to professionalize HR by implementing bureaucratic processes failed, for the simple reason that the countries scented the danger to their autonomy and performance and blocked the initiatives.
When we had our first meeting, the client wanted to talk about organizing a world-wide high-potential group to bring the regions of the organization into better contact with one another, and about how to embed the meetings of the group in an HR selection, development and retention strategy which would support the company’s independent culture and avoid a second rebellion.
I suggested they skip the bureaucratic middle step and go directly for a participatory approach based on the insights of complexity strategies–an approach we will be developing together over the coming months in preparation for the next global meeting.
Here are the first outlines of what we are thinking about, starting with some context in the current norm, before we go to more complexity-based approaches.
The modern HR model saw its most prominent initial large-scale implementation at GE under Jack Welch, who focussed talent development not only on what people in the company deliver, but on how they deliver it based in a competence model which describes behavioural success factors for leadership and performance.
A good representation of this approach is given by Gary Steele, the Head of HR and Sustainability at ABB in Zurich in an interview, where he describes people and talent management as the “spine” or “thread” that determines everything ABB does. The purpose of the programme is to drive the culture of performance and delivery across the organisation. Part of the programme is top-down, through leadership assessment based on a competence model to look at how performance is delivered, and the other part is bottom-up through performance reviews that include the competence model criteria for assessment. At its heart is the attempt to develop core values, which describe the way the company as a whole does business, and to which a large part of the work of coordinating activities company-wide can be devolved.
As Steele explains, the competence approach seeks to create an advantage in the “war for talents” by dealing with the problem that leaders with bad behaviour drive away valuable talent, so that even if they bring in good performance short-term, their cost in terms of people involves unacceptable risk to success. Given the good intention behind the competence model approach to widening performance management to include good behaviour in leaders, it is tragic, then, to see the results in how people experience the process, especially in large corporations that have done their homework in thoroughly implementing a talent management strategy.
Through the ever tighter requirements of corporate governance, combined with a focus on short-term results, talent management largely backfires. Among the hires who come to my clients’ companies, there are a large number of corporate refugees who want out of the bureaucratic straightjacket of competence-based perfomance reviews, and into an environment in which they can work productively and focus on results–and remain the individuals that they are. As employees vote with their feet, it is apparent that talent management is making a major contribution to exactly the problem it was designed to prevent.
To understand the failure of the classical approach to talent management, it is helpful to look at the dilemma it finds itself in for most corporate systems:
Performance is social, in the sense that no one is successful alone. Companies create value through the work of people in groups, whether these are organized through the machine paradigm or, more modernly, in teams or networks. Although companies are social organizations, they exist not for their own sake, but for the external purpose of creating value for others in a market. There are, therefore, two coordinating principles for social organization in companies (see below).
The source of the failure lies in the complete difference in nature of coordination based on judgment of results, and coordination based in social relations. The first system is transactional: we sign a contract in which we are paid for measurable performance based on explicit indicators. We fulfil a function or a role in a structure of power, and we can be replaced anytime. We follow rules, and perform functions. If we overperform relative to benchmark, we get bonuses and promotions; underperformance means stagnation or firing. Having a place in the company social group depends on what we do and how well we do it, without regard to our history, reputation, or who we are as people. Our positon is fragile, subject as it is to the vagaries of power and control and to the incalculabilities of the market and company politics.
The second kind of coordination is rooted in social dynamics: in a complex reality whose vagaries cannot be known ahead of time or planned for, we look to each other as people for orientation. Through give and take, we learn to rely each other, and the history of our behaviours forms our reputation and instills trust or mistrust towards us in others. In the absence of full knowledge, we orient to values to inform our decisions, and how reliably we do so contributes to our standing in the group. Our influence is based more on our experience in dealing with uncertainty, on our tacit knowledge and who we are as people, than on our position in the organisation, and so is resilient to the changes in the power structure.
When in the talent management process behaviours are evaluated, we effectively collapse the second world of social coordination into the first of performance and results–with catastrophic results:
Picture for a moment the dynamics of the goal-setting meeting between a manager and an employee in sales. The manager’s incentive is to set a high goal for the sales represenative, both to maximize performance and to minimize the bonus. The incentive of the sales representative is to agree to a minimal goal, both to reduce effort and increase his certainty of achieving results, and to maximize the bonus. The boss says 20%, the sales rep. 0%. Then it is 15-5, and agreement might come at 10%. There are always good arguments for both sides. However it is achieved, the result is not an objective response to market realities and a reflection of personal abilities, but a negotiated settlement which has to do much more with the illusion of planning and with tactics. In the worst case, top-down planning is simply imposed through the agreement, and the employee is told to perform accordingly.
When behaviour is treated on the basis of the same logic, the result goes beyond the pseudo-objectivity of the planning process to effect cynicism and distrust in the social fabric of the organisation, as an employee report on the Stack-Rank performance review system at Microsoft under Steve Balmer devastatingly shows. In the video above, the interviewer mentions to Gary Steele that talent is an emotional issue, and asks him (without any apparent sense of irony), how to mandate the emotions aimed at by the talent management process. Steele doesn’t lose his stride.
Picture the same sales representative negotiating about the evaluation of his behaviour as a communicator and team player. His manager may criticise his behaviour, and the sales rep. will explain or justify himself. The manager will find examples, the sales rep. counter-examples. In the end, the evaluation is just as arbitrary as the planning number, with the employee trying to show himself from his best side, while the manager tries to reduce him to his failures to satisfy the bell-curve of possible evaluation distributions. The best managers, who genuinely try to support their people’s development, learn how to game the system, giving their team a leg-up relative to others in the rating game, against which HR must find counter-measures, and so the irrationality potentiates itself up the system.
The simple answer to the question of how you mandate emotions is, “you can’t.” Values, beliefs and emotions cannot be mandated, and attempts to do so bring with them all of the nasty consequences of social engineering. To enable people to develop their potential, what my client and I are working on is how to ensure that performance appraisal on the one hand, and potential for development and growth on the other, are treated differently, each according to its own logic and mechanisms of success, and the one is not collapsed into the other.
This is simple to do, but difficult to manage within a short-term performance measurement environment. The key lies in the concept of “obliquity,” and in the ability of the company culture to tolerate the disconnect between supporting the development of employees on the one hand, and planning for and getting results on the other. Very much according to the maxim of giving unto Caeser what is Caeser’s, key performance indicators need to be aimed at, and results measured. But since only a tiny part of what takes place in companies operates on the transactional level of planable ordered systems, the rest is beyond direct control. For system two, managers need only to foster human potential and… to trust! And that is what makes system two management so intolerably uncertain for classical management. The highest performing groups are the ones whose skills we support, but whose behaviour we do not measure. The whole point of transactional goal-setting is that it does not matter how we get there–only the results count.
How then do we deal with the legitimate concern about abusive or destructively instrumental behaviour in our leaders? Healthy social groups take care of that on their own. Thieves, liars, the abusive and the sociopathic are quickly disposed of by a team with a purpose, that knows where it wants to go, and has a healthy values culture among the team members. Those who want a place in their group will gladly be honest and reliable and get results to best of their abilities. (The same principle counts when we look outside the company to customers and markets, who are more than able to regulate what is socially acceptable and what not in their relations to a company when empowerd to do so through, for example, the internet.)
What organisations can do to support the process of social self-regulation is to provide their people with the resources and opportunities to do so, not to sabotage their efforts through bureaucratic, pseudo-objective planning and control systems, to listen, and to take the opinions of their people seriously when it comes time to make decisions about talent. For the rest, “talent manages itself,” as Kevin Wheeler and Murry Christensen of Jet Blue say in an interview snippet from the Future of Talent Retreat 2009. That is of course a simplification, as talent flourishes best in a rich environment full of experienced people, interesting challenges, trustworthy leaders, and immediate reality-based feedback– things which do not happen by accident. That will also be the point of the Talent Management strategy, to focus on creating the environment and resources talent needs to succeed.
My second client is at a different point in his trajectory, having come to the insight that the traditional and informally highly networked family corporation lacked even the most rudimentary global processes in many areas, including HR, and the new General Managers have embarked upon a thorough and consequent strategy of making the organisation compliant through stricter process-orientation. While getting their ordered systems processes created and under control will be a boost to solving many of their challenges, it will be interesting to see where the system type boundary is seen and what influence it will have on Talent Management.
Post Scriptum: By the way, the talent development challenge in business is logically identical to the problem of learning and performance measurement in the education of our children, as the more we measure learning performance in schools, the less education our children receive, leading to poorer–not better–performance in the jobs market, as a lucid RSAnimate video of a talk by Sir Ken Robinson explains for the curious, and from which I am tempted to see an analogy between the “epidemic” of ADHD in children and the alarming rates of burnout among managers who are caught between competing imperatives of the two systems they work in, and which companies do not help them to resolve.