Get the best out of your people |
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| Entrepreneurs must not just say people matter. They must take concrete action, writes Suzi Woolfson of PWC (The Sunday Times Profit Track 100 – Britain’s private firms with the fastest growing profits, April 2nd, 2006). | ||||||||
| Entrepreneurs
who run and own companies like those in the Profit track 100 are a breed
apart. They are prepared to take risks and responsibilities that go with
turning ideas into action. But they cannot do everything on their own.
As the Profit track 100 research shows, the successful entrepreneurs are
the ones who get their staff to share their vision for the business.
And they know that building a skilled, motivated and loyal workforce will give them a competitive advantage. Companies know that investing in people can make a real difference to business success, but too often they fail to act on it. They will say “people are our greatest asset” but research by Price Waterhouse Coopers into British middle-market companies shows that this is more rhetoric than reality. Companies focus on business strategy but often relegate people issues to a series of administrative tasks. The most successful private businesses, such as those in the Profit Track 100, set out to differentiate themselves through their people. Their human resources strategy is an integral part of their vision for the business. They see investing in training and development as a way of getting people to perform to their best, and of building the skills required for tomorrow’s challenges. And they act on it. They put a programme in place and appoint a training manager to run it. Succession planning is also a hallmark of the successful private businesses. Owners need to think about what and who will take the company to the next stage. |
Many
look inside the company for the stars of the future, both at board or
other levels. Pret a Manger (No. 21 in the Profit Track 100) has promoted
60% of its shop managers from people working on the shop floor, and has
achieved profit growth of 89% a year to £9.5m.
A company’s approach to human resources will be seen in its working practices. Communication is a key element – and quality not volume is the key here. The more people feel involved in the business, the more they will contribute. At River Island (No. 44), for example, people at all levels work together in multi-disciplinary project teams. From the managing director to the shopfloor operative, anyone with a good idea gets his or her chance to contribute. With profits growth of 76% a year to £111m, the company has invested in training its people to work in this way and is reaping the benefits. Successful companies don’t just say that people make the difference, they take concrete action. It takes bravery for an entrepreneur who has nurtured a company from its birth to step back and allow the management team to run the business. It also takes a good human resources strategy and genuine belief and trust in people.
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Do Stars Make Companies or Do Companies Make Stars? |
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| She
had graduate degrees in business and management science, including one
from MIT. She progressed rapidly and consistently over a 16 year period
through the sales and marketing ranks at AT&T. She helped lead the
spin-off of Lucent Technologies in 1996. In 1998 she became president
of Lucent’s global service provider business and set it off on a
‘bold new course’. In 1999, at the age of 44 she was appointed
the first outside CEO in the history of Hewlett Packard. The Wall Street
Journal lauded her as ‘a star - unshakable, self-reliant, fond of
the dramatic gesture, impervious to criticism, passionate about the big
picture; the kind of person who bounds from project to project, embracing
change as a way of life’. To Hewlett Packard’s Board of Directors,
her vitality and charisma seemed to be just the tonic needed to shake
up and revitalize the venerable technology icon. To some, she was the
perfect mirror opposite of the incumbent at the time, 30 year operations
veteran Lew Platt.
In February 2005, the Board of Directors of Hewlett Packard asked for Ms. Fiorina’s resignation citing a lack of the ‘requisite skill sets’ to move the company forward. Rear-view pundits immediately lambasted her as a ‘deeply divisive figure’, ‘a raw irritant who battled Hewlett Packard’s storied culture from the day she arrived’. She was maligned for being non-technical, a ‘fatal flaw’ in an engineer’s organization. Others vilified her ‘self-centred, narcissistic, autocratic style’. The New York Times called her a ‘change junkie’ while BusinessWeek suggested that ‘she resisted changing course – a dangerous trait in an industry in which the most successful leaders have been those who don’t fall in love with their strategies’. She was concurrently accused of selecting the wrong strategy and stubbornly resisting the need to appoint a COO to implement her strategies. She was called a ‘celebrity CEO’, whose ‘self-serving’ acquisition of a corporate jet was in clear contradiction to the ‘HP Way’. The Economist described her performance as ‘horrid’ and trumpeted the need to hire a ‘details guy’. This article will neither trivialize the immense task of leading a legendary $80 billion technology giant through unprecedented turbulence nor will it cast aspersions on a talented executive whose performance will best be judged with the benefit of time. Instead, it will use the hiring of Ms. Carly Fiorina into Hewlett Packard as a vehicle to explore the seductive, yet dangerous obsession with heroic leadership and the instructive value it holds for all organizations seeking to add key talent to their executive ranks. It will also ruminate on why so many so-called ‘can’t miss’ star performers fail to shine in their newly adopted environments. Our Obsession
with Star Gazing There
is an undeniable seductiveness to the heroic notion of the archetypical
‘star’ performer whose sheer radiance promises to illuminate
and invigorate the organizations fortunate enough to employ them. It
is an image cultivated by legions of legendary figures that, lore would
have it, single handedly performed acts of near religious resurrection.
Lou Gerstner remains the tech sector’s prototype of such an individual,
an outsider with little industry experience who eschewed ‘the
vision thing’ yet created a powerful overarching strategy for
IBM and transformed it into a high end services giant. By proving that
he could ‘teach elephants to dance’ he joined figures such
as Chrysler’s Lee Iacocca in the pantheon of urban legends.The
business literature’s relentless hero-worshiping fuels the intuitive
belief that star performers deliver significantly greater value than
mere mortals. Stars see what others cannot, they work smarter, harder,
they revitalize, mobilize, fix what is broken. They are modern day alchemists
who transform base metal businesses into gold. Stars sit comfortably
atop the 80/20 model of performance skewing everyone’s output
upwards. Hitch your corporate wagon to their glowing tails and they
will lead you to wherever you want to go. If asked, we will confidently list the qualities which make up the prototypical ‘star’ performer: ambitious, brainy, decisive, aggressive, charismatic, hard-working, proactive, over-achieving and on and on and on. We regularly glean the latest celebrity CEO biography for additional tips on the more subtle spices in ‘the’ recipe for greatness; perhaps a strong, dominant mother figure, a childhood filled with adversity, birth-order, high emotional intelligence etc etc. While we may hesitate if asked to articulate exactly how these ingredients interact to create greatness, we sense that excellence is the sum of individual characteristics with more of each being better than less. Books such as Good to Great challenge our world view of heroic leadership and may even give us cause for momentary pause. Yet, rather than wrestle with excellence of leadership as contextual, nuanced, or even performance art, we retreat to the safer conceptual cocoon of applied science. By likening management to a context-free profession, much like engineering or medicine, we allow it in the words of Henry Mintzberg, ‘to be codified and certified as to its effectiveness’. And, like in any trained profession, the ‘expert’ can always outperform the layman. When we abstract the capacity for high performance into a universal, certifiable set of traits, we set the table for convincing ourselves that it should be possible to list and rank the requisite attributes of ‘excellence’, and hire against them. We also lay the groundwork for the logic that a ‘star performer’ can be transplanted from one organization or industry into another without compromising their effectiveness. Unfortunately, as the countless Carly Fiorina stories illustrate, the irregularly shaped reality peg doesn’t quite fit into the theoretically square hole we have constructed for it. Last year, the Harvard Business Review reported on an eight year study of Wall Street investment banks and their recruitment practices. Preferring where possible to ‘buy a book of business’ rather than build it, these firms zealously plunder each other’s top performers along with their valuable customer lists. The study tracked the performance of the newly hired ‘stars’, noting the time it took them to integrate and become top performers in their new organizations. The study’s surprise finding was that an alarmingly high percentage of these ‘stars’ failed when they moved to their new organizations. In many cases, the transplanted individuals’ tenure was abruptly short, in other cases they simply never came close to the level of success they experienced in their previous employers. In yet other instances, there was a sharp decline in the functioning of the group or the entire department which the star joined. In its conclusion, the study makes the point that while stars may well make organizations decidedly better, to a significant degree, organizations play a key role in making those stars. The distinction is critical for organizations seeking to hire high performers into their fold. Stars
in Context It is perhaps more apt if we consider the construct of ‘star performance’ not as a universal abstraction, but rather as an output, one which is heavily influenced by a constellation of variables. In other words high performance and the individuals who deliver it, should be understood in the context in which that output took place. Stars shine in companies and markets, each with distinct characteristics and environmental influences. They outperform at different times in their lives, with changing motivators and personal circumstances. They excel when surrounded by other people, supported by certain systems, processes and resources. Thus, without questioning the importance of intellect and personality in contributing to high performance, the HBR article asks us to consider the possibility that other factors enable, mitigate, form and perhaps even limit the expression of those talent-based inputs. It makes the case that these context factors should have standing in any discussion on the matter of hiring ‘stars’. Context factors incorporate such considerations as the markets and environment in which a firm competes, its systems and processes, resources, people and culture. A careful assessment of a firm’s context is an important exercise for any organization contemplating hiring a new executive. Such analysis is useful both in predicting the likelihood that an individual will succeed in a new company and in suggesting where transitional support will be most beneficial. Though a detailed discussion of context should include a consideration of the individual level variables which affect success, this article will restrict itself to the influences of environment, process, people and culture at the organization and industry level. Environment An organization’s life-stage, place in time and market conditions are also significant variables. For example, the metrics of performance during the high growth ‘dot com’ era were very different than in the more operationally focused period that followed. Individuals who thrived in a company or period of unfettered growth or little competition cannot be assumed to be effective in a company facing industry consolidation, pressures for operational efficiency or intense competition. Organizations also boast a certain cadence or tempo specific to their industries. For example, the rapidly moving graphics industry boasts extremely short product life cycles and leapfrogging innovation. A career aerospace sector executive might thus find the rapid pace of a company such as ATI to be a significant adjustment. Several recent articles have questioned the degree to which a career spent entirely at AT&T, however successful, prepared Ms. Fiorina for success at Hewlett Packard. With its monopolistic roots severed and its highly regulated industry shattered, AT&T had itself become an organization searching for a place in an unfamiliar world. While Ms. Fiorina may well have been a vibrant instrument of change in that organization, she was herself born and educated to its culture, one which proved to be a formidable adversary to Michael Armstrong and other outsiders who joined AT&T with similar mandates given to Ms. Fiorina at Hewlett Packard. While this is not to suggest that a career spent entirely at AT&T was a variable in equipping or hindering Ms. Fiorina at Hewlett Packard, it does point to the importance of considering how one’s past forms and equips them going forward. Resources
and Support Resources allude to the collection of marketing collateral, technical resources, IT, human resources, administrative assistance, processes and money which support employees in their roles. It extends to a range of subtle, yet important enablers, such as organizational brand recognition and company reputation which can aid in someone’s success. The Harvard Business Review study makes the observation that, ‘although most companies overlook this fact, an executive’s performance depends on both her personal competencies and the capabilities, such as systems and processes of the organization she works for. When she leaves, she cannot take the firm-specific resources that contributed to her achievements. As a result she is unable to repeat her performance in another company; at least not until she learns to work the new system, which could take years’. Understanding the characteristics and dynamics of individuals’ previous work environments, how they performed in each, how they transitioned from one to the other, their preferences, and the learned assumptions they bring to their new employers, can pay large dividends in avoiding hiring mistakes. People
Transitioning into a new organization also comes at a cost of existing relationships. A person moving to a new organization needs to develop new relationships. This cannot be assumed to be inconsequential as co-workers may resent the new ‘star’, his or her pay, or the process by which that person was brought into the company. Relationships also extend outside the organization to include customers, channels, industry influencers, experts, as well as other key stakeholders. The ‘star’ generalization often devalues these relationships and assumes they will be replaced or rebuilt. While this may be true, the transition comes at the cost of time which must be granted to individuals relinquishing their key relationships in order to change industries or organizations. Culture High performers are hired into organizations with the often implicit expectation that they will either ‘fit into’ an organization’s culture or the explicit desire that they will change it. Corporate culture raises questions about the manner by which high performers do what they do. Cultures are dynamic, with varying degrees of elasticity, at times intransigent and rarely simple to change. Stars, charged with affecting an organization’s culture may bring a veritable tool box of sophisticated instruments to the task. Or, they may simply bring a collection of hammers. Understanding the range and quality of tools individuals possess, their experience in deploying them in various circumstances and their own predispositions in how they will affect organizational change is an important consideration. Wishing
Upon a New Star Taken
for the Stonewood Group Inc bulletin – Spring 2006
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