Tag: Organizations

How Performance Reviews Can Kill Your Culture

Performance reviews are designed to motivate and bring the best out of our teams, but they often do the opposite. Here’s how to bring out the best in your people.

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If you ask people what’s wrong with corporate workplaces, it won’t take long before you hear someone mention something about being put into a performance bucket. The A bucket is for the best, and the C bucket is for the underperformers. The middle and most common bucket is B, as it spares the supervisor from having to justify why an individual is exceptional or on the verge of getting fired. The problem is that ranking someone against their peers is not the ranking that matters and is counterproductive in terms of building an exceptional corporate culture.

People hate performance reviews. And why wouldn’t they? You either come up short against the superstars, walk away being told to keep doing what you’re doing, or leave feeling like your days are numbered. In this common construct, no one is getting the information they need to properly grow, and a toxic competitive situation is created within the organization. Forced comparisons against others don’t accomplish what we want from them. We think it inspires people. It often makes them dislike each other.

The problem is the system.

The goal of performance reviews is ostensibly to help people become better, but forced ranking has two serious flaws. First, it doesn’t take account of individual rates of improvement. We’re all starting from different places, and we’re also all improving at different rates. If you always come up short, no matter how hard you try, eventually you can’t be bothered putting in the effort to get better.

The second, more important, argument is that forced rankings create a toxic environment that rewards poor behavior. When you’re pitted against your coworkers, you start to game the system. You don’t need to improve at all to get into the A bucket, you just need to make the others look bad. The success of one person means the failure of another. How likeable are you? How good are you at whispering and gossip? How big is your Christmas present to your boss? You can end up cutting others down to stand out as a star performer. But undermining the success of your coworkers ultimately means undermining the success of the entire organization.

Margaret Heffernan, author and former CEO, explained on The Knowledge Project how the relationship between coworkers is fundamental to the function of an organization:

“…the whole premise of organizational life is that together you can do more than you can do in isolation, but that only works if people are connected to each other. It only really works if they trust each other and help each other. That isn’t automatic. … You’re only really going to get the value out of organizational life to the degree that people begin to feel safe with each other, to trust each other, to want to help each other…What impedes the flow is distrust, rivalry, or not knowing what other people need.”

Most of us inevitably compare ourselves to others at some point. Chronic comparing though leads to misery. What matters is not what we do compared to what someone else does, it’s what we do compared to what we’re capable of doing. Both as individuals and in organizations, we need to pay attention to this gap—the gap between where we are right now and what we’re capable of.

Internal motivation is easier to sustain. We produce and push ourselves because we get this immense satisfaction from what we are doing, which motivates us to keep doing it. It doesn’t work the same way when your motivation comes in the form of external comparisons.

So what do we do instead?

If you must grade performances, do it against the past. Is she learning? Is he improving? How can we increase the rate of progress and development? Empower people to help and learn from each other. The range of skills in an organization is often an untapped resource.

Organizations today are often grappling with significant corporate culture issues. It can be the one thing that differentiates you from your competitors. Comparing people against their past selves instead of each other is one of the most effective ways to build a culture in which everyone wants to give their best.

[Episode #30] Company Culture, Collaboration and Competition: A Discussion With Margaret Heffernan

On this episode, I’m joined by speaker, international executive, and five-time author Margaret Heffernan (@M_Heffernan). We discuss how to get the most out of our people, creating a thriving culture of trust and collaboration, and how to prevent potentially devastating “willful blindness.”

As former CEO of five successful businesses, Margaret Heffernan has been on the front lines observing the very human tendencies (selective blindness, conflict avoidance, and self-sabotage to name a few) that cause managers and sometimes entire organizations to go astray.

She has since written five books and has spoken all over the world to warn, educate and instruct leaders to not only be aware of these tendencies, but how to weed them out of our companies, our business, and even our relationships.

In this conversation, we discuss many of the concepts she shares in her books, namely:

  • How to tap into the collective knowledge of your organization so problems are solved quickly, efficiently, and cooperatively.
  • The strange experiment Margaret ran to build “social capital” in one of her early businesses that transformed the way her employees treated and interacted with each other
  • How to build a culture that doesn’t create in-fighting and unhealthy competition within your organization, and how many companies today are missing the mark
  • One simple thing you can do as a leader to increase the buy-in, productivity and overall satisfaction of your team members (and it takes less than 30 seconds to do.)
  • The dangers of binary thinking and how Margaret catches herself from oversimplifying a situation.
  • Why arguing may be one of the purest forms of collaboration — and how to do it correctly.
  • How to identify the environment and context where you do your best work and how to best replicate it.
  • How “willful blindness” has caused catastrophic disasters in business, professional and personal relationships, and what we can do to avoid being another statistic
  • The wonderful advice Margaret gave to her kids when it came to choosing a career path

And much more.

If you interact with other human beings in any capacity, you need to hear what Margaret has to say.

Take a listen and let me know what you think!

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#ListenAndLearn

Transcript
An edited copy of this transcript is available to members of our learning community or for purchase separately ($7).

If you liked this, check out all the episodes of the knowledge project.

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The Reasons We Work

Why do you go to work? Chances are it’s got something to do with money. But as most of us know, it’s more complicated than that. “There is a spectrum of reasons why people do their jobs,” write Neel Doshi and Lindsay McGregor in Primed to Perform: How to Build the Highest Performing Cultures Through the Science of Total Motivation.

“Understanding that spectrum is the key to creating the highest levels of performance.”

The authors argue there are six reasons we do anything. The first three they call indirect motivations and the latter three are direct motivations.

The Reasons We Work

The Direct Motives

Play

You’re most likely to lose weight—or succeed in any other endeavor— when your motive is play. Play occurs when you’re engaging in an activity simply because you enjoy doing it. The work itself is its own reward. Scientists describe this motive as “intrinsic.”

Play is what compels you to take up hobbies, from solving crossword puzzles to making scrapbooks to mixing music. You may find play in weight loss by experimenting with healthy recipes or seeking out new restaurants that offer healthy options. Many of us are lucky enough to find play in the workplace too, when we do what we do simply because we enjoy doing it.

Curiosity and experimentation are at the heart of play. People intrinsically enjoy learning and adapting. We instinctively seek out opportunities to play.

[…]

Play at work should not be confused with your people playing Ping Pong or foosball in the break room. For your people to feel play at work, the motive must be fueled by the work itself, not the distraction. Because the play motive is created by the work itself, play is the most direct and most powerful driver of high performance.

Purpose

A step away from the work itself is the purpose motive. The purpose motive occurs when you do an activity because you value the outcome of the activity (versus the activity itself). You may or may not enjoy the work you do, but you value its impact. You may work as a nurse, for example, because you want to heal patients. You spend your career studying culture because you believe in the impact your work can have on others. Dieters may not enjoy preparing or eating healthy meals, but they deeply value their own health, an outcome of healthy eating.

You feel the purpose motive in the workplace when your values and beliefs align with the impact of the work. Apple creates products that inspire and empower its customers, a purpose that is compelling and credible. …

The purpose motive is one step removed from the work, because the motive isn’t the work itself but its outcome. While the purpose motive is a powerful driver of performance, the fact that it’s a step removed from the work typically makes it a less powerful motive than play.

Potential

The potential motive occurs when you find a second order outcome (versus a direct outcome) of the work that aligns with your values or beliefs. You do the work because it will eventually lead to something you believe is important, such as your personal goals.

Dieters motivated by potential eat healthfully to achieve other things they care about—the ability to run faster on the football field, for example, or to keep up with their kids. When a company describes a job as a good “stepping-stone,” they’re attempting to instill the potential motive.

These are the direct motives. Direct because they generally connect to the work itself.

As a result, they typically result in the highest levels of performance. If you remember only one thing from Primed to Perform, it should be that a culture that inspires people to do their jobs for play, purpose, and potential creates the highest and most sustainable performance.

Not all motives correlate with higher performance. Motives that don’t connect to the work itself typically reduce performance.

The Indirect Motives

Emotional Pressure

The first indirect motive, emotional pressure, occurs when emotions such as disappointment, guilt, or shame compel you to perform an activity. These emotions are related to your beliefs (your self- perception) and external forces (the judgments of other people). The work itself is no longer the reason you’re working.

You may practice the piano so you don’t disappoint your mother. You may stay in a job because its prestige boosts your self-esteem. A dieter may eat healthy meals because he’s embarrassed by how he looks, or because he feels guilty when his partner catches him with his hand in the cookie jar.

In each case, the motive is not directly connected to the work. It is indirect.

When your motive to work is emotional pressure, your performance tends to suffer. … High-performing cultures reduce emotional pressure. … [E]motional pressure is the weakest of the three indirect motives. The effects of economic pressure can be much worse.

Economic Pressure

Economic pressure is when you do an activity solely to win a reward or avoid punishment. The motive is separate from the work itself and separate from your own identity (see Figure 3 for an illustration of this separation). In business, this often occurs when you’re trying to gain a bonus or a promotion, avoid being fired, or escape the bullying of an angry boss. Economic pressure can occur outside the workplace, whenever you feel forced to do something.

[…]

The biggest misconception about the economic motive is that it is strictly a matter of money. In a study we conducted involving more than ten thousand workers, we looked to see how the economic motive changes with household income. We expected to find that the people with the least income experienced the highest economic pressure. Instead, we learned that income and the economic motive were statistically unrelated. People at any income level can feel economic pressure at work.

This is an important insight. Money alone does not cause the economic motive.

[…]

There are situations where money works, and situations where it doesn’t. It all depends on whether or not the reward or punishment is the motive behind the activity, and whether the activity would benefit from adaptive performance.

Inertia

The most indirect motive of all is inertia. With inertia, your motive for working is so distant from the work itself that you can no longer say where it comes from—you do what you do simply because you did it yesterday. This leads to the worst performance of all. … As destructive and insidious as it is, inertia is surprisingly common in the workplace.

I’ll have more to say about culture but needless to say, this is only one lens.

The Wisdom of Crowds and The Expert Squeeze

As networks harness the wisdom of crowds, the ability of experts to add value in their predictions is steadily declining. This is the expert squeeze.

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In Think Twice: Harnessing the Power of Counterintuition, Michael Mauboussin, the first guest on my podcast, The Knowledge Project, explains the expert squeeze and its implications for how we make decisions.

As networks harness the wisdom of crowds and computing power grows, the ability of experts to add value in their predictions is steadily declining. I call this the expert squeeze, and evidence for it is mounting. Despite this trend, we still pine for experts— individuals with special skill or know-how— believing that many forms of knowledge are technical and specialized. We openly defer to people in white lab coats or pinstripe suits, believing they hold the answers, and we harbor misgivings about computergenerated outcomes or the collective opinion of a bunch of tyros.

The expert squeeze means that people stuck in old habits of thinking are failing to use new means to gain insight into the problems they face. Knowing when to look beyond experts requires a totally fresh point of view, and one that does not come naturally. To be sure, the future for experts is not all bleak. Experts retain an advantage in some crucial areas. The challenge is to know when and how to use them.

The Value of Experts
The Value of Experts

So how can we manage this in our role as the decision-maker? The first step is to classify the problem.

(The figure above — The Value of Experts) helps to guide this process. The second column from the left covers problems that have rules-based solutions with limited possible outcomes. Here, someone can investigate the problem based on past patterns and write down rules to guide decisions. Experts do well with these tasks, but once the principles are clear and well defined, computers are cheaper and more reliable. Think of tasks such as credit scoring or simple forms of medical diagnosis. Experts agree about how to approach these problems because the solutions are transparent and for the most part tried and true.

[…]

Now let’s go to the opposite extreme, the column on the far right that deals with probabilistic fields with a wide range of outcomes. Here are no simple rules. You can only express possible outcomes in probabilities, and the range of outcomes is wide. Examples include economic and political forecasts. The evidence shows that collectives outperform experts in solving these problems.

[…]

The middle two columns are the remaining province for experts. Experts do well with rules-based problems with a wide range of outcomes because they are better than computers at eliminating bad choices and making creative connections between bits of information.

Once you’ve classified the problem, you can turn to the best method for solving it.

… computers and collectives remain underutilized guides for decision making across a host of realms including medicine, business, and sports. That said, experts remain vital in three capacities. First, experts must create the very systems that replace them. … Of course, the experts must stay on top of these systems, improving the market or equation as need be.

Next, we need experts for strategy. I mean strategy broadly, including not only day-to-day tactics but also the ability to troubleshoot by recognizing interconnections as well as the creative process of innovation, which involves combining ideas in novel ways. Decisions about how best to challenge a competitor, which rules to enforce, or how to recombine existing building blocks to create novel products or experiences are jobs for experts.

Finally, we need people to deal with people. A lot of decision making involves psychology as much as it does statistics. A leader must understand others, make good decisions, and encourage others to buy in to the decision.

So what are the practical tips you can do to make the expert squeeze work for you instead of against you? Here Mauboussin offers 3 tips.

1. Match the problem you face with the most appropriate solution.

What we know is that experts do a poor job in many settings, suggesting that you should try to supplement expert views with other approaches.

2. Seek diversity.

(Philip) Tetlock’s work shows that while expert predictions are poor overall, some are better than others. What distinguishes predictive ability is not who the experts are or what they believe, but rather how they think. Borrowing from Archilochus— through Isaiah Berlin— Tetlock sorted experts into hedgehogs and foxes. Hedgehogs know one big thing and try to explain everything through that lens. Foxes tend to know a little about a lot of things and are not married to a single explanation for complex problems. Tetlock finds that foxes are better predictors than hedgehogs. Foxes arrive at their decisions by stitching “together diverse sources of information,” lending credence to the importance of diversity. Naturally, hedgehogs are periodically right— and often spectacularly so— but do not predict as well as foxes over time. For many important decisions, diversity is the key at both the individual and collective levels.

3. Use technology when possible. Leverage technology to side-step the squeeze when possible.

Flooded with candidates and aware of the futility of most interviews, Google decided to create algorithms to identify attractive potential employees. First, the company asked seasoned employees to fill out a three-hundred-question survey, capturing details about their tenure, their behavior, and their personality. The company then compared the survey results to measures of employee performance, seeking connections. Among other findings, Google executives recognized that academic accomplishments did not always correlate with on-the-job performance. This novel approach enabled Google to sidestep problems with ineffective interviews and to start addressing the discrepancy.

Learning the difference between when experts help or hurt can go a long way toward avoiding stupidity. This starts with identifying the type of problem you’re facing and then considering the various approaches to solve the problem with pros and cons.

Still curious? Follow up by reading Generalists vs. Specialists, Think Twice: Harnessing the Power of Counterintuition, and reviewing the work of Philip Tetlock.

A Successful Businessperson Has to Learn to Say No

“The art of leadership is saying no, not yes. It’s very easy to say yes.” — Tony Blair

Tony Blair isn’t the only one who thinks that. So does Steve Jobs and Warren Buffett. Focus is everything.

One of the most evident signs of poor leadership is the inability to focus — it’s easy to say yes, and it’s very hard to say no.

Seymour Schulich elaborates on this in Get Smarter: Life and Business Lessons:

This piece of wisdom was instilled in me many years ago by Joe Rotman, an entrepreneur who is the benefactor of the Rotman School of Business at the University of Toronto. Many years ago, prior to the philanthropic work that made him famous, I arranged for a meeting so that I could gather the insight of an astute businessman who’d built a fortune in the resource business, primarily through oil and gas production.

“Every successful businessperson has to learn how to say no,” he told me that day. If you spend your life in business, you will see dozens or perhaps hundreds of potential deals. A small number will be highly attractive; most will be average or below average. The path to superior results is to accept only the best ideas — indeed, no venture capitalist or merchant banker could survive for very long without saying no to 90 per cent (or more) of the pitches he sees.

You can be diplomatic, firm, or a combination of the two, but you must be comfortable with the idea of handing out rejection. Rotman’s lesson became rooted deeply in my consciousness and caused me to be much less wimpy about turning down venture capital deals, start-up companies, and charities.

It’s not so much what you do but rather what you don’t do that matters.

Follow your curiosity to eight ways to say no with grace and style.

The Last Thing We Need Right Now is a Vision Statement

elephants

In this excerpt from Who Says Elephants Can’t Dance?, Louis V. Gerstner Jr. says something I wish tech companies would heed.

I said something at the press conference that turned out to be the most quotable statement I ever made:

“What I’d like to do now is put these announcements in some sort of perspective for you. There’s been a lot of speculation as to when I’m going to deliver a vision of IBM, and what I’d like to say to all of you is that the last thing IBM needs right now is a vision.” You could almost hear the reporters blink.

I went on: “What IBM needs right now is a series of very tough-minded, market-driven, highly effective strategies for each of its businesses— strategies that deliver performance in the marketplace and shareholder value. And that’s what we’re working on.

“Now, the number-one priority is to restore the company to profitability. I mean, if you’re going to have a vision for a company, the first frame of that vision better be that you’re making money and that the company has got its economics correct.

“And so we are committed to make this company profitable, and that’s what today’s actions are about.

“The second priority for the company,” I said, “is to win the battle in the customers’ premises. And we’re going to do a lot of things in that regard, and again, they’re not visions— they’re people making things happen to serve customers.”

I said we didn’t need a vision right now because I had discovered in my first ninety days on the job that IBM had file drawers full of vision statements. We had never missed predicting correctly a major technological trend in the industry. In fact, we were still inventing most of the technology that created those changes.

However, what was also clear was that IBM was paralyzed, unable to act on any predictions, and there were no easy solutions to its problems. The IBM organization, so full of brilliant, insightful people, would have loved to receive a bold recipe for success—the more sophisticated, the more complicated the recipe, the better everyone would have liked it.

It wasn’t going to work that way. The real issue was going out and making things happen every day in the marketplace.

Fixing IBM was all about execution. We had to stop looking for people to blame, stop tweaking the internal structure and systems. I wanted no excuses. I wanted no long-term projects that people could wait for that would somehow produce a magic turnaround. I wanted— IBM needed— an enormous sense of urgency.