Sterling Performance

In straitened times, perks are a tricky area for employers looking to buoy spirits without busting out massive bonuses.

It would be disingenuous to say pay doesn’t matter. But engaging anyone — from board members to employees — is better done by allowing them to take ownership of strategies, says Richard Donkin in the FT.

The psychology of motivation can elude employers because it taps into irrational behaviour. Financial wins work on a different part of the brain to that controlling altruism and social interaction, according to Ori and Rom Brafman’s book, Sway, the Irresistible Pull of Irrational Behaviour.

They quote a study at Duke university in North Carolina, where two groups of students took the same business exam, but one group was offered 2.5 cents for every correct answer.

The unpaid group scored higher on the tests — the reward in this case acted as a disincentive, probably because it was a risible amount. It would be like a friend offering you money to help them move: you’d probably be insulted rather than grateful.

It’s a question of what your incentives tap into — someone’s financial interests or, say, a sense of loyalty. Sometimes the most simple perks work just as well, if they play on the non-financial motivations.

Donkin also notes the value of “speedy recognition” through relatively low-cost rewards — breaks, use of the company Jag, a bottle of wine. This is still money, in some cases — he quotes Projectlink Motivation, which offers vouchers and ‘supercheques’ to high performers as part of its service. But these tend to be more affordable one-offs that presumably give still someone the gambling-high of a big financial win.

I was intrigued by the national differences between gifts people award themselves via Projectlink vouchers. According to the company’s managing director, Stephen Humphreys, the French like a good bottle of wine, the Spanish a cured ham. And the Brits? We slap ourselves on the back with brand new paper shredder.

He’d said he was going to go at the end of June, and as good as his word, Sir Alan Sugar’s given over the day-to-day running of Amstrad to plain Alun Webber, the managing director.

The Hackney-born entrepreneur founded Amstrad at 21 and last year sold the set-top box business to BSkyB for £125m, netting £34.5m and bringing his personal fortune to an estimated £830m.

Sugar will concentrate on other interests including computer business Viglen, Jersey-based investment vehicle Amshold, and his lucrative (well, in better times) property holding, Amsprop, whose portfolio includes the old IBM building on London’s South Bank and which is apparently run by Sugar’s son, Daniel. There’s also the little indulgence that is Amsair, a private jet company that must be smarting from high fuel prices, if not declining custom from its high-net worth client base.

But Sugar will always have his TV appearances to fall back on and will be back for another round of firings in next year’s Apprentice.

For John Naughton, it’s probably good riddance. He classes Sugar among the corporate world’s “vulgar, undisciplined, ego-maniacal brutes” who allow their businesses to become vehicles for their “infantile personalities”.

Does Sugar deserve such a drubbing? He may not be the most subtle boss on the block, but he represents a charismatic and no-nonsense entrepreneurial type that’s quickly going the way of the Dodo.

Two of Amstrad’s four senior managers have worked with Sugar for a collective 43 years — how bad can he be? And, cynicism notwithstanding, it’s unusual for a tyrant to attribute his company’s success to its “talented and loyal team”.

Egotistical? Possibly. Brash? Certainly. But after Sugar, there’s only Branson to claim the role of big business personality. Doesn’t business need a few larger-than-life characters — or are they part of a model that’s no longer sustainable?

Everyone seems to be talking about talent management at the moment. It came up as a priority for at least 50 per cent of Ashridge’s Management Index of important trends, driving the business school to launch a course to help managers frame the business case and avoid common pitfalls.

At Ribbon Farm, Venkatesh Rao takes a stroll through nine flawed talent management theories to explain why they don’t work. And Tammy Erickson identifies the top 10 talent management challenges.  To her list, I’d add a couple more.

First, the definition. What exactly do people mean by talent management? Is it about identifying and nurturing high-flyers, or helping all of your people to develop their particular skills?

The general assumption is that talent management is an enabler, while performance management is more about setting goals and monitoring their delivery.

But beyond that, there’s a muddle as to what is meant by talent and where it talent resides in the business. Is it the anointed few, or, in the right managerial hands, the many, the any?

Done badly, there’s potential for a massive rift to emerge between the ‘talented’ — the ‘hi-pos’ (high potentials) — and the ordinary, tellingly defined recently as as ‘the po-pos –passed over and p***ed off’.

It’s very dangerous to single out the stars in an organisation to the exclusion of all others. There are far more ‘utility players’ on most teams than standouts, for one thing.

It goes against the ‘enabling’ aims of talent management, for another. If you make a big deal of a select few, there’s every chance you’ll have a clutch of demanding and difficult divas in one corner and the disenfranchised masses in another.

It’s also bad for business, says Professor Robin Stuart-Kotze, chairman of Behavioural Science Systems. He points to the automobile industry as proof. “General Motors, Ford, Chrysler — they struggle while Toyota continues to grow revenue and profits, because Toyota listens to everyone’s views. It gets literally hundreds of thousands of ideas from employees at all levels — and it accepts and implements something like 90 per cent of them.”

The assumption that some people are born talented and some aren’t overlooks the fact that behaviour, rather than personality, drives performance, he adds.

The word ‘talent’ is  part of the problem. Says Stuart-Kotze: “It has a sprinkling of star dust about it and implies that so-called ‘talented people’ are very special, but talent is a relative concept.”

Talent’s also apt to wax and wane. Talent management theories often presuppose a mystical group of Alpha employees whose work is consistently stellar. Individual and team behaviour is cyclical — like stock tips, ‘talent’ tips should be taken with the same caveat — that performance can go up or down.

Yet, it’s a fact that some employees will rise to the challenge more often and more ably. It’s an issue managers are going to have to learn to deal with in a businesslike manner.

“Culturally, relationships are more important than tasks to UK managers, so we shie away from having respectful, frank, potentially difficult conversations,” says Penny de Valk at the Institute of Leadership and Management.

Turns out it’s not the word ‘talent’ we need to be worrying about after all. It’s our old friend ‘management’.

A rising tide floats all boats, but in today’s economy companies face a falling tide and choppier waters.

Last week, for example, Ilva’s UK operation went into administration, continuing the poor performance of furniture retailers (see also SCS and Land of Leather). Few companies are immune — even Nike’s shares fell after it reported flat sales growth in the US.

There are a few ways to succeed in today’s tidal conditions:

• Be the lowest-cost supplier of everyday essentials. Last week, for instance, it was reported that discount food retailers Lidl and Aldi are currently delivering double-digit growth.
• Have a unique, distinctive and valuable customer proposition. Apple continues to deliver growth as a result of its stream of innovative and desirable products which are able to transcend normal economic realities.
• Adapt to the new conditions quickly.

For most of us, the only real option is three — we must find new ways to succeed. As Charles Darwin wrote, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.”

Reducing cost is essential, but is unlikely to be sufficient. SCS, Ilva and Land of Leather all operated lean, low-cost business models, but this has not been enough when they reached the economic low tide.

You must also find new ways to grow. There are three mindsets that are critical to delivering growth in any conditions.

1. Create success for your customers. It is often easier to grow by selling more to your best customers than by seeking out new customers. What new forms of value could you create and deliver that will benefit your best customers and strengthen the relationship between the two of you?
2. Focus on action. Amazon.com has transcended the dotcom boom and bust cycles by continuously developing, testing and delivering new benefits for customers. It’s what CEO Jeff Bezos called “the institutional YES!”
   “People say ‘We’re going to do this. We’re going to figure out a way’,” Bezos told Harvard Business Review.
3. Accept risk. In many ways doing nothing is the highest risk option for many companies. In any case, as management writer Peter Drucker once wrote, “People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.”

What other strategies help your organization sail on through today’s tricky tides?

The Workplace Law Network explains how the draft Equality Bill, ‘Framework for a Fairer Future’, could affect UK employers and their teams.

It aims to “de-clutter” complex discrimination laws and bring them together under the heading of ‘Equality Duty’. It also zeroes in on weak spots in those current rules — ageism, homophobia and disability discrimination are still going unchecked, according to Equality Minister Harriet Harman.

Key proposals

• Employers to report on equality matters such as pay and diversity. (According to Francis Gibb, Harman was pushing for compulsory pay audits.)
• Positive discrimination OK for for women or minority job candidates if it comes down to a ‘tie-breaker’.
• No more ageism in the provision of services.
• Employers cannot outlaw discussion of pay.
• Tribunals can rule for the benefit of not just an individual, but the whole workforce of a discriminating employer.
• The government will investigate how multiple complaints can be brought — say, if someone claims discrimination as a disabled woman.
• Public-sector purchasing will promote the equality agenda through through procurement.

It’s all voluntary — at least for now — so employers’ organisation the CBI is broadly approving.

But all this talk of openness makes me think of Trendwatching’s Transparency Tyranny.

Surely all this disclosure can go too far. Or is it just a case of careful training, so that line managers can handle the tricky conversations that ensue when X finds out that Y is earning more — not because of some unfounded prejudice, but because Y is better at their job.

As entrepreneur John Timpson once said, not everyone is equal. (He even admits to ‘discriminating against drongos’.) But perhaps it’s not the employer’s place to exacerbate those inequalities any more than necessary. As you can tell, I’m on the fence on this one.

But employees up for letting it all hang out can have their say, too, by visiting Glassdoor.com — which reveals what employees think of companies, what they pay and how the CEO is rated.

British consumers are fed up with the high cost of living, according to McCann Erickson’s annual ‘Mood of Britain’ survey, written up in Marketing. And brand managers, marketers and advertisers may need to re-think campaigns to match the shift in sentiment.
The economic situation is now the biggest influence on UK consumers, with the high cost of living as the UK’s biggest gripe — consumers are increasingly concerned as they see it outpacing salary rises.

It’s not yet directly affecting the UK’s love of shopping, but the research into what makes consumers angry indicates that it soon will — and then they will want something different from their favourite brands.

“Attitudes toward debt are changing. The excesses of the ‘living on credit’ lifestyle are becoming more frowned upon and could… soon become as unacceptable as smoking,” says the article.

Other targets for British ire include

• Gordon Brown
• Banks
• The environment
• Crime
• Immigration

How brands should respond

• Add value Brands that offer more value for consumers will earn favour — Sainsbury’s ‘Feed a family for a fiver’ or Lloyds TSB’s AirMiles mortgage. Environmental campaigns should help consumers save money while saving the planet.
• Be sincere Messages need to convey the appropriate level of gravitas, with financial services firms and banks such as Barclays already opting for more earnest campaigns.
• Tout your history Brands with heritage offer the comfort of solidity to consumers. (more…)

UK managers underestimate the skills of their Chinese counterparts, says Management Issues, reporting on the Institute of Leadership and Management’s report, ‘Global Management Challenge: China vs the World’.

The western perception of Chinese management is outdated, says the ILM — we see China’s as a place where long hours and low costs prevail and management is authoritarian. But Chinese managers are highly principled and consider themselves good motivators who are outcome-focused team players.

What’s more, China is starting to develop a “distinctive and highly effective management culture” that could result in businesses that leave the west in their wake, doing for China what techniques such as ‘kaizen’ did for Japan.

“The similarities with post-war Japan are uncanny,” says David Pardey, the ILM’s senior manager, research and policy. If so, western businesses need to up their game or find themselves outstripped in the longer term.

Chinese managers are generally far more educated and ambitious than those in the west, and in-house training is taken seriously — telecoms giant Huawei has its own university.

The ‘Chinese way’ of management draws on western management models but is binding them with its own culture to create a new practice.

The traits most valued by Chinese managers reflect this:

• Knowledge, wisdom and the ability to learn.
• Taking responsibility.
• Teamworking skills.

“The emphasis is on ‘communitarian’ values, discussion and consensus,” says Pardey. “Decisions emerge, rather than being made.”

What appears to western eyes as a reluctance to make decisions is simply a result of this consensual approach. What’s more, because everyone’s been consulted on a decision, they are more likely to buy into it.

The management model also focuses on long-term results. “There’s a strong emphasis on relationships and not allowing short-term setbacks to deter a business from its end goals, whereas the Anglo Saxon model is much more short-termist,” says Pardey.

He cites China’s barter-style investment in Nigerian oil as an example — it’s willing to shoulder an initial loss for a bigger gain in the long term.

This is where western complacency is dangerous. Chinese businesses may not be immediate threats to their western rivals, but in 10 years, they will have deep foundations that guarantee success.

The ILM research also claims western managers tend to be slower to identify areas for improvement than the Chinese, a trait that must change.

Says Pardey: “We have got to learn and we’ve got to innovate. The UK’s strength is in risk-taking — culturally, it is more prepared for innovation. But not enough UK organisations are at the leading edge.”

Having trouble persuading your boss that you need a pay rise? The FT’s Adam Jones offers a compelling argument, courtesy of legendary music producer Quincy Jones.

Managers’ work, if done well, is likely to be invisible, argues Jones (Adam). What you do all day is smooth the path for others to deliver results. Your ability is in the orchestration — like QJ’s.

It’s also about bringing together the right contacts from your network, which, in Quincy J’s case have included Ella Fitzgerald, Miles Davis, Diana Ross, Lionel Ritchie and Michael Jackson.

A manager’s value is bound up in his or her star contacts, plus their ability to get others to produce. It’s also, presumably, about creating in-house stars — who might go on to eclipse their manager.

This is the hard part. Adam Jones doesn’t mention it, but the famously perfectionist QJ could also teach managers a lot about how to forego the limelight while retaining recognition.

Mind you, any boss who’s experienced the ‘negative equity’ resulting from poor management — or no management at all — will recognise these ‘invisible’ skills in a trice. Won’t they?

Contrary to conventional wisdom, conflict is an essential characteristic of any high-performing team.

Weak teams and committees are full of people who keep their opinions to themselves when together, only to whine when outside the group.

Effective teams get the issues on the table immediately, confident in the knowledge that they are working toward the same goals.

Take Manchester United. From Schmeichel to Keane to Rooney, and not forgetting the manager, Sir Alex Ferguson, the team has always had individuals ready to challenge others — often very directly — to raise their game.

The key to success is to ensure that the conflict is positive, not destructive. In business, there are two major advantages to allowing conflict and differences of opinion to influence big issues and decisions:

• Clarity of solution. Sculptors often remark that as they work on the stone, the final piece reveals itself. Solutions to major decisions are the same. They are crafted and shaped by the arguments and counter-arguments that positive conflict encourages. As weak arguments and ideas are chiselled away the best solution becomes clear.
• Commitment to action. Allowing and encouraging positive conflict builds rather than destroys commitment. Everyone can be involved in developing the solution, giving your team greater ownership of the solution. As the quality of the final solution is likely to be higher, your people will have greater confidence that it will work in practice.

So how can you promote and develop positive conflict with your team? Here are three steps you can take:

1. Develop genuine alternatives. There is more than one way to grow sales profitably. A good alternative should
   • Address the issue or opportunity head-on.
   • Enable you to create real performance improvement.
   • Improve your competitive position.
   • Be feasible for your organisation to deliver.
2. Encourage an ‘inquiry mindset’. Harvard Business School’s David Garvin argues that business leaders should create an ‘inquiry mindset’ across their teams, promoting collaborative problem-solving where team members remain open to alternatives and accept constructive criticism. They should avoid an ‘advocacy mindset’, where decision-making is a win-lose contest involving persuasion, lobbying and the dismissal of others’ views.
3. Recognise the risks. All alternatives have risks and, even with your final solution, these should not be played down. Recognising the risks allows you to plan preventative and contingent actions, giving you and your team even more confidence in the final solution.

Is there sufficient positive conflict in your team? If not, is it time to encourage your people to challenge others’ ideas and assumptions and put forward genuinely new alternatives?

Web 2.0: Lessons in ROI from Threadless

Plenty of businesses still don’t see where Web 2.0 delivers a return on investment, says David Tebbut at SmallBizPod.

Inc’s profile of Threadless, the online community-led T-shirt retailer whose 2006 profit was an estimated $6m, could offer some insight.

“Our brand is a fun boys’ and girls’ club,” says co-founder Jake Nickell.

Says the article: “Eventually, Threadless-like communities could form around industries as diverse as semi-conductors, auto parts and toys.”

How Threadless excels

• Research and design is conducted in an open source way, via “innovation commons”.
• Customers freely share ideas and receive payment and kudos for winning designs.
• Trust is a core competency.
• It asks a lot of its customers, but it reciprocates — there’s a story about Nickell and CEO Jeffrey Kalmikoff leaving a high-powered dinner to meet up with a Threadless customer.
• It has inbuilt growth potential. Naked & Angry, a promising spin-off, will sell user-designed bags, wallets and dinner services. Threadless is expanding into prints and posters.
• It knows where the brand value lies. It turned down offers from Urban Outfitters and Target.com because the retailers couldn’t tell the Threadless story in their shops.
• Its employees are true believers — 75 per cent of the company’s 50 employees were community members before being hired.
• There are toys in the office, but most people end up working.

Potential hurdles

• Core fans may not applaud the company’s expansion.
• It has painted itself into a cool corner.
• Minority stakeholder Insight Venture Partners could start pushing for faster growth.
• Is there an IP issue bubbling under?

(more…)