Sterling Performance

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?

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.”

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…)

Years ago, an English rugby side came to play a ‘friendly’ in Edmonton, Alberta. They surprised everyone by losing. As they boarded their plane the next day, the players made the ‘V for victory’ sign, reported the Edmonton Journal. (Must’ve been a slow news day.) Er, no, that’s not what that sign means…

In Brazil, the American sign for ‘OK’ means something very rude. And it’s not just sign language that differs from one culture to the next. Despite globalisation, there are plenty of cultural idiosyncrasies that mark one nation out from another.

Sometimes the stereotypes are true, too. Visa once did a funny survey about the habits of business travellers from around the world. (It probably wouldn’t pass the PC test today.) All I remember is that the Brits were invariably to be found propping up the bar in the airport lounge.

A well-travelled journalist once remarked that you could identify nationalities at a business convention by their suits: Russians (in those days) invariably wore cheap brown ones (she said), Brits wore ill-fitting M&S (this was before Zara hit our high streets) and Americans were rarely without chinos and penny loafers.

Then there are the business decisions that didn’t translate: Chevrolet’s discovery that its Nova car was a literal ‘no go’ in Latin America springs to mind.

In China, ‘guanxi’ is considered essential to long-term business success. “We must take the time to really understand the cultures of partners we work with,” says BT’s Jeff Patmore.

But where do people learn about the cultural mores of new markets — what’s the correct etiquette for a business lunch? In which country is it considered rude to show your host the soles of your shoes? Why is it a good idea to have your business cards spruced up before a visit to Japan?

What are some other do’s and don’ts for doing business in different nations?

It’s been said that Winston Churchill was a great wartime leader, but less effective during peacetime.

There are some senior executives that fall into that category, too.

Today, Trevor Bish-Jones, Woolworths’ chief executive, has stepped down, the latest in a list of top executives who can’t seem to handle the heat. He was hardly booted out in shame, but Woolworths’ failure to establish a clear identity as a ‘value retailer’ has resulted in disappointing sales and downgraded forecasts, and the buck stops with him.

Erin Callan, until recently the CFO at Lehman Brothers, is another: she was recently demoted, along with Lehman’s COO Joseph Gregory. That seems quite a bit more ignominious, but the point’s the same: she wasn’t a wartime CFO.

(By the way, how does demotion work? Are you literally relegated to a lower floor, or is it like being ‘asked to leave’ a smart school that never uses the word ‘expulsion’?)

When Bradford & Bingley’s Steven Crawshaw resigned (not because of B&B’s profit warning, but too swiftly ahead of it for anyone’s liking), there were mutterings of ‘high time’ and simultaneous snorts of disgust.

CEOs on their way out are called ‘embattled’. But that’s exactly what they aren’t. They are the ones leaving the trenches. “Like rats abandoning a sinking ship,” is how one bank’s customer put it.

Yet if they don’t have experience of recession — Bish-Jones, Callan and Crawshaw are all in their 40s — is it better that they leave, or stay on and potentially make a hash of it? If you go out on a low, are you automatically a rat?

You could argue that this is where true leaders come into their own: they have character traits that make them great bosses in fair weather or foul.

Maybe so. But I doubt many boards would take a chance on an unproven executive in today’s economy. Unless you’ve had cause to demonstrate your ‘under siege’ abilities, who’s going to know you come into your own under pressure?

Anyway, there’s no substitute for experience. Talking to property company Segro’s chairman, Nigel Rich, about the credit crunch, he came across like a four-star general. He could draw on 30 years’ experience and recall lesssons from two recessions (1990s Britain and 1980s Hong Kong).

It’s given him perspective that cannot be faked. (Mind you, it couldn’t save Segro’s shares from falling by 3.1 per cent.)

Maybe it’s just about inspiring confidence. In which case, all leaders — that includes managers, anyone in charge of another person — should be able to don battle gear when necessary.

Coincidentally, a compact version of Robert Greene’s ‘33 Strategies of War’ landed on my desk this morning. Timely. And I thought the workplace-as-a-battlefield ethos was over.

Photo by Dierk Schaefer, CC 2.0 

The fight for qualified project professionals is becoming dog-eat-dog. It’s driving up costs and driving away loyalty, says Greg Balestrero, the chief executive of the Project Management Institute (PMI), a global organisation for project managers.

A PMI/Economist Intelligence Unit survey on talent management found:

• Over 95 per cent agreed that their organisational success hinges on finding people with the right skills.
• Only 12 per cent believe their companies are any good at finding these skilled people.
• 72 per cent say business performance has suffered as a result of skills gaps.

Yet less than half of them are directing the company to invest in skilled labour — that means built-in career paths, talent management, the kind of model you’d see in GE or in corporate universities such as those run by Motorola or Huawei.

Three things get in the way of talent management:

1. Lack of management directives
2. Lack of time
3. Other priorities

“All it says is that talent management isn’t a priority,” says Balestrero. “The companies that have higher returns are those which invest more in talent management. So it seems to be counter-intuitive.”

The problem? “Rapid growth yields urgency, and urgency leads people to chase the job not the career.” He explains what’s going on — and how it affects managers worldwide. (more…)

Most companies say that being customer-led is at the heart of their growth strategy. Yet market leaders achieve success by being distinctive — they lead customers, not vice-versa.

Take Apple. A columnist who has interviewed Steve Jobs several times told me that, in all his sessions with Apple’s CEO, Jobs has not once used the term ‘market research’ or ‘focus group’.

Instead, as with last week’s launch of the second generation of its iPhone, Apple’s success lies in its ability to be truly distinctive and to offer customers benefits they never knew they needed.

In their book, Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne studied over 100 business launches. They found that truly distinctive companies accounted for just 14 per cent of the launches but delivered over 60 per cent of the profits generated by the organisations studied.

The problem with being customer-led is that customers can’t predict the next big thing — you can’t give focus groups a blank sheet of paper and ask them to create a groundbreaking idea. If you do, you will only discover incremental improvements, not breakthrough growth.

Customers don’t notice incremental changes — most are too busy, and already have too much choice, to notice most new products, even when they’re an improvement on the current offer.

So how do you become ideas-led? Here are three practical strategies for success:

• Change the rules of the game. Ryanair started out life in 1985 as a smaller version of BA and Aer Lingus on routes between Ireland and London. It was only in the early 1990s, when it changed its mission to be Europe’s premier low-fare carrier, that it became one of the most profitable airlines in the world.

• Focus on early adopters. It is unlikely that, 10 years ago, a focus group of lorry drivers would have agreed to pay £2.50 for a frothy coffee. Now they happily shop at Starbucks. Instead of asking busy, satisfied customers about a new offer, focus on customer groups looking for change. It is these early adopters who will sell the idea to the majority, not you.

• Create a stream of ideas, not a one-off win. Apple’s product strategy is to launch a series of product upgrades that deliver better features at a lower price. Gillette, similarly, has consistently grown through a stream of innovations. As an ex-Gillette chairman once put it, “We have never launched a major new product without having its successor in development. You have to steer the market.”