Your SlideShare is downloading. ×

Slideshow pfeffer 24 09

578
views

Published on

Jeffrey Pfeffer. The Return from Investing in People. Evidence and Applications - Slides HR Square event 24/09/2013

Jeffrey Pfeffer. The Return from Investing in People. Evidence and Applications - Slides HR Square event 24/09/2013

Published in: Business, Technology

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
578
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
54
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide
  • Not the next how to guide
  • v
  • ( G. E. does this, Toyota does that…)
  • ( G. E. does this, Toyota does that…)
  • E.g., why people put up with bad behavior from people like Steve Jobs
  • E.g., why people put up with bad behavior from people like Steve Jobs
  • Transcript

    • 1. Mensen maken het verschil (People make the difference) Luc Sels Dean Faculty of Economics and Business
    • 2. The next book on the shelf? Guiding principles 1. Balancing between strengths and giftedness approaches 2. Relating to the talent mismatch debate to raise awareness 3. Appealing to the responsibilities of (line) management 4. Evidence-based (where evidence is available) 5. Non-prescriptive nor normatively framed
    • 3. 1. Balancing between strengths and giftedness approach “… essentially a euphemism for ‘people’” “… a select group of employees – those that rank at the top in terms of capability and performance – rather than the entire workforce” “… a person’s recurring patterns of thought, feeling, or behavior that can be productively applied” “… the human resources that organizations want to acquire, retain and develop in order to meet their business goals” “… competence [being able to do the job] times commitment [willingness to do the job] times contribution [finding meaning and purpose in work]”
    • 4. 1. Balancing between strengths and giftedness approach Giftedness approach Strengths approach↔ Top 1-10% Everyone has talent↔ Gift = innate ability Strengths = systematically developed↔ Gifts can manifest themselves in different talents ↔ People should develop strengths, not weaknesses Manual dexterity, painter OR pianist Opposite of ‘gap’ thinking in HR Exclusive versus inclusive
    • 5. 2. Relating to the talent mismatch debate to create awareness
    • 6. 2. Relating to the talent mismatch debate to create awareness (historical and projected replacement demand) Interpretation: of all employees aged 50-plus in 2007 281.800 left the labor market in the period 2007-2012
    • 7. The shortage we createThe shortage we create ourselves…ourselves… Aiming ever higher in recruitment and selection Expecting supreme productivity as of day one Wanting to be lean (and mean) Searching for the white crow Focusing on credentials instead of competencies Always fishing in the same pond (with bigger baits) Not recognizing bottleneck vacancies as ‘first priority’
    • 8. 3. Appealing to the responsibilities of (line) management 1. (Express your) believe that your team members can grow in their capabilities (Incremental implicit theory) 2. Expect a lot of your team members, reinforce your expectations with positive messages (Pygmalion effect) 3. Keep your promises (Behavioral integrity) 4. Admit mistakes when they occur (Psychological safety) 5. Allow all members of the team to voice their opinions even if they differ from your own (Inclusive leadership) 6. Ask for feedback about your actions and plans (Feedback seeking) 7. Stimulate all members to become engaged in the leadership of the team, to influence and guide fellow team members in an effort to maximise the team’s potential (Shared leadership theory)
    • 9. 4. Evidence-based (where evidence is available) Common mistakes in retention management 1.All voluntary turnover is bad: the lower, the better! 2.‘Most voluntary turnover is avoidable’ versus ‘there is little managers can do’ 3.Turnover is primarily a pay issue 4.People quit because they are dissatisfied with their jobs 5.Exit interviews are the prime source of information
    • 10. -.15-.1-.050.05 LogLaborProductivity 0 .1 .2 .3 .4 .5 .6 .7 .8 Volunta ry T urnover R ate L in ea r Q uadratic T hird Ord er F ourth O rder F ifth Ord er Im pact V olu ntary Turnove r R ate on Labour P roductiv ity Relationship voluntary turnover and productivity
    • 11. Turnover and firm performance Where are they going? Voluntary turnover Firmperformance Quitter moves to competitor Quitter moves to client or supplier
    • 12. 5. Non-prescriptive nor normatively framed  Failure to manage expectations about career progression  Disillusionment with the employer (e.g. peers progressing at faster rate)  High potential ‘burnout’, work-life balance tensions (mid-career)  Using inadequate high potential identification criteria – Peter Principle  Management cloning/homosocial reproduction  Not paying enough attention to non-leadership talent (e.g. experts)
    • 13. 5. Non-prescriptive nor normatively framed 1. Should HiPo’s be identified at all? 2. Why not ‘buy’ instead of ‘make’ future leaders? 3. Someone with ability, engagement, and aspiration to rise/succeed in … in what? 4. How to identify the ‘talented’? 5. How to develop the ‘talented’? 6. Should we share talent decisions? 7. The ideal size of a talent pool? 8. One or more than one talent category? 9. How to balance employee and employer interests? 10.How to track progress?
    • 14. Masterclass, Brussels,24th September 2013 Lut Crijns The return on investment in talent
    • 15. Why (now) a book about talent management and ROI? • Economic change: the pressure on organizations, and consequently on people, is increasing. • Demographic change: the aging workforce and diversity on the work floor: we are in need of a paradigm shift regarding work (and workers). • Technology change: the information technology and data intelligence.
    • 16. 5 levers 1. First, you need a perspective on people 2. Talent is not enough 3. HR practices make strategy work (or not) 4. Care about the hardware 5. Develop HR Intelligence
    • 17. 1. First, you need a perspective on people
    • 18. HR practices can only be efficient if they are applied in alignment with the underlying perspective on people. • What lies below the surface? Do you believe humans want to work and are self-motivated? • Do you believe in their potential and their ability to improve upon themselves? • Are you willing to set the bar high, to challenge, to give responsability and to tell the truth as it is? • Do you think that workers want to build co-operative and intimate working relationships with those that they work for and with, as well as the people that work for them? • How much confidence do you have in the ability of people to participate in decision making process? • Do you not only care about how management views employees, but also about how workers might perceive management?
    • 19. Douglas McGregor (Theory X & Y) William Ouchi (Theory Z) Tends to categorize people as one type or another: either being unwilling or unmotivated to work, or being self motivated towards work. Threats and disciplinary action are thought to be used more effectively in this situation, although monetary rewards can also be a prime motivator to make Theory X workers produce more. Believes that people are innately self motivated to not only do their work, but also are loyal towards the company, and want to make the company succeed. Theory X leaders would be more authoritarian, while Theory Y leaders would be more participative. But in both cases it seems that the managers would still retain a great deal of control. Theory Z managers would have to have a great deal of trust that their workers could make sound decisions. Therefore, this type of leader is more likely to act as "coach", and let the workers make most of the decisions. McGregor's managers, in both cases, would seem to keep most of the power and authority. In the case of Theory Y, the manager would take suggestions from workers, but would keep the power to implement the decision. The manager's ability to exercise power and authority comes from the worker's trusting management to take care of them, and allow them to do their jobs. The workers have a great deal of input and weight in the decision making process. This type of manager might be more likely to exercise a great deal of "Power" based conflict resolution style, especially with the Theory X workers. Theory Y workers might be given the opportunity to exert "Negotiating" strategies to solve their own differences. Conflict in the Theory Z arena would involve a great deal of discussion, collaboration, and negotiation. The workers would be the ones solving the conflicts, while the managers would play more of a "third party arbitrator" role. Appraisals occur on a regular basis. Promotions also occur on a regular basis. Theory Z emphasizes more frequent performance appraisals, but slower promotions. Theory X,Y :Mc Gregor, The human side of enterprise, 1960 Theory Z: How American business can meet the Japanese challenge, W. Ouchi, 1982
    • 20. What perspective on people guides your HR practices? HRM X • Recruits in the moment, when the need arises • Selects based on proven knowledge and skills • Provides jobspecific training • Is forced to hire externally for functions with more/higher responsability • Pays a fixed salary, not linked to performance management • Recruits in the moment, when the need arises • Selects based on proven knowledge and skills • Provides jobspecific training • Is forced to hire externally for functions with more/higher responsability • Pays a fixed salary, not linked to performance management HRM Y • HRM Y + • Driven by the will to succeed: has a simple but strong performance management system • Builds stronger teams with delegation of power • Encourages generalization versus specialization: jobrotation, broadening of skills • Strong cultural leverage • HRM Y + • Driven by the will to succeed: has a simple but strong performance management system • Builds stronger teams with delegation of power • Encourages generalization versus specialization: jobrotation, broadening of skills • Strong cultural leverage • Has a workforce plan stretching over 2 to 3 years • Selects internally and externally based on performance and potential • Provides training and development possibilities beyond job specific requirements • 2 out of 3 “next level” jobs are filled in internally • Pays a fixed salary, and a bonus linked to performance management • Has a workforce plan stretching over 2 to 3 years • Selects internally and externally based on performance and potential • Provides training and development possibilities beyond job specific requirements • 2 out of 3 “next level” jobs are filled in internally • Pays a fixed salary, and a bonus linked to performance management P&O Z
    • 21. 2 Talent is not enough
    • 22. 2 Talent is not enough • Gifted or strength? Everyone has talent, but not everyone is born with an exceptional talent in a specific field. • Every talent can be developed into a strength, through “10.000 hours of deliberate practice”. • Talent leads to results and efficiency if deployed in combination with other talents for a specific goal. • If talent isn't used in the right context, it will not pay.
    • 23. 3 HR-practices make strategy work (or not) • Coming up with a strong strategy is a challenge. Excellent execution of strategy is infinitely more challenging. • The performance level a company can achieve, is determined more by the capability of people and organizations to execute strategy, rather than the choice between strategies or the sector in which you operate. • The strategic role of HRM is not in defining the strategy, but in developing the ability to execute the strategy. How to connect people and their daily work with strategic objectives?
    • 24. Example: Performance management (Acerta)
    • 25. Klantenkompas: Wij willen de beste zijn in geïntegreerde HR dienstverlening voor de klant Medewerkerskompas: Wij zijn klantgedreven experten in alles wat te maken heeft met het werken van mensen. Financieel kompas: Wij willen ons aandeel in de HR Wallet van elke klant verhogen 3 compasses
    • 26. Getting results and measuring them : 3 Acerta compasses = 3 lagging indicators De NPS peilt bij de klant en de boekhouder in welke mate hij Acerta als HR dienstverlener aan anderen (vrienden, collega’s, familie, …) zou aanbevelen. Het is de meest duidelijke indicator voor onze capaciteit om klanten te houden en aan te trekken. De NPS van de medewerker meet in hoeverre medewerkers, bereid zijn Acerta als werkgever bij vrienden en bekenden aan te prijzen. Het is de meest duidelijke indicatie van onze aantrekkelijkheid om goede mensen te houden en aan te trekken De totale omzet van Acerta gedeeld door het aantal voltijdse equivalenten Acerta medewerkers is een simpele en krachtige meter van onze efficïentie.
    • 27. Getting results and measuring them : 3 Acerta compasses = 15 leading indicators
    • 28. Net promotor score van de medewerker Net promotor score van de klant en partner klantenkompas financieel kompas medewerkers kompas Tevredenheid over kwaliteit coaching Tevredenheid over kwaliteit coaching eigen medewerkersfinancieel kompas medewerkers kompas N coachingacties per medewerker N coachingacties per medewerker financieel kompas medewerkers kompas toepassen van coachingmethodiek Acerta Wij willen de beste zijn in geïntegreerde HR dienstverlening voor onze klanten Contributie klantenkompas financieel kompas medewerkers kompas % medewerkers die tevreden zijn over de kwaliteit van de coaching % medewerkers van mening dat ze hun talenten effectief kunnen inzetten en ontwikkelen % medewerkers die tevreden zijn over de werkcontext (organisatie, reward, infrastructuur, cultuur) Wij zijn gedreven experten Wij willen ons aandeel in de HR Wallet van elke klant verhogen Resultaatmeters en resultaatbrengers van Managing director : Astrid De Lathauwer Verantwoordelijk voor Consult 1 Net promotor score van de medewerker Net promotor score van de klanten die Consult diensten afnemen % verstrekte services dat voldoet aan de kwaliteitsnorm. % verstrekte services waarvan de klant aangeeft dat ze voldoen aan de minimumscore voor toegevoegde waarde Contributie per business unit N klanten dat in één jaar diensten van minimum 3 business units afneemt Systematisch leren uit alle klantenbevragingen 4 N werknemers waarvoor werkgevers min. €500 per wn/jaar besteden bij Acerta N werknemers waarvoor werkgevers min. €500 per wn/jaar besteden bij Acerta Acerta compasses Unit compasses Individual compasses= coachingtool Every coworker contributes to Acerta’s strategy
    • 29. 4 Care about the hardware Work and work environment have to answer to 3 basic and universal needs: 1. Autonomy: can I make my own choices and is there room for independence? 2. Involvement: is there room for positive relationships, allowing me to feel accepted and valued? 3. Competence: do I feel like I have the right skills, and can I fully make use of them?
    • 30. Organizations eat talent for lunch, every day M. Seligman, flow Karasek, Job demand control talent challenge flow
    • 31. Identify work characteristics • Motivation and involvement are a complex system (not personal traits), built on the basis of work processes, job design, organizational structures and culture * 40
    • 32. Intention of recommandation • Who are the detractors? • Experience the employer, the corporate values and culture, job satisfaction and career possibilities as hardly attractive • Experience significantly more verbal abuse and harassment at work • Are unsatisfied and have a donkey or exhausting job • Who are the active promotors? • Don't feel overstretched mentally, and experience their career possibilities and job satisfaction, corporate values and culture, and their employer as highly attractive • Are engaged in their work • Who are the passive promoters? • Experience little pressure at work, a high level of job satisfaction and view their career possibilities and employer as attractive
    • 33. Job design or job crafting? • The central idea of job crafting is for people to be able to craft their own jobs, based on their motivation and talent. • This can be an individual or a team process . • A positive or negative effect on performance is not yet proven, but people are significantly more motivated when allowed to shape their job.
    • 34. 5 Develop HR Intelligence Effects of HR practices are measurable on three levels: Immediate HR effects: employee satisfaction, turnover, absenteeism,… Operational effects: productivity, quality of service, process improvement,… Financial results: profit evolution, cost management,…
    • 35. Moving forward
    • 36. Acerta ROIT®- analysis 45
    • 37. Impact analysis & predictive analysis • Does modifying the bonus system of your salesteam leads to more revenue? • Does your investment in account management leads to a higher customer satisfaction? • Do retention efforts (higher merit, faster career growth, more training facilities) lead to a higher customer satisfaction and better product quality • Does a higher NPS of your employees lead to a better NPS of your customer? • …
    • 38. Thank you for your attention
    • 39. WHY PEOPLE ARE THE BEST SOURCE OF SUSTAINED COMPETITIVE ADVANTAGE—THE EVIDENCE, THE LOGIC, AND WHAT COMPANIES MUST DO Jeffrey Pfeffer Graduate School of Business Stanford University
    • 40. CONVENTIONAL WISDOM ABOUT SOURCES OF COMPANY SUCCESS • Being first with an idea is important • It is important to be in the right industry • Being large matters--accounting for the wave of mergers and consolidations • Being in a high technology industry is the path to success • Downsizing and reducing labor costs are important for increasing profits
    • 41. DO YOU NEED TO BE FIRST WITH THE IDEA? • Amazon.com was at least the fourth company to begin selling books online • Xerox invented the first personal computer, and also developed the first word processing program • Diner’s Club predated the Visa credit card • Pfizer’s Lipitor was at least the third statin (cholesterol lowering drug) on the market • There is no evidence for a consistent first-mover advantage
    • 42. THE EVIDENCE: DOES INDUSTRY MATTER? • According to one study of 1,800 companies by Booz Allen, industry growth rates were unrelated to a company’s ability to create shareholder value over a ten year period • A study by Mercer Management Consulting found no correlation between industry growth rates and the growth rate of any individual company within an industry
    • 43. THE EVIDENCE: DOES INDUSTRY MATTER? • A 2012 study by Booz & Company of 6,138 companies from 2001-2011 concluded: “if you throw out the number one and number 65 industries in our study…the median returns of the ‘best’ and ‘worst’ industries are within 16% of one another. The gap within industries is far greater: The top companies in each industry have annual TSRs that are 72% higher, on average, than the TSRs of the worst companies.” • Although profit margins do vary by industry, there is tremendous variation within each industry.
    • 44. 30 YEAR TOTAL SHAREHOLDER RETURN— FROM MONEY’s 30TH ANNIVERSARY ISSUE • Southwest Airlines—25.99% • Wal-Mart Stores—25.97% • Kansas City Southern Industries—25.61% • Walgreen Company—23.72% • Intel Corporation—23.49% • Comcast Corp.—21.99% • Circuit City Stores-Carmax—21.71% • Forest Laboratories—21.69% • State Street Corporation—21.45% • Kroger Company—21.16%
    • 45. The conclusion: you are better off being a great company in a “bad” industry than an ineffective, poorly managed company in a great industry.
    • 46. THE EVIDENCE: DOES SIZE MATTER? • In 44% of the industries covered by Value Line, there is a negative correlation between company size and measures of profitability • Across the 80 nonfinancial industries, the average correlation between size and percent earned on net worth was just .11. • Toyota was not as large as General Motors in sales, but it has been much more profitable.
    • 47. THE EVIDENCE: DOES SIZE MATTER? • The most profitable airline in the U.S. is Southwest; it is not the largest • The only other airline to have been profitable every year for the past 30 is Singapore; it is also not the largest • Most mergers (about 70%-80%) fail according to academic and consulting firm studies, with failure defined as destroying market value and as not achieving the intended financial objectives
    • 48. THE EVIDENCE: DOES SIZE MATTER? • On Forbes list of America’s best and worst banks for 2013, based on their financial health, of the top 40, only 4 have assets over $200 billion and of the top 15, only 1 does. • On the ABA Banking Journal’s list of the top performing big banks Ranked by return on average equity, of the top 10, only 2 have assets of more than $200 billion.
    • 49. THE EVIDENCE: EFFECTS OF DOWNSIZING • Downsizing does NOT increase stock price, either immediately or over a two year period. • A study using Census of Manufacturing data found that establishments that increased productivity over a ten-year period were as likely to add as reduce people. • An American Management Association survey of 700 companies found that productivity rose in 34% of the cases but fell in 30%
    • 50. THE EVIDENCE: EFFECTS OF DOWNSIZING • A study of the S & P 500 by Wayne Cascio found that downsizing did not increase profitability (either return on assets or stock returns) • A Society for Human Resource Management study found that only 32% of respondents reported that layoffs improved profits • An AMA survey reported that only 35% of respondents increased product or service quality following downsizing
    • 51. THE EVIDENCE: EFFECTS OF DOWNSIZING • A survey of 720 companies found that 1/3 had brought back laid off employees as temps or contractors—downsizing often doesn’t even reduce costs • On average, 2/3 of companies that lay off people in one year do it again the next year • 45% of companies that downsized rehired laid-off employees full time, 17% rehired people as consultants, and 56% hired employees after the layoff
    • 52. THE EVIDENCE: EFFECTS OF DOWNSIZING • A Right Associates survey reported that 70% of senior managers remaining in downsized firms reported that morale and trust declined • A survey of “survivors” found that: 54% felt overworked 59% lacked time for reflection 45% reported having to multitask too much
    • 53. THE EVIDENCE: EFFECTS OF DOWNSIZING • A study of 300 large and midsize firms discovered that stress-related disorders among employees (including mental health and substance abuse, high blood pressure, and other cardiovascular problems) at downsizing companies increased between 100% and 900% • Downsizing hinders innovation, by breaking the networks of relations necessary for developing new things
    • 54. WHAT ARE THE SOURCES OF COMPANY & COUNTRY SUCCESS? • Low wages—and consequently, low labor costs? • Low taxes—and consequently, lower costs? • Absence of governmental regulation—and consequently, more flexibility?
    • 55. WHAT ARE THE SOURCES OF COMPANY & COUNTRY SUCCESS • Education and skills? • Lack of strong labor unions, facilitating managerial autonomy? • An engaged, committed, motivated work force?
    • 56. ACCORDING TO THE WORLD ECONOMIC FORUM, WHICH COUNTRY GOES WITH WHICH GLOBAL COMPETITIVENESS RANK? • China • South Korea • India • Sweden • Switzerland • #1 • #3 • #4 • #59 • #29
    • 57. MISPERCEPTIONS ABOUT COUNTRY SUCCESS • World Economic Forum 2012-2013 competitiveness rankings Switzerland ranked #1 Sweden ranked #4 Singapore, the U.S., Germany, Japan, Finland, Hong Kong, Denmark, and the United Kingdom complete the top 10 South Korea ranked #19 China ranked #29 India ranked 59th
    • 58. Which Pilot Hourly Wage Goes With Which Airline (in 2004)? • United • US Airways • Southwest • Alaska • Frontier • $194 • $175 • $151 • $149 • $143
    • 59. PILOT WAGES (similar seniority and flying the same plane type • Alaska • Southwest • Frontier • United • US Airways • $194 • $175 • $151 • $149 • $143
    • 60. CIRCUIT CITY: THE HIGH PRICE OF THE SEARCH FOR LOWER COSTS • An electronics retailer that, in late March, 2007, laid off 3,400 of the company’s most experienced sales clerks (to save money by hiring less expensive replacements); sales associates are paid in part on the basis of how much they sell. • Can you guess what happened?
    • 61. Circuit City v. Best Buy, 2006- 2007 Circuit City -77.9% TSR -5.5% sales decline EPS went from $0.47 to <$1.25> Best Buy -14.1% TSR 11.4% increase in sales EPS grew 11.5% ($2.79 to $3.11)
    • 62. Having lost its best sales associates (many of which were hired by its competitors), Circuit City lost sales, cut more costs, and went into a death spiral. It went into bankruptcy and was liquidated.
    • 63. CHOOSE A STRATEGY TO COMPETE IN THE GROCERY STORE INDUSTRY • Minimize labor costs by Lean staffing Minimizing wages, benefits, and training Getting by with few skills • Minimize product costs by Centralized purchasing In large quantities • Staff the store generously • Let individual store department managers do their own stocking • Hire more qualified people • Pay more and train more
    • 64. WHICH LOOKS MORE SUCCESSFUL TO YOU? • Grocery store industry 29.6% gross margin 5.8% operating margin 8.4% return on total capital 14.7 P/E ratio • Whole Foods Market 37.4% gross margin 8.7% operating margin 11.3% return on total capital 31.6 P/E ratio 16.5% 10 year CAGR in sales 22.0% 10 year CAGR in earnings 293% five year TSR
    • 65. WAL-MART v. COSTCO • Average Costco employee earned $15.97 an hour in 2004, 39% more than the average Sam’s Club employee who earned $11.52 • Costco provides benefits such as health insurance (82% of employees covered), Sam’s does not (47% covered by a less generous plan) • Which discount chain is more profitable?
    • 66. WAL-MART v. COSTCO • Turnover is 6% in the first year at Costco v. 21% at Sam’s • Costco generated $795 sales per square foot, Sam’s Club $516. • Therefore, profit per employee was $13,647 at Costco v. $11,039 at Sam’s Club • Labor rates do not equal labor costs or profits!
    • 67. WHY DOES TOYOTA OUTPERFORM GM, FORD, AND DAIMLER- CHRYSLER? • Lower retiree health care and pension costs? • Lower wages? • Higher labor hour productivity? • Higher realized revenue per vehicle sold?
    • 68. In 2004 (the last year for which data are available), Toyota received, on average, about 30% ($6,000) more per vehicle sold than GM. GM’s health care and retirement costs were about $1,500 per car higher. Lesson: in this case, as in many, the key to economic success is revenues, not costs!
    • 69. WHAT MATTERS FOR SUCCESS? THE EVIDENCE • Semiconductor fabrication • Integrated steel manufacturing and steel minimills • Apparel manufacturing • Automobile assembly • Oil refineries • Medical and electronic devices
    • 70. WHAT MATTERS FOR SUCCESS? THE EVIDENCE • Telephone call centers • Financial services • Survival rate of initial public offerings • Multi-industry studies of the effects of management practices on performance
    • 71. Productivity and Quality Comparisons Among Four Automobile Plants Framingham GM-Fremont NUMMI Takaoka 1986 1978 1986 1986 Overall Productivity Hourly 36.1 38.2 17.5 15.5 Salaried 4.6 4.9 3.3 2.5 Total 40.7 43.1 20.8 18.0 Adjusted Productivity Hourly 26.2 24.2 16.3 15.5 Salaried 4.6 4.9 3.3 2.5 Total 30.8 29.1 19.6 18.0
    • 72. Productivity, Quality and Work Organization in 62 Automobile Plants Dimension Mass Flexible % Difference Production Quality (defects per 100 cars) 94.1 49.5 47.4% Productivity (hours/car) 36.6 20.9 42.9% % Work force in teams 5.0 70.2 1,304% Suggestions/Employee .24 36.5 15,108% Training New Hires (0=Low to 3=High) 1.0 1.9 90% Job Rotation Index (0=None; 4=Much) 1.2 3.0 150%
    • 73. Productivity, Quality and Work Organization in 62 Automobile Plants Dimension Mass Flexible % Difference Production Contingent Pay (0=None; 4=Based on plant performance) .72 3.0 317% Status Differences (0=Extensive; 4=Little) 1.1 3.4 209% Inventory Level (in days for 8 parts) 2.8 .63 -77.5%
    • 74. Effects of Control Versus Commitment Human Resource Systems in 30 U.S. Steel Minimills • 57% less turnover in commitment systems • 34% fewer labor hours required to produce one ton of steel in commitment systems • 63% better scrap rate in commitment systems
    • 75. Effects of Control Versus Commitment Human Resource Systems in 30 U.S. Steel Minimills Dimension Control Commitment %Difference Wage Costs $18.07 $21.52 19.1% Benefit Rate 27.3% 32.01 17.2% Bonus Rate 30.0% 13.62% -54.6% Percent Unionized 38 57 50% % in teams or
    • 76. Effects of Control Versus Commitment Human Resource Systems in 30 U.S. Steel Minimills Dimension Control Commitment %Difference % of all employees who are craft or maintenance (skill level) 14 19 35.7% Number of company organized social events per year 3.94 7.31 85.6%
    • 77. Effects of Human Resource Practices on Organizational Survival for IPOs Human Resource Value Scale • Executive with HR responsibility • Use full-time employees • Have an employee training program • Cite employees as strategic asset • Quality of employee relations Rewards Scale • Stock plan for all employees, or just management • Profit sharing for all employees, or just management • Other incentives for all employees, or management
    • 78. PROBABILITY OF AN INITIAL PUBLIC OFFERING FIRM SURVIVING FIVE YEARS 87.0% 79.0% 45.0% 60.0% Human Resource Value Rewards PERCENTOFIPO'SSURVIVINGAFTER FIVEYEARS One Standard Deviation above the Mean One Standard Deviation below the Mean
    • 79. FINDINGS FROM THE STANFORD PROJECT ON EMERGING COMPANIES • Sharing information doubles the odds of an IPO • Having peers involved in hiring (hiring for fit) triples the odds of an IPO • Firms founded under a “commitment” model have 12 times the odds of going public • None of the firms founded with a commitment model failed during the study period
    • 80. PARTICIPATIONS LEVELS COMPARED TO PERFORMANCE RANKS FOR SEMICONDUCTOR FABRICATION PLANTS (Participation includes information, rewards, knowledge, and decision making power) Participation Defect Line Cycle Density Yield Time High 5.83 6.92 5.50 Medium 7.00 7.00 8.60 Low 12.50 10.88 11.00
    • 81. THE LINK BETWEEN EMPLOYEE MANAGEMENT AND PATIENT MORTALITY IN HOSPITALS • A study of 61 hospitals in the U.K. found that, for instance, an increase of one standard deviation in team work—approximately 25% more staff working in teams—is associated with 275 fewer deaths per 100,000, a 7.1% reduction • A study in the U.S. of hospitals that were able to attract and retain good nurses and provided opportunities for good nursing care had 4.6% lower mortality than the control hospitals
    • 82. FORTUNE 100 BEST PLACES TO WORK—SHAREHOLDER RETURN 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% "100 Best" Reset Annually "100 Best" Buy & Hold S & P 500 Annual Return
    • 83. EFFECTS OF HIGH PERFORMANCE WORK PRACTICES ON COMPANY FINANCIAL PERFORMANCE A study of 100 German companies in ten industrial sectors found that companies higher on employee focus earned a greater total shareholder return than those that did not. Employee focused companies also created the most jobs A study of 129 Korean firms found that those higher on organizational commitment to their employees earned a higher return on assets
    • 84. WHY DOES PEOPLE MANAGEMENT/ORGANIZATIONAL CULTURE MATTER? • An M.I.T. study found that investments in information technology, by themselves, had no effect on productivity. It was IT investment, when coupled with an engaged and motivated labor force, that produced important differences in company performance. • The service profit value chain: motivated, committed employees provide service and productivity advantages that translate into higher profits
    • 85. WHY DOES ORGANIZATIONAL CULTURE MATTER? • Frederick Reichheld, The Loyalty Effect, found that customer retention was the key to profitability, because it is much more expensive to attract new customers than to retain existing ones. The key to customer retention was employee retention, as long-tenured employees were more productive, could provide a higher level of service, and were essential for building relationships with customers.
    • 86. WHY DOES ORGANIZATIONAL CULTURE MATTER? • It is easy to copy technology or even imitate products. Copying organizational culture and capabilities is much more difficult. • Relatively few companies see their people as assets, as contrasted with viewing them as costs.
    • 87. It is almost impossible to earn exceptional economic returns by doing what everyone else is doing, by being average, and by benchmarking what others do. If you want to achieve exceptional results, you must take the risk of doing things differently.
    • 88. HIGH PERFORMANCE MANAGEMENT PRACTICES • Employment security and a policy of mutual commitment Commitment is reciprocal—if you want someone to be loyal and committed to the company, the company must be loyal and committed to them This does not mean not firing individuals; it does mean not laying off people for economic fluctuations over which they have no control After 9/11/2001, neither Southwest Airlines nor EADS (the manufacturer of Airbus planes) laid people off • Selective recruiting for fit with the culture and values, not just skill Don’t select on the basis of skills that can be learned relatively quickly; use qualities that are important and more permanent in your hiring decisions
    • 89. HIGH PERFORMANCE MANAGEMENT PRACTICES • Sustained and substantial investment in training and development Investment in people signals their importance and invokes the norms of reciprocity Training builds skills, including leadership as well as technical skills Investments in human development, by signaling people’s importance, raise their self-esteem and self-confidence, thereby making them more effective • Decentralization of decision-making, often to self- managing teams This reduces costs by eliminating unnecessary supervision and control Creates more learning Enables decisions to be taken closer to where the organizational action is
    • 90. HIGH PERFORMANCE MANAGEMENT PRACTICES • Promotion from within Avoids the “outsider” bias—outsiders often appear to be more attractive candidates, even if they aren’t Doesn’t send the wrong signal—that people in the company don’t really have a future and aren’t “good enough” • Information sharing—open book management People need data to make decisions Keeping secrets implies a lack of trust An important part of employee involvement and engagement
    • 91. HIGH PERFORMANCE MANAGEMENT PRACTICES • Pay that is contingent on group and organizational, not just individual, performance Don’t implement pay systems that fail to provide incentives for employees to help each other out, make suggestions, and improve things Share the benefits of enhanced company performance with the people who contributed to that performance—the front line employees • An egalitarian culture with few status distinctions Enhances teamwork Encourages people to surface problems and to make suggestions for improvements
    • 92. WHY DO THESE PRACTICES WORK? • Discretionary effort • More learning • More sharing of knowledge and, therefore, more collective learning • Leaner and faster
    • 93. SELF-ASSESSMENT • How does your organization score on the practices required to build a high performance culture? • What do you and your associates need to do differently?
    • 94. SELF-ASSESSMENT (1=very little to 7=a great deal) • Employment security ___ • Sustained investment in training & development___ • Selective recruiting for cultural fit___ • An egalitarian culture___ • Information sharing with everyone___ • Decentralization of decision-making___ • Promotion from within___ • Pay that is contingent on group & organizational performance___
    • 95. SOME EXAMPLES
    • 96. SAS INSTITUTE • Largest privately owned software company in the world, founded in 1976 in North Carolina • 2012 revenues of over $2.8 billion • More than 13,000 employees • 90 of the top 100 companies on the 2012 Fortune Global 500 list are customers • SAS has customers in more than 130 countries • In 2006 (height of the economy), 34,761 job applicants • Turnover of less than 4% (software industry is typically 25%-30%
    • 97. SAS INSTITUTE • 10th straight year was on Fortune’s “100 Best Companies to Work For” list • SAS Norway named #1 best place to work in Norway in 2007 • SAS Sweden named best place to work of small companies in Sweden • SAS Mexico named among the best places to work in Mexico
    • 98. SAS INSTITUTE • 96 of the top 100 Fortune U. S. companies are SAS customers • High (98%) customer retention, and customers typically spend more money with the company over time • 25% of their revenue reinvested in research and development
    • 99. SAS INSTITUTE: WHAT DO THEY DO? • Generous benefits—that signal that employees are valued and cared for Onsite, high quality, subsidized day care Physical recreation facilities Onsite, very low cost (to employes), healthcare Onsite massage Elder care and adoption assistance
    • 100. SAS INSTITUTE: WHAT DO THEY DO? • Shorter work hours (typically 35-40, unusual for the software industry) Puts pressure on the company to avoid wasted time (e.g., unproductive meetings) Avoids mistakes—people mess up when they are tired Permits people to have a job and a life • Everyone has a private office • Beautiful physical facilities (two full-time artists to ensure the décor is attractive and there is a lot of good art) • Management is based on mutual trust
    • 101. THE MEN’S WEARHOUSE • Retailer of off-priced, tailored men’s clothing (a declining business, since in the U.S., fewer men wear dress clothes) with operations in the U.S. and Canada. They also rent and sell tuxedos. • Founded in 1973 in Texas by George Zimmer. Headquarters now in Fremont, California, near San Francisco. • Since becoming a public company in 1992, has achieved a compounded annual growth rate of 14.4% in sales and 16.8% in net income • 2012 revenues of about $2.5 billion • The company has made money every year, even during recessions—they have never suffered an annual loss
    • 102. THE MEN’S WEARHOUSE • Basic marketing strategy is to use television and radio advertising, not print; tag line is, “I guarantee it.” • Business strategy is to locate its stores (about 5,000- 7,000 square feet) in strip centers, not in big malls with higher rents, and to provide an outstanding customer service experience coupled with excellent selection of merchandise. The idea is to produce higher margins through the differentiated service • The company today sells between 20%-25% of all men’s suits sold in the U.S. • Ranked #50 on Fortune’s Best Places to Work list (12th time they have been ranked in the top 100)
    • 103. THE MEN’S WEARHOUSE: WHAT DO THEY DO? • Visible leadership • Put employees first, customers second, suppliers third, the community fourth, and shareholders fifth in priority • Pay better than the average retailer • Provide more training than typical in retail • Use fewer part-time employees • Offer benefits, including medical and retirement • Provide assistance to employees having financial difficulties • Emphasize fun and the social connections among employees—elaborate holiday parties
    • 104. THE MEN’S WEARHOUSE: WHAT DO THEY DO? • Many of their practices would seem to drive up their costs —training, benefits, wages, for instance. But they take the position that what is important is not what people cost, but what they accomplish in terms of sales and service. In other words, their business model emphasizes revenues and margins.
    • 105. ALIGNING MANAGEMENT PRACTICES WITH BUSINESS STRATEGY: AN ANALYTICAL PROCESS
    • 106. THE ALIGNMENT PROCESS What is your organization’s strategy? What differentiates you from the competition? What are your companies intended distinctive capabilities and competencies?
    • 107. THE ALIGNMENT PROCESS What skills, abilities, attitudes, and behaviors, are required for your company to successfully execute its intended strategy? (reduce the list to no more than six or seven key qualities)
    • 108. THE ALIGNMENT PROCESS What are your companies current policies and practices with respect to: Recruitment (sources of people and the promises that are made) Selection (the criteria and methods used to choose among applicants)
    • 109. THE ALIGNMENT PROCESS Compensation, including both level of pay and variable compensation plans Career development, including training, movement through and across jobs, and progression in the organization
    • 110. THE ALIGNMENT PROCESS Use of contract labor, part-time people, and temporary help Work organization (e.g., use of teams, number of levels, amount of decentralization in decision making) Mechanisms for employee voice
    • 111. THE ALIGNMENT PROCESS To what extent are each of these policies and practices consistent, or inconsistent, with obtaining the skills, attitudes and behaviors required to execute your strategy?
    • 112. THE ALIGNMENT PROCESS To what extent are the various management practices consistent with each other (internally consistent)?
    • 113. Alignment in a Health Care Organization Critical Skills Practices Recruitment Selection Compensation Training Career Development Use of Contractual Help Governance Management Teamwork CustomerFocus Skills/Training Commitment Problem Solving Caring HardWorking Flexible Values(SocialMission) L L L L L L L L L L O OO O O O O O O O-L O-L O-L O/L O H-L O O O O O O O O O O OO OOOOO O O O O OOOL-O D* L-H L-H O-L O-L L-O O O O O O O L L H-LL-O L-O O O OOO H = Highly consistent L = Not consistent O = Neutral in effect * = Dysfunctional
    • 114. SOME EXAMPLES OF HIGH PERFORMANCE WORK PRACTICES Jeffrey Pfeffer Graduate School of Business Stanford University
    • 115. SAS INSTITUTE • Largest privately owned software company in the world, founded in 1976 in North Carolina • 2012 revenues of over $2.8 billion • More than 13,000 employees • 90 of the top 100 companies on the 2012 Fortune Global 500 list are customers • SAS has customers in more than 130 countries • In 2006 (height of the economy), 34,761 job applicants • Turnover of less than 4% (software industry is typically 25%-30%
    • 116. SAS INSTITUTE • 10th straight year was on Fortune’s “100 Best Companies to Work For” list • SAS Norway named #1 best place to work in Norway in 2007 • SAS Sweden named best place to work of small companies in Sweden • SAS Mexico named among the best places to work in Mexico
    • 117. SAS INSTITUTE • 96 of the top 100 Fortune U. S. companies are SAS customers • High (98%) customer retention, and customers typically spend more money with the company over time • 25% of their revenue reinvested in research and development
    • 118. SAS INSTITUTE: WHAT DO THEY DO? • Generous benefits—that signal that employees are valued and cared for Onsite, high quality, subsidized day care Physical recreation facilities Onsite, very low cost (to employes), healthcare Onsite massage Elder care and adoption assistance
    • 119. SAS INSTITUTE: WHAT DO THEY DO? • Shorter work hours (typically 35-40, unusual for the software industry) Puts pressure on the company to avoid wasted time (e.g., unproductive meetings) Avoids mistakes—people mess up when they are tired Permits people to have a job and a life • Everyone has a private office • Beautiful physical facilities (two full-time artists to ensure the décor is attractive and there is a lot of good art) • Management is based on mutual trust
    • 120. THE MEN’S WEARHOUSE • Retailer of off-priced, tailored men’s clothing (a declining business, since in the U.S., fewer men wear dress clothes) with operations in the U.S. and Canada. They also rent and sell tuxedos. • Founded in 1973 in Texas by George Zimmer. Headquarters now in Fremont, California, near San Francisco. • Since becoming a public company in 1992, has achieved a compounded annual growth rate of 14.4% in sales and 16.8% in net income • 2012 revenues of about $2.5 billion • The company has made money every year, even during recessions—they have never suffered an annual loss
    • 121. THE MEN’S WEARHOUSE • Basic marketing strategy is to use television and radio advertising, not print; tag line is, “I guarantee it.” • Business strategy is to locate its stores (about 5,000- 7,000 square feet) in strip centers, not in big malls with higher rents, and to provide an outstanding customer service experience coupled with excellent selection of merchandise. The idea is to produce higher margins through the differentiated service • The company today sells between 20%-25% of all men’s suits sold in the U.S. • Ranked #50 on Fortune’s Best Places to Work list (12th time they have been ranked in the top 100)
    • 122. THE MEN’S WEARHOUSE: WHAT DO THEY DO? • Visible leadership • Put employees first, customers second, suppliers third, the community fourth, and shareholders fifth in priority • Pay better than the average retailer • Provide more training than typical in retail • Use fewer part-time employees • Offer benefits, including medical and retirement • Provide assistance to employees having financial difficulties • Emphasize fun and the social connections among employees—elaborate holiday parties
    • 123. THE MEN’S WEARHOUSE: WHAT DO THEY DO? • Many of their practices would seem to drive up their costs—training, benefits, wages, for instance. But they take the position that what is important is not what people cost, but what they accomplish in terms of sales and service. In other words, their business model emphasizes revenues and margins.
    • 124. HOW TO ACCOMPLISH CULTURE CHANGE • Begin with the end in mind—what are the most important (no more than 3) values that are… Critical to your organization’s business success (most companies do not know the answer to this question) Values/objectives that will engage the hearts and emotions of your customers and employees Are different than what you are currently doing
    • 125. HOW TO ACCOMPLISH CULTURE CHANGE • Begin with a reasonably short deadline, because the idea that the culture change is going to take a long time means that…. You won’t ever begin the process (the deadline effect) You send a message that the culture change is not that important You imply that the task is difficult Effective culture change requires no more than 6 months to 1 year—what you haven’t achieved in that time, you almost certainly never will
    • 126. HOW TO ACCOMPLISH CULTURE CHANGE • Put people first—and mean it Support people during personal difficulties (such as illnesses or family problems)—SAS Institute keeping children of a deceased employee in subsidized day care When “tested” (as will be inevitable), demonstrate the importance of people through actions and investments—Boise Cascade’s willingness to repave an employee parking lot at a paper mill Southwest Airlines’ culture committees
    • 127. HOW TO ACCOMPLISH CULTURE CHANGE • Measure progress Gordon Bethune, CEO of Continental Airlines, measured employees’ purchases of company- insignia merchandise, reasoning that when employees would be willing to voluntarily spend their money on items with the name “Continental” on them, the company would be on its way to turning its employee relations around DaVita’s survey of adherence to values and assessing whether or not the company “walks its talk”
    • 128. HOW TO ACCOMPLISH CULTURE CHANGE • Celebrate/recognize success Kimberly Clark Andean region taking 140 people on a three-day offsite at a cost of more than $400,000; local recognition and celebrations, also DaVita’s annual rewards dinners/celebrations with almost 2,000 employees in attendance Continental’s bonus payments to all employees for on-time performance Harrah’s Entertainment’s bonus payments for improvements in service quality (regardless of financial results)
    • 129. HOW TO ACCOMPLISH CULTURE CHANGE • People must have a personal connection to and stake in what you are asking them to do; few employees care about shareholder value or even profits. The question you must able to answer is: what’s in it for me? Profit sharing/gain sharing Promotion/advancement opportunities Personal job security (the New Zealand Post)
    • 130. HOW TO ACCOMPLISH CULTURE CHANGE • Let people know how they and the company are doing DaVita posts labor hours efficiency and DaVita Quality Index scores in the employee area of each of its dialysis centers Harrah’s posts operating information for all its employees to see at each facility to see how they are doing
    • 131. HOW TO ACCOMPLISH CULTURE CHANGE • Reduce barriers between senior management and employees so that two-way communication can occur Kimberly Clark—informal dress, no security to get onto the executive floor, everyone called Sergio Nacach, the leader of the Andean region, “Sergio” DaVita—the CEO answered all e-mails, showed up at town hall meetings and would answer any questions, dressed informally
    • 132. HOW TO ACCOMPLISH CULTURE CHANGE • Use language that motivates and reinforces the culture Kimberly Clark: “dreams” not budgets DaVita—teammates and associates, never “employees” or “workers” The Men’s Wearhouse—”wardrobe consultants,” not clerks or salespeople
    • 133. HOW TO ACCOMPLISH CULTURE CHANGE • Let people make decisions Kimberly Clark: decentralized decision making to local units so they could respond to local conditions and tailor marketing programs to local customs and holidays DaVita: devolved decision making to the individual centers
    • 134. HOW TO ACCOMPLISH CULTURE CHANGE • Invest in Training that Builds Values, Not Just Skills Kimberly Clark: invested in the training and development of people at all levels, to signal that a) they had a future with the organization, b) they were important, and c) to improve skills to enhance operational performance DaVita: built DaVita University, with programs for front-line teammates, facility administrators (FAST —facility administrator survival training), and more senior leaders
    • 135. AN EXAMPLE: KIMBERLY CLARK, ANDEAN REGION (Peru, Columbia, Ecuador, Bolivia, and Venezuela) from a presentation by Sergio Nacach, at the time, head of that region and now in charge of all of Latin American operations for Kimberly Clark
    • 136. During the first Andean meeting in 2006 we set our first dream: - Align the organization (after 3 attempts) - Be a global benchmark in organizational culture - Achieve excellence in execution In order to: Be the best region in top & bottom line growth
    • 137. x 2 17 % 32 % 26 % Andean Net Sales US$ MM Winning Culture
    • 138. Winning Culture x 3 79 % +$63 27% +$17 40 % +$57 Andean Operating Profit US$ MM
    • 139. 06 07 08 GPTW # 1 1 3 Ecuador GPTW # 1 1 7 Perú GPTW # 2 4 5 Colombia GPTW # 3 Bolivia
    • 140. By December 2007, We Set another dream & Started Building Our Legacy : • Talent generation and recognition – By 2010 • 6 persons from Andean region in key Latin American Operation ($2.5 billion regional organization overseeing Central and South America) positions • 3 persons from Andean region in key D&E (headquarters) positions – By 2015 • 20 persons from Andean in key positions in or outside K-C
    • 141. Talent Exports to LAO • Rafael Ravettino – HR Director CA&C / BCC LAO • Mario Loor – Category Director Family Care Brazil • Luiz Marcel Padilla – Country Manager Venezuela • Carlos Rupay – Country Manager Bolivia • Ximena Galvis – Strategy Manager BCC LAO • Lazlo Belmont – Marketing Coordinator Adult Care LAO • Alex Schuller – LAO Tissue Manufacturing & Eng. • Nhora Tobon – Equity BCC LAO
    • 142. Talent Exports to D&E • Sergio Cruz – Managing Director KC Philippines • Marcelo Hernandez - Family Care Product Supply Director • Mario Escudero – Marketing Director Eastern Europe • Sergio Nacach – VP D&E Baby and Child Care
    • 143. A CASE STUDY: COLORADO PERMANENTE MEDICAL GROUP TUNRAROUND (from a presentation by Dr. Jack Cochran, the elected head of the physician partnership)
    • 144. KP COLORADOKP COLORADO 19981998 ON THE BRINKON THE BRINK
    • 145. CPMG Physician SatisfactionCPMG Physician Satisfaction Would Recommend KP to a FriendWould Recommend KP to a Friend ‘94-’98‘94-’98 96% 89% 80% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 % Probably/Definitely “%yes”
    • 146. CPMG Physician SatisfactionCPMG Physician Satisfaction Would Choose CPMG Again 1994 -1998Would Choose CPMG Again 1994 -1998 94% 84% 77% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 % Probably/Definitely
    • 147. 61% 46% 39% 30% 40% 50% 60% 70% 1994 1996 1998 % Extremely/Very Satisfied CPMG Physician Satisfaction Overall Satisfaction w/CPMG ‘94-’98
    • 148. 91% 89% 85% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 % Probably/Definitely CPMG Physician SatisfactionCPMG Physician Satisfaction Would Choose A Career In MedicineWould Choose A Career In Medicine AgainAgain
    • 149. People Pulse Care IndexPeople Pulse Care Index 50.5 51 51.5 52 52.5 53 53.5 54 54.5 55 55 52 1998 1999
    • 150. Overall Patient SatisfactionOverall Patient Satisfaction 89% 89% 88% 88% 86% 80% 82% 84% 86% 88% 90% PercentHighlySatisfied 1994 1995 1996 1997 1998
    • 151. Net IncomeNet Income (in millions)(in millions) 29.02 26.587 11.788 10.18 -0.02 -5 0 5 10 15 20 25 30 1994 1995 1996 1997 1998
    • 152. MULTI-DIMENSIONALMULTI-DIMENSIONAL TURNAROUNDTURNAROUND Employee MoraleEmployee Morale Physician Morale/CareerPhysician Morale/Career Service and Customer SatisfactionService and Customer Satisfaction Financial ViabilityFinancial Viability
    • 153. Initial Team FociInitial Team Foci Leadership DevelopmentLeadership Development Team DevelopmentTeam Development CommunicationCommunication Balancing Short/Long TermBalancing Short/Long Term
    • 154. Defining and Creating the Culture Clear Values and Expectations Recruit Orient Evaluate Promote
    • 155. We Must Fortify theWe Must Fortify the Physicians Voice in thePhysicians Voice in the Business of Health CareBusiness of Health Care
    • 156. CPMG Physician SatisfactionCPMG Physician Satisfaction Would Recommend KP to a Friend ‘94-’02Would Recommend KP to a Friend ‘94-’02 96% 89% 80% 95% 98% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 2000 2002 % Probably/Definitely “%yes”
    • 157. CPMG Physician SatisfactionCPMG Physician Satisfaction Would Choose CPMG Again ‘94-’02Would Choose CPMG Again ‘94-’02 94% 84% 77% 90% 97% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 2000 2002 % Probably/ Definitely
    • 158. CPMG Physician SatisfactionCPMG Physician Satisfaction Overall Satisfaction w/CPMG ‘94-’02Overall Satisfaction w/CPMG ‘94-’02 61% 46% 39% 57% 74% 30% 40% 50% 60% 70% 80% 1994 1996 1998 2000 2002 % Extremely/Very Satisfied
    • 159. CPMG Physician SatisfactionCPMG Physician Satisfaction Would Choose A Career In MedicineWould Choose A Career In Medicine AgainAgain 91% 89% 85% 82% 88% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 2000 2002 % Probably/Definitely
    • 160. 8.9 4.2 3.6 0 1 2 3 4 5 6 7 8 9 2000 2001 2002 Physician Turnover RatesPhysician Turnover Rates
    • 161. People Pulse Care IndexPeople Pulse Care Index 0 10 20 30 40 50 60 70 55 52 1998 1999 2000 2002 59 67
    • 162. Overall Patient SatisfactionOverall Patient Satisfaction 89% 89% 88% 88% 86% 86% 89% 89% 92% 80% 82% 84% 86% 88% 90% 92% PercentHighlySatisfied 1994 1995 1996 1997 1998 1999 2000 2001 2002
    • 163. Colorado RegionColorado Region Voluntary Termination RateVoluntary Termination Rate 1.7% 2.4% 3.6% 2.7% 3.2% 2.6% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 1995 1996 1997 1998 1999 2001 Voluntary Term. Rate KPPG Goal 2.0%
    • 164. NY TimesNY Times American Heart AssociationAmerican Heart Association NCQA - Best in the WestNCQA - Best in the West QUALITYQUALITY
    • 165. 0 10 20 30 40 50 60 70 80 90 100 Adol Imm Combo 2 Cholesterol Management Screening Cholesterol Management Level Contolling High Blood Pressure Eye Exams for People with Diabetes Follow up After MH Hosp. 7 Day Follow-up after MH Hosp. 30 day HEDIS MEASURES PERCENTAGE Kaiser Colorado HMO/PPO National Average HEDIS 2002 REPORTING PERFORMANCE FOR 2001 SELECTED EFFECTIVENESS OFCARE MEASURES National NCQA Benchmark #2 in USA #1 in USA #1 in USA #1 in KP #3 in USA #2 in USA #1 in USA
    • 166. The New York Times on Colorado Kaiser Permanente’s Mammography Program: • “Every mammography program in the country should be doing something like this.” • “The team’s accuracy is close to what experts say is the best mammography can offer.” • If Kaiser Permanente’s improvement were duplicated across the country, it “ . . . could mean finding upwards of 10,000 more [breast cancers] annually.”
    • 167. Net IncomeNet Income (in millions)(in millions) 29 26.5 11.8 10.2 -0.02 29 38 39 49 -5 0 5 10 15 20 25 30 35 40 45 50 1994 1995 1996 1997 1998 1999 2000 2001 2002
    • 168. The lesson: All of the performance metrics move together. There are not trade-offs. A strong, positive employee culture drives better customer outcomes and better financial results.
    • 169. In all kinds of companies, industries, and geographies, companies have built people-centered cultures with remarkable results. Don’t make excuses for why things can’t change. Change them.
    • 170. WE ALL KNOW THIS— TURNING KNOWLEDGE INTO ACTION Jeffrey Pfeffer Graduate School of Business Stanford University
    • 171. There is No Knowledge Advantage! Everyone Knows • More than 50,000 business books published per year • More than $60 billion spent on training • More than $80 billion spent on management consulting • More than 140,000 business school graduates just in the U.S. each year, and lots of business school research
    • 172. There is No Knowledge Advantage! Everyone Knows • There are translations among languages of articles in the various sciences and engineering • Information—both business but also technical information—diffuses more rapidly and more completely • Therefore, simply possessing information can not provide sustained competitive advantage
    • 173. “We’ve deliberately, as an organization, downplayed the importance of ideas. Ideas are cheap. If you build your culture right, you get a zillion. If you’ve got a good idea, everyone else probably has the same idea, too. What’s hard is the articulation of the idea and the execution of the ideas by the team and the company. Coming up with ideas, is easy, the implementation is hard.” John Lilly, former CEO of Mozilla
    • 174. Does the Knowing-Doing Gap Matter? • The success of most interventions to enhance organizational performance depends mostly on implementing what is already known
    • 175. Honda’s BP (Best Practice, Best Process, Best Performance) Program… • Achieved an average 50% productivity improvement in 53 suppliers • By implementing “concrete and simple rather than abstract and complex” changes on the production line, most changes being small, simple, and quite common sense • Actual part, actual place, actual situation
    • 176. Measuring the Knowing- Doing Gap • Is important to assess the degree of the problem and to chart progress in its resolution • Is a very useful way of measuring the effectiveness of organizational learning, training, and change efforts—a successful effort should reduce the gap
    • 177. Measuring the Knowing-Doing Gap • Construct a list of management practices and actions • Ask people the extent to which they believe each is related to organizational performance • Ask people throughout the organization the extent to which they think the practices and actions are occurring
    • 178. Measuring the Knowing-Doing Gap: What You Learn • Is there agreement on what produces success? If not, work on building a common understanding of the business and its strategy. • Is there agreement on what the company is actually doing? Understand what is really going on. • Is the company doing what it knows it should? If not, why not? • Measure over time!
    • 179. Knowing v. Doing In A Restaurant Chain Knowing Doing Sharing financial information 4.3 3.8 Active suggestion program 4.8 3.9 Getting good ideas from other units 4.9 4.0 Detailed assessment for hiring 5.0 4.2 Posting all jobs internally 4.2 3.5
    • 180. Knowing v. Doing From a Survey of General Managers Knowing Doing Learning from mistakes 5.5 3.3 Setting direction & empowering team members 5.9 4.0 Regularly reviewing team purpose, goals, & tactics 5.3 3.5 Getting ideas from customers 5.5 3.7 Expressing unpopular point of view 5.6 4.1
    • 181. Knowing v. Doing: A Korean Company Sample Knowing Doing Actively listening to employees 5.4 4.5 Sharing information 5.4 4.2 Involve employees in decisions 5.2 4.1 An environment of experimen- tation and creativity 5.0 3.8 Opportunities for personal growth and development 5.4 4.0
    • 182. Some Causes Of The Knowing-Doing Gap •Talk, presentations, meetings, and decisions substitute for action—for actually doing something •Memory, precedent, standard operating procedures, unexamined cultural values and beliefs substitute for thinking
    • 183. Some Causes Of The Knowing-Doing Gap •Fear prevents acting on knowledge, or for that matter, learning or taking any action at all •Measurement, too many of the wrong things using the wrong time horizon, obstructs good judgment
    • 184. Some Causes Of The Knowing-Doing Gap •Internal competition turns friends into enemies, reducing knowledge sharing, collaboration, learning, and disrupting the social networks necessary for innovation
    • 185. How Talk (Presentations) Substitutes for Action “I spent almost two weeks of every month flying back and forth to Melbourne…sitting in a darkened room…I kept trying to remind my associates that we weren’t in the business of making overheads, but in the business of mining and smelting ores, making steel, refining oil, and so forth.” Burgess Winter, Former CEO of Magma Copper while working for BHP
    • 186. How Some Organizations Avoid Hollow Talk And Value Action • Career systems that put people in senior positions who actually know and do the organization’s work. SAS Institute Southwest Airlines’ day in the field DaVita “Reality 101”
    • 187. Having Leaders Who Know and Do the Work • Promotes assessments based on performance rather than on how people sound • Gives leaders credibility with those doing the jobs • Keeps leaders in touch with the core technology and work processes of the firm
    • 188. How Some Organizations Avoid Hollow Talk And Value Action • A culture that values simplicity, in which “common sense” is valued
    • 189. The Importance of Simplicity “When I talk to people about the lessons the turnaround taught us, they say, “those seem simple enough.” Saving Continental wasn’t brain surgery…you can’t afford to think too much during a turnaround” Greg Brenneman, Former President and COO, Continental Airlines
    • 190. Simplicity Is a Barrier to Imitation They [people] have many ways of saying,”If the solution were simple, we would already have thought of it.” Greg Brenneman, Former COO, Continental Airlines
    • 191. The SAS Institute “Strategy” (or Business Model) • “Listen to your customers. Listen to your employees. Do what they tell you” John Sall, co-founder “If you treat your people as if they make a difference to the company, they will make a difference to the company.” SAS Institute Annual Report
    • 192. How Some Organizations Avoid Hollow Talk And Value Action •Be sure to have systems the ensure follow-up The GE work-out process After action reviews in the Army—one instructor per leader, who gives detailed and specific feedback right after each simulated battle
    • 193. How Some Organizations Avoid Hollow Talk And Value Action •Don’t accept excuses for why things won’t work or can’t be done
    • 194. Don’t Accept Excuses • Donald Regan at Merrill, Lynch • David Russo explaining the SAS Institute’s success
    • 195. Build A Philosophy That Promotes Action • “Enlightened trial and error outperforms the planning of flawless intellects.” • “Fail early and fail often.” This is better than failing once, failing at the end, and failing big. David Kelley, IDEO Product Development
    • 196. How Companies Avoid “Memory as a Substitute for Thinking” • Start a new organization or subunit • Use dramatic means to break with the past • Surface underlying assumptions • Build organizations where people constantly question precedent and are forced to do new things, in different ways
    • 197. Breaking From the Past in an Existing Organization • Mitel Corporation’s “attacking the sacred cows” workshop • Magma Copper
    • 198. At Mitel, R & D employees spent three days identifying rules, rituals, and attitudes that stood in the way of doing things fast…the list filled 71 pages. Every participant had to identify two “personal cows” and to devise a plan for attacking them the following Monday morning. The session ended with a celebratory beef barbecue.
    • 199. Results of a “Sacred Cow” Exercise • At Pillsbury and Winthrop, LLP, sacred cow task forces launched to get rid of ingrained and dysfunctional practices in early 1999 Example: attorneys and offices handled collections in idiosyncratic ways, replaced with consistent procedures and monitoring Result: Average bill paid in 3.2 (instead of 4.5 months); related labor costs cut by more than 25%
    • 200. We have stopped complaining about the quality of our ore bodies and each other and instead have focused on what can be done to make our core operations productive and profitable. We gave up our attachments to conversations regarding transgressions and events of the past, and committed ourselves to the fulfillment of a future which we invented together. Burgess Winter, former CEO, Magma Copper
    • 201. Magma Copper… • Enlisted 140 people from all levels, departments, and backgrounds to work in a “Future of Magma” visioning committee • Eventually fired managers who did not adapt and adopt the organization’s new way of working and leading
    • 202. Fear of Job Loss Causes Problems • At Analog Devices, layoffs stalled a TQM effort and a plant that been #1 on H-P’s list of best ten suppliers became #2 on its list of ten worst suppliers in two years • At H-P’s Roseville plant, “downsizing curtailed any remaining effort to implement self-managing teams.”
    • 203. Fear of the Boss Restricts Information Flow • Leaders often have inaccurate images of their firms and the problems NASA engineers risk estimate of rocket engine failure= 1 in 300 NASA top administrators’ estimate=1 in 100,000
    • 204. Other Effects of Fear • Focus on the short-term rather than the long-term • Focus on the individual’s survival rather than the welfare of the entire organization
    • 205. How Organizations Drive Out Fear • Encourage open communication • Give people second (and third) chances • Admit that leaders are fallible, too
    • 206. “This is the best we can think of right now. But the only thing I am sure of is that it [the structure] is temporary and it is wrong. We just have to keep experimenting so it keeps getting better all the time.” David Kelley announcing a major reorganization at IDEO
    • 207. How Organizations Drive Out Fear • Learn from, and even celebrate, mistakes • Don’t punish people for trying new things
    • 208. Error is the Result of Action • At Skyline Toy Design 4,000 ideas generated 226 developed into a nice drawing or prototype 12 sold 2-3 are moderate commercial successes The studio had a good year!
    • 209. How Measurement Obstructs Good Judgment • Too many measures • Incomplete measures (e.g., measuring costs but not associated benefits) • Excessive focus on short-term financial performance • Too little focus on in-process measures, and too much emphasis on final results
    • 210. Too Many Measures • Theory: “what gets measured gets done; therefore, if you measure more, more will get done.” • The magic number 7, plus or minus 2. • Focus on a few, central drivers of the business Southwest Airlines: on-time performance, lost bags, customer complaints DaVita: labor hours and the DaVita Quality Index SAS Institute: the attraction and retention of employees and customers and software quality
    • 211. “The company that is not in control has far more measures because they’re not changing the basic management systems that are in place. We’ve got to shrink the number of measures, get the organization focused on them, and then build a pyramid that says, ‘these are the primary measures, progress measures, and in process measures,’ so everybody can link their job to the overall measures.” Tom Lasorda, formerly with General Motors and Vice-chair of Daimler-Chrysler
    • 212. Avoiding Measurement Problems • Measures should be relatively global in scope, focusing less on individual performance, and focusing on factors critical to organizational success • Measures should be focused on processes and on means to ends rather than solely on end-of-process outcomes
    • 213. Avoiding Measurement Problems • Measures should reflect the business model, culture, and philosophy of the company • The measures should result from a mindful, ongoing process of learning from experience
    • 214. When Internal Competition Turns Friends into Enemies • Absence of a “company effect” on performance measures in multi-site organizations • Software development at Microsoft • Southwest and American Airlines—the paradox of individual accountability
    • 215. American Airlines: Crandall’s Philosophy “People are naturally competitive. They absolutely need to know the score.” If a delay occurred on a flight making connections, “Crandall wants to see the corpse,” said one field manager.
    • 216. American Airlines: The Results “If you ask anyone here, what’s the last thing you think of when there’s a problem…the customer… There is so much internal debate, and reports and meetings [sorting out the cause of delays]… This is time that we could be focusing on the passengers.” Field Manager
    • 217. Southwest Airlines Southwest has a “team delay” with the goal of diffusing blame and encouraging learning. “We could have more delay categories,” said Jim Wimberly, EVP of operations,” but we only end up chasing our tail.”
    • 218. Overcoming Destructive Internal Competition • Focus attention on external competitive threats and challenges Southwest Airlines Apple Computer • Hire team players and fire people who do not work collaboratively with others SAS Institute The Men’s Wearhouse
    • 219. Overcoming Destructive Internal Competition •Avoid using measures and compensation systems that emphasize individual success at the expense of others Willamette Industries Guidant Cardiovascular
    • 220. “If you tie pay to individual performance…it just becomes very hard to manage. You start to get people competing with each other about which department they’re going to be in, or which team they’re going to be on, or who’s going to assess my performance….We just decided we don’t want to deal with that. We want to incent the company and we’re going to incent people across the board, and it’s worked out very well for us.” Peter McInnes, Vice President, Guidant
    • 221. Guidelines for Action • Why” before “how”—the importance of philosophy “We have been benchmarking the wrong things. Instead of copying what other companies do, we need to copy how they think”
    • 222. Guidelines for Action • Reward smart action, not just smart talk. As David Sun of Kingston Technology has said, if you know by doing, there is no gap between what you know and what you do. • If you really want to break from the past, work on creating a new future and make it difficult to go back to the past
    • 223. Guidelines for Action • There is no doing without mistakes; what is the company’s response? • Fear fosters knowing-doing gaps; drive out fear • Beware of false analogies: Fight the competition, not each other
    • 224. Guidelines for Action • Measure what matters –intermediate outcomes and processes • What leaders do,not just what they say-- how they spend their time and how they allocate rewards and resources—is critical
    • 225. MAKING THE CASE: PRACTICING EVIDENCE-BASED MANAGEMENT Jeffrey Pfeffer Graduate School of Business Stanford University
    • 226. Why evidence-based management is important
    • 227. REASON #1: REACTIONS TO THE KNOWING-DOING GAP
    • 228. REASON #2: THE EVIDENCE-BASED MOVEMENT IN MEDICINE AND POLICY SCIENCES • Evidence-based criminology  Example: the effects of incarceration on juveniles  Example: the use and effects of youth curfews  Example: using incarceration and parole resources more effectively
    • 229. REASON #2: THE EVIDENCE-BASED MOVEMENT IN MEDICINE AND THE POLICY SCIENCES • Evidence-based education  Singapore’s decision about how to teach mathematics  New Zealand’s governmental mandate to have all education policy be evidence-based  The policy to end “social promotion” and its effects
    • 230. IMPETUS #2: THE EVIDENCE-BASED MOVEMENT IN MEDICINE AND POLICY SCIENCES • Evidence-based medicine Effects of being up to date on patient outcomes Understanding what are the most important interventions to save lives—the 100,000 lives project Reimbursement established on the basis of adherence to clinical practice guidelines
    • 231. IMPETUS #3: ORGANIZATIONAL EFFECTS ON PEOPLE AND SOCIETY • Public opinion data on employee attitudes and disengagement • Studies of workplace bullying and intimidation • The effects of workplace conditions on employee mental and physical health
    • 232. THE “FAILURE” TO USE EVIDENCE • Would you (voluntarily) undergo a medical procedure that has a 70% failure rate?
    • 233. THE “FAILURE” TO USE EVIDENCE • Would you (voluntarily) undergo a medical procedure that has a 70% failure rate?  Proudfoot Consulting estimates the failure rate of mergers at 83%  Other studies (including peer-reviewed journal articles) estimate the failure rate at approximately 70%  Most mergers fail to create value; many destroy it
    • 234. THE “FAILURE” TO USE EVIDENCE • Would you use a managerial intervention where an analysis of more than 200 studies had concluded it was ineffective?
    • 235. THE “FAILURE” TO USE EVIDENCE • Would you use an intervention where an analysis of more than 200 studies had concluded it was ineffective?  A meta-analysis of more than 200 studies found no relationship between senior management equity ownership and any measures of company performance  There is no evidence for the effectiveness of stock options (except in increasing the likelihood of financial restatements)
    • 236. THE FAILURE TO “USE” EVIDENCE • Research by Penn State professor Donald Hambrick and colleagues has shown that stock options (not surprisingly) increase risk taking, leading to a) more volatile organizational performance and b) to more acquisition activity and to overpaying for acquisitions • Nonetheless, most compensation consultants a) don’t know about this research and b) aren’t interested in learning about it
    • 237. THE “FAILURE” TO USE EVIDENCE • After trying a policy for a decade or more and watching it fail, would you recommend its continuation and expansion?
    • 238. THE “FAILURE” TO USE EVIDENCE • After trying a policy for a decade or more and watching it fail, would you recommend its continuation and expansion?  Ending social promotion in schools leads to higher dropout rates, lower graduation rates, and fails as schools get overcrowded
    • 239. ORGANIZATIONAL DECISIONS ARE OFTEN BASED ON… • What senior leaders have done in the past and think has been effective—their “experience” • What others are doing—casual benchmarking • Ideology and belief—ideas about how things ought to work But NONE of these Lead to Better Decisions
    • 240. ORGANIZATIONAL DECISIONS ARE OFTEN BASED ON… • What senior leaders are good at doing—their specialty • What is being advocated or talked about in the business press—what is being hyped • What consultants and other vendors are selling But NONE of these Lead to Better Decisions
    • 241. WHAT IS EVIDENCE-BASED MANAGEMENT? • A way of thinking  The attitude of wisdom—knowing what you know and knowing what you don’t know—and being willing to act on the basis of what is known at the time while learning as you act  Being committed to “fact-based” and “evidence- based” action  Being committed to hearing and telling the truth
    • 242. WHAT IS EVIDENCE-BASED MANAGEMENT? • Treating your organization as an unfinished prototype—an “experimenting”/learning mindset IDEO, Yahoo, Harrah’s, Google, the Home Shopping Channel • Knowing what the theory and evidence is, and using it in formulating decisions and actions • A set of standards for evaluating information and making decisions
    • 243. WHAT EVIDENCE BASED MANAGEMENT IS NOT • An excuse to endlessly delay taking action • Using data without judgment • “Benchmarking” without taking into account differences in the situations • A reason to not consider alternative explanations and issues of causality
    • 244. WHY MANAGERS DON’T USE EVIDENCE-BASED MANAGEMENT • Too much information • Recommendations that are not integrated, so they can’t be remembered—lists • Vendors who have agendas and products, and who often aren’t completely candid about what they know about what works and downsides and side effects
    • 245. WHY MANAGERS DON’T USE EVIDENCE-BASED MANAGEMENT • “Not enough time” to reflect—and learn— and not enough interest in doing “after action” reviews and learning from experience • Inconsistent guidance and recommendations
    • 246. WARRING BOOK TITLES In Search of Excellence Charisma: Seven Keys to Developing the Magnetism that Leads to Success Love is the Killer App The Peaceable Kingdom Managing with Passion Out of the Box Built to Last: Successful Habits of Visionary Companies The Myth of Excellence Leading Quietly: An Unorthodox Guide to Doing the Right Thing Business is Combat Capitalizing on Conflict Managing by Measuring Thinking Inside the Box Corporate Failure by Design: Why Organizations are Built to Fail
    • 247. WHY MANAGERS DON’T USE EVIDENCE- BASED MANAGEMENT • Reluctance to “face the facts” and the evidence  “What’s done is done”—an unwillingness to evaluate, and therefore learn from, past decisions and decision processes  Delivering bad news is dangerous; hearing bad news is unpleasant  Human beings “see what they believe” Result: not telling or ”hearing” the truth is pervasive inside organizations of all types!
    • 248. WAYS TO PRACTICE EVIDENCE-BASED MANAGEMENT • Developing skill at uncovering assumptions and examining them • Looking Inside: Challenge conventional wisdom and be an advocate for “evidence based management” • Looking Outside: Avoid the “dangerous half truths” of management
    • 249. UNCOVERING ASSUMPTIONS: WHAT DO YOU DO WHEN YOU CAN’T KNOW ALL THE EVIDENCE? • Every organizational intervention and management practice—and every piece of HR software—is premised on (sometimes implicit) assumptions about people and companies—what are those assumptions? • Confront the assumptions with evidence, or at least the wisdom and informed opinion of you and your colleagues • Change to different and more effective mental models—and practices—on the basis of the evidence and what you know to be true
    • 250. FORCED-CURVE RANKING SYSTEMS • Made famous by General Electric and featured in The War for Talent • Forces people to “grade” their employees on a curve • Top performers receive outsize rewards, lower performers are counseled out or fired, and the middle is largely ignored • What do such programs assume about  People (subordinates and their managers)?  Sources or causes of organizational performance?
    • 251. MERIT PAY IN SCHOOLS • To fix problems of school performance, many districts have instituted individual merit pay for teachers • Rewarded on the basis on increases in student test scores over the course of a year • Typically amounts to less than 5% of salary, often about $1,000 to several thousand dollars
    • 252. MERIT PAY IN SCHOOLS • Because of limited budgets for bonuses, typically could not be given to all (or even most) teachers in a given school or district • What do such incentive programs assume about Students? Teachers? Schools as organizations?
    • 253. LOOKING INSIDE—GARY LOVEMAN AT HARRAH’S: COVENTIONAL WISDOM IN THE GAMING INDUSTRY • Comping” rooms is a great way of attracting customers • It is important to make casinos and their associated hotels more “family friendly” to draw business • High rollers are an important source of profits • Building beautiful edifices with convention and meeting space is a good way to attract business
    • 254. THE FACTS—AS DISCOVERED BY HARRAH’S • Free chips and meals are more important than rooms—most frequent gamblers live nearby • Families with young children have neither much discretionary time nor income • Most profits come from regular players of slot machines, not from high rollers • Investing in data mining,“experiments,” and HR practices to cut turnover and provide better service provides a better return than building palaces
    • 255. GARY LOVEMAN • In 1998, was a Harvard Business School untenured associate professor in the service management group • Hired as COO by Harrah’s • Appointed CEO in 2003 • Increased profitability and shareholder value dramatically
    • 256. GARY LOVEMAN AND EBM • Built a culture of admitting mistakes (starting with him) • Encouraged experimentation—learning by doing • Questioned conventional wisdom and assumptions • Emphasized learning, teaching, and the process of decision making
    • 257. LOOKING OUTSIDE: THE BEST EVIDENCE REVEALS MANY DANGEROUS HALF-TRUTHS • Work is Fundamentally Different From The Rest of Life, and Should Be? • The Best Organizations Have the Best People? • Financial Incentives Drive Company Performance? • Strategy is Destiny?
    • 258. LOOKING OUTSIDE: THE BEST EVIDENCE REVEALS MANY DANGEROUS HALF-TRUTHS • Change or Die, and Change is Difficult & Takes a Long Time? • Great Leaders are in Control of their Companies, And Ought to Be?
    • 259. THE COMPANY WITH THE BEST PEOPLE WINS? • In an increasingly competitive world, companies must get the best performance in order to succeed. • Research shows that, in many tasks such as computer programming, book writing, and music composition, the most productive outproduce the least productive by many times, and therefore, selection matters.
    • 260. THE COMPANY WITH THE BEST PEOPLE WINS? • It is possible to identify better performers in advance  Measures of ability, such as intelligence  Work samples  Values, attitude, and character measures
    • 261. THE COMPANY WITH THE BEST PEOPLE WINS, BUT… • Talent is neither fixed (unless you think it is) nor necessarily easily assessed  Michael Jordan was cut by his high school basketball coach  Kurt Warner (football MVP) was available in the 1999 draft  J. S. Bach was not considered a great musician until long after his death, because what is great art is determined by the times and tastes
    • 262. THE COMPANY WITH THE BEST PEOPLE WINS, BUT… • Deming and the quality movement maintain that it is the system that determines performance, not individual ability or motivation—and there is evidence for this • Research by Carol Dweck (Mindset) contrasts the effects of an “evaluative” versus a “learning” or “growth” mind set
    • 263. PRODUCTIVITY AND QUALITY OF THE SAME PEOPLE, DIFFERENT SYSTEM Performance GM-Fremont NUMMI Overall Prod. 43.1 hrs./car 20.8 hrs./car Adjusted Prod. 30.8 hrs./car 19.6 hrs./car Quality Index 2.6-3.0 3.6-3.8
    • 264. MANAGING TALENT • Treat talent and performance as something that almost anyone can achieve through effort and practice—be aware of the self-fulfilling prophecy • Worry about the “system,” management practices, and the culture, not just the individual people
    • 265. FINANCIAL INCENTIVES DRIVE COMPANY PERFORMANCE? • Reward systems help people self-select (e.g., performance-based systems attract those who are—or at least believe they are—better at their jobs and who are more motivated) • Reward systems signal what is important and, therefore, focus attention • Rewards motivate and direct behavior
    • 266. REWARDS CAN MATTER A LOT • There is evidence that, for instance, piece work systems at Safelite Glass (an installer of glass windshields in cars) increased productivity, because of motivation, selection, and learning effects • Using differential rewards is consistent with Western ideas about tying pay to performance
    • 267. INCENTIVES MATTER, BUT… • Surveys consistently show that people at work are motivated by many factors that they rate as more important than money • There is an “extrinsic incentives” bias, in which people believe that others are motivated by money even as they are not
    • 268. INCENTIVES MATTER, BUT… • Sometimes you get what you pay for, but don’t actually want it  Albuquerque garbage truck drivers  Nordstrom shoe sales people  Putnam Toyota car sales people  Corporate CEOs & the effects of stock options
    • 269. INCENTIVES MATTER, BUT… • Sometimes you don’t want people who have joined your organization just for the money • The use of variable pay increases pay dispersion, which can have negative effects on both individual and organizational performance
    • 270. INCENTIVES MATTER, BUT… • Extrinsic financial rewards can undermine intrinsic motivation (interest in the work itself) • Monetary rewards are expensive and lose their effectiveness: “a raise is only a raise for 30 days, after that, it’s your salary.”
    • 271. SOME GUIDELINES FOR USING INCENTIVES • Don’t try to solve every problem with financial incentives • Sometimes “less” is more effective • Be careful what you reward, you might just get it • Worry about comparisons and distributions, not just individual pay
    • 272. STRATEGY IS DESTINY • Companies and their senior leadership spend most of their emphasis, and most of their consulting dollars, on strategy. Strategy consulting is more expensive and “higher end” than HR or IT implementation. • The logic is that doing the wrong thing well is a recipe for failure. Success comes from knowing what to do to compete effectively.
    • 273. STRATEGY IS DESTINY, BUT… • Strategy can almost certainly not provide sustainable competitive advantage.  Consulting firms will provide the same answers to anyone who buys their services (the Towers, Perrin “problem”)  Strategies are often easy to discern—they are frequently announced—and therefore are easy to imitate.
    • 274. STRATEGY IS DESTINY, BUT… • What is difficult to imitate is the ability to execute, which comes from culture and processes that are a) harder to ascertain and b) more difficult to copy  “I could leave our strategic plan on a plane, and it wouldn’t make any difference. No one could execute it. Our success has nothing to do with planning. It has to do with execution.” Richard Kovacevich, CEO, Wells Fargo Bank
    • 275. CHANGE/INNOVATE OR DIE • In an increasingly competitive world in which product life cycles are shorter than ever, innovation is critical for success. • Because sustainable competitive advantage is difficult to maintain, the only effective strategy is to continually change as circumstances/the environment changes
    • 276. CHANGE/INNOVATE OR DIE, BUT… • Research in the “population ecology” of organizations reveals that change is disruptive. Fundamental changes in organizational form, and changes in leadership, increase the risk of organizational mortality. • Data from the Stanford Project on Emerging Companies shows that companies that changed their HR “blueprint” to a “commitment” model increased their risk of failure, even though this model was more effective overall.
    • 277. ORGANIZATIONAL CHANGE IS DIFFICULT & TAKES A LONG TIME • Most culture change efforts fail—indeed, most organizational change efforts of any sort are unsuccessful • People develop habitual ways of doing tasks and relating to each other and their company— these habits die hard
    • 278. ORGANIZATIONAL CHANGE IS DIFFICULT & TAKES A LONG TIME, BUT… • Continental Airlines went from “worst to first” in one year, in the process fundamentally altering the relationship with employees (and customers) • Magma Copper went from the verge of bankruptcy to the cover of Industry Week magazine in less than two years • People (and companies) change all the time.
    • 279. PARTING THOUGHT 1: TREAT YOUR ORGANIZATION AS AN UNFINISHED PROTOTYPE • IDEO’s David Kelley shaved off his mustache— showing anything can be changed, and changes can be temporary • Yahoo does about 20 controlled experiments a day, each with a sample of several hundred thousand visitors.
    • 280. PARTING THOUGHT 2 : PRACTICING EVIDENCE-BASED MANAGEMENT IS ABOUT BEING MASTER OF THE OBVIOUS AND MUNDANE • The Obvious: Nothing works unless you actually do it, but action requires believing that improvement and competitive advantage are possible • The Mundane: Conscientious people, setting goals, wanting to fly on time, washing hands, and standing-up
    • 281. PARTING THOUGHT 3: THE BEST SINGLE DIAGNOSTIC QUESTION • What Happens When People Fail?  Forgive and remember  The importance of setbacks, for leadership development and for organizations
    • 282. FOR HR TO LEAD, HRFOR HR TO LEAD, HR LEADERS NEED TOLEADERS NEED TO DEVELOP THEIRDEVELOP THEIR POWER SKILLSPOWER SKILLS Jeffrey PfefferJeffrey Pfeffer Graduate School of BusinessGraduate School of Business Stanford UniversityStanford University
    • 283. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  Things are “not always so”—because we areThings are “not always so”—because we are dealing with the probabilities of predicting humandealing with the probabilities of predicting human behavior, not physical laws of naturebehavior, not physical laws of nature  Also “not always so” because there areAlso “not always so” because there are differences in situations and circumstances thatdifferences in situations and circumstances that affect what worksaffect what works  However, there are principles that generally holdHowever, there are principles that generally hold that you can use to increase your probability ofthat you can use to increase your probability of successsuccess  Acquiring power is about changing how youAcquiring power is about changing how you think, what you see, and your mind setthink, what you see, and your mind set
    • 284. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  PathPathss (there are more than one) to power(there are more than one) to power  Power is not the same as happiness—in fact, thePower is not the same as happiness—in fact, the two are often inversely relatedtwo are often inversely related  Power isolates those in powerPower isolates those in power  Power creates trust dilemmasPower creates trust dilemmas  Power is inversely related to autonomyPower is inversely related to autonomy  Obtaining and maintaining power requires time andObtaining and maintaining power requires time and efforteffort  You get to choose, consciously or lessYou get to choose, consciously or less consciously, how much you will seek power andconsciously, how much you will seek power and what you will do to obtain itwhat you will do to obtain it
    • 285. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  We are often our own biggest impedimentWe are often our own biggest impediment to having powerto having power  Do we have both the will and the skillDo we have both the will and the skill to seek and attain positions of power—to seek and attain positions of power— what goals do we set for ourselves—dowhat goals do we set for ourselves—do we opt out of “the game”?we opt out of “the game”?  Do we limit ourselves by being afraidDo we limit ourselves by being afraid to take chances or fail (engaging into take chances or fail (engaging in self-handicapping) or worry too muchself-handicapping) or worry too much about what others think about us?about what others think about us?
    • 286. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  We are often our own biggest impedimentWe are often our own biggest impediment to having powerto having power  Can we “accept” status andCan we “accept” status and hierarchical differences, being willinghierarchical differences, being willing to subordinate ourselves and also useto subordinate ourselves and also use power over others?power over others?  Can we surmount the “just world”Can we surmount the “just world” effect, to see things as they are, noteffect, to see things as they are, not as we wish them to be (includingas we wish them to be (including ourselves)?ourselves)?
    • 287. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  The road to becoming powerful is, in part, filledThe road to becoming powerful is, in part, filled with trade-offswith trade-offs  Being liked all the time versus getting thingsBeing liked all the time versus getting things donedone  How we spend our time and focus ourHow we spend our time and focus our attention—strategic v. “fun” interactions andattention—strategic v. “fun” interactions and relationshipsrelationships  Doing what we like or what we findDoing what we like or what we find interesting versus doing what might be mostinteresting versus doing what might be most useful for our advancementuseful for our advancement
    • 288. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  Because power is about relationships,Because power is about relationships, relationship skills (networking) arerelationship skills (networking) are importantimportant  The ability to “put yourself in the other’s place”The ability to “put yourself in the other’s place” and to see the world through their point ofand to see the world through their point of viewview  And then to be able to take actions consistentAnd then to be able to take actions consistent with that insight and perspective, whichwith that insight and perspective, which requires effective “self-management”—requires effective “self-management”— including controlling our emotionsincluding controlling our emotions
    • 289. FUNDAMENTAL IDEASFUNDAMENTAL IDEAS  The “mere exposure effect”—we chooseThe “mere exposure effect”—we choose (and prefer) what seems familiar to us(and prefer) what seems familiar to us  Differentiation—being just differentDifferentiation—being just different enough to stand out, without being soenough to stand out, without being so different as to create social distance anddifferent as to create social distance and concernconcern  Self-enhancement and the importance ofSelf-enhancement and the importance of egoego
    • 290. A BEHAVIORAL THEORY OFA BEHAVIORAL THEORY OF POWER AND INFLUENCEPOWER AND INFLUENCE  One of the most basic motives, particularly inOne of the most basic motives, particularly in Western societies, is to defend the ego andWestern societies, is to defend the ego and enhance the self—the self-enhancement motive.enhance the self—the self-enhancement motive. Therefore…Therefore…  We overestimate our abilities, including inWe overestimate our abilities, including in negotiationsnegotiations  We overestimate our effectiveness in intervening inWe overestimate our effectiveness in intervening in situationssituations  We have an “illusion of control”We have an “illusion of control”  We often have “positive illusions” about ourselves,We often have “positive illusions” about ourselves, and are overly optimisticand are overly optimistic
    • 291. EFFECTS OF APPARENTEFFECTS OF APPARENT “INVOLVEMENT” IN PRODUCING AN“INVOLVEMENT” IN PRODUCING AN ADVERTISEMENTADVERTISEMENT 0 1 2 3 4 5 6 Control Surveillance Feedback Ad. Quality Mgr. Effec. Emp. Abil.
    • 292. CONSEQUENCES OF THECONSEQUENCES OF THE SELF-ENHANCEMENTSELF-ENHANCEMENT MOTIVEMOTIVE One consequence of the self-enhancementOne consequence of the self-enhancement motive is the connection between perceivedmotive is the connection between perceived similarity and interpersonal attractionsimilarity and interpersonal attraction  Another consequence is ingroup favoritism andAnother consequence is ingroup favoritism and outgroup derogation (the positive effect ofoutgroup derogation (the positive effect of similarity on liking and choice at the group level)similarity on liking and choice at the group level)  Because people “like” themselves, they likeBecause people “like” themselves, they like others who they see as being “like” them (or asothers who they see as being “like” them (or as they imagine themselves or would like to be),they imagine themselves or would like to be), and that includes others who act/behave likeand that includes others who act/behave like they dothey do
    • 293. ONE IMPLICATION:ONE IMPLICATION: THE EFFECT OF EVENTHE EFFECT OF EVEN INCIDENTAL SIMILARITYINCIDENTAL SIMILARITY  The importance of sharing a social identityThe importance of sharing a social identity and being perceived as similar, even onand being perceived as similar, even on irrelevant attributes, on others’ complianceirrelevant attributes, on others’ compliance with requests can not be overestimatedwith requests can not be overestimated  Shared experiences, even including conflict,Shared experiences, even including conflict, create a “unit relationship”create a “unit relationship”
    • 294. THE IMPORTANCE OFTHE IMPORTANCE OF SIMILARITYSIMILARITY  Many interpersonal influence techniquesMany interpersonal influence techniques rely on establishing a feeling of similarityrely on establishing a feeling of similarity or creating a “unit relationship”or creating a “unit relationship”  Social proof (sharing the perceptions andSocial proof (sharing the perceptions and beliefs of others, particularly similar others)beliefs of others, particularly similar others)  Reciprocity (sharing the experience of anReciprocity (sharing the experience of an exchange or transaction)exchange or transaction)  Liking—based on similarity and/or flatteryLiking—based on similarity and/or flattery
    • 295. ANOTHER IMPLICATION:ANOTHER IMPLICATION: COMMITMENT TO DECISIONSCOMMITMENT TO DECISIONS  The self-enhancement motive helps account forThe self-enhancement motive helps account for the effect of behavioral commitment (thethe effect of behavioral commitment (the tendency to persist with choices once made,tendency to persist with choices once made, even if they don’t work out)—people don’t wanteven if they don’t work out)—people don’t want to admit they have made a mistake.to admit they have made a mistake. Commitment operates by psychologicallyCommitment operates by psychologically binding an individual to some course of action orbinding an individual to some course of action or person, creating an identification between theperson, creating an identification between the person and their decision, so persistence (orperson and their decision, so persistence (or change) implicates the self-concept. Thischange) implicates the self-concept. This suggests that separating the decision from thesuggests that separating the decision from the individual’s self-concept is crucial to changingindividual’s self-concept is crucial to changing
    • 296. A THIRD IMPLICATION:A THIRD IMPLICATION: ASSOCIATING WITHASSOCIATING WITH SUCCESSSUCCESS  Because of people’s interest in enhancing theirBecause of people’s interest in enhancing their self-esteem, they want to associate and identifyself-esteem, they want to associate and identify with “winners” and to distance themselves fromwith “winners” and to distance themselves from “losers”“losers”  Basking in reflected glory study (and theBasking in reflected glory study (and the opposite effect—we will distance ourselvesopposite effect—we will distance ourselves from “failure,” particularly the failure offrom “failure,” particularly the failure of “similar” others)“similar” others)  Has implications for why people will a) notHas implications for why people will a) not necessarily hold a grudge when they havenecessarily hold a grudge when they have lost and b) attach themselves to people wholost and b) attach themselves to people who are “going places” even if they are notare “going places” even if they are not necessarily interpersonally attractivenecessarily interpersonally attractive
    • 297. HOW AND WHY WINNINGHOW AND WHY WINNING CAN ATTRACT OTHERSCAN ATTRACT OTHERS  ““Call me arrogant, cocky, crybaby, whiner,Call me arrogant, cocky, crybaby, whiner, or whatever names you like. At leastor whatever names you like. At least they’re not calling us losers anymore. Ifthey’re not calling us losers anymore. If people like you too much, it’s probablypeople like you too much, it’s probably because they’re beating you.”because they’re beating you.” Steve Spurrier,Steve Spurrier, Football coachFootball coach
    • 298. WHAT HAPPENS WHENWHAT HAPPENS WHEN SIMILAR OTHERS FAIL?SIMILAR OTHERS FAIL?  Evidence suggests that problems orEvidence suggests that problems or difficulties of someone similar is moredifficulties of someone similar is more threatening to the self, and that therefore,threatening to the self, and that therefore, there is more punitive action and morethere is more punitive action and more “distancing” rather than “helping” behavior“distancing” rather than “helping” behavior in the case of the failure of someonein the case of the failure of someone similar or from your “in-group”similar or from your “in-group”
    • 299. A FOURTH IMPLICATION:A FOURTH IMPLICATION: WHAT PERSONALWHAT PERSONAL QUALITIES BECOMEQUALITIES BECOME IMPORTANTIMPORTANT  Attributes that signal you are likely toAttributes that signal you are likely to win/succeedwin/succeed  Energy/enduranceEnergy/endurance  AmbitionAmbition  FocusFocus  Big goals/ambitionBig goals/ambition  Confidence (which is contagious)Confidence (which is contagious)  Ability/willingness to fightAbility/willingness to fight
    • 300. A FOURTH IMPLICATION:A FOURTH IMPLICATION: WHAT PERSONAL QUALITIESWHAT PERSONAL QUALITIES BECOME IMPORTANTBECOME IMPORTANT  Attributes that imply your skill at gettingAttributes that imply your skill at getting others on your sideothers on your side  Self-awareness/self knowledgeSelf-awareness/self knowledge  Empathy with others—ability to put yourself inEmpathy with others—ability to put yourself in another’s place and see their perspectiveanother’s place and see their perspective  Being non-judgmental and your ability to buildBeing non-judgmental and your ability to build relationships even with those that you don’trelationships even with those that you don’t like or respectlike or respect
    • 301. A FIFTH IMPLICATION:A FIFTH IMPLICATION: WHY PEOPLE LOSEWHY PEOPLE LOSE POWERPOWER  Ego/self-esteem, particularly when strokedEgo/self-esteem, particularly when stroked by flattering others, causes individualsby flattering others, causes individuals to…to… a.a. Overestimate their power—and theirOverestimate their power—and their indispensabilityindispensability b.b. Become overconfident and less vigilantBecome overconfident and less vigilant c.c. Stop doing all the things that brought themStop doing all the things that brought them to power in the first placeto power in the first place
    • 302. An Integrated Perspective on Power and Influence Self-enhancement Motive Similarity – Attraction Ingroup favoritism & outgroup derogation Perseverance of hierarchy Submission of self Less evaluation of decision consequences Escalation of commitment to avoid being “wrong” Desire to associate with “winners” Faith in supervision & illusion of control Importance of shared social identity- “we-ness” Success based on “similarity” including dept. affiliation
    • 303. STAYING IN POWERSTAYING IN POWER  Never stop analyzing sources of powerNever stop analyzing sources of power and the political landscape, including whoand the political landscape, including who can cause trouble and what allies youcan cause trouble and what allies you need.need.  Don’t take anything for granted.Don’t take anything for granted.  Many of the things required to obtainMany of the things required to obtain power in the first place, are precisely whatpower in the first place, are precisely what will keep you in power.will keep you in power.
    • 304. SIX POWER RULESSIX POWER RULES  Everyone has a boss(es)—keep them happyEveryone has a boss(es)—keep them happy  Discern people’s interests and POV and use thatDiscern people’s interests and POV and use that knowledge to guide your interactions and strategiesknowledge to guide your interactions and strategies  Because power is the obverse of dependence, avoidBecause power is the obverse of dependence, avoid dependence as much as possible—ALWAYS havedependence as much as possible—ALWAYS have options (this has implications for your networking)options (this has implications for your networking)  Flattery (both explicit and implicit, as in asking forFlattery (both explicit and implicit, as in asking for someone’s opinion or help) workssomeone’s opinion or help) works  Organizations seldom honor the idea of reciprocity—theyOrganizations seldom honor the idea of reciprocity—they are focused on the future, not the past; don’t expect aare focused on the future, not the past; don’t expect a just world (be pleased if you happen to encounter one)just world (be pleased if you happen to encounter one)  Be strategic rather than emotional—think about yourBe strategic rather than emotional—think about your objectives, threats and opportunities, and what you needobjectives, threats and opportunities, and what you need to doto do
    • 305. IT’S NOT THAT DIFFICULTIT’S NOT THAT DIFFICULT  Be strategic and thoughtful—seizeBe strategic and thoughtful—seize opportunitiesopportunities  Small things can matter a lotSmall things can matter a lot  Acquiring—or not acquiring—power isAcquiring—or not acquiring—power is more aboutmore about youyou than it is a matter ofthan it is a matter of rivals or competitionrivals or competition
    • 306. Conclusion Astrid De Lathauwer Managing Director Acerta Consult