In a business environment that is characterized as disruptive, rapidly changing and you-name-the-descriptor, leaders often struggle to keep up. Computer hardware has been replaced by the cloud. Business processes have been replaced by ‘hacks’. Business travel has been replaced by Skype. Reports have been replaced by infographics. Organizations must be able to quickly adjust business strategies too– become more agile – in the face of increasingly rapid changes.
Rapid organizational change, though, can cause stress for employees. How can leaders convince top talent to stick around when strategies and organizations change rapidly?
In a McKinsey & Company interview titled Going from Fragile to Agile, two McKinsey organizational development principals, Aaron De Smet and Chris Gagnon discuss the topic. Here are some (edited) excerpts:
Rapidly changing business conditions are demanding more flexible organizations, explaining why agile companies outperform others. The pace of change has gotten a lot faster. It’s just a lot more intense.
Look at the statistics on how long companies last in the Fortune 500. They’ve dropped so precipitately that all of our clients are talking to us about the pace of change. Doesn’t matter industry, doesn’t matter geography. CEO tenure is also way down.
So against that backdrop, McKinsey’s been doing a large amount of research, utilizing a big tool that we have—the Organizational Health Index. Measuring organizational speed AND stability. If you emphasize speed and if you at the same time emphasize stability, you have hit a sweet spot that will lead you to far and away outperform anybody who’s just doing one or the other.
How can you have both?
Well, take speed as a proxy for how responsive, nimble, and dynamic the organization is. And speed is the best proxy we have to measure it. Just go fast, in lots of ways and on lots of dimensions. Going fast does not mean that you have to be completely chaotic and unstable.
The best companies create what we’ve started to refer to as a “stable backbone.” I don’t want to seem like we have all the answers here. We’re working this live with our clients and looking at some fascinating companies and what they do. But if you were to draw commonalities, you’d say that what that stable backbone seems to do, most of the time, is take care of people. It answers the “what’s in it for me” questions, like “how am I going to get evaluated? How am I going to get paid? How am I going to get developed?” And the best organizations seem to say, “don’t worry about that. We’ve got that taken care of. You have a home, and that home doesn’t change. Our strategies may change all the time. The things we do to be fast and responsive to the market may change. But your home’s not going to change. Relax.”
If we go back to look at these agile companies and approach them and say, “hey, we’re going to change this element of our strategy,” in an agile company people can say, “great, I’m in. How do we start?” They know the backbone’s there to take care of them. They’ve seen this movie before. They know they’re going to see it again. It’s part of their job expectation, as opposed to “whoa, wait a minute.”
I think it gets at this notion we’ve been telling each other forever—change is hard. And there’s some truth to that, I get it. But change that’s good isn’t as hard as change that’s bad. I think a really important thing is that people enjoy being in these agile organizations.
Based on the McKinsey research, then, a key to creating and sustaining an agile organization is to have a “stable backbone” for people. When key leaders and talent understand that their livelihood and career upside are not at risk when strategies change, they are more likely to embrace the changes. Organizational agility can then become a major source of competitive advantage.
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Do you work as part of a management team? Or serve on a board? Or lead a business, department or project team? Most of us are involved with one or more work teams. Some teams work together better than others. Team results also vary. Why is that?
In November, Google published an article about the factors that most influence team effectiveness. Interestingly, their findings determined that team success was not dependent on the mixture or level of talent of the individual team members (even though Google has some highly talented individuals). Instead, what did matter is how the team members interact, structure their work, and view their contributions.
Here are the five key dynamics that set successful teams apart from other teams at Google, as well as additional detail from the article defining the most important factor:
- Psychological safety: Can we take risks on this team without feeling insecure or embarrassed?
- Dependability: Can we count on each other to do high quality work on time?
- Structure & clarity: Are goals, roles, and execution plans on our team clear?
- Meaning of work: Are we working on something that is personally important for each of us?
- Impact of work: Do we fundamentally believe that the work we’re doing matters?
Psychological safety was far and away the most important of the five dynamics — it’s the underpinning of the other four. How could that be? Taking a risk around your team members seems simple. But remember the last time you were working on a project. Did you feel like you could ask what the goal was without the risk of sounding like you’re the only one out of the loop? Or did you opt for continuing without clarifying anything, in order to avoid being perceived as someone who is unaware?
Turns out, we’re all reluctant to engage in behaviors that could negatively influence how others perceive our competence, awareness, and positivity. Although this kind of self-protection is a natural strategy in the workplace, it is detrimental to effective teamwork. On the flip side, the safer team members feel with one another, the more likely they are to admit mistakes, to partner, and to take on new roles. And it affects pretty much every important dimension we look at for employees. Individuals on teams with higher psychological safety are less likely to leave, more likely to harness the power of diverse ideas from their teammates, bring in more revenue, and are rated as effective twice as often by executives.
These findings by Google are fascinating, and provide insights we can use with our own work teams. For those of us who are leaders or managers, embracing these team dynamics may help us improve overall business performance as well.
Much is written about the importance of #2, individual dependability in work environments as well as #3, clarity of goals by leaders. More recently the importance of finding meaning (#4), and purpose (#5) in our work has been explored through research on employee engagement. According to the Google study, though, creating a culture of trust and psychological safety in the work environment may be the most important challenge we have as leaders.
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LinkedIn is full of quotes from various sources with some form of this saying, “Hire for character, train for skill”. While I understand the concept and agree with it, I don’t often see it used in practice. In our executive search business, character is rarely referred to by clients as they discuss qualifications of candidates sought. The typical job description includes experience, skill and education requirements with an occasional reference to integrity as ‘a must’.
Here are some questions to ask that may help determine if your practices reflect hiring for character:
1. How do you define character?
2. Is character referred to in your corporate purpose, mission, vision and value statements?
3. What aspects of your candidate identification, attraction and hiring practices help identify character?
4. What elements of your interview process are used to document and evaluate character?
5. What character flaws are candidate knockout factors (even for a candidate who has the skills, experience and accomplishments you seek)?
6. Do you have learning and development practices in place to train for missing skills?
7. Who was the most recent business leader you hired who had great character, but lacked the skills necessary for the role?
8. Have you ever fired a business leader or key-talent for character flaws/incidents?
9. Do you have leaders or key-talent in place now who have questionable character?
10. Do you know for sure?
Beyond criminal background checks and reference calls – usually completed after a hiring decision is already made – most organizations have no formal steps for determining character.
I’m certain that every hiring manager is interested in hiring candidates with integrity. I’m less certain that hiring managers are prepared to hire unskilled people with integrity.
However, if a company is facing a skills/talent shortage (and most are) and current methods of identifying, attracting and hiring are not producing the candidate flow it desires, figuring out how to hire for character and train for skill may open an untapped candidate pool and increase focus on corporate values.
As part of an integrated talent strategy, one that is tied to corporate purpose, mission, vision and values, ‘hiring for character and training for skill’ can be a reality and achieve the desired results.
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Boards of directors and senior management teams are tasked with maximizing opportunities and managing risks for organizations. In sports terms, to me, maximizing opportunities is like playing offense and managing risks is like playing defense. For now, let’s focus on defense.
According to Wikipedia, Risk management is the identification, assessment, and prioritization of risks (defined as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. Risk management’s objective is to assure uncertainty does not deflect the endeavor from the business goals.
Sticking with definitions for the moment, Talent may have a wide range of meanings, but for our purposes, let’s define talent as the people who drive performance and value within an organization. So managing talent risk is aimed at minimizing bad outcomes related to the people who drive value in an organization.
What are the bad outcomes related to talent? Here are a few to consider:
- Sudden loss of key people – unplanned turnover.
- Lack of return on key people and leader investments – poor performance.
- Failure to attract, develop and retain talent.
With a little imagination, these bad outcomes can go from unfortunate to scary.
What should board directors and senior executives do to help address and mitigate these risks? In a report called The Talent Intelligent Board published by Deloitte, the authors call for increased talent management oversight and outline five steps for improving talent risk management. Here are some excerpts from that article:
Improving the oversight of talent risk begins with understanding those risks and management’s approach to addressing them.
Here are five key steps for boards to consider in their talent oversight role:
- Review talent-related risks: Many boards have adopted a twice-a-year talent review in which the chief human resources officer (CHRO) summarizes the external talent trends, and workforce and talent strategy for the business, including a comprehensive review of talent, HR risks and the associated mitigation strategies.
- Develop measurable outcomes: It is also wise to request a benchmark analysis that covers employee engagement, top performer and executive attrition, and other factors related to talent retention at the senior levels and for other critical positions. This can be accomplished by leveraging industry or HR data and/or using historical organizational data as comparisons.
- Assign the responsibility: More and more boards designate a director and/or members of the remuneration committee to address talent-related issues and risks (often a former or current CHRO), and ask for frequent “in camera” sessions with the board on talent-related risks. The head of HR could report to both the CEO and the board. For the board, this designated director can help raise awareness of talent issues; moreover, this individual has the appropriate background to question management and inform the board about talent-related risks and how management is addressing them.
- Monitor the talent pipeline: Talent supply and demand data should be reviewed as part of capital investments and business strategy reviews at least annually, and ideally more frequently. In addition, the need to develop new products, enter new markets, or combat new competitors will dictate the demand for specific experience and skills. The board should ascertain that management and the HR team have plans in place to meet that demand.
- Align the talent and business strategy: In reviews of strategy, the board should ask management how it aligns the talent strategy with the business strategy. Forward-looking talent strategies maintain this alignment while helping target investments in talent development for optimal efficiency and effectiveness. The board should also be aware of talent issues related to any initiative that comes up for its review or approval. For example, in merger and acquisition (M&A) situations, talent due diligence is often neglected and talent the organization intended to acquire on Day 1 may be lost. In a recent survey, only a quarter of respondents indicated that talent/HR metrics were used to determine the overall success of their transaction. Among the same respondents, those that rated their M&A as successful or highly successful were far more likely to have considered talent implications during the due diligence stage.
Talent identification, attraction, performance management and retention is already at the forefront of senior executive’s minds. Recognizing and managing talent risks will help organizations focus on maximizing opportunities through people. When it comes to talent, the best offense may start with a good defense.
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