Are Bosses Necessary? – The Atlantic

A radical experiment at Zappos may herald the emergence of a new, more democratic kind of organization

Deeply strange reports have been emerging from the Las Vegas headquarters of Zappos, until recently the world’s happiest shoe store. This spring, by order of the CEO, Tony Hsieh, the company abolished managers, eliminated job titles, denounced its own organizational hierarchy, and vested all authority in a 10,000-word constitution that spells out a radical new system of self-governance. Holacracy, it’s called, and it makes all previous moves toward “employee empowerment” look like the mild concessions of an 18th-century monarch. Freed from direct supervision, employees are expected to join various impermanent democratic assemblies called “circles” (headed, but notrun, by a “lead link”), in which they will essentially propose their own job descriptions, ratify the “roles” of others, and decide what projects the group should undertake.

The constitution was written by Brian Robertson, a Philadelphia entrepreneur unaffiliated with Zappos who’d grown disaffected with standard management practices. Hsieh had heard him speak about holacracy at a 2012 conference, and was captivated. “We adopted it wholesale with zero changes,” says John Bunch, who used to be a technical adviser at Zappos but is now title-less. (He is, nevertheless, heading the implementation of holacracy.)

The media has so far reacted with a mix of understandable skepticism and outright derision. “Mr. Hsieh’s hot hand appears to be at risk of going cold,” The New York Times reported in July. Employees at Zappos, the paper said, have met the development “with everything from cautious embrace to outright revulsion.” The tech site Pando was less measured: “Holacracy of Dunces,” a headline snorted that same month.

Holacracy’s implementation at Zappos, still in process, has undoubtedly caused problems (more on those later). But such reports risk missing the larger picture. However fraught it may be, Zappos’s experiment with holacracy is just the latest sign that information technology is allowing the emergence of a new form of organization.

For years, pockets of the U.S. military have been slowly taking decisions out of the hands of high-ranking commanders and entrusting them to teams of soldiers, who (armed with the concept of “commander’s intent”) are told what problems to solve—but not how to solve them. “The organization as a rigidly reductionist mechanical beast is an endangered species,” General Stanley McChrystal writes in his new book, Team of Teams. “The traditional heroic leader may not be far behind.” At the video-game maker Valve, new employees are told not to expect instructions, because even the managing director “isn’t your manager,” says the employee handbook. “You have the power to green-light projects. You have the power to ship products.” And so they do

What’s enabling this shift, argues Thomas Malone, a professor at MIT’s Sloan School of Management, is simple: falling information costs. In his 2004 book,The Future of Work, Malone broke the history of organizations into three stages. In stage one, information is expensive to convey, so most decisions are made face-to-face in necessarily small firms. As communication costs begin to fall, Malone explained to me, we reach stage two, in which “it becomes economically feasible to send information to a single, central place for decisions to be made.” That is, the large, centralized hierarchy becomes possible. Then comes stage three: “As communication costs continue to fall, there comes a time when it’s economically feasible to bring information to all points, so in some sense, everyone can know everything.” In this third stage, the benefits of bigness can persist, but its traditional handmaiden, hierarchy, doesn’t have to. (Indeed, when the volume of information grows large enough, trying to direct its flow upward for evaluation can slow everything down.)

Malone points to the history of government. We lived most of our existence in small, fairly egalitarian bands of hunter-gatherers, until the advent of written language, which arose in tandem with record-keeping, taxation, and the founding of the first kingdoms, around 3000 B.C. Large-scale democracy did not appear until an equally momentous information technology, the printing press, enabled the “reading revolution” of the 18th century.

In business, the transition from bands to kingdoms came courtesy of the telegraph in the mid-19th century. And what it begat—the large, managerial hierarchy; the salaried manager; the modern definition of a job—has endured, with occasional pushes to prune and flatten management, until now, a good two decades after the Internet radically altered the volume, velocity, and direction of information flows. (Doubters, check your inbox.)

Why the lag? A look back at the mid-19th-century transition suggests an answer. After a new information technology appears, the organizational innovation that it allows doesn’t knock at the front door and present itself. People have to invent it. The ones who did last time around aren’t as celebrated as Morse, or before him Gutenberg. But what they arrived at looks obvious only in retrospect.

In 1854 the Board of the New York and Erie Railroad promoted Daniel McCallum, a Scottish-born bridge builder, to general superintendent, hoping he could address the railroad’s mysterious ills. As the railroad grew larger, it was growing not more efficient per mile, as Adam Smith would have predicted, but less so. Had the company hit some sort of natural size limit? No, McCallum concluded. What was breaking down was its stage-one organizational system.

At a small railroad—and all railroads up to then had been small—the superintendent could give every aspect of its business his personal attention, McCallum wrote. “Each employee is familiarly known to him, and all questions in relation to its business are at once presented and acted upon.” But as The Atlantic marveled in an 1858 article featuring McCallum’s ideas, the New York and Erie had to coordinate the movements of some 200 locomotives, 3,000 cars, and 4,700 employees dispersed over hundreds of miles. What was needed, McCallum wrote, was “a system perfect in its details, properly adapted and vigilantly enforced.”

The system he spelled out—in great detail—delineated who had the authority to decide what, and even what words to use in communicating that decision back to their superiors on the telegraph. (“All subordinates should be accountable to, and be directed by their immediate superiors only.”) In the elaborate diagram that McCallum created—widely considered the first modern organizational chart—17 spokes, each representing a different division, radiate from a central hub that is the office of McCallum himself. Thanks to a system of hourly reports, The Atlantic wrote,

“the General Superintendent at his office can at any moment tell within a mile where each car or engine is, what it is doing, the contents of the car, the consignor and consignee, the time at which it arrives and leaves each station, (the actual time, not the time when it should arrive,) and is thus able to correct all errors almost at the moment of commission … The great regulator … is the electric telegraph, which connects all parts of the road, and enables one person to keep, as it were, his eye on the whole road at once.”

The most striking aspect of McCallum’s system comes near the top of his report. For all the rigidities, he admitted, the system was an improvisation—one man’s attempt to bring his organization into better alignment with a rapidly changing environment. It would “require amendment,” he wrote, “and a reasonable time to prove its worth.”

Which sounds a lot like the commentary of Brian Robertson, the entrepreneur who created holacracy. Like McCallum’s, his decision to put pen to paper was not utopian but pragmatic. The idea was born out of his own frustrations as the CEO of Ternary Software, which he founded in 2001. “When I tried to design organizations purely from my own intellect,” Robertson says, “I always got it wrong. I’d design solutions for problems that didn’t exist. Other parts were overdesigned. We’d end up solving problems that would never come up in practice, and then you’d miss the ones you actually needed to solve. You can’t know enough.”

He didn’t start with any radical notions of overturning hierarchy. He just wanted his company to function better. After exhausting the most-obvious solutions—hiring better managers, attempting to nail the perfect org chart—he finally concluded that the problem was the very concept of a rigid org chart. And so, as McCallum had a century and a half before, he wrote out a new set of rules delineating a new system.

Like McCallum’s, it is very, very complicated—too complex to describe fully here, and too complex for the liking of some at Zappos. (The constitution Robertson drafted runs more than twice the length of the Founding Fathers’.) But its basic principles go something like this: Instead of being assigned job descriptions from on high, employees take on mutable roles where they see a need. The hierarchical org chart is replaced by an ever-changing array of circles that can form, merge, or collapse in response to opportunities and threats in the marketplace. Reorganization, in effect, becomes a permanent way of life. The rigid forms invented in the steam age give way to something more organic—a jellyfish, perhaps.

It makes some sense on paper. But in practice? Holacracy’s first laboratory, Ternary, was a tiny company that didn’t survive the Great Recession. And at Zappos, given the choice of embracing holacracy or taking a buyout this past spring, 210 employees, or 14 percent of the company’s workforce, chose the latter. John Bunch notes that holacracy has created a whole set of new problems that have to be addressed. How to evaluate people’s performance is one. (Zappos is working on a system called “badging,” whereby employees earn badges for acquiring new skills.) How to compensate someone who splits her time among three different roles (say, customer care, event planning, and brainstorming a new Zappos product line) is another. The list goes on. How do you stop people from trying to exercise power they no longer have? And how does a system conceived to reduce information overload (“the goal,” says Bunch, “is to find the optimal circle structure where the need for communication between the circles is the least”) not add to it instead, in the form of endless meetings?

But just because solutions don’t yet exist doesn’t mean they won’t be found, says Robertson, who likens holacracy to a computer’s operating system and the solutions to apps. Remember when the App Store first opened? It didn’t have a lot on offer. Bunch told me that it’s too soon for Zappos to begin making amendments to holacracy; the company needs to finish the difficult process of understanding it first. “If someone comes to me super-frustrated, borderline angry,” he says, “that’s actually a really good sign to me, because it means they’re at least trying to understand it.”

The important point is this: To pronounce holacracy unworkable now would be akin to pronouncing democracy unworkable in the midst of the French Revolution. And should holacracy at Zappos fail, which it well may, neither should its principles be pronounced dead. The New York and Erie Railroad was in receivership within a few years of McCallum’s report—but the system he pioneered there became utterly commonplace by century’s end.

With that in mind, it’s not hard to imagine a future in which the only thing strange about what’s going on at Zappos is that it ever seemed strange at all.

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3 Reasons Millennials Are Getting Fired – by J.T. O’Donnell

Recently, I wrote this article explaining why Millennials aren’t getting promoted. In response to Millennial readers’ requests for a deeper understanding of how being misperceived can negatively affect their careers, I’m taking it a step further and outlining exactly what’s getting them fired.

Employers are seriously fed up.

To get a sense of how heated this has become, read this article by one irate employerand his prediction of the backlash that will soon ensue from the Millennials’ attitudes toward work.

Additionally, this survey by SmartRecruiter of 28,000 bosses detailing where Millennials are falling short is just one example of the data to support the huge disconnect costing some Millennials their jobs. Here are the key takeaways Millennials need to know.

1. Employers don’t want to be parents.

Growing up, Millennials were coached their entire lives and they unknowingly assumeemployers will coach them too. However, the relationship isn’t the same. An employer pays us to do a job. We are service providers. Expecting extensive training and professional development to do the job doesn’t make financial sense. In many employers’ minds (especially, small to midsized businesses with limited budgets and resources), Millennials should foot the bill to develop themselves and make themselves worth more to the employer.

Tip: Millennials should do their best to proactively seek resources on their own to help them close gaps in skills and knowledge in the workplace. There are plenty ofonline tools and resources to help them put their best professional self forward. Additionally, they should seek out a mentor to privately ask questions and get guidance on how to make the right impression.

2. The anti-work attitude isn’t appreciated (or tolerated).

As explained here, Millennials tend to work only the minimum time expected–and will push for flexibility and a reduced work schedule to create more time for other pursuits. Being demanding about when and how they want to do their job can be viewed as disrespectful. A great way to look at how some employers feel is the way the dysfunctional phone/cable companies work. It’s annoying when they announce they can come out only on a certain day. They can’t tell you what time, and then they say they’ll call the day of and give you a four-hour window when they’ll arrive. While the phone/cable companies have us trapped, employers don’t feel the same about Millennials. They’ll fire the Millennial worker and find someone who can work when they need them to–and without the attitude.

Tip: In the early days and weeks of a new job, Millennials can make up for what they lack in skills by being consistently on time. When an employer sees their commitment to their work, they will earn her trust and respect, resulting in her being comfortable with their taking time off, and even providing them with a more flexible work schedule. When Millennials prove they can deliver on their company’s terms, their company will give them more of what they want.

3. Millennials’ happiness isn’t the employer’s responsibility.

Millennials are pretty vocal about wanting work to be a “fun” place to go. Besides career development, they also desire lots of cool perks and benefits to make their job feel more rewarding. Besides nice work spaces, amenities like gym memberships, healthy meals on-site, in-house parties, etc., are being used in an effort to attract and maintain Millennial workers. Unfortunately, this is backfiring on employers–and that makes them angry. In spite of all the perks to keep them happy, Millennials are getting to these jobs and quickly showing visible signs of disappointment and dissatisfaction within months of joining the company.

Why are Millennials so tough to keep happy?

Part of the problem is how much external motivators were used on Millennials growing up. In the book Punished by Rewards, Alfie Kohn argues that Millennials have an addiction to praise, perks, and other incentives to learn–better known as bribes. Thus, when they get to the job and the newness wear off, they think it’s the company’s job to fix it with more incentives. But, this is where the cycle of bribing has to stop. A company can offer only so much in the form of compensation and benefits. The reality is that Millennials (like all workers) must learn to find intrinsic motivation (internal drive for work), so they can find real satisfaction and success in their careers. Since Millennials haven’t learned this yet, they’re experiencing sadness and confusion in the workplace. Unfortunately, their unhappiness is transparent to employers who have no desire to pay for what they perceive as a bad attitude at work.

Tip: Millennials who feel confused and unhappy in their job should not blame the employer (yet). First, they should seek some career coaching. Many Millennials just need help understanding some of the basic elements for finding an internal motivation for work. They need to know their professional strengths and workplace personas, and the defining skills they’d like to grow so they can build up their specialties and find direction and motivation at the job.

Millennials, don’t get mad, get ahead!

While the rest of their peers continue to be misunderstood, smart Millennials can make some simple changes and set the standard for what an outstanding young professional looks like to employers today. As this article points out, doing so could lead an employer to fast-track a career as an example to other workers. Why not benefit from the opportunity?

7 Interview Questions That Determine Emotional Intelligence – by Carolyn Sun

Determining who you hire for a job plays a big part in forming your company’s culture and ensuring its future success. Selecting informative interview questions can be a key factor in finding the right employees — as well as weeding out the ones that won’t fit. A candidate’s answers can be telling.

While different companies embody various values and cultures, success in the workplace is strongly influenced by a person’s emotional intelligence, a quality that should be a non-negotiable when vetting job candidates, says Mariah DeLeon, vice-president of people at workplace ratings and review site Glassdoor.

Here are seven interview questions that can draw revealing answers from the job candidates you interview — and get you on your way to finding employees with stellar emotional intelligence.

Related: 8 Revealing Interview Questions to Hire Standout Staff

1. Who inspires you and why?

The job candidate’s answer often gives the interviewer a peek into who the interviewee models him or herself after. The response can also highlight the sorts of behavioral patterns the interviewee respects, saysCraig Cincotta, chief of staff and vice-president of communications at online home improvement marketplace Porch, where he’s heavily involved in team expansion and hiring.

2. If you were starting a company tomorrow, what would be its top three values?

Every good relationship starts with trust and aligned values. Insight into a person’s priorities — as well as honesty and integrity — can emerge in the candidate’s answer, explains Robert Alvarez, the CFO of ecommerce platform Bigcommerce.

3. If business priorities change, describe how you would help your team understand and carry out the shifted goals?

Shifting priorities happen in every company, and every job, so look for candidates who are flexible and possess the skills to help carry out change. Hire employees who are self-aware, motivated and display empathy advises DeLeon. “These skills will help employees better work in teams.”

Related: The 5 Must-Ask Interview Questions to Determine if Someone’s a Fit

4. Did you build lasting friendships while working at another job?  

It takes a while for people to build relationships — and being able to do so is a sign of solid emotional intelligence, Alvarez says. “[A lasting friendship] tells you that relationships and caring about people are important to the person.”

5. What skill or expertise do you feel like you’re still missing?

Curiosity and the desire to learn are vital signs that a prospective employee wants to get better at something. “People who struggle with this question are the people who think they already know it all,” warns Alvarez. “These are the people you want to steer away from.”

6. Can you teach me something, as if I’ve never heard of it before? (It can be anything: A skill, a lesson or a puzzle.)

A job candidate’s answer to this question can reveal several qualities:

  • Whether the person is willing to take the time to think before speaking.
  • If the candidate has the technical ability to explain something to a person who is less knowledgeable in the subject.
  • Whether the candidate asks empathetic questions to the person being taught, such as, “Is this making sense?”

7. What are the top three factors you would attribute to your success?

The answer to this question can determine whether a person is selfless or selfish, Alvarez says. “When people talk about their own success, listen to whether someone talks about ‘me-me-me’ or ‘I-I-I.’ Or whether they talk about ‘the team,’ ‘we’ or ‘us.’”

“Look for a team player who brings something positive to the company,” Cincotta shares. “Someone can be the smartest person in the room, but if they are not someone you enjoy working with — because they are more concerned with their own success over that of the company — they won’t be a fit.”

Carolyn Sun

Research Editor
Carolyn Sun is the research editor at Entrepreneur.com.

How to separate learning myths from reality – by Artin Atabaki, Stacey Dietsch, and Julia M. Sperling

Over the years, you have probably gained some insight into how your brain works. You may have taken a course or read a book that promised to reveal the secret of maximizing your mental capacity—a common sales pitch of leadership coaches these days. In the process, you may have read that after a critical period in childhood there is no hope for significant learning, that half of your brain is inactive at any given time, or that you’re capable of learning properly only in your preferred style.

Each of these claims is what we call a “neuromyth,” a misconception based on incorrect interpretations of neuroscientific research. Our experience advising companies on their lifelong-learning initiatives suggests that such misunderstandings remain embedded in many corporate training programs. As companies increasingly pour money into developing their employees, they can no longer afford to invest in training programs based on inaccurate and out-of-date assumptions. In recent years, for example, US businesses alone spent more than $164 billion annually on employee learning.1 The stakes are high and getting higher.

Bridging the gap between popular neuromyths and the scientific insights gathered in the past few decades is a growing challenge. As modern brain-imaging techniques, such as functional magnetic resonance imaging (fMRI), have advanced scientific knowledge, these misleading lay interpretations by business practitioners have advanced as well. Unless such misconceptions are eliminated, they will continue to undermine both personal- and organizational-learning efforts. In this article, we’ll address the three most prominent neuromyths in light of the latest research and explore some of the implications for corporate learning.

Myth #1: The critical window of childhood

Most of us have heard about critical learning periods—the first years of life, when the vast majority of the brain’s development is thought to occur. After this period, or so the assumption too often goes, the trajectory of human development is deemed to be more or less fixed. That, however, is an exaggeration. Recent neuroscientific research indicates that experience can change both the brain’s physical structure and its functional organization—a phenomenon described as neuroplasticity.

Researchers studying the plasticity of the brain are increasingly interested in mindfulness. Practicing simple meditation techniques, such as concentrated breathing, helps build denser gray matter in parts of the brain associated with learning and memory, controlling emotions, and compassion. A team led by Harvard scientists has shown that just eight weeks of mindful meditation can produce structural brain changes significant enough to be picked up by MRI scanners.2

Organizations from General Mills in consumer foods to digital bellwethers such as Facebook and Google increasingly give their employees opportunities to benefit from mindfulness and meditation. Most such programs have garnered enthusiastic support from employees, who often see a marked improvement in their mind-sets and job performance. For example, employees at the health insurer Aetna who have participated in the company’s free yoga and meditation classes report, on average, a 28 percent decrease in their levels of stress and a productivity increase of 62 minutes a week—an added value of approximately $3,000 per employee a year. CEO Mark Bertolini, who started the program a few years ago, marvels at the level of interest generated across the company; to date, more than a quarter of Aetna’s 50,000 employees have taken at least one class.3 Leaders like Bertolini understand that providing them with the tools to become more focused and mindful can foster a better working environment conducive to development and high performance.

Myth #2: The idle-brain theory

A recent European survey discovered that nearly 50 percent of teachers surveyed in the United Kingdom and the Netherlands believed that the idle-brain theory has been proved scientifically.4 This misunderstanding originally stemmed from inaccurate interpretations of activation hot spots in brain-imaging studies. By now, more carefully interpreted functional brain scans have shown that, irrespective of what a person is doing, the entire brain is generally active and that, depending on the task, some areas are more active than others. People can always learn new ideas and new skills, not by tapping into some unused part of the brain, but by forming new or stronger connections between nerve cells.

This insight into the brain’s capacity becomes particularly relevant for the environment and context in which learning typically occurs. Everybody knows, all too well, about the habit of quickly checking e-mails or planning for the next meeting in the middle of a training session. The problem is that such multitasking engages large parts of the brain’s working memory. Without freeing that up, we cannot successfully memorize and learn new information. In short, multitasking and learning cannot occur effectively at the same time.

Some organizations, recognizing this problem, are working to build immersive learning environments where distractions are eliminated. At McKinsey, we’ve created a model factory that participants can walk through to see operating conditions in action. But first, everyone is asked to place their phones and other distractive belongings in a locker, so they can fully concentrate on the learning exercise at hand. At many companies, removing the temptation of using mobile devices during learning sessions is becoming commonplace.

Myth #3: Learning styles and the left/right brain hypothesis

Almost everyone has encountered the theory that most people are either dominantly analytical (and left brained) or more creative (and right brained). However, this either/or dichotomy is false. The two hemispheres of the brain are linked and communicate extensively together; they do not work in isolation. The simplistic notion of a false binary has led, in many businesses, to the misconception that each one of us has a strictly preferred learning style and channel. Recent studies have flatly disproved this idea, suggesting instead that engaging all the senses in a variety of ways (for instance, audiovisual and tactile) can help employees retain new content.

One organization that puts this idea into practice is KFC, which uses multiple forms of learning in customer-service training. Sessions begin with an after-hours board game placing the entire team of a store in the role of the customer. This is followed up by “gamified” learning that fits into roughly 15-minute windows during shifts. These video game–like modules put the employees behind the cash register to handle a number of typical customer experiences, including responding to audio and visual cues of satisfaction. At the end of the online modules, employees physically reconvene at the front of the store to hear feedback, report on what they’ve learned, and receive live coaching as reinforcement.

Although significant progress has been made, much remains to be done to eradicate neuromyths from the philosophy of corporate-training programs. Neuroscience research has confirmed some of the approaches that learning professionals already use, such as on-the-job reinforcement and engagement without distractions. But that research has also contradicted other approaches. Companies should draw on the newly substantiated insights and may need to rethink their training programs accordingly. At the very least, they need to improve their dialogue with, and understanding of, the scientific community.

About the authors

Artin Atabaki is a consultant in McKinsey’s Stuttgart office; Stacey Dietsch is an associate principal in the Washington, DC, office; and Julia M. Sperling is a principal in the Dubai office.

The authors wish to thank McKinsey’s Jennifer May, Michael Rennie, and Kristina Wollschlaeger for their support of and contributions to this article.

Culture: Why It’s The Hottest Topic In Business Today – by Josh Bersin

Last year Merriam Webster’s dictionary stated that ”culture” was the most popular word of the year. Well, it has now become one of the most important words in corporate board rooms, and for good reason.

We have a retention crisis. New Deloitte research shows that culture, engagement, and employee retention are now the top talent challenges facing business leaders. More than half business leaders rate this issue “urgent” – up from only around 20% last year.

What’s going on? It’s very simple: as the economy picks up steam (unemployment now below 5.5%), employees have more bargaining power than ever before. Thanks to social websites likeLinkedIn LNKD +0.07%, Glassdoor, and Indeed, a company’s employment brand is now public information so if you’re not a great place to work, people find out fast. This shifts power into the hands of job-seekers.

And many companies have work to do.  Gallup’s latest research shows that only 31% of employees are engaged at work (51% are disengaged and 17.5% activelydisengaged). Analysis of the Glassdoor database shows that the average employee gives their company a C+ (3.1 out of 5) when asked whether they would recommend their company to a friend (Bersin by Deloitte research with Glassdoor).

We have arrived in a world of “haves” and “have-nots” when it comes to attracting and engaging top talent.

Let me cite some examples:

  • I recently met with one of the world’s biggest industrial manufacturers on the east coast and they lamented losing top aerospace engineers to Google GOOGL +0.73%. They’re scratching their heads to figure out how to prevent more top engineers from leaving.
  • A large well-known Silicon Valley company considering a major facelift of its corporate campus to attract young people. They’re not sure if it will work or not, but they feel they have no choice. Here there is a war to build the “best workplace in the world” – free food, unlimited vacation, yoga classes, beer bashes, and bright open offices are everywhere. (Check out Google’s new space age campus design.)
  • Most financial services companies I meet with tell me they are struggling to hire top people. While the industry is still popular with MBAs, the recession damaged the reputation for this industry and it’s just starting to recover.

Companies that focus on culture are becoming icons for job seekers:

  • Fortune’ Best Companies happen to be many of the same companies listed in Glassdoor’sBest Places to Work and also LinkedIn’s Most In-Demand Employers. This shows that companies with strong positive cultures (Fortune and Glassdoor’s list is based on employee surveys) are now the most in-demand.  So the “culture winners” are winning bigger.
  • Younger companies that focus on culture see a huge payoff. HubSpot, a growing New England tech firm focused on its culture (around 1,000 employees), has Glassdoor ratings of 4.6, far above the industry average. They give their staff free books and education and believe so strongly in transparency that they post their board meeting notes and culture manifesto online.
  • NetFlix’s culture manifesto ”freedom with responsibility” is one of the most popular documents on the internet, 11 million+ viewers. Everyone wants to copy it.
  • Value statements have popped up everywhere. Zappos’ cultural values focus on innovation, Quicken Loans  uses its colorful “ISMS” to guide values (“call back every client the same day” is one of their values), Google has its 10 ”truths” (focus on the user is one), RW Baird has its “ unique culture,” Salesforce focuses on community, and it goes on and on.
  • Culture-driven companies explicitly put their people first. Wegmans, the #7 best place to work in the Fortune list, reset business goals just to create the jobs and career growth they want for their people. “Take care of your people and they will take care of your customers,” as the saying goes.
  • Traditional companies like Aetna are now heavily focused on culture. Recently the New York Times published an article about Aetna’s CEO Mark Bertolini. He has raised wages, improved health benefits, and introduced yoga and mindfulness training to his entire company to improve retention and culture in the call centers. Their $100M + turnover problem is rapidly going away and he claims to have already improved the bottom line by 3-4 %.

google

Look at how office space is now part of building a great culture. Fortune’s new “25 coolest offices of the 100 Best Companies” shows how most of these great places to work are actually great PLACES to work. Flexibility, entertainment, and bright colorful offices and art make these companies a fun place to work.

People now believe that culture has a direct impact on financial performance. I just talked with two industry analysts who read Glassdoor comments before they publish analyst reports.  Both told me they use this data to understand employee sentiment read comments about the CEO as part of their core research. It also helps them compare competitors.

As the saying goes, “Culture eats Strategy for Lunch.”  (And free lunch is now part of the culture.)

Ok it’s a popular topic. What is culture anyway?

Culture is a big and somewhat vague term. Some define it as “what happens when nobody is looking.”

In reality, it’s much more complex. Culture is the set of behaviors, values, artifacts, reward systems, and rituals that make up your organization. You can “feel” culture when you visit a company, because it is often evident in people’s behavior, enthusiasm, and the space itself.

I visit a lot of companies and I can often sense the culture in a few minutes. Are people busy and working with customers? Or are they quietly working alone? Do they get in early and leave late? Or does the parking lot empty at 4:30? Is the office beautiful and inspiring with values and icons around, or is it messy and busy? Is there a sense of order or a sense of family?  All these clues help diagnose culture.

The Competing Values Framework, by Kim Cameron and Robert Quinn, is a terrific textbook on organizational culture. After years of research the authors grouped organizational cultures into four types and their research shows that most teams fall into one of these four types. You can diagnose your culture using tools like theirs (and others) and it will help you align your values and hiring to the culture you want to build.  There are three issues to consider:  type (what is your culture), strength (how strong is it), and congruence (how consistent is it).

competing-values-framework

Our research shows that culture and employee engagement are tightly linked (“culture” vs. “climate”), but not the same thing. Culture is slow to build, pervasive, and hard to change. Climate can be changed quickly.

When you communicate and honor culture, people know what to expect and feel comfortable. And the climate must support it. For example, a CEO I interviewed told me that “calling people back the same day” was part of his culture – so he monitors this behavior because to him, customer service is cultural bedrock.

As a company grows or acquires another company, the culture will often shift. IBM has been through many culture changes over the years, and one can trace them to major transitions in the business. When I worked there in the 1980s, IBM was a technology pioneer, but then later slowly but deliberately changed its culture to that of a consulting organization. Now it seems to be headed back.

Sometimes an acquisition will damage a well-honed culture, so watch out here. (When HP acquired Compaq, for example, a culture of engineering quality was mixed with a culture of low-cost production, causing a historic challenge.)

Many HR and management practices will drive or support culture. Do you value employee development? Are people empowered to take charge or do they follow the rules? How are people promoted and why? The Simply Irresistiblemodel describes many of the factors. If you’re focused on culture, we encourage managers and HR teams to think about the “total employee experience”: everything from the coffee in the coffee machine to the quality of management plays a role.

simply irresistble

How Do We Build And Manage Great Culture?

Ultimately culture is driven by leadership. How leaders behave, what they say, and what they value drives culture.

I proved this myself: I analyzed the Glassdoor database and found that the factor most highly correlated with an individual’s recommendation of their company as a place to work was “quality and trust in leadership.”

So the selection of leaders, development of leaders, and the coaching of leaders are all critical to building the right culture. Companies that focus on building great leaders spend almost 3X the average on leadership development, and they get a tremendous return for it.

Once culture is established and communicated, it becomes a tool to screen and assist candidates. The Talent Board (a research group that studies the job candidate experience) found that 41% of all candidates search for information about a company culture before they apply. So your culture is already a screening tool when you recruit people.

Zappos relies on culture to screen all hires, by trying to see if they are “wacky.” (Zappos assesses culture before they even assess job fit.) Southwest Airlines assesses culture fit by asking candidates to tell a joke. When you focus on culture as strategy you find that some people just won’t fit, regardless of their pedigree.

When I asked the SVP of HR at a financial institution how they guard their culture she said “people who don’t work as a team just don’t like it here.  They leave.”  Culture is like a flywheel: it gets stronger the more you reinforce it.

culture

If you want to improve your culture, look carefully at how you coach and evaluate your people. Do you believe in “forced ranking?” or “up or out?” That process in itself creates a type of culture – one most companies are moving away from. Today more than 60% of the companies we surveyed are changing how they evaluate performance because they want to drive empowerment and innovation into their organization. We call performance management the “secret ingredient” to building a highly engaged culture.

The ISMS Culture Book of Quicken Loans

A New Industry Of Culture And Engagement Tools

An industry of new culture diagnostic and feedback tools is emerging. Historically culture assessment has been a niche market of small psychology firms (companies like Human Synergistics, Dennison Consulting, and Senn Delaney have been around for years). Now, driven by the need to engage and attract people, this market is going mainstream. New, mobile and real-time tools to assess culture, collect regular and real-time feedback, and analyze employee sentiment are disrupting the $billion market for employee engagement and culture surveys.

Some of the new vendors include CultureAmp, TinyHRBlackbookHR,Achievers, GloboforceBetterCompany.co, Glint.io, OfficeVibe, Waggl, Canary,RelatedMatters, and dozens of others now offer real-time engagement and employee feedback tools to help you better understand and improve your workplace environment. Deloitte has a new culture assessment tool which is gaining great momentum. (Read Why Companies Fail to Engage Today’s Workforce for more information on this new market.)

Keeping It Simple:  Part Of Building A Great Culture

Remember also that great cultures are easy to understand. So keep it simple.  If you can’t write your values and culture down in a few words, it’s probably too complex to understand.

simplification

We believe simplification is becoming the next big thing in business. More than 60% of the companies we surveyed told us that their employees feel “overwhelmed” by the volume of activity and messages they get at work.  So part of your cultural facelift should also be “decluttering” of the workplace.

GE recently launched a major new strategy to simplify its business: the company is teaching managers how to focus, showing people how to spend more time with customers, and simplifying its back office processes. SAP did the same thing, and saw employee engagement rise by almost 30%.

Simplification can also improve the culture of compliance. New research by Deloitte Australia shows that financial services firms that focus on culture instead of compliance systems have better compliance. The research believes $240 billion is wasted on overly-complex compliance systems which could be replaced by a “culture of compliance.”

Great corporate cultures have always thrived on simplicity. Remember the mantra at IBM in the 1970s and 1980s?  It was very simple: “Think.” The Nordstrom’s rule?  ”Use good judgement.” These are simple statements that help people focus. When the rules and values are simple, we remember them.

One of the 10 ”Isms” in Quicken Loans’ manifesto is “ keep it simple.” Don’t make things complicated and don’t design for the “edge cases.”

Design thinking, agile and distributed management is all a part of simplifying work and improving corporate culture. This is an area where HR has work to do (read The Decluttering of Human Resources for more).

Ok I get it. Culture Matters. What should I do?

The prescription is pretty simple. Do you take culture seriously? Do you understand and monitor your culture? Does leadership use culture as a way to communicate values and strategy?  Are you investing adequately in your people programs?

There are many role models to follow:  Southwest Airlines’ culture of customer service and fun (elegantly described in The Southwest Way); Apple Inc.’s culture of innovation and technology elegance; Google’s culture of focusing on the user; even the US Post Office’s culture of service and reliability. Most of the companies in the Fortune Best Places to Work have a strong focus on culture – usually embodied by the CEO.

Your culture, like your strategy, is unique to your organization. It builds over time and is often hard to change. And when things don’t seem to be going well, turn back the clock. Sometimes the culture is what changed: remember what made your company great in the first place.

Finally, remember that culture lets you focus on your purpose and mission. As Joey Reiman describes in his book The Story of Purpose, people are not intrinsically motivated by profit or market share – it is purpose and values that bring us to work every day.

No matter if you’re a CEO, HR executive, manager, or team leader –  culture really matters. Consider it one of your most powerful tools for business success.

Josh Bersin


Josh Bersin is a leading analyst in HR, talent, leadership, and HR technology. He is also founder and Principal of Bersin by Deloitte, a leading research and advisory firm.

Guess Who Doesn’t Fit In at Work – by Lauren A. Rivera

 ACROSS cultures and industries, managers strongly prize “cultural fit” — the idea that the best employees are like-minded. One recent survey found that more than 80 percent of employers worldwide named cultural fit as a top hiring priority.

When done carefully, selecting new workers this way can make organizations more productive and profitable. But cultural fit has morphed into a far more nebulous and potentially dangerous concept. It has shifted from systematic analysis of who will thrive in a given workplace to snap judgments by managers about who they’d rather hang out with. In the process, fit has become a catchall used to justify hiring people who are similar to decision makers and rejecting people who are not.

The concept of fit first gained traction in the 1980s. The original idea was that if companies hired individuals whose personalities and values — and not just their skills — meshed with an organization’s strategy, workers would feel more attached to their jobs, work harder and stay longer. For Southwest Airlines, screening job candidates based on their willingness to provide a wacky experience for strangers contributed to the fun environment that enabled the company’s financial success. Likewise, for the investment firmBridgewater Associates, which seeks to distinguish itself through its pursuit of transparency and honesty, screening out potential hires who couldn’t handle criticism made good business sense.

But in many organizations, fit has gone rogue. I saw this firsthand while researching the hiring practices of the country’s top investment banks, management consultancies and law firms. I interviewed 120 decision makers and spent nine months observing the recruiting practices of one firm in particular. The professionals I spoke with, who were charged with reviewing applications and conducting interviews, consistently underscored the importance of cultural fit in hiring. While résumés (and connections) influenced which applicants made it into the interview room, interviewers’ perceptions of fit strongly shaped who walked out with job offers.

Crucially, though, for these gatekeepers, fit was not about a match with organizational values. It was about personal fit. In these time- and team-intensive jobs, professionals at all levels of seniority reported wanting to hire people with whom they enjoyed hanging out and could foresee developing close relationships with. Fit was different from the ability to get along with clients. Fundamentally, it was about interviewers’ personal enjoyment and fun. Many, like one manager at a consulting firm, believed that “when it’s done right, work is play.”

To judge fit, interviewers commonly relied on chemistry. “The best way I could describe it,” one member of a law firm’s hiring committee told me, “is like if you were on a date. You kind of know when there’s a match.” Many used the “airport test.” As a managing director at an investment bank put it, “Would I want to be stuck in an airport in Minneapolis in a snowstorm with them?”

Selecting new employees based on personal similarities is by no means unique to banking, consulting or law; it has become a common feature of American corporate culture. Employers routinely ask job applicants about their hobbies and what they like to do for fun, while a complementary self-help industry informs white-collar job seekers that chemistry, not qualifications, will win them an offer.

Although diversity in many industries has increased in recent decades, progress in the corporate realm has been slower than expected. Selection based on personal fit can keep demographic and cultural diversity low. In the elite firms I studied, the types of shared experiences associated with fit typically required large investments of time and money.

Class-biased definitions of fit are one reason investment banks, management consulting firms and law firms are dominated by people from the highest socioeconomic backgrounds. Also, whether the industry is finance, high-tech or fashion, a good fit in most American corporations still tends to be stereotypically masculine. Consequently, fit can exclude high-performing candidates — female or male — who are more stereotypically feminine.

Some may wonder, “Don’t similar people work better together?” Yes and no. For jobs involving complex decisions and creativity, more diverse teams outperform less diverse ones. Too much similarity can lead to teams that are overconfident, ignore vital information and make poor (or even unethical) decisions.

Perhaps most important, it is easy to mistake rapport for skill. Just as they erroneously believe that they can accurately tell when someone is lying, people tend to be overly confident in their ability to spot talent. Unstructured interviews, which are the most popular hiring tools for American managers and the primary way they judge fit, are notoriouslypoor predictors of job performance.

Fit can work, but personal similarity is not the key. Organizations that use cultural fit for competitive advantage tend to favor concrete tools like surveys and structured interviews that systematically test behaviors associated with increased performance and employee retention. For managers who want to use cultural fit in a more productive way, I have several suggestions.

First, communicate a clear and consistent idea of what the organization’s culture is (and is not) to potential employees. Second, make sure the definition of cultural fit is closely aligned with business goals. Ideally, fit should be based on data-driven analysis of what types of values, traits and behaviors actually predict on-the-job success. Third, create formal procedures like checklists for measuring fit, so that assessment is not left up to the eyes (and extracurriculars) of the beholder.

Finally, consider putting concrete limits on how much fit can sway hiring. Many organizations tell interviewers what to look for but provide little guidance about how to weigh these different qualities. Left to their own devices, interviewers often define merit in their own image.

Wanting to work with people like ourselves is not new. In the past, employers overtly restricted job opportunities based on sex, race and religion, which is now illegal. But cultural fit has become a new form of discrimination that keeps demographic and cultural diversity down, all in the name of employee enjoyment and fun.