Author: Kris Dunn

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The Trap of Big Data in HR

As it happens with so many things in life, big data has not only come to human resources, but it’s also rapidly making its way from the HR executive suite to the HR trenches.

What could go wrong?

Whether you call it “big data,” “small data” or “HR analytics,” odds are that HR pros in your organization all the way down to the manager level are actively being pitched on the benefits of making data-driven decisions.

If you’re an HR leader contemplating big data in the world of HR, I’ve got good news and bad news for you.

First the good news. If you’ve got control over the systems used in your HR practice, you’ve got a unique opportunity to train your minions and make big data work for you — companywide.

To make sure you give your HR pros data and analytics that don’t blow up in their face, let’s talk about what’s real and what’s not.

But with every silver lining comes a thunderstorm. Even if you control the analytical solution set across your HR practice, you’ve still got the challenge of making sure your teams can accurately engage the operations side of the business related to what the data mean and what adjustments are necessary to maximize the effect of talent on the business.

Did you just gulp? 

Your HR pros in the trenches are all good people. To make sure you give them data and analytics that don’t blow up in their face, let’s talk about what’s real and what’s not.

One of the biggest lies the data devil ever told was that we can base talent analytics on our performance management process. Don’t get me wrong; I’m pro performance management. It’s just that we all struggle with rater bias, calibration issues on ratings, etc.

Big data based on performance ratings is a dumpster fire outside a two-star restaurant in the bad part of town. The only exception is for lower-level positions that have clear production metrics. If that’s you, shine on you crazy diamond. The rest of us need to look elsewhere for analytics that matter.

And what about quality of hire? I know, you really want to talk about it. You’re right about one thing: It’s the holy grail. But it’s too linked to performance data for you to pull off across the enterprise. 

At this point, I’m the world’s biggest data buzz kill. But wait! I do have good news. 

There are two keys to launching HR analytics. To succeed, you need to focus on how the data are sliced for reporting purposes, then you need to train your HR pros in the field about how to be consultative with the operations leaders they support.

Let’s focus on data slices first. To truly maximize the effect of any data sets you report, you need to be brave. Courage with big data in HR means that you set up reporting to establish scoreboards designed to put pressure on managers in your organization. Key choices in this regard include the development of reports that compare locations, functional areas and, yes, even managers against each other across your company.

Need an example? Here’s a favorite analytical track of mine: hiring manager batting average. This average assumes any employee who leaves before their one-year anniversary is a hiring miss. Regardless of what caused the bad selection process, it’s all embedded in the calculation.

Calculating the hit-miss percentage on this data point across the past 12 months at your company is easy. Develop scoreboards that show which department or hiring manager is the best at this and you’ve got a shot at having meaningful conversations about how to improve.

But the big data secret sauce in HR is the negotiation and consultative skills of your HR pros in the field. If your trench-level HR team can’t perform in these areas, any analytical platform you’re trying to develop will be dead on arrival.

The skill set needed by your HR pros in the field isn’t complicated, but it requires confrontation. First, they need to be able to review the data for the groups they support and identify underperforming units using analytics.

The next step is more complex. Your line HR pros have to be confrontational with the operations side of the house, tell them where they have a problem, and then offer consulting services to help the underperforming manager or unit improve.

Big data in HR can thrive, but only if you understand and develop the consultative skills necessary for your field HR pros.  

Without these skills and a willingness to engage or confront, big data is just a fancy phrase for another report that no one is going to use.

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Rules Orientation Is Your Best Bet for Cultural Fit

"It’s better to be a pirate than join the Navy.”

That’s a loaded quote from a favorite cultural maven, Steve Jobs. Keep it in mind for the next few minutes, because I’m going to tell you the best thing you can do when hiring for cultural fit is figuring out who is a pirate — and who is a great fit for the navy.

Let me guess: You think your culture is unique.

Your employment brand is strong, with Glassdoor singing your praises and local newspapers dropping by to click photos of your workspace and write glossy profiles about how much passion your employees have.

I’m not hating on that. There’s one little problem, through. You’re allowing your managers to decide who fits your culture, right?

Your hiring managers aren’t great at interviewing for knowledge, skills and abilities. They’re even worse when it comes to deciding who fits your culture.

Rules orientation works like this: People who are 'high rules' actively look for the operations manual on the shelf when they’re dealing with issues. 'Low-rules' people, on the other hand, cringe at the thought of having to comply with an operations manual.

How do you get a better handle on helping your managers evaluate cultural fit? First, you need to define your culture, but, more importantly, you need to identify the type of person across all job titles who is successful in your culture.

It’s impossible to write an article that meets everyone’s needs from a cultural-fit perspective. But let’s assume this: Most people who promote their workplace culture as a competitive advantage tout some similar items as key to what makes them different.

Your best chance at successfully hiring for cultural fit is to figure out what type of DNA becomes a star in your company and then find a behavioral assessment tool that can help you measure it.

The problem is there are only a few behavioral characteristics that can provide a true link to the type of company you have. If I were going to choose a single behavioral characteristic to tie cultural fit to — regardless of company — it would be what I call “rules orientation.”

Rules orientation works like this: People who are “high rules” actively look for the operations manual on the shelf when they’re dealing with issues. Doesn’t matter what their annual salary is, high-rules people want to be told what to do.

That doesn’t mean they won’t do the job in question at a high level, but as you might expect, you really can’t expect a high-rules person to have a jones for innovation. They value structure and order.

Translation: They are great fits to join your “navy.”

Low-rules people, on the other hand, cringe at the thought of having to comply with an operations manual. Low-rules people love organizational chaos, and they want to figure out what to do given a specific set of circumstances.

Low-rules people will help you build the operations manual, but you better have another challenge/job for them once it’s built because they’ll refuse to have their daily activities managed to that degree.

These types of people are organizational pirates. Combine this trait with strong cognitive skills and high assertiveness, and the only thing missing is an eye-patch that matches the person’s version of business casual.

Why is rules orientation your best bet?

First, if your business revolves in any way around innovation, you’ll need a higher percentage of low-rules people than most companies. Innovation means you’re creating something out of nothing.

Asking a high-rules person to innovate on a daily basis is problematic. Remember that an individual being high rules isn’t good or bad; it’s just who they are. It’s up to you to make the right match for your company.

But wait! Before you accuse me of writing only for the software industry, let’s ponder an alternative. Many of you are HR/talent professionals in very conservative companies where risk management is a primary concern.

Even so, rules orientation is still important. From time to time, you might think you need someone with the ability to innovate or be a change agent. If that’s your goal, rules orientation is the best directional tool available.

The problem is that your company most likely can’t provide an environment where the low-rules individual can be successful. You can want it and your hiring manager can want it, but you’ll likely still fail when hiring a low-rules person.

A low-rules person joining a high red tape company would probably lead to frustrations from the level of approval that would be necessary to get things done. It will be tough for them to be successful (often in their own eyes) because of the time it takes to push a great idea through the approval change.

Does the candidate in front of you want to be a pirate or join the navy? The answer is your best chance to add a little science to how you view cultural fit when hiring today.

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Hiring a White Guy as Your Diversity Leader

If there’s anything that gets people riled up, it’s race. That’s why the recent move by Twitter to hire a white guy, Jeffrey Siminoff, as the company’s new diversity leader is so interesting — and explosive.

First up, the question of whether your diversity chief needs to hail from a protected class gets the juices flowing in a way few topics can. Most of us believe that the best candidate for any job should be selected, right?

Not so fast, my friends. It’s America — and that means you’re in a country with decades of baggage related to hiring practices, corporations that look like country clubs and distrust from all sides.

Need proof? Tell your average white male over 35 in America that Twitter should have hired a person of color as its diversity chief and wait for the fireworks.

Most white people served by HR professionals think of affirmative action when they hear the word diversity. Most organizations are full of white people and have a greater business need for diversity. Those two facts are key when determining whether a white person can lead diversity efforts at your company.

Let’s take two well-known organizations — the NFL and Facebook — and dig into their initiatives to increase diversity to understand why optics matter.

The NFL has the Rooney Rule. It mandates that any football team in the league filling a head coaching position must interview at least one minority candidate. Named after the Pittsburgh Steelers’ owner Dan Rooney, chairman of the league’s diversity committee, the rule was created in the hopes of increasing the number of minority head coaches in the league.

Your managers hear diversity and think race. And that’s exactly why your diversity leader should not be white but progressive in his or her definition of diversity.

Facebook borrowed this concept in 2015 and implemented a policy of having at least one minority candidate interview for open positions as well. Sounds like affirmative action, right? It’s not; it’s more about the realities of selection bias and forcing hiring managers to surprise themselves.

On many occasions, hiring managers have a candidate in mind that they want to plug into a job. When this happens, they’re usually so set on the decision that they think any other interviews (even internal candidates) may be a waste of time.

The tough part about that is that your company still has a process, and the hiring manager needs to put forth a little more effort. If you’re like the NFL and Facebook, you might plug in a diversity candidate and mandate an interview even if the hiring manager objects.

Your hiring manager doesn’t want to do it, and he or she is bitching about it. You’re faced with the classic Catch-22. You either force the process and risk looking like a bureaucrat, or you let hiring managers do their thing without interviewing a diverse candidate, which is undoubtedly bad for the long-term diversity of your workforce as well as your goal of hiring the best talent.

I’m a moderate Republican and, as you’ve probably noticed, white. You might think I would vote to allow the hiring manager to skip the diverse candidate interviews with that profile, right?

But I wouldn’t, and here’s why. I’ve learned that for every 10 interviews you make hiring managers do against their will, they are going to get two to three pleasant surprises. That means they’re impressed enough by the candidate in question that they’ll change their mind and offer them the job, or they’ll put the memory on reserve and as a result hire them for a future role.

Both outcomes don’t happen unless you force the hiring manager to conduct the diverse interview. And the surprise can help change attitudes and mindsets in your company.

Can a white guy lead your diversity practice? My take is you need a nonwhite person as your diversity leader, but that person has to be worldly enough to expand the definition of diversity at your company as soon as he or she walks in the door. The person can’t be what the majority expects.

You and I know that diversity transcends race. But that’s because we’re classically trained. Your managers hear diversity and think race. And that’s exactly why your diversity leader should not be white but progressive in his or her definition of diversity.

There’s no surprise in a nonwhite person being named as your diversity leader. It’s what happens next that is key. If your nonwhite diversity leader presents a broader context/business case for diversity that transcends race and backs it up with action, he or she has a greater chance for success.

White people can do a good job as diversity officers at your company. Nonwhite people can do it better — as long as they make diversity about more than race.

It’s all about surprising the narrow-minded people in your organization.

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Please Kill the Fourth Round of Interviews

If you’re like most companies that interview and hire professional-grade talent, you’ve lost control. Your interview process has morphed from the reasonable to the absurd.

Why? Because more and more companies are conducting interview processes that resemble a game of survival. Candidates are asked to return four and five times for subsequent stages of interviewing.

Is that fourth round of interviews necessary? Hell, no.

If you’ve had the feeling that your hiring process is slowerthan ever, some new research actually quantifies that your gut feeling was right. Data from CEB recently showed that the average time to fill positions in the U.S. is at 63 business days — 21 more days than it was five years ago.

Part of that number might be the improved economy, but I’ll guarantee you the majority of it is the inefficiency of the recruiting process.

We’ve tricked ourselves into believing that taking longer and involving more “stakeholder” or “hiring decision influencer” types is the path to better selection. We believe that, by having four or more interviews, we can better determine things like cultural fit.

If you don’t trust the hiring manager’s boss, you should insert yourself into that process, interviewing finalists as well.

Simply put, it’s not true. Using a longer process and more stages/interviews implies that some key selection competencies — namely interviewing skill and feedback assimilation across multiple interviewers — are healthy enough to contribute to better selection.

Unfortunately, fourth rounds of interviews aren’t used to flex incredible organizational skill at interviewing or breaking down the merits of candidates. They exist to give more people “veto” power.

Let’s say you’re like most companies and your hiring managers are mediocre at best when it comes to interviewing and selection. You don’t have the time, budget or organizational discipline to do an intervention and significantly improve interviewing skills, right?

If that’s the case, your best path is not to let a four-round interview process muddy up the already chum-infested waters; it’s to allow that hiring manager’s next-level boss to contribute to the process and grow the hiring manager over time. 

Inexperienced hiring managers interview multiple candidates. They bring back two or three candidates for final interviews with the boss, and that person breaks it down and decides whom to hire. It’s called mentoring.

If you don’t trust the hiring manager’s boss, you should insert yourself into that process, interviewing finalists as well. But you don’t need additional rounds of interviews with others in the organization that cost time.

Of course, many companies circulate those candidates for additional interviews outside the department in question to gauge “cultural fit.” The problem with that is most of the companies taking this course lose out on diversity of talent by allowing people to decline candidates who aren’t “like us.”

If cultural fit hasn’t been defined from a selection perspective, you’re just letting people veto candidates based on nontangible items. That’s going to kill you over time.

Finally, conducting three to five rounds of interviews to get to the offer stage on any candidate implies you unlock the selection horsepower of all those interviews by having a disciplined candidate breakdown process.

If you don’t demand that all interviewers spend at least 15 minutes together being led through a feedback process designed to compare and contrast views on candidate strengths and weaknesses, you’re wasting your time.

Conducting more than two rounds of interviews is killing your recruiting operation. You can make those two rounds as in-depth as you would like and get multiple people involved, but additional rounds are fool’s gold.

What’s that? You need stats? OK, nerds. CEB further outlines in its report on recruiting efficiency that for every week you shave off your time-to-fill by eliminating additional rounds of interviews, you save $2,000.

You think that fat recruiting process is free? Turns out, it’s not. The time spent in interviews combined with the opportunity cost of having a job open for longer than it needs to be has real costs for your organization.

You can unlock those savings by approaching your recruiting process with common sense.

If your company has a cumbersome process, take the offensive and tell them your time-to-fill problem isn’t about HR or recruiting; it’s about the number of interview rounds.

Stop the five-round interview madness. Do an initial round of interviews and involve as many people as you’d like. Bring back two candidates, have them work through final inbox exercises, interview with the skip-level manager, etc. … and MAKE A DECISION!

You’ll be glad you did.

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The Big Lie of Hiring for Cultural Fit

You know the drill. You did the work sourcing great candidates, selling them on the opportunity at your company with the mission, the vision — the whole deal. You took the time to set up a live interview with the hiring manager.

Then the post-interview feedback came back: They didn’t like the candidate. You did the reasonable thing and asked why, at which point you got this gem from the hiring manager:

“I just didn’t think she was a fit.”

Your first reaction is to yell. Then you recover and ask them why the candidate wasn’t a fit, at which point the glittering generalities start flying related to your company’s culture and the candidate’s perceived fit with that culture — from the hiring manager’s perspective, of course. 

To defend yourself and your team from this excuse for not hiring the right candidate, it’s important to get your arms around the concept of 'fit' and prevent hiring managers from using 'fit' as a utility tool to discard candidates with reckless abandon.

Everyone thinks fit for culture is important. But when you start talking about “fit,” too many times it’s code for the following: You have to be (young/look good/have gone to my school/have energy/seem like me) to work here.

To defend yourself and your team from this excuse for not hiring the right candidate, it’s important to get your arms around the concept of “fit” and prevent hiring managers from using “fit” as a utility tool to discard candidates with reckless abandon. 

Let’s start with “cultural fit.” Some companies try to define their culture by corporate values. Others try to describe what new employees will experience on their first day after joining the company.

It’s hard to capture the essence of your culture by the presence of a pingpong table or a barista. It’s even harder to accurately capture your culture via words that could be featured in a “Successories” poster in your hallway. 

That’s because many of the company values you’ve identified are hard to measure. A better way to measure cultural fit in your organization is to ask the following question: “What do all high performers in our company— across all positions — have in common?”

In organizational design circles, the answer to this simple question creates a common language called “potential factors,” which are similar to competencies, but are the same across all jobs in your company. They show what it really takes to be successful amid the chaos in your company; they’re the same for every job in your workplace.

Do this and do it well, and you’ll have a single set of competencies to guide your conversations on “cultural fit.”

Of course, managers are a crafty bunch. Some who are likely to decline candidates for “fit” don’t always point to your company’s culture as the reason. Sometimes they question the candidate’s willingness to do the work in question with the following gem:

“He wasn’t a fit. He’s not going to be satisfied with this job. I think he’ll be bored.”

What’s the solution to that? Most of us are believers in the behavioral interview, but if I had only five minutes with a candidate, I’d ask them the following two questions, both of which help you address fit when it comes to potential job satisfaction:

“Tell me when you have been most satisfied in your career” and “Tell me when you have been least satisfied in your career.”

Assuming you like the background and experiences of the candidate and are confident they can do the job, you really need to evaluate only if your company, the specific opportunity and the candidate are a fit for each other. These questions help you determine that.

Once you get that, you’ll have what you need. Say the candidate likes a lot of structure, but all you can provide is that circus you call a company? Move on. If the candidate likes to play pingpong for four hours a day, but your CEO walks around evaluating if people are working hard enough by how unhappy they look? Probably not going to work out.

Ask motivational fit questions this way (and train your managers to do the same), and you’ll move away from generalities related to potential candidate satisfaction.

We get it. You never want to hear “He just wasn’t a fit” again. To arrive at that happy place, you’ve got to do some organizational design work associated with cultural and motivational fit, train your managers, and then have a set candidate breakdown process designed to force hiring managers away from the generalities.

Stop holding the bag when it comes to great candidates and their “fit.” Do the work, and you’ll end up with a more diverse workforce capable of helping your company reach its potential.

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Meet the Aggregator Killer

If you’re in talent acquisition or recruiting, the past decade has been a whirlwind of change.

The traditional job posting as we know it had its dominance stripped away. Rather than ask you to pay for a job posting, aggregator site Indeed took a different path. It aggregated most every job in the world, and then capitalized on the fact that more and more candidates looked for a job via a simple Google search.

The result? You don’t pay for a job posting; you pay to have your job moved up as high as possible in the search results on Indeed.com.

Welcome to the wonderful world of your company’s jobs being aggregated — and monetized.

You probably know Indeed, but you might not know the other aggregators, and that’s where the problems start.

To be fair, other changes have rocked your world in the recruitment marketing space. LinkedIn became the Death Star of recruiting databases. Glassdoor has emerged as a leader in company reputation and rating. CareerBuilder has done a solid job of responding to all trends by creating a meaningful, balanced portfolio of services for recruiters.

But regardless of the core strengths of each of these companies, there’s one thing that ties them together: They all have an eye on aggregating as many jobs as possible. Aggregated jobs combined with search engine optimization expertise equals traffic, which ultimately equals revenue.

I define a job aggregator to be any company that scrapes your jobs with or without permission and makes them part of their service or product offering.

You probably know Indeed, but you might not know the other aggregators, and that’s where the problems start.

Want a million-dollar product idea in HR? I’ve got one for you: the Aggregator Killer. What does it do? The Aggregator Killer makes sure the jobs that you close on your career site actually drop off all the aggregators that are out there (especially the bad ones). 

The need for the Aggregator Killer is based on some basic marketplace realities that are killing your employment brand. Let’s take a run through these realities.

Reality No. 1: While Indeed is the gold standard of job aggregation, its success has spawned lots of competitors in that space, most with substandard tech and discipline. If anything defines America, it’s that a good idea based on technology can be copied and deployed quickly with a minimal commitment to customer service.

Reality No. 2: You probably didn’t even notice there was an aggregation issue until LinkedIn created its “economic graph” and basically started scraping every job known to man.

LinkedIn announced in 2014 that it would offer hundreds of thousands of jobs aggregated from the career sites and applicant tracking systems of U.S. employers that don’t prohibit it. The reality is that in addition to your career site, LinkedIn also relies on a network of aggregators below the Indeed quality line to round up as many jobs as possible.

LinkedIn by itself is high quality. But as part of its economic graph, it basically started “aggregating the aggregators.” What could go wrong?

Reality No. 3: As a result of all the bad Indeed imitators and LinkedIn scraping those imitators, it’s now really hard to ensure that after you “unpost” a job (hopefully you filled it), that job actually goes away across the Internet within a reasonable time frame.

Turns out that aggregators below the Indeed and LinkedIn quality line are really good at aggregating jobs; they’re just bad at de-aggregating them.

So you filled a job and took it off your career site. Congrats! But people keep seeing that job because of the size and scale of the aggregation industry and the fact that bad actors didn’t pull the position down. As a result, candidates are going to experience a variety of unsatisfactory things (too numerous to mention here) when they express interest in a job that’s closed (but looks open!) in your company.

You can’t blame the aggregation industry for chasing Indeed with hundreds of “me too” products.

But you can hate them for being less than systematic when it comes to getting your jobs off the grid after you close or unpost in any way.

So here’s how my Aggregator Killer is going to work. Through a rare cocktail of technology and recent, underemployed law school graduates, we’re going to guarantee your closed jobs will come off all the boards.

Cost? Just $5 a job. Sounds expensive, right?

Sure it does. Until you get embarrassed in a million different ways by not being able to take that job down. Wait until your CEO gets a nasty note that you can’t even unpost jobs that were recently filled.

Just $5 a job; and you have to sign up all your jobs. It’s a bargain, people. Unless your organization’s reputation and brand are like a lot of these aggregators: bargain basement.

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White People and Political Correctness

The first thing I want you to know is that this page has nothing to do with what you might expect to find based on the title.

It’s obvious that white people should think twice before commenting on a lot of things because it puts you in a no-win situation. Don’t get me wrong; I’m not suggesting that being white is a burden, but I am suggesting that as a white person, you might have something to add to the dialogue on race. But based on the audience, your personal delivery skills and a million other factors, it might go horribly wrong.

So most balanced white people do the smart thing. They shut up, especially at work. 

Because this is a column about work, it makes sense to talk about it here.

The white people with the most interesting things to say in any situation involving race are the ones who shut up. Think about it: The bigots generally are the ones who are the most vocal and disruptive. The white folks who generally are wrestling with it all and really trying to get to the right place on any item involving race? You won’t hear from them.

Here’s another reason smart white people are conditioned to shut up on any item involving race: There’s a whole group of politically correct white people who love to evaluate anything you say and — you guessed it — criticize you for being insensitive at best, racist at worst.

Need an example? I recently used the word “kemosabe” in a blog post. 

Now, my use of kemosabe wasn’t guided by any background in Native American history or a love for the “Lone Ranger” series. It was driven by the way I’ve heard references to the way the always goofy Matthew McConaughey talks (alright, alright, alright).

But as you might expect, I got comments on the post that basically said I was being racist by using the term. Although a definitive meaning is elusive, subsequent research on the word “kemosabe” indicated it might mean “friend” or “trusty scout” or even “one who is white.”

Sorry about calling you white. My bad.

Further research into the commenter to my blog indicated she is a self-proclaimed expert on diversity and, yes, while she has not completed a self-ID form, whiter thanpost-rehab Courtney Love at a legal hearing. She felt compelled to wag the finger at me for my use of a word she tied to the Native American culture without doing the research.

The point? The more the politically correct segment of Americans chooses to wag the finger and call reasonable people insensitive or racist rather than engage in meaningful conversation, the more the majority — white people — avoids dialogue on all these topics.

Look around your workplace and it’s everywhere. People of different races refusing to discuss current events because they’re not sure of the ground rules.  Fewer conversations among reasonable people lead to feelings that certain individuals are aloof or worse.

That lack of communication spills over into quality of work. Conversations about news and world events are just practice for the conversations that really matter — the ones that are work-related and determine whether your company succeeds or fails.

If I wasn’t willing to share my feelings with you on what’s going on in the news, why would I risk giving you feedback on your communication style witha customer?

I wouldn’t. Trust is built by discussing things outside of our comfort zones and finding commonality where we thought none existed.

Finally, if you really dig into your company’s communication style, you’ll find that your manager’s ability to drive performance is hamstrung by the same phenomenon. Is a tough conversation needed to give a direct report the chance to succeed? Most managers will pass on that. Too risky.  

We think we’re doing the right thing by forcing political correctness in corporate America. We’re actually doing theexact opposite, lowering the probability that employees and managers alike give feedback that drives performance, engagement and a general sense of team.

That’s bad for America, and it’s bad for your workplace. 

Kris Dunn, the chief human resources officer at Kinetix, is a Workforce contributing editor. To comment, email editors@workforce.com.

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The Tyranny of the Merit Matrix

Photo courtesy of Thinkstock.

When you think about the biggest lies in the world of HR, there’s one that comes to mind at the end of the year when most companies are considering the annual review and the pay increase that’s tied to the yearly performance ritual.

The lie? “We believe in pay for performance.”

Maybe “lie” is too strong a word. Everyone loves seeing a high performer get a 10 percent raise just for being a star. It doesn’t happen enough, and the reason is pretty simple. In this Darwinian world we call global business, cost pressure is everywhere.

As a result, we’ve got to budget for annual salary increases, and then live by the budget to make sure razor-thin margins stay intact.

Enter the merit matrix, which has a strange way of making no one happy. 

True stars in your company have options. They can give themselves a big raise by taking another job.

The merit matrix is a feature of mature compensation theory. It’s designed to take the budgeted number for salary increases companywide and create a grid telling your managers what raise is recommended for every employee based on performance and relative position in that worker’s salary band (often referred to as “compa-ratio”).

The morality play resulting from the merit matrix happens everywhere. We need average performers to make the business formula work. We’d rather give the star a flat raise than tell the average performers they’re getting little or nothing, which is what it takes to put pure pay for performance in place in a company with an aggressive, unyielding merit matrix. Sound familiar? Of course it does.

But if you’re sick of that process, you can break out of the merit matrix blues by understanding some consistent realities in corporate America. 

The first way to unshackle yourself is to understand that there are different rules for stars. It’s hard to get an exception made to the merit matrix at the end of the year.

That’s why smart managers don’t wait until the end of the year to take care of their stars. They take care of them long before the annual review/merit process kicks off.

True stars in your company have options. They can give themselves a big raise by taking another job. They know it. You know it. The people who run your company know it.

If your goal is to get a nice raise for the top talent on your team, the time to do it is in May, not in December or January. Simply raise retention of stars as a true risk and make a skip-level recommendation on an equity increase to lower the odds they’ll jump ship.

The funds are there via unfilled positions that take longer to fill than expected. Making this request with turnover risk as your rationale is the best way to take care of the star. Do it long before the merit matrix raises its ugly head.

That takes care of the stars, which are a limited group. To understand how to get pay for performance out of the standard merit matrix for the masses, you’ve got to stop treating everyone equally.

Start by acknowledging that former General Electric CEO Jack Welch was right about forced ranking; he just went too far.

Welch’s theory that you should identify the lowest performers on your team and treat them differently than your stars was technically correct. The concept of forced ranking goes south when you start firing average employees.

But the theory of forced ranking works well for merit increases, especially when you combine it with some analytical work regarding when employees are most likely to leave your company. Study voluntary turnover and you’ll find something interesting related to tenure. Average employees are much more likely to leave you between the one- to three-year marks of tenure.

The reasons for that are pretty simple. In the first year, employees still have that new “afterglow,” with the world (and your company) full of promise. Once employees hit the three-year mark at your company, they’re less likely to churn based on real and perceived benefits of tenure. 

The tyranny of the merit matrix is that you have limited resources and many mouths to feed. You believe in pay for performance, but you can’t get true separation via the merit budget you have. Mixing Welch’s philosophy and turnover trends are the best hope you have. Your path to a better blend of pay for performance that rewards top performers is to rapidly decelerate increases for average performers with more than three years of tenure, regardless of compa-ratio. 

There’s no such thing as a free lunch. Somebody has to pay in order for you have something approaching pay for performance for the masses.

Take care of your stars early, and be more strategic about how you distribute merit increases for the rest. It’s your only shot at pay for performance in today’s corporate world.

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The Workplace Market and Hobby Lobby

Americans love their constitutionally protected freedoms and rights. Free speech, the right to bear arms, the right to assemble, freedom of religion. We love to talk about these freedoms as Americans, and they make the United States a special place to live.

There’s just one little problem with our love of these rights: We think that they grant us protection against people who disagree with us, especially in the workplace.

They don’t.

While those with differing opinions generally can’t take away your rights provided by the Constitution, there’s another American tradition that can punish those who exercise their individual freedoms in any workplace setting: the free market. 

Constitutionally granted freedoms are on my mind because of the U.S. Supreme Court’s ruling on retail chain Hobby Lobby, where justices stated in a 5-4 decision that closely held companies (defined as five or fewer individuals holding 50 percent or more ownership in a company) don’t have to abide by Affordable Care Act provisions that mandate coverage of certain types of contraceptives.

The blowback from both the far right and far left was immediate. The far right noted it as a win for religious freedom. The far left decried it as a denial of rights granted by law (in this case the ACA) and a slippery slope.

Me? I say honor the decision and let the free market decide what happens to Hobby Lobby. The market never lies about what’s most important to the people it serves.

Let’s take a moment and explore the impact of market forceson both individuals and companies exercising their constitutionally granted rights to various forms of freedom. 

Individuals are always at risk in an at-will employment setting. While employment law shelters employees from certain forms of discrimination, there’s really nothing that prevents a company from firing you for exercising your other constitutional rights, including free speech.

Free speech that’s inflammatory in nature and makes other employees uncomfortable presents any organization with an issue it has to address. Do you leave the opinionated employee in his or her seat or move to terminate that person?

The answer is based on the free market, which in this case is your employee base that’s aware of the questionable free speech. Is the employee base so appalled by the worker’s free speech that it pressures your management team to remove the employee?

This type of pressure happens every day in the U.S. workplace. It’s the market deciding what’s appropriate and what isn’t. The market always trumps individual freedoms if the pressure is significant enough.

The free market also decides how companies will be treated for decisions they make. Consider the case of Donald Sterling of the NBA’s Los Angeles Clippers.

Sterling had a long history of questionable business practices. He then was caught on tape making inflammatory comments on race. It was free speech.

But the league took one hard look at the overwhelming negative response internally and externally and moved to pull his ownership of the team.

The market — defined as your employee base or your customer base — has a great way of telling you what’s too much. As managers, we measure the response and make appropriate decisions.

Which brings me back to Hobby Lobby. The Supreme Court granted the company the ability to make its own decisions related to what contraception is covered based on the religious beliefs of a few owners. 

The Hobby Lobby decision is all about the rights of a closely held company to make its own decisions — in this case, decisions based on religious beliefs.

What will the market say in response to Hobby Lobby? Will employee turnover increase? Will customers stop shopping there or flock to locations in record numbers? Will job candidates start asking questions about the religious beliefs of the owners?

The market will tell us. And other companies will plot their course based on what they see.

As for the slippery slope created by the Hobby Lobby decision, there’s a lot of focus regarding other decisions closely held companies could make based on the religious beliefs of the owners.  

But the market never lies. When it yawns, it’s telling you the issue in question doesn’t matter to most people. When the camera crews show up or employees start marching out your door, it provides a wake-up call.

Listen to the market; it will tell you which way to go.

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Culture, Zappos and Drinking Games

Zappos holacracy

Zappos CEO Tony Hsieh helped change the company's culture.

There's a new joke rolling around HR conferences near you. It goes something like this, “Anytime you hear someone say ‘Zappos,’ you have to drink.”

It’s HR nerd humor at its best. And all HR leaders (including me) who have been in the game for a decade or more have a little HR nerd in them.

The point of the HR drinking game is simple. Like any industry, HR tends to latch onto cool, trendy ideas and drive them into the ground. Las Vegas-based online retailer Zappos.com has done a great job in building and sustaining its workplace culture — so much so that it has become a target for cynics who enjoy a shot of Jägermeister.

The drinking game doesn’t diminish what exists at Zappos. It simply underscores how hard it is to replicate.

Creating a culture that is truly unique and real is incredibly hard. There’s no doubt that companies on lists like “Great Places to Work” have unique cultures that have been defined, sustained and drive ongoing business results.

The real question is whether the rest of the world can realistically expect to build a culture that produces similar results. If you start breaking down the list of features in companies that are reported to have great cultures, you’ll see two feature sets: benefits others don’t have and transformational people practices.

The good news is that you can buy the first feature. Simply write a check and you’ll find yourself with a slate of benefits that don’t exist in most companies. You’ll see upticks in both recruiting and retention success, even if your employees don’t actually use the slate of goodies you’ve provided. The fact the benefits are on the brochure is enough.

But how realistic is writing a check for benefits that represent a 20 percent lift in benefit spending? I’ve seen one company this year out of the hundreds I come in contact with that actually increased its benefit spending.

The second feature is even more problematic. Name the transformational people practice that’s top of mind for you — coaching models, a focus on innovation, agile employee development to name a few — and as soon as you start digging in, you’ll get a sinking feeling in your stomach.

That gut feeling is telling you that your company doesn’t have what it takes to scale transformational people practices at the organizational level. Whether it’s executive buy-in or the discipline necessary to sustain upstream people practices once launched, most companies don’t have the DNA to create and sustain a great culture at a macro-level.

Which means that most culture statements you see are vapor. They’re aspirational statements a company creates but doesn’t come close to living up to.
That doesn’t mean you can’t do anything about the culture at your company. You simply need to shift your focus from “macro” to “micro.”

Micro-cultures exist everywhere in your company. Look out on the floor of your company and focus on a manager and his or her team who claim a chunk of your real estate. That’s a micro-culture.

Managers who lead a team at your company have a micro-culture based on their style and effectiveness in how they manage people. 

It’s a fact that people will join your company based on your macro-brand, but they’ll leave you in a heartbeat if the micro-culture around their manager is toxic — or at times, even average. That reality is as true at Zappos as it is at your company.

But the flip side is also true. In toxic companies with turnover percentages approaching triple digits, great managers who develop trust with their teams through authentic leadership and transparency will not only retain talent, but also get much higher performance than can be found in the rest of the organization.

As it turns out, culture isn’t defined for most of us by what we see on the website. It’s defined by the managers who are leading small teams.
That means the best play in defining culture for most of us is to focus on getting the right people leading small teams than having a plan to enable them and make them better at what they do.

Micro-cultures are developed when your managers add their own style to the tools and training you give them. That’s where the authenticity comes from.

Want to know which managers already own your culture? On your next employee survey, ask the following question: “Other than your own manager, what manager would you want to work for at our company and why?”

You’ll learn a lot. Employees talk. They already know where the micro-cultures exist and which managers drive those incredibly positive micro-cultures.

All culture is local. And everyone drink up the next time you hear the words “Zappos and culture” together.