In sports, we would quickly question Kraft’s sanity. Yet, in the corporate world, we call this talent management.

Google indirectly addressed this issue after trying to figure out how to keep its high performers after the IPO in 2004. They stumbled upon research from Ernest O’Boyle and Herman Aguinis showing that across a wide range of fields, human performance followed the power law: high performers are not only one or two standard deviations above the average — they have dramatically higher levels of impact than average performers. This led to changes in the way google rewarded its people.

As google’s former Chief People Officer Laszlo Bock wrote in his book Work Rules! “we have many cases where people at more “junior” levels make far more than average performers at more “senior” levels. It’s a natural result of having a greater impact, and a compensation system that recognizes that impact.”

Google tells their MVPs to stay on the field.

Do people even want to climb the ladder?

Despite the clear signals from organizations that success and climbing the ladder go hand in hand, most people are unconvinced. McKinsey’s Women in the Workplace 2016 laid out this lack of desire for both women AND men.

They found that only 40% of women and 56% of men had the ambition to become a top executive in a company. If we are basing our metrics of success on obtaining powerful positions, why don’t more people actually want that power?

It could be because the climb is exhausting. As companies have become more complex, the range of functional expertise and skills has expanded. What this means for selecting today’s leaders is that they need to meet an almost impossible set of requirements.

At the CEO level, the demands are even more extreme, with them having to be highly skilled in investor relations, operations, strategy, community relations, politics and on top of that, being cheerleader in chief for the organization.

We are requiring today’s leaders to be the best player on the team, the coach, general manager and CEO. Instead of attracting people that want to lead and inspire, we end up attracting those the types of people who are motivated by money, power and status – many of which happen to be narcissists and psychopaths.

Creating paths for coaches

Bill Belichick is seen as an incredible leader. However, in sports, that is exactly what you are looking for in a coach. In organizations, there is no coach. You have to throw 50 touchdowns before you even have the chance of leading others.

If we want more diversity, more vibrant organizations and more fulfilling work, we need to change our assumptions that being ranked higher in a company should be the goal for everyone. Authority does not equal performance and being promoted is not always the best way to unlock creativity and innovation.

We need more organizations that want to let their star quarterbacks stay on the field and create paths for the people that are driven to lead and inspire those stars.

The post The Tom Brady Principle: Don’t Promote Your Best People appeared first on Boundless by Paul Millerd.

The is-ought “problem” was identified by David Hume. Also known as Hume’s Law or Hume’s Guillotine (I prefer this)— he noticed it was the logical error people would make connecting what “is” with what “ought” to be.

This conclusion starts with his belief that all knowledge is the result of two things:

1. Logic and definitions
2. Observation

Thus, if you start with an observation and then come up with a statement that it “ought” to be true — this is a mistake. For example, if we step back twenty years:

Gay marriage is illegal, therefore — this is the way things are meant to be

In the workplace this is closely related to the “not invented here” mindset. As someone that is always trying to question and understand a better way of doing things, I found myself incredibly frustrated when others did not always agree. However, as I learned more about the psychology around the resistance to change and phenomena like the “ought-is” fallacy I understood why progress was so hard in the workplace.

Before the creation of the internet, the ought-is fallacy was a logical way to behave in the workplace. It was hard to figure out what other firms were doing or if there was a better process. You often had to hire a consulting firm that would help you identify what other companies were doing.

As the internet has emerged, this has changed. Google is one company famous for continually experimenting and trying new ways of innovation on its people operations. It even published the information for all the world to see: Re:Work With Google.

At Basecamp, DHH and Jason Fried are constantly challenging the status quo of the working world. Here is DHH on questioning the conventional wisdom that since most startups is never-ending work that it OUGHT to be the case:

One of the most pervasive myths of startup life is that it has to be all consuming. That unless you can give your business all your thoughts and hours, you don’t deserve success. You are unworthy of the startup call.

There are many more examples. The point is that relying on ought-is thinking as a way to make sense of what is happening in your workplace is no longer ignorance, but pure ineptitude. The information is out there — and if not, we should be running experiments and making changes to figure out what the answers are. We need to start with “why” instead of accepting what was created long long ago.

41k+ Sold! (Top 1% Book) The Pathless Path is Paul's book about walking away from a "perfect" job with a promising future and starting over again. Through painstaking experiments, living in different countries, and a deep dive into the history of our work beliefs, Paul pieces together a set of ideas and principles that guide him from unfulfilled and burned out to what he calls "the pathless path" - a new story for thinking about work in our lives. Learn More & Buy The Book Here

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Yesterday I read about Naval Ravikant’s approach to hiring the right people — it has nothing to do with hiring and selecting the right people. It is about one thing — making sure you fire the wrong people fast.

Two great reads — Malcolm Gladwell’s The Talent Myth and a book, The Halo Effect — made me aware of how little we actually know about “talent.” For the most part, we look at people’s past work experience and the companies they have worked for. If they have worked for highly respected companies and have shown signs of continuous promotion, they are labeled “talented.”

It is incredibly hard to assess for most people in the knowledge economy. Is it the context people are in and the systems they are part of or are they actually talented on their own? We may never know the answer to this question.

Back to Naval —I like how he has some simple systems that help address some of the shortcomings in this talent problem. Here are some of his thoughts on getting the right people:

• Create a pipeline — Asking people the best people they know
• The mission: You need a clear mission to excite people
• Bringing them in: Having a talented in-house recruiter
• Quick decisions: Move fast with hiring AND firing
• Level Playing Field: Bring everyone in at the same level and have a true meriotocracy. Most companies use age as a heuristic for “experience” — he thinks this is a big mistake.

I love the simplicity of this. Most companies I have been part of spend months recruiting a single person. This is under the belief that the more time you spend the better at decision making you become. The best companies I have worked for — McKinsey & Company — did the thing Naval talks about really well: they fired the wrong people quickly, but did it in a compassionate way.

41k+ Sold! (Top 1% Book) The Pathless Path is Paul's book about walking away from a "perfect" job with a promising future and starting over again. Through painstaking experiments, living in different countries, and a deep dive into the history of our work beliefs, Paul pieces together a set of ideas and principles that guide him from unfulfilled and burned out to what he calls "the pathless path" - a new story for thinking about work in our lives. Learn More & Buy The Book Here

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The post How to hire the best appeared first on Boundless by Paul Millerd.

What were these companies going to do instead? Are they addressing a symptom or the root cause?

The elimination of performance review is a reaction to the “measure it and control it” attitude that has proliferated in the past twenty years.

Many organizations understand that we need a new way — but by eliminating the performance review companies are plunging themselves into a period of uncertainty and chaos.

Complexity & Control

Over the last twenty years, the business world has seen an unprecedented increase in information and a simultaneous increase in complexity and confusion. In reaction, many well trained MBA’s and other business types (count me as one!) have taught ourselves many different methods for planning, controlling and optimizing. This has driven an unprecedented rise in complexity.

BCG has done research to show how dramatic this shift has been:

The performance review has similarly become more and more complicated over the years. How many categories were you assessed on last year? I would bet most of you can not name the exhaustive list of criteria you were evaluated on. Nor could your manager — that’s why your performance still comes down to a few simple things:

• do people like working with you?
• does the person evaluating you have a favorable impression of your work?
• do you have a strong reputation for what you are expected to do?

Almost everything in the business world has been reduced to a performance metric than can be measured and controlled. Yet, assessing talent remains largely an elusive mystery. Even identifying performance of a CEO is close to impossible. Only 21% — at most — of a companies performance can be directly linked to a CEO. Even then, some researchers believe it is luck still — because a CEO’s job is predicting the future and deciding whether to pursue strategy A or B. If assessing even the performance of the CEO is hard — how can a company truly assess performance at all levels?

Some of you may stop me here and say “my company is the exception — we have the best people!” You may be right — but this is almost impossible to test. There is no alternative scenario to test your organization with different people. This leads to a well-documented phenomenon called the halo effect — which in the business world — ascribes positive traits to people who happen to be in successful organizations.

Ditching the Performance Review

By re-thinking the performance review, companies are rebelling against the analyzing, controlling and measuring tendencies of the last twenty years — and a long-term trend since Taylor. These companies have taken the bold step to acknowledge that the business world has changed and they had to adapt. Whether they know it or not, these companies have taken the plunge into figuring out what the future looks like.

These companies may not fully know what that end state looks like, but I believe it will be harder than they realize. Take GE’s CHRO Susan Peters who said: “The world isn’t really on an annual cycle any more for anything.”[2] This seems to indicate that the reason for removing the performance review has more to do with the increased pace and exchange of information than trying to move towards a healthier and more successful reality. GE’s solution is to implement an app-based model where you can constantly get feedback from your co-workers. As Pascal-Emmanuel Gobry, a writer and fellow at the Ethics & Public Policy remarks, “Constant feedback also means constant pressure.” [3] How companies manage the unintended consequences of these decisions remains to be seen.

Google’s former Chief People Office Laszlo Bock offers a different perspective:

Performance management as practiced by most organizations has become a rule-based, bureaucratic process, existing as an end in itself rather than actually shaping performance. Employees hate it. Managers hate it. Even HR departments hate it. [2]

Eliminating the performance review may be a leading indicator of the exhaustion from more rules, more analysis, more spreadsheets, more data and the illusion of control. However, the move to eliminate the performance review is a net positive for the business world and not for the reason you expect.

I don’t believe companies will figure out a magic formula for assessing talent in a better way (at least not in the near term future). However, the real benefit for these companies is the fact that they are accepting that the working world has changed and they need to figure out how to operate in that new world.

What Could the Future Look Like?

As complexity continues to increase, controlling and measuring will no longer suffice. The companies that succeed will be the ones that master the core principle that will be the driver for 21st-century governance:

TRUST.

Warren Buffet is one of the few Fortune 500 CEO’s that have fully embraced this. Compared to most companies, some would say his system is radical. His right-hand man Charlie Munger puts it best:

A lot of people think if you just had more process and more compliance — checks and double- checks and so forth — you could create a better result in the world. Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it on us. We just try to operate in a seamless web of deserved trust and be careful whom we trust

Consider the following:

• Over 50+ CEO’s report to Buffett and they only have to submit monthly financial statements and the free cash flow generated by operations
• The CEO’s of individual businesses do NOT have to meet with anyone from HQ, ever. They don’t need to submit strategic plans.
• The global HQ does not have HR, a general counsel, PR, Investor Relations or corporate strategy

He prides himself on his bare bones operations. Here is his modest corporate staff in 2016:

Change is Hard.

Unfortunately, you cannot appoint Warren Buffett and Charlie Munger to be co-CEOs of your organization. Nor can you manufacture trust and magically transform your culture by eliminating performance reviews. Building a strong culture around a set of values that reinforces behavior is hard work — and may even be harder if people have become accustomed to yearly cycles and clear expectations of how they are assessed.

The language many companies are using around eliminating performance reviews signals that leaders are still re-imagining a future state based on the current system. Most of today’s business leaders were promoted through this system — one that was built on structures, processes, and hierarchies — and are assuming that changing a few of the policies will position the company for long-term success. They are likely not anticipating the state of increased uncertainty and confusion

CEB has done some analysis on the companies that have eliminated rating and found less than positive results:

• Less than 5% of managers are able to effectively manage employees without ratings
• Managers have more time, but time spent on informal conversations decreases by 10 hours
• Employee engagement drops by 6%

This has not stopped companies. Eliminating the performance review has shifted from a bold move to conventional mainstream practice. The increasing popularity of eliminating performance reviews with the proliferation of low-cost HR technology ensure that this trend will not slow. Not to mention the ability to placate an increasingly restless millennial workforce.

What does the future look like?

Companies are being forced to give up more control to employees, whether they want to or not. The performance review is the start of a broader trend. To cope with increased complexity, companies that succeed will need to be self-governing, focused on trust, values, and behavior.

The inevitable failure of the elimination of performance reviews will force companies to re-think the types of people they hire, re-define how they approach culture and even re-think the way people are organized and deployed to solve problems across their organizations. These are big questions that some organizations are likely dealing with, but have not fully tackled.

I expect three kinds of companies to emerge over the next several years:

Many companies shifting to “Company 2.0” are eliminating performance reviews but they are layering new systems and behaviors on a foundation that prioritizes policies, processes, and controls.

The companies that react quickly and continue to make bold moves — beyond eliminating the performance review — will create the future. The journey will be hard — but it will be one that ultimately determines which companies survive in today’s economy.

As Warren Buffett says about his business strategy, “find good people and trust them.” Trust is going to be the competitive advantage of the 21st century and if leaders are not willing to find good people and trust them, they will struggle to build a scalable, sustainable modern organization. Getting rid of the performance review is a necessary first step, but companies have a long way to go.

[1] “In a big move, Accenture will get rid of annual performance reviews and rankings” Washington Post, 21 July 2015

[2] “Why The Annual Performance Review Is Going Extinct” Fast Company, 20 October 2015

[3] “Why eliminating annual performance reviews will make your job worse” The Week, 20 August 2015

41k+ Sold! (Top 1% Book) The Pathless Path is Paul's book about walking away from a "perfect" job with a promising future and starting over again. Through painstaking experiments, living in different countries, and a deep dive into the history of our work beliefs, Paul pieces together a set of ideas and principles that guide him from unfulfilled and burned out to what he calls "the pathless path" - a new story for thinking about work in our lives. Learn More & Buy The Book Here

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The post RIP: Is The Performance Review Dead? appeared first on Boundless by Paul Millerd.