When Talent Can Easily Find New Opportunity, How Do You Retain Talent?

Talent moves around more and more

Talent in Companies

There used to be a long-term economic and psychological pact between employee and employer that guaranteed lifetime employment in exchange for lifelong loyalty; this pact has been replaced by a performance-based, short-term contract that’s perpetually up for renewal by both sides.

As an individual professional, you aren’t wild about pledging lifelong loyalty to a single company because, thanks to LinkedIn and other services, you can more easily locate new opportunities and you can more easily be found by recruiters and companies. The grass is always greener on the other side; now it’s easier than ever to see that grass, and chase it. Companies, as a result, don’t want to invest in training and developing you in part because you’re not likely to commit years and years of your life to working there — you will have many different jobs in your lifetime.

In the Start-Up of You, we talk about how individual professionals should manage and invest in themselves in light of this more fluid relationship with employers.

But how should companies think about the implications of these expectations? How do companies think about HR and retention? If individuals live the Start-Up of You, it means that if you have 500 employees you do not have 500 individuals ready to be subservient and loyal for life; rather, you have 500 businesses-of-one who are leasing their talent to you at this point in time.

Instead of denying the job-hopping, opportunity-seeking ways of young talent today, it seems wiser for companies to face the reality and embrace it. Help employees develop transferrable skills. Help them build the start-up of themselves. And be very explicit with new hires about the expectations: “We expect you to give us a really strong tour of duty for 2-3 years. When you leave, we expect you to be part of our corporate alumni group. We want you to be part of our corporate alumni network. We want you to help recruit new employees. We want you to be lifelong ambassadors and evangelists for our products and services. But we know you’re super talented and will come upon many other career opportunities while you work here. We know your tenure at the company may not last more than a few years.”

Essentially, try to retain employees for as long as possible, but be frank about their likely brief tour of duty, and be clear that you expect them to be active corporate alumni members for the years after they leave the company.

Talent in Countries

Elites of troubled or poor countries ask themselves: “How we keep our brightest young here? How do we get them to build companies here, be part of the local workforce, and (re)build the local economy?” In Greece, this was the question elites in the country were thinking about. I just returned from a few days in Morocco–it was a huge topic of conversation there, too.

Usually, elder elites appeal to youth’s sense of nationalism / patriotism: “You’re Cypriot. This country raised you. Stay and help grow your country.” Or, as I suggested to some Greek entrepreneurs during my trip there, governments could appeal to the business opportunities associated with societal problems–many problems means there are many potential solutions. Trash collection has become impossible in Athens due to protests; perhaps the wealthy would pay for a private trash collection service?

But if they’re honest, older government officials and businesspeople know that for the average 18, 19, 20 year-old in Cyprus or Morocco there will, on average, be more professional opportunities abroad. Government officials fear that if they acknowledge this fact publicly, talented youth will flee. The problem is, they’re going to flee anyway, or at least try to, because they see the economic dynamism abroad. They watch MTV Cribs.

So here’s a radical view: government and business elites in certain poor/developing/troubled countries should explicitly tell their most talented youth to go abroad. Indeed, help them to do this–pay for it, even. As part of this, forge with them a new social contract. Have them sign a document stating their expectation to return after 5-10 years. When they return, they can share what they’ve learned abroad and infuse their native culture with the attitudes gleaned from the cultures in which they spent their 20’s. Plus, chances are they’ll be even more patriotic upon return. Spending time abroad can remind you how Moroccan, or American, or Greek you really are. You realize how many of your habits are cultural; you feel more affinity for your native culture.

The big difference, of course, between the company example and the country example I’ve mentioned is that once an employee leaves a company, he isn’t likely to return again later, whereas for countries, the point is the emigrant will one day return. But maybe this could be made parallel as well. Bain & Co. and McKinsey famously invite ex-employees back after they’ve gained additional experiences elsewhere.

Bottom Line: Talent seeks opportunity. With opportunity increasingly visible and accessible, talent is moving around more and more. Poor countries should relinquish the idea that they can hold onto all their best young people; instead, send a high profile number of them abroad, and get them to commit to return home later. Company executives, similarly, should relinquish the idea that employees will profess long-term loyalty to their corporation. Instead, they should be explicit with employees about signing up for a tour of duty for a period of time and, from then on, remaining an active ambassador and recruiter for the company as part of the corporate alumni group.

What Finance is About

I thought Jerry Webman, the chief economist at Oppenheimer Funds, captured the essence of finance nicely and simply in his op/ed in the FT the other day:

At its core, finance is about linking people with savings to those that can put them to productive use. Performed correctly, it can fund retirement accounts, foster growth in emerging markets and support the technology companies that help protesters assemble in a flash. A well-functioning financial system is critical for economic growth. Investments that support worthwhile projects can build the human and physical capital that generates growth and raises standards of living around the world.

I've been negative on the finance industry and bankers in a couple recent tweets, quoting Nassim Taleb and Michael Lewis. It's good to go back to the basics, as Webman does, and be reminded of what finance is really about–when it functions correctly.

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Not to be negative again on banks — just when we were being positive! — but a point about those Goldman Sachs / Citibank magazine advertisements and pre-roll online video commercials that talk about how Goldman/Citi help communities flourish, how they empower small business owners, etc. They've been in heavy rotation ever since the '08 crisis. And they are stylistically just like the Exxon and Shell Oil commercials that claim that oil companies are leading the way in finding renewable energy.

Continuous, Real-Time, Semi-Structured Feedback Instead of Annual Reviews

In a question on Quora about how a start-up should handle performance reviews, John Lilly writes:

After believing in annual reviews for most of my career, I don't really believe in them anymore. Not timely enough, demoralizing in general (everyone thinks they're above average), and just a hell of a lot of work for everyone. This negative view of annual & traditional reviews is quite strongly supported by university research — it's just counter-productive, even though we all think we should do it.

My own view is that you need tools like Rypple to do continuous, real-time, semi-structured feedback that adds up, over the course of months or years, to a real picture of how the person is performing, and gives both the employee and managers a way to get better.

Hear, hear. In particular, the "continuous" and "real-time" parts. This ensures that feedback is given soon after whatever event prompted the feedback. I've been involved in feedback sessions that reference events that occured months and months earlier–those never end well.

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Other links:

Bryan Caplan offers tips on how to reduce your envy of others.

A University of Chicago project on defining and exploring the nature of wisdom.

Tyler Cowen riffs on which intellectuals have true influence. He has a very high standard for what "influence" means. The upside to such a high standard is it helps prevent word inflation. "Brilliant" is an adjective that has lost meaning due to overuse. The downside to such a high standard is that people who truly do wield influence but maybe not world-changing influence can more easily forget the responsibility that comes with it. When Tyler blogs, people listen. His influence is non-trivial. He should not taking his writing lightly…and I know he doesn't! He's influential.

Steve Silberman's sober, reflective look at what he learned from Allen Ginsburg:

One of my favorite Zen koans is, "Who was Buddha's teacher?" You don't need a spiritual parent to tell you that contentment is elusive and fleeting, that every thing and every place you treasure is in the process of being transformed into something unrecognizable, and that every love affair, killer startup idea and Facebook thread eventually ends with shrugs and a funeral.

Serving the Audience vs. Doing Your Thing (and Other Links)

Talking Funny is a four-way conversation between Jerry Seinfeld, Chris Rock, Ricky Gervais, and Louis CK on the craft of comedy. Here's Part 1 (and embedded below). One bit jumped out in Part 1: Gervais argues that you shouldn't care about the competition or the customer or the market — you should just be you, tell your jokes. Rock and Seinfeld respond that you have to be thinking about the customer and the competition. You have to be at least as good as whoever performed previously in the venue. Both sides are right, of course. It's interesting to hear them talk about how to navigate the tension.

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Other links:

  • Robin Hanson riffs on "morality porn" and the "X porn" construct more generally.
  • The always-interesting Christopher Caldwell writes against excessively gruesome warning labels on cigarette boxes, calling it "more about class than compassion" (i.e., rich people against poor people).
  • A fascinating piece in The Atlantic called The Triumph of New Age Medicine. Here's the debate about the article. I'm sympathetic to the author of the piece. If it works, it works. Some of the harder core people opposed to alternative medicine remind of me hard core atheists who attack quiet, religious folk taking comfort from their faith.
  • Bill Simmons says Will Smith does not take creative risks by doing the same sort of movie over and over and eschewing opportunities to take on new roles. Yet, Simmons does the same thing over and over. We don't expect him to pump out fiction or other sorts of non-fiction. Why do we frown upon actors who don't dabble within their broader profession, yet we think no less of writers to stick to a shtick, be it non-fiction/fiction, academic vs. narrative, etc.? One theory: we think acting is easier than it is; we think acting is acting and there is no sub-specializing.

Knowing Your Audience in the YouTube Era

A few months ago, when Senator John Kerry was in Pakistan to push for the release of CIA agent Raymond Davis, he held a Q&A with local media in Lahore. You can hear by the questions that the local journalists are not at all fluent in English. So when I watch the back and forth, I’m struck by the complexity of Kerry’s sentences and vocabulary.

Kerry doesn’t seem to be making an attempt to speak in clear, short sentences that the folks in the room would understand. Instead, he offers circular answers with words like “consternation” and “signatory”:

“Sometimes, to the consternation of many of us…”
“Your government is a signatory to that”
“We don’t want this relationship to come into a difficult situation because we’re unable to find reasonableness.”

What’s going on? Is John Kerry trying to communicate with the people asking him questions? If so, he’s not doing a very good job. He has forgotten to simplify his language to fit the audience. He doesn’t “know his audience.”

But perhaps he does know his audience — it’s just that the audience is not the local media assembled in the room. The audience consists of all the people who will be reviewing video footage of the exchange, including English-fluent decision makers in Pakistan and policy makers in U.S.

Jay Leno — and all TV stars who perform in front of a live audience and the cameras — know this concept well. The physical audience in Leno’s studio in Los Angeles is not the audience that counts. His real audience is middle America watching at home on TV, and he tailors his jokes appropriately. I know corporate executives who do as Leno does. They go give a talk in front of 50 people, videotape it, and then email it out to 1,000 clients. Their audience isn’t the 50 people who hear the speech live — it’s the 1,000 clients who watch it on YouTube.

Bottom Line: “Know your audience” is an axiom of public speaking and communication. But most advice on this front assumes your audience is whoever is in the room listening live. In an era of cameras and YouTube, your audience rarely consists only of the people listening to you live. Usually there will be (or can be) a YouTube audience as well. Communication strategy ought to account for this now-obvious but sometimes still overlooked reality.

Understanding Your Customers, Brazil and Senior Citizen Edition

Proctor & Gamble wasn't selling enough diapers in Brazil. So they took a closer look at the cultural dynamics of the market:

In America, when parents buy nappies they often demand fussy add-ons (think nappy flaps, subtle scents, biodegradable material and so on). But in Brazil, babies often sleep with their parents, and many families are poor. Thus what consumers really care about is keeping the baby (and parents) dry all night. So Procter & Gamble eventually launched a cheap, ultra water-tight nappy in Brazil, without fussy details – and sales soared. Many parents are happier now, they are getting more sleep,” one industry leader observed with a chuckle, at a recent debate at the World Economic Forum

Other cultural mistakes of western companies entering international markets:

…western multinational companies have repeatedly tried and failed to sell breakfast cereal in India; apparently this is because local families want hot breakfasts, and most western cereal cannot survive contact with hot milk. Similarly, I also heard a story about how a US car company tried to sell a cut-price version of its bestselling car to India – and removed the rear-seat electric window controls to save costs. That also flopped since the Americans had failed to notice that while the rear seat is low-status in the west (since that is where kids sit) it is high status in India (since wealthy families have chauffeurs).

Makes sense.

Understanding your customers also matters when selling to a demographic in your own country that may have unique needs. GE's industrial design team emphasizes "empathy" when its engineers try to design products for the booming Baby Boomers segment:

We hold empathy sessions to help our designers understand what the aging population goes through every day — we tape their knuckles to represent arthritic hands, put kernels of popcorn in their shoes to create imbalances, and weigh down pans to simulate putting food into ovens. We have a moving-parts kitchen that helps us build products like our wall oven, which is at a height where people don't have to stoop down or stretch awkwardly over the stove to take that turkey out of the oven.

Literally putting yourself in the shoes (and clothes and environment) of your customer. I love it.

Sometimes It’s Faster to Do It Yourself

When it comes to delegating or outsourcing small tasks, the question always is, "Would it be faster if I just did it myself?"

I was struck by this thought when I saw the following picture of Barack Obama editing his remarks on a laptop before addressing an audience at Northern Michigan University in February. Yes, even for the POTUS, despite his legions of speechwriters and aides, sometimes it's faster to sit down and just do it yourself.

Obamaspeec

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The White House flickr stream is kind of fun to flip through. Here's a photo of Obama and crew watching Mubarak's speech on television. Yep, they're watching the same thing we're watching!

Asking About a Person’s Weaknesses

Austrian entrepreneur Hermann Hauser, in an interview in yesterday's FT, was asked about his three worst features. His answer: "I am impatient, I don't suffer fools gladly, and I am too demanding."

I've seen impatience cited as a weakness in several interviews with big-ego execs. What a cop-out. Though it's not as bad as when someone's self-critical moment comes via a line like, "I work too hard on the weekends."

When attemping to rely on a person's self-knowledge — a treacherous affair — stick to asking about the person's top strengths.

If, however, you're keen on asking a question that prompts a darker reflection, don't ask explicitly about weaknesses. Ask instead, "What keeps you up at 2 AM?"

You won't get an honest answer there, either, but, in my experience, you get a bit closer.

Hiring and Business

This week Steve Newcomb and Ben Horowitz both wrote dynamite posts on hiring and business.

In Steve's post, he sets up the topic this way:

What happens when founders try to sleep at night is this: their mind spins uncontrollably between scenarios that result in a glorious success and scenarios that result in a burning death crash.  Most founders I know ride a fine line between seeming to be in total control and going nut balls.  

All I can say is welcome to the club – you're normal!  

Whenever people ask me how I make it through, I always say the same thing.  Sit down and write down the shit storms that you are worrying about and divide them into two list.  Those that are under your control and those that aren’t.  Then focus on the list that you can control.  If you stare at that list long enough you’ll realize a commonality.  That the solution to every single one of them begins with having a team that is rock solid, one that isn't afraid of challenges and one that believes in you as a founder.  If you do this one thing right, it will steady you and calm your mind enough to face and conquer any challenge.

Focus on things you can control is a lesson one can never hear too many times. Steve says the answer to all of a founder's worries is to have a rock solid team behind you. Very generalizable. In the post he goes on to offer a rich list of tips for how to recruit and retain a killer team. Read the whole thing.

Ben Horowitz's post is intriguingly titled: If You've Never Done the Job, How Do You Hire Somebody Good? CEOs often hire people to do jobs they've never done and never could do. You're hiring domain experts. But if you're not a domain expert yourself, how to evaluate the candidate? That's the set-up for an excellent analysis on hiring.

One of his early points is that you should figure out what strengths you need from a candidate and focus on that:

The more experience you have, the more you realize that there is something seriously wrong with every employee in your company (including you). Literally, nobody is perfect. As a result, it is imperative that you hire for strength rather than lack of weakness. Everybody has weaknesses; they are just easier to find in some people. Hiring for lack of weakness just means that you’ll optimize for pleasantness. Rather, you must figure out the strengths you require and find someone who is world class in those areas despite their weaknesses in other, less important domains.

Then he suggests coming up with a list of questions for different types of candidates that cut at the heart of that specific domain (sales force, operational management, etc).

He notes the usefulness of front door references:

For the final candidates, it’s critically important that the CEO conduct the reference checks herself. The references need to be checked against the same hiring criteria that you tested for during the interview process. Backdoor reference checks (checks from people who know the candidate, but were not referred by the candidate) can be an extremely useful way to get an unbiased view. However, do not discount the front door references. While they clearly have committed to giving a positive reference (or they wouldn’t be on the list), you are not looking for positive or negative with them. You are looking for fit with your criteria. Often, the front door references will know the candidate best and will be quite helpful in this respect.

Against Occupational Licensing

Matthew Yglesias discusses the follies of occupational licensing, citing the case of whether barbers ought to have licenses to set up shop:

If you just assume optimal implementation of regulation, then regulation always looks good. But as I noted in the initial post the way this works in practice is the boards are dominated by incumbent practitioners looking to limit supply. One result is that in Michigan (and perhaps elsewhere) it’s hard for ex-convicts to get barber licenses which harms the public interest not only by raising the cost of haircuts, but by preventing people from making a legitimate living. States generally don’t grant reciprocity to other states’ licensing boards, which limits supply even though no rational person worries about state-to-state variance in barber licensing when they move to a New Place. In New Jersey, you need to take the straight razor shaving test to cut women’s hair because they’re thinking up arbitrary ways to incrementally raise the barrier to entry.

In principle, you could deal with all these problems piecemeal. But realistically this sort of problem is inevitably going to arise when you pit the concentrated interest of incumbent haircutters against the diffuse interest of consumers. It’s hard enough to make sure that really important regulatory functions related to environmental protection, public safety, and financial stability are done properly.

In the comments section of Marginal Revolution, there's a link to Dan Klein's PowerPoint on occupational licensing. I spent five minutes flipping through the slides and learned a lot about the issue and about how economists think about topics such as this. Highly recommended. I learned, for example:

  • Occupational licensing affects 29% of U.S. workers
  • There are three levels of control: registration (an official list of providers), certification (if you want to use the official title you have to be certified), and licensing (you cannot do business unless you have a license).
  • Popular rationale for licensing includes helping consumers find trustworthy providers because consumer cannot judge quality and safety before and (sometimes) after the fact.
  • Official stance on licensing: protects consumers. Skeptical stance: protects incumbents from competition.
  • Voluntary supply of assurance: certifications, word of mouth, brand names, warranties, etc.
  • Studies consistently support the skeptical stance on OL. Reduces supply, increases prices; no quality difference net net, sometimes even a worse quality among licensed practitioners; depresses wages.
  • Licensing boards made up mostly of existing practitioners in the industry and they spend most of their time prosecution unlicensed practitioners, regardless of quality. In-group ethic is strong.
  • Another example of the persistence of a bad status quo thanks to concentrated benefits, diffused costs.

BTW it's interesting to see Yglesias's liberal readership bash him in the comments section, even though his sensible less regulation idea ahelps (via lower prices) poor people who consume the services and helps the (generally speaking) poorer people who want to start businesses like barber shops. One commenter, after the onslaught of negativity toward Yglesias, writes: "The left once again reveals itself as not pro working class, or pro woman, or pro black, or pro muslim, or pro oppressed group of the day, but merely the voice of the state." A later commenter says the right doesn't even pretend to care about the oppressed. Both sentiments contain a truth. I think a better way to split the political left and right is comparing the Tragic and Utopian View of the World.

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Here's my older post on the Case Against Credentialism, which covers similar themes.