Part Four: Designing Organizations Around the Critical Path
Organizations have many “levers” to promote the critical path. These include the big five:
The right staff;
Performance evaluation system;
Reward system;
Organizational culture; and
Organizational structure
Too many companies do not use their levers to promote the critical path. Instead, these levers push people in directions that undermine it. For example, many performance evaluation systems rate behaviors that are not related to the critical path. This wastes a lever and causes employees to wonder if management knows what it is doing. Likewise, reward systems not tied to the critical path push people away from it by incentivizing behaviors that do nothing to connect the company to its customers. For example, many school systems and government agencies give employees raises if they take continuing education courses or get educational certificates even if those activities do not improve actual job performance. Some companies award bonuses to top executives even though the company’s market share, profits, and stock price have declined. Those companies should not be surprised when they do not get the performance they desire.
In this section of the book, we will look at how to use these levers to build a business with the critical path at its very center. We begin with hiring that has the critical path in mind and designing performance evaluations that measure things that matter. This includes a proper definition of value and how to appropriately link employee incentives to the critical path.
Companies need to design each lever so that its primary function is to support the critical path. This involves an external focus viewpoint on their customers, and an internal focus on management and employees. Consider how these levers individually can make the critical path better, faster, shorter, smarter, more effective, and more profitable for the customer, the company, and the employees. Then consider how you can put the levers together to create a reinforcing lattice where they all work together to promote and reinforce the critical path.
Lesson 28: Hiring for the Critical Path
The first organizational lever is hiring the right people. This is where it all starts. No business survives without good workers committed to the critical path. But finding, selecting, and retaining good workers is hard—and very few people, if any, are good at this task.
It’s amazing how many people believe that they are good at predicting who will be a good worker. We have asked thousands of people if they believe they can select a worker who will be successful on the job. Well over half of these believe that they have that skill, which, of course, is statistically improbable.
Most people believe that after a 30-minute interview, they can size up the person sitting in front of them and predict whether she or he will be successful on the job. Most people are wrong.
The research on selection does not support these people's self-image. Industrial-organizational psychologists who specialize in selection appraisals find that well-crafted, research-based selection procedures only yield a predictive validity score between .20 and .25. In lay terms, you will get 1 out of every 4 or 5 hiring decisions right. This is better than 0, but not that great.
What is most interesting is that the most commonly used selection technique, i.e., unstructured interviews where two strangers try to get to know each other and size each other up, has a predictability score close to zero. In other words, most of the job interviews companies are conducting are a waste of everyone’s time. The only thing that they predict is that people will favor hiring strangers who like to talk about the same things they like to talk about. Rather than interview the candidates, you would do just as well to put all their names in a hat and hire the people whose names you draw.
The field of industrial-organizational psychology has spent decades trying to improve selection procedures. They have come up with ways to move the needle toward greater reliability and validity, but these methods involve days of assessments, multiple trained assessors using multiple methods, and are very expensive. The time and cost may be worth it for very high-level jobs in very large companies or where the downside risk of a poor hire is very high. But for most jobs the costs outweigh the benefits. Plus, many job candidates are unwilling to spend that kind of time nor submit themselves to what some see as invasive assessments.
So, what to do?
Let’s start with what not to do.
Tom Hodgkinson in his book, Business for Bohemians, relates some of his mistakes. Hodgkinson founded the Idler magazine in London. It offered an alternative view to the busy-busy rat race of contemporary life. In his worldview, everyone was just too intense. A workout at the gym, whose purpose was to help you relax, became another competition against yourself or others. His magazine argued for slowing down to take in the world and your own existence.
To everyone’s surprise, the magazine became popular, leading Hodgkinson to open a bookstore and cafe where he began hosting events. However, he soon found himself increasingly in the same rat-race that his magazine argued against with a business that needed employees. As he tells it, he went from being a counter-culture writer to a bewildered boss trying to hire, handle, and meet payroll for unreliable employees.
In the chapter “How to Choose Who You Work With,” he highlights his people problems. “Employing people is tricky,” he writes. “I hired anyone who happened to be hanging around at the time and was fairly nice.” He often hired friends or his friends’ children. Most had little interest in the business and no appreciation for all the hard work that Hodgkinson and his spouse put in to meet payroll.
Instead, he found that his workers wanted to put in the minimum amount of work for the most pay. Most felt underpaid, consequently drinking the wine meant for events while hanging out in the storeroom, rather than serving customers. He learned too late the sound advice of management expert Charles Handy: that when you go into business with a friend, you risk losing the business or the friend.
After several false starts and many hiring mistakes, he began to realize “why there are thousands of books about management out there: it is a very difficult thing to do.” He learned that he needed to surround himself with professionals who knew how to do their jobs. Let them do their work, which freed him to add value as the CEO. He eventually learned the essential truth offered by British publisher, Felix Dennis: “Find the talent. Hire the talent. Pay the talent.”
Let’s start with finding the talent.
As industrial-organizational psychologists will tell you, the best predictor of future performance is past performance. So start there. Look at the candidate’s past performance in light of the critical path.
Look for answers to four questions:
Does this person have a proven track record of critical path outcomes?
Does this person have a critical path mind-set?
Does this person energize, elevate, and support critical path performance in others?
What is their critical path potential?
Let’s explore these 4 questions in greater detail.
1) Does this person have a proven track record of critical path outcomes?
What is their critical path record?
Were they on the critical path?
Did they know they were on or off the critical path?
How do they describe the critical path and their role on it?
How do they describe their past record?
When they describe their qualifications, what do they emphasize?
When they discuss their achievements, what do they emphasize?
Do they reference the critical path when discussing their achievements and qualifications?
Can they draw a causal connection between what they did to the critical path and the bottom line?
Do they differentiate inputs, throughputs, outputs, and outcomes? (These will be explored in more detail in Lesson 28.)
2) Does this person have a critical path mind-set?
Do they understand what the critical path is?
Can they explain the critical path and value chain of a previous employer? How about for your company?
Do they understand how important the critical path is to the company’s success?
Are they focused on making the critical path shorter, faster, smarter, better, more effective, and more profitable?
Can they explain what drives the costs, revenues, and profits of their current employer? How about for your company?
Do they focus on customers?
Are they obsessed with the satisfaction, retention, increasing market share, and profitability of the paying customer?
Do they understand how their work impacts the paying customer?
Do they differentiate between internal and external customers?
Do they see how the work of internal customers must benefit the external paying customer?
Do they focus on competition?
Do they know who their competition is for their current employer and for your business?
Do they know the strengths and weaknesses of each major competitor?
Can they identify new and/or disruptive competitors?
3) Does this person energize, elevate, and support critical path performance in others?
What are their people skills?
Do they create positive energy in the workplace and, like Draymond Green of the Golden State Warriors (See Lesson 30), elevate the performance of their co-workers?
Do they encourage co-workers to stay focused on the critical path?
Do they help co-workers succeed on the critical path?
Do co-workers help them succeed on the critical path?
Do they have positive relations and impact on other parts of the critical path?
Are they part of the glue that holds the company and its critical path together?
Do co-workers like to work with them?
What are their management skills?
Do they develop others to become star performers who produce important critical path outcomes?
Do they inspire others to get on and contribute to the critical path?
Are they a critical path role model?
Do their teams outperform and outproduce other teams on the critical path?
4) What is their critical path potential?
Do they have skills that could have a major impact on the critical path—today and/or tomorrow?
Do they fill a critical path need that we have identified or that they have identified (and which we missed)?
Perhaps their previous job did not give them access to the critical path. If they were allowed on the critical path, would they make important contributions?
Do they want to be on the critical path? Is this important to them and does it energize them?
Of course, you should vet any answers you receive with people who have actually worked with the candidate. Don’t rely just on supervisors. If possible, get candid assessments from co-workers and subordinates. If the person had contact with customers or suppliers, seek their views of her critical path performance. Likewise, if she served on volunteer boards or community task forces, inquire of the people who served with her. Try to get a 360-degree view that gives you a more full-rounded picture of the candidate’s past performance and future potential.
As you consider hiring people, you should think in terms of the critical path. What positions do you need to make the critical path successful? How do you create a team of critical path professionals who both make their piece successful and work together to make the whole critical path successful? This team becomes the backbone of any successful organization.
Patty McCord, the former Chief Talent Officer at Netflix, recommends a forward-looking hiring strategy for the critical path:
Write down what the team will be accomplishing six months from now that is important to the critical path that it's not accomplishing now. This could be starting development of a new product, getting in touch with customer needs, or eliminating product-shipping delays.
Think about what things are being done differently from the way they are currently done. Imagine yourself coming into the office six months from now. What has changed? Is the operation running smoother? Is the new product better than the old one? Has the shipping process been re-designed? Are there fewer meetings, but more teamwork?
In order for these changes to happen, what would people need to know how to do? It could be technical skills, collaboration skills, or agile teamwork skills.
Does your current team have the right skills, knowledge, and experience to make your change vision happen? If not, can they learn them quickly enough to respond to your critical path needs?
If your team is not equipped to make it happen, you probably need to bring in people who can. Would the new people be additions to the team or replacements for some of your current team members who cannot keep up with your critical path needs?
As McCord said, the company’s mission should be "hiring the best people to solve the problems that you need to solve in your particular company—and then making sure that those teams are always comprised of those kinds of people." But, as she notes, "It's not always the same people."
Also keep in mind that you should allow the people who will work with the candidate on a regular basis to also be part of the assessment process. Just make sure that they understand it is not a popularity contest. You are hiring for individual and team critical path performance—both today’s and tomorrow’s.
Will this approach to hiring mean that you will not make mistakes? No. Will it do better than the traditional hiring techniques? Absolutely yes. Will it do better than the .20 to .25 of the better hiring techniques? We’d bet on it.
If you consistently hire based on the critical path, you also send a message that that is what you are about. It is the first step in creating a high-performance culture.
Critical Path Action Items
What is your critical path success record?
What is the critical path success record of your department?
Does your team have the right “talent”, i.e. people who can make significant critical path contributions?