Saturday, November 28, 2015

On 360 degree feedback

This is a companion post to the one on performance management here. This one focuses on 360 degree feedback.

360 degree feedback is a popular system to measure performance, behaviors, and competencies. The idea is to get feedback to a person from all stakeholders. Used by the German army during World War II. Makes sense due to matrix structures in companies today, involving multiple locations, business units, teams etc. Sources of feedback for each question/skill/behavior/competency:
  • Self
  • Manager
  • Peers
  • Subordinates
  • Customers 
  • Suppliers 
Why is 360 more useful than just your manager's feedback?
  • Provides diverse perspectives from the lens of different stakeholders (for example, your manager might not know how you fare with your subordinates).
  • Provides greater number of feedback data points. 
  • Provides an avenue for feedback that is typically not given (for subordinates for example, make sure it's confidential)
  • Identifies hidden strengths and development opportunities.
A good way to understand 360 feedback is to have a grid; 45% of feedback is typically unexpected (Antonini 1996, Ward 2003), and therein lies the value. 
StrengthsDevelopment
ExpectedStrenghts (25%)Development areas (20-30%)
UnexpectedHidden strengths (30%) Blind spots (15-20%)

How is 360 feedback used?
  • Formal evaluation system
    • Do not make this the sole source of feedback
    • Self-ratings are inflated
    • Peer-ratings are inflated in absolute rating, and deflated for forced distribution
  • Developmental system (companies use this 3x more than first)
    • Raters/ratees typically prefer this
What are challenges with 360 feedback?
  • Inexperienced raters
  • No accountability for ratings 
  • No consistency in ratings 
  • Misunderstanding of rating scales
  • Key stakeholders not included 
  • Low participation rates 
What are good practices for 360 degree feedback?

  • Alignment: Make sure skills/behaviors/competencies are aligned with the company's.
  • Continuity: Collect feedback continuously (say after each project), not once a year 
  • Validation: Make sure to not conflate evaluation and observation (Don't give 1/10, because you have no datapoints on the person).
  • Reliability: Need 9 subordinates, 8 peers, 4 managers to get a good set for a 5-point scale. 
    • Use olympic judging: throw out highest and lowest scores
    • Use intra-class correlation coefficient: > 0.48
Positive effects of 360 degree feedback:
  • Helps make us and peers better
    • Come up with a development plan, and follow through on it
      • 72% thought managers do not follow up on their development plan
  • Managers become more receptive to upward feedback, without feeling undermined

On performance management

In the last post, we outlined how to attract, select, and onboard talent. In this post, we will examine aspects of performance management.

Why do we need performance management (when it's actually expensive to implement)?
  • Dunning-Kreuger effect: Novices are more confident than they should be, while experts are less confident than they ought to be. People have inflated perception of themselves. Performance evaluation brings this to light. 
  • Helps identify who deserves to be promoted, given bonuses, needs development etc. 
How does performance management help?
  • Increases motivation and engagement (there is a sense of equity)
  • Results in learning and development
  • Insight into current talent's skills and competencies
  • Better clarity on the state of company's goals
  • Can be used to identify discrepancies between strategy and talent (happens often enough with disruptive companies: Blockbuster vs Netflix, Borders vs Amazon)
  • Bad performance management can result in outcomes contrary to above, as well as risk of litigation. 
What are good practices for measuring performance?
  • Identify several dimensions of performance (based on goals and behaviors)
  • Assign scores to each (5-point scale is good: most of the variability of 7-point is captured, while a 3-point scale causes people to feel that it's harder to progress)
  • Get a weighted score of the dimensions, to obtain a single overall number
  • Do this often, and not just once a year.
What is the scale used for rating? Two fundamental approaches: 
  • Absolute rating scale: all employees are compared to a standard
  • Comparative rating scale: employees are compared to each other 
    • Stack rank
      • Order by the single overall number listed above
      • Pair-wise comparisons is one way to stack rank: order by number of wins
    • Forced distribution approach (10% low, 70% middle, 20% high)
      • Jack Welch thought this was kind :) For employees in the low bracket:
        • Gives them opportunity to improve
        • Gives them a head start for job search
  • So, which is better?
    • 8% better performance with comparative ratings (research here)
      • We work harder when comparisons are done
        • Partly because incentives are clear cut between different levels
      • Top performers better rewarded, and more motivated 
    • Companies do not fare well switching from absolute to forced distribution
      • Initial performance improvement, then drops precipitously 
      • People get demotivated after the initial rounds of appraisal
    • Forced distribution could result in:
      • Lack of collaboration (drag others down to get ahead). Seen as a zero-sum game, and highly political process. 
      • Unethical practices like cheating, cooking numbers, sabotage etc. 
      • Abets extreme risks, especially if rewards are skewed to top 
      • Perception of inequity (especially when the curve causes you to push down people), and accompanied low morale
  • Another popular system is the 360 degree feedback; you can see a detailed post here
What are some rater errors in performance management? 
  • Availability error: We overemphasize very available information (typically tends to be recent, or highly marketed). 
    • Make sure you track performance over the entire year 
    • More frequent feedback helps
  • Leniency error: Tendency to inflate errors (especially with absolute rating scale). 
    • We want to be liked; reluctant to deliver bad news, avoid escalation
    • Central tendency: avoid extremes (no bad news for low performers, no promises for high performers)
    • Top performers do not get separated easily 
  • Attribution errors: Needlessly stringent ratings, and development plan might not work because of underlying reasons like lack of business unit support etc. 
  • Sample size errors: Not having many data points results in extreme judgements. 
  • Halo error: Having a good perception in one dimension causes us to rate a candidate good on several other dimensions. 
How to handle rater errors?
  • Rater training
    • Educate about rater errors, so errors are minimized
    • Have a facilitator walk raters through examples, and point discrepancies
  • Frame of reference training 
    • Establish a common standard of what is good/bad/ugly
  • Research here shows what errors are reduced by:
    • Rater training: Halo, leniency, better rating accuracy
    • Frame of reference training: better rating and observational (how we measure performance) accuracy
The effect of stereotypes
  • Gender 
    • Women are penalized, especially when they are below 20% of population (research here). 
    • Women are perceived more negatively than men when they are autocratic (because they are "supposed" to be nurturing). Gives lesser options to women in terms of styles of leadership. 
    • Women receive lesser salary than males. 
  • Racial 
    • African-Americans receive lesser salary increase than whites (research here)
  • Beautiful
    • People with "attractive" faces get 3% more salary (research here)
    • Players with symmetric faces receive higher salaries
    • Order of magnitude higher bias than gender
    • Halo factor plays a role here
  • Framing the conversation in terms of "Group A has an unfair advantage over group B" helps move discussion forward (as opposed to saying "Group B has a disadvantage over group A"; see research here).

Friday, November 27, 2015

On hiring people

In this post, we will examine how to manage human capital. Managing talent is typically top of mind for most CEOs (along with operational excellence, innovation etc.) Managing talent involves:

  • Attracting talent
    • Strategy => What positions are required? => What kind of talent is required?
    • How do we go about finding this talent? 
      • Have a plan! Here are a few dimensions to think about:
        • Short-term or long-term (consultant vs employee)
        • Current outstanding projects: what are the gaps?
        • Attrition (depends on industry)
        • Demand forecasting: understand what will be needed, given the strategy and potential changes to strategy.
        • Supply forecasting: understand what is available internally and externally. It might turn our your existing folks have all the needed skills! Human capital management systems help with this. 
      • What are we looking for in talent?
        • Skills
        • Experience
        • Abilities
        • Behaviors
        • Expertise
        • Special requirements (mobility, hours, environmental concerns)
      • Build a recruitment brand (that can attract top talent)
        • What's your value add (vision/mission etc.)?
        • What differentiates you from competition?
        • What are you/want to be known for (values, processes, innovation etc.)? 
        • What's your value add to your employees? 
        • Any other special considerations? 
        • Examples of company brands
          • GE: Creation brand (makes CEOs)
          • Google: Environment brand (good place to work with great people)
          • Walmart: Price brand 
          • Apple: Innovation brand 
          • Tiffany: Prestige brand 
          • Unicef: Legacy brand (leaving the world a better place)
        • Everyone/Everything should be aligned to support this brand
          • Hiring managers 
          • Recruiters
          • Employees
        • Elements of a recruiting plan
          • Who is needed? What positions? 
          • What does the position entail? What needs to be done?
          • How to go about this process? 
            • Recruiters/hiring managers should be able to 
              • Attract talent 
              • Explain things clearly once talent is in
            • Clarity on who the decision maker is
          • Where are we going to find such candidates?
            • Internal
            • External 
              • Recruiters/headhunters/gamification (uberdrive)
            • Create robust pool of diverse candidates
              • Avoid groupthink; happens if we select with our biases
            • Jobs website, other websites (linkedin, university), referrals, campus recruiting, your suppliers
          • When should we find them? What's the timeline? 
  • Selecting talent
    • Testing is good
      • IQ is a good first-order predictor of high performance (research here)
        • But considered to have cultural bias
        • And reluctance in western cultures for these tests
        • Interviews and work samples viewed better  (research here)
    • Ensure positive experience throughout
      • Offsets anxiety caused by testing 
      • When candidates believe selection process is good, they perform good (research here
      • Candidates say good things whether or not they are hired 
    • Behavioral interviewing is next best predictor of high performance after tests
      • Talk for 10min, hear for 50min
      • Ask candidates to describe past experiences
        • Teamwork
        • Creativity
        • Conflicts
        • Failures
        • Learning
      • Such questions should allow us to gauge:
        • Ability
        • Learning agility
        • Aspirations 
        • Engagement in work
        • Emotional intelligence
      • Best done by pairs of people (provides two perspectives on each discussion)
      • Debrief after interview, and have a rating scale
  • On-boarding talent
    • Important avenue to assimilate, impart culture, set a positive tone
    • 4% leave on first day, 22% turnover happens in first 45 days (Josh Bersin @ Deloitte)
    • Assigning a buddy helps
    • Full body on-boarding
      • Welcome gifts, material, people to meet etc.
      • Periodic checkins: day 30, day 90, day 180
  • Retaining talent
  • Letting people go 


Thursday, November 26, 2015

What managers do?

Here are some quick thoughts on what managers should do:
  • Setting vision and strategy
    • Communicate/reinforce
  • Setting goals accordingly
    • SMART goals
  • Achieve high performance
    • Using rewards
    • Giving feedback
    • Understanding what motivates employees
    • Influencing people for positive outcomes
  • Managing talent
    • Hiring 
    • Retaining
    • Letting go

On high performance - Performance appraisal

In the last post, we discussed how to achieve high performance with the right use of rewards. In this post, we will discuss coaching for high performance, with performance appraisals being a critical component. Performance appraisals have three purposes:

  • Evaluate
  • Develop
  • Motivate
When receiving negative feedback, people tend to shut down (as a self-defense mechanism to protect self-esteem). So, it might be good to break Evaluation and Development into separate sessions.

Why are performance appraisals so difficult?
  • Cognitive biases on both sides makes it difficult to reach a shared understanding
    • Fundamental attribution error
      • We attribute success to our abilities/motivation/hard work etc., and attribute failures to the team, the environment etc. AND at the same time, 
      • We attribute others' success to their team, their environment, support from company, while we attribute their failures to their lack of ability, hard work etc. 
      • What to do about this?
        • Be aware of this bias, especially when communicating evaluation.
        • Make conversations more objective; collect objective metrics in preparation for feedback. 
    • Illusion of transparency
      • We think we are more transparent than we usually are. We assume/expect others to know, even when they really do not. 
      • Especially happens when experts talk to non-experts; the curse of knowledge. The knowledge-gap is so great that it takes active effort to bridge. 
      • Elizabeth Newton's experiment on guessing the song from a tune. 50% thought others would predict the song, while only 2.5% actually did. 
      • What to do about this?
        • Listen actively to what the other person is saying.
        • Ask questions. 
        • Ask the other person to repeat to make sure they understand.
    • Self-fulfilling prophecy
      • Rosenthal and Jacobson's experiment with school children. When people thought some students selected randomly were gifted, they actually performed better. 
      • If we believe someone will be successful, they will be. If we believe they will fail, they will.
        • Why? We invest time and effort if we believe. 
      • What to do about this?
        • Focus on strengths and unique skills, and develop them.
        • Reserve negative judgement, especially when not enough data points. 
What are the dangers of not doing appraisals?
  • People who need feedback, do not get it.
  • Leads to incongruity of expectations.
Here's a good checklist for performance appraisals:
  • Don't wait to provide feedback. Give feedback as close to the issue as possible. 
  • Focus on behaviors, not on personality. Calling someone lazy is not useful, identify when they have missed some deadlines etc. 
  • Focus on few key behaviors. When there's a laundry list, it's hard to improve on everything all at once. 
  • Be very specific about the changes you want. Do not sandwich or sugarcoat. 
  • Make sure the other person understands you accurately. 
  • Follow up with positive reinforcement, when the other person is responding favorably. 
How often should feedback happen?
  • As often as needed! Don't wait for an entire year to provide feedback. 
  • Actively seek feedback! 
    • When leaders seek feedback, they are seen as being more creative, open, caring. 
      • Not seen as weak or vulnerable, like we usually assume. 
    • Helps get more accurate picture of how others perceive us. 
    • Do not seek affirmation; it reduces perception of effectiveness of the exercise (and remember, this becomes self-fulfilling). Be open to critical feedback. 

On high performance - Rewards

In the last post, we saw the factors that motivate people, and how to apply that understanding to motivate teams. In this and the next post, we will examine two means to promote good/useful behaviors (and thus, high performance): rewards and feedback.

Aligning rewards with good behaviors is important for two reasons:
  • Provides reinforcement: encourages good behaviors, and dissuades bad behaviors. 
    • How many types of reinforcement are there? (research by Ivan Pavlov and B.F. Skinner)
      • Positive reinforcement: Good work begets good rewards
        • The best type of reinforcement; gets results consistently and continuously
      • Negative reinforcement: Good work begets removal of pain
      • Punishment: Bad work begets punishment
        • Generates resentment, turnover, sabotage, stress
        • Behavioral changes potentially unsustainable 
        • Use with caution; can be used effectively 
          • When you publish guidelines to eliminate bad behaviors
            • Racist remarks etc. 
          • Apply as soon as transgression is made, and communicate rationale
  • Provides encouragement/incentives to employees, and helps maintain high motivation levels. 
    • Fairness
      • Why is it that this maintains high motivation levels? Let's say we rewarded arbitrarily; it would offend our sense of fairness (because we tend to do social comparisons), and we feel unhappy. 
        • See the experiment on capuchin monkeys here
        • Another example is the outcome at Gravity Payments where a minimum wage was set high enough, and high performers left because they thought it was not fair. 
        • See the concept of equity by John Adams. People seek to minimize the ratio of input/rewards, and are "hardwired" to compare their ratio with others. 
      • Lack of fairness has several negative consequences
        • Burnout
        • Stress (directly linked to heart diseases etc.) 
        • Absenteeism
        • Theft
      • How to address a situation where the perception of lack of fairness occurs?
        • Get people to shared understanding with respect to inputs (experience, education etc.) 
        • Make sure inputs are relevant (effort is not, outcomes are). 
        • Make sure rewards are what the person wants (recognition wanted vs pay given is not good)
        • Communicate when there is temporary inequity (for example, communicate when only half-pay is given; see research here).
        • Make sure to maintain equity in the long run, of course!
    • Folly of rewarding A while hoping for B
      • We also need to make sure we do not mistakenly/actively reward bad behaviors. This is the folly of rewarding A while hoping for B. Some examples:
        • Rewarding short term deliverables, while hoping for long term goods (stock market mentality)
        • Stack ranking that dissuades collaboration (bring down others to look better)
        • Punishing mistakes/failures, while expecting innovation 
        • Rewarding only individuals, while expecting teamwork
        • Rewarding meeting goals, while expecting stretch goals (incentivizes people to set small goals)
        • Rewarding "yes boss", while expecting candor
        • Rewarding patents, while expecting innovation 
      • Why does this folly happen?
        • Fascination with instant gratification: we want to reward short term success, even though it may or may not be relevant to long term success.
        • Fascination with objective metrics: such metrics are hard to devise for long term success, while things like #patents are easy to measure. 
      • How do we make sure we do not do this folly?
        • Know what behaviors you are rewarding, and identify misalignments. 
        • Correct the reward system, to reinforce good behaviors, and dissuade bad behaviors.
Another fascinating question is when and how should rewards be given out?
  • Traditional schemes are fixed interval (after certain time), or fixed ratio (after certain amount of work delivered)
  • Variable interval, and variable ratios work better (one of the reasons people are addicted to slot machines). 
    • Variable interval > fixed interval
    • Variable ratio > fixed ratio (see example of grades who got a bonus at variable ratio, even though total compensation is same)
  • Ratio schedules > interval schedule. Turns out to be good, but also allows you to reward work done as opposed to effort put in over time. 



Thursday, November 5, 2015

On motivating your team

A team can do wonders, when it is highly motivated. There is research (gallup survey in Oct 2013) that shows that when teams are motivated, the firm's profitability increases (20%), productivity increases, quality increases, employee turnover/absenteeism falls (60%). However, the same survey shows that only 13% of employees are actively engaged with their work (63% were not engaged, while 24% were actively disengaged).

What do actively engaged people do to make a difference?

  • They are willing to work hard, often working or thinking about work outside work hours. 
  • They learn all they can about the work, and push the envelope (improving efficiency, or delivering innovations). 
  • They are craftspersons in their field, take pride in their work, and that shows in the quality of their work. 
  • They are willing to help the team be more successful. 
So, given the above, how can we get people to be more engaged? It would be good to understand some research and models of motivation, to see what works. There are three models we will look at:
  • Maslow's hierarchy of needs (1940s)
    • Here's the hierarchy; the claim is that only when one need is met, one thinks/cares about the next level. 
      • Physical needs (food, clothing, shelter)
      • Safety and security 
      • Belonging (being part of a community)
      • Esteem (a sense of self, confidence, of having unique skills and abilities)
      • Self-actualization (fulfillment of one's skills/abilities)
    • It could be that individuals rank this in a different order (belonging more than safety, for example), but the idea is to be aware of these different needs of people, and to use this understanding to motivate different people accordingly. 
    • HermanMiller did a similar study across cultures, and found 6 common needs: Security (safety in Maslow's terms), status (esteem), achievement (esteem), autonomy (esteem), purpose (self-actualization), belonging (belonging). 
    • If values can be learnt (religions tend to influence values, and there are several religions), how uniform are values across cultures. This research (of ~ 30000 people) shows that across cultures, there are 10 core values ranked in this order: benevolence, independence, understanding/wisdom, security, conformity, achievement, pleasure, excitement, tradition, and power. 
      • Millennials value achievement more than security. 
      • Inter-generational conflicts decreases productivity by 12% (cref this). GenX, GenMe tend to value extrinsic motivators like bonuses and leisure, more than intrinsic motivators like meaning at work etc. 
  • Hertzberg's two-factor model
    • Hygiene factors and motivators
      • Hygiene factors prevent disengagement, are table-stakes
        • Company policy/admin, relation with supervisor/peers/subordinates, work conditions, salary, status, security, personal life
      • Motivators actually enable satisfaction, and higher productivity
        • Achievement, recognition, work itself, responsibility, advancement, growth
  • Deci and Ryan's extrinsic and intrinsic motives
    • Extrinsic motives: money, badges, titles, fear of failure, gold stars etc. 
    • Intrinsic motives: autonomy, belonging, curiosity, love, learning, mastery, meaning
    • Which is more important? In what context? 
      • This research on sales people showed that intrinsic and extrinsic motives explain 49% of performance, and intrinsic motivation had 44% more impact on performance than extrinsic motivation. 
      • Intrinsic motives can be undermined by focusing only on extrinsic motives. This research shows that while extrinsic rewards can give a short term boost to performance, they do not result in long term increase in performance. Intrinsic motivation is key to achieving long term performance. 
      • This research shows that while intrinsic motivation boosts performance (even with no financial reward), direct extrinsic rewards do not go much beyond, while indirect extrinsic rewards (paying for engagement, not outcome) does the best.
      • Intrinsic motivation works better for quality, while extrinsic motivation works better for quantity (research by Cerasoli et. al. here). 
    • Meaning of work is often considered the most important intrinsic motivation. How can we make the employees feel their work is important? 
      • Tie their work to the organization's work (not just a cog in the wheel)
      • Remind them of the beneficiaries of their work (radiologist example here, and doctors/nurses washing hands more when patients are involved here).
    • It's interesting though that intrinsic motivation can cause dissatisfaction, when you feel a commitment despite the downsides. Some research on zookeepers here
Now that we know what motivates people, it's good to be aware of common pitfalls in applying this understanding:
  • Social projection: thinking the others are like you. The research here shows that we assume our group shares our values to a greater degree than is true, and that we assume other groups share less commonality than is true. 
  • Extrinsic rewards do not linearly increase happiness. This research shows that after a certain point, money does not make us more happy (probably because we compare with others even after reaching a certain class). 
  • Using inappropriate rewards for a given context. Extrinsic rewards are more useful for routine jobs; intrinsic rewards are better for innovative jobs (refer to the indirect extrinsic rewards mentioned above). 
  • Customizing rewards to the point of being perceived as unfair. Given the above, the natural inclination is to customize rewards to the values of each employee. Need to ensure that rewards are commensurate with contributions, and that they are equitable.