Monday, February 25, 2008

Fire All Managers!

(With apologies to my readership; I've been laid up with the flu... I should have my next piece up on Sunday evening as normal.)

OK, not really. But experiences I’ve had, plus some related to me during email exchanges and conversations indicate to me that many managers are severely lacking in one key experience: being unemployed and having to look for a job in today’s environment.

I’ll start this posting with a specific example: prior to my landing my current position, I had an interview with a large, multi-national company. More specifically, this company made a line of products that a previous employer of mine purchased en masse; we bought millions of their product line every year. I was very familiar with their product, understood – from a customer’s perspective – what was important, and had people from that former employer willing to be my references. If not a shoe-in for a job offer, this should have been as close to it as it is possible to get assuming I didn’t contract foot-in-mouth disease.

Unfortunately, I ran into something I had not expected. Specifically, I ran up against the experiences of the hiring manager. You see, this man had worked his entire career, I believe over two decades, at this one company. In contrast, my resume showed a couple of layoffs, and at the time of my interview I had had three short-term contract positions in succession to “put beans on the table.” The stated reason for my not being hired was that the hiring manager was uncomfortable with my not having also been continuously employed by the same place for ten-plus years. (Fortuitously, I got the interview through a recruiter who has been exceptional at getting me actual, real feedback as opposed to the typical pap foisted on rejected candidates.)

This man, apparently, had no concept beyond the abstract that layoffs happen. In theory, of course, he knew, but there is a perception on the part of people who have jobs that those who lose theirs in layoffs somehow deserved it. This is an ugly truth; when a job search coach or recruiter says “Oh, don’t worry – nobody holds being unemployed against you anymore,” your BS detector should peg out.

His second point was that I “bounced around a lot” and thus gave the impression that I was not someone who would stay long. On the face of this, this was utterly ridiculous. I had worked for an employer – their former customer – for six years; my downsizing was a part of a massive RIF consisting of almost 2,000 people. The next downsizing was also involuntary, and part of a rolling reorganization of the company after a couple of new managers were brought on board. New managers like to do that, and most people “in the trenches” are aware of this and, in fact, have probably experienced it. I was aghast that this man was so unaware of the current business climate that he didn’t comprehend how this is now the standard.

Then, the coup de grace: Three short-term contracts in a row indicated, apparently, that I was truly not committed to staying with an employer. Hello? Bueller? Bueller? That’s why they’re called contracts – so that the employer can use people to get a particular job or task done, and then dispose of the expendable asset at their convenience. More to the point, most people don’t do contracts for love of the lifestyle – though some do – they do them because they need an income, any income, and they take what they can get in order to survive.

Managers, especially managers who have been employed at one company for any length of time, should not really lose their jobs – that was a bit of hyperbole to get the readers' attention. But they should, somehow, be brought up to speed that today’s workplace is nothing like the job-for-life environment they knew when they were job searching. Perhaps this could be a good exercise for a Personnel (not HR) member to go through the 100+ resumes received for the manager’s requisition, and do a histogram with average number of positions, time in a company, etc. Place that on top of the pile of resumes passed to the hiring manager. The hiring manager must, in turn, sign a written acknowledgement that they have read and understood the statistics of the people whose resumes they are about to review.

Yes, it sounds kind of hokey and certainly silly. But, apparently, hiring managers need to have it entered into their heads that the world has changed from when they were bright youngsters. And part of that is an understanding, based on actual numerical data, of applicants’ job histories and the current job search world. It would also be enlightening to see how many have taken contract positions, their number and duration. I think that hiring managers who have been insulated, as was the one I related, would be very surprised to see that information.

Another reason managers should be fired – hyperbole! – is the simple reason that they don’t seem to understand the difficulty of the environment in general. People who are secure in their roles and status have no empathy for the job searcher. Note that I don’t mean that people should be hired because they are a sad case; rather, that between the “Perfect Fit Syndrome” making it extraordinarily difficult for people to find work if they are stepping outside the boundaries of what they’ve done in the past and the tighter-than-anyone-really-imagines environment, they’re having a hard time landing. And hiring managers can be surprisingly blunt with that lack of empathy.

As an example of that, I was on a second interview (different company) – the contest was between me and one other person – and I thought the interviews were progressing quite well. I had had an excellent chat with the Manufacturing Manager, in which we discussed the need to design products to take advantage of common components, Design-for-Assembly rules, etc. Design-for-Six-Sigma, about which I know enough to be dangerous, was also discussed… as well as the need, on every dimension, for the designer to understand that someone has to be able to measure it or the value is useless. Other discussions went, I thought, equally well.

Then, my wrap-up meeting with the actual hiring manager. Again, I thought things were going well until he asked how long I’d been unemployed. I’m not a dissembler, I don’t hem and haw easily, and so I replied to the effect of “about a year.”

His next question floored me. “What’s wrong with you?”

Sadly, I exploded and destroyed any chance I might have had, but this was a particularly sore spot with me and my frustration had been growing over the last several months. Details omitted, but to sum up, I have excellent qualifications, accomplishments, education, and feedback from interview practice sessions including comments from persons who were hiring managers themselves plus HR persons attending these practice sessions all said I interviewed very well. So to ask me “What’s wrong with you?” when, by all indications of past accomplishments and career-coaching feedback I was doing everything right was the proverbial straw on the camel’s back.

My own diatribe notwithstanding, complaints like this regularly come up in discussions of my own job search group, and with others on a one-to-one basis. It’s one thing to give someone out of work the advice to buck up, put on a happy face, stay positive, etc., but for a person who may be a month away from losing their home because they haven’t found anything for over a year, their savings are gone, and their stop-gap bagging-groceries job doesn’t pay squat, putting on a cheery disposition is not so simple.

So another recommendation for that “cover sheet” of the resume pile would be to include statistics of how long people are out of work. This can be difficult as most standard guidelines for resume writers recommend only including years. Still, some will include months, and that should be enough to give at least a rough picture.

The conclusion is this: That many of today’s hiring managers do not have direct experience with the fears and frustrations of the typical job seeker in today’s world. Managers that have been in one company for any length of time have, based on my experience, no gut-level understanding of what is happening today.

We get what we measure and reward; and we can only truly adjust what we are able to measure. Here are some modest (OK, not so modest) thoughts.

Any manager who has hiring authority has included in their performance review some new metrics:

1. The raw number of resumes received by the company vs. the number passed on to the hiring manager as meeting their job description. What this measures is “Perfect Fit Syndrome,” i.e., just how ludicrous is their expectation. For example, I did a phone screen interview with an HR person, who declined to pass me on to the hiring manager after I met every criterion except knowing the right CAD software. I had more years of experience doing this task than they required, and anyone who knows anything about it understands that new software can be learned quickly (I had never used the particular CAD software used by my current employer, but that didn’t stop me from playing around and building a real-live, substantially-complicated model for a project – even before I took the week of training I eventually attended!) but that didn’t matter. The hiring manager demanded this particular software, so a promising potential candidate who met everything else desired never even crossed his desk.

2. The ratio of people brought in for an interview vs. the number of offers made (offers can be rejected; if this happens often it should prompt other corporate soul-searching beyond the scope of this essay); and as a supplement, the time between when candidates start being brought in for interviews, and someone is hired. Company leadership needs to understand that job seekers are a very talkative bunch – companies that have the same position open for months unending gain a reputation as not being serious; potential candidates heed warnings from others on this.

3. Lastly, and this is more likely for larger companies, a database of these other metrics for comparable levels and departments can highlight hiring managers who fall far outside the normal ranges – which should prompt questions by their boss as to why it takes so long for them to hire and fill vacancies.

No reasonable person expects the hiring manager’s boss to tell them whom to hire. No self-respecting hiring manager should tolerate such micromanagement. But if a hiring manager is subjecting candidates to the Goldilock’s Treatment of “too hot” or “too cold” for too long, their boss needs to step in and set them right for the good of the organization as a whole. This “setting right” could include strong input from Personnel, who should be far more aware of the job search realities than hiring managers. All these could, potentially, give the hiring managers in question some additional perspective on why they can’t seem to fill that opening, as well as receiving explicit permission from their bosses to deviate from their own exhaustive list of criteria with the associated increased risk of hiring the wrong person.

The above could be refined to be faster-acting than an annual or semi-annual performance review. To wit:

Statistics regarding open positions should be brought to upper management’s attention on a regular basis, perhaps in a monthly meeting where many things are typically discussed. I imagine something quite simple: Reviewing a list of open postings by department/line manager. Each manager would have a list of open positions underneath their name, along with some cut-and-dried numbers regarding each position in their purview.

* Time position has been open (months)
* Number of resumes received; number passed on to hiring manager
* Number of persons interviewed; number of offers made (relevant if offers are being refused!)
* A ranking of green, yellow, red as determined by a standard set (e.g.: IMHO I think that to not be able to find, interview, and hire someone for a “rank and file” white collar position in six months after such a position is listed publically is an indication something is wrong… and note that this is said with the caveat that I have not been in a hiring authority position – your mileage, and your acceptable time frame, may vary)

Green: Opening falls within previous time data on filling similar positions
Yellow: Opening has not been filled within a “typical” time but is not yet twice the average
Red: Opening has remained unfilled for more than twice the “typical” time

There are three necessary tensions here.

The first is between the need to get feedback to the hiring managers’ bosses about the potential Goldilocks attitude of their subordinate versus the need to not make this a major issue if the hiring manager’s other metrics are fine. This is not, nor should it be, an A-level, firing offense – but there still remains the need to give feedback to those hiring managers that, perhaps, they are being too picky.

The second is the tension between upper management's need to control the organization given their perspective, vs. micromanaging a subordinate's department. Specifically, hiring managers need to understand that if needed from an organization-as-a-whole perspective, they have their boss’ permission to relax their criteria with the accepted price of a longer and steeper learning curve without being directed to hire any particular person. Heaven forfend, they may even need to send someone to learn the particulars of a new CAD software (obligatory snarky comment).

The third tension is the balance between having genuine needs in the organization, hence the open position, and desperation to get a warm body – any warm body – in there who could end up being a catastrophe.

So take these recommendations as I intend them: As a thought starter. If people are, indeed, a company’s most valuable “asset” (cough), surely companies can develop ways to incorporate a feedback loop to hiring managers on their hiring practices. The leisurely and overly persnickety approach to filling openings could now have a counter-balancing force. Where that equilibrium point falls will need tuning, but in today’s hypercompetitive world, the “Goldilocks” approach to hiring candidates without thought to the organizational consequences of leaving positions open too long cannot stand. And the other things that cannot continue are the attitude of hiring managers that candidates must meet their own prejudices regarding work history or there is something "wrong" with them, as well as the idea that being professional and objective in evaluating candidates means that one can ignore the emotional consequences of being unemployed on candidates. Being polite is not a weakness; remember, someday you may be on the other side.

Monday, February 18, 2008

Oil Profits: Simple Economics

This essay discusses a critical part of the economy, and some myths therein. Since oil prices have an enormous effect on the economy, with subsequent bearing on employment, I have decided to opine about it. I hope you enjoy. At some point in the future I will also write about Ricardo’s Theory of Comparative Advantage and its effect on free trade policies.

Gas Prices and Profits

With gas prices rising the chattering classes are busy carping about price gouging, excess profits, etc. with the same reliability as Congress voting itself a pay raise. Yet, in fact, there are five very simple reasons why oil companies make increased profits whose dollar amounts – and increases – seem “obscene,” particularly as prices go up. These five reasons are:

1. “Elasticity of Demand”
2. “Substitutional Elasticity”
3. Profit per unit vs. profit margin
4. “Inventory Turns”
5. Volume

In laymen’s terms, what does “Elasticity of Demand” really mean? It means how easily you can adjust your use of something when the price changes. We hear the term “Supply & Demand” constantly for many things, and it is, in fact, a basic law: The more something is demanded, the higher the price goes as people pursue their own enlightened self-interest to make money. The higher the price goes, the more incentive suppliers have to increase their output to make more money in turn. As the supply increases relative to demand, the price falls back. At least, that’s how it works in theory.

In practice, it’s not quite so simple. Some things are easier to give up than others. Gasoline is one.

For the sake of argument, let’s say that my daily commute, each way, is one gallon’s worth of gasoline given the mileage of my current car. Five days a week, twice a day, I drive that distance to get to and from work. Ten gallons a week. Plus, I drive to go shopping, making several trips to the store to pick up one thing or another that, somehow, runs out despite careful attempts at planning and making exhaustive shopping lists. Plus there are other driving trips – to the mall, driving to the post office when I could walk, etc.

So, the price of gas goes up. What can I change? The vast majority of my driving is my daily commute to work; ballpark estimate is that my commute is 90% of my driving. And even with that remaining 10 percent, with diligent planning I could probably only cut it in half. Semantically, Elasticity of Demand is defined as the percent change in quantity demanded divided by the percent change in price. When this number, in absolute value, is greater than one, demand is elastic: The amount people purchase is very dependent on the price.

But in the case of gasoline, it’s the opposite. If the price of gasoline goes up by 20%, 50%, even – God forbid – 100%, my ability in the short term to significantly affect my usage is very limited. Now, in the long term, all things are elastic (you can move, make carpool arrangements, buy a fuel efficient mode of transportation – I admit the idea of a motorcycle in the summer is appealing – or even find a new job closer to home). But I’m not talking about the long term.

Take-away #1: The ability for most people to significantly affect their usage of gasoline downward is very low when the price increases.

The second is “Substitutional Elasticity”. This is to say that when the price of one good goes up, the consumer is able to substitute another. As an example, consider Green Giant frozen baby peas (the best, when I’m in the mood for peas). If the price of these peas doubled, it would be fairly easy to substitute the store brand, or perhaps Bird’s Eye, or, if the price of peas went up across the board, perhaps another legume whose price is more stable could be substituted. The dishes that require legumes themselves could be benched in favor of other vegetables. In other words, the ability to rapidly adapt and substitute when prices rise.

Gasoline is gasoline. You can’t just pour motor oil in and expect it to work, nor will cooking grease work (though I’m all in favor of biodiesel and diesel in general, as I think diesel has great potential). Even the noted ethanol has both potential and problems, though the idea of a flex-fuel vehicle plan would have, I think, greater impact than the new MPG mandates precisely because of the ability to substitute ethanol for gasoline more readily.

But that’s beside the point. My car runs on gasoline. I can put only gasoline in it. If the price doubles, I still can only put gasoline in it. My substitutional elasticity is very low. I’m stuck with gasoline regardless of the price.

Take-away #2: The ability of people to substitute another, less expensive fuel, for gasoline is very limited due to engine technology (availability is another issue altogether and beyond the scope of this essay).

Third, there is the difference between profit per unit and profit margin.

Profit per unit is simply how much profit, in dollars, a company earns for each unit sold, regardless of the actual sale price. A one dollar item sold with a 10 cent profit earns the same profit per unit as a ten dollar item that happens to sell with a 10 cent profit.

Profit margin, on the other hand, is a measurement of the efficiency of each dollar invested. Who here would put the majority of their savings into a savings account that returned a 1% interest rate? On the other hand, who reading this would not seriously look at a savings account that returned a 20% interest rate?

Take-away #3: Investors judge a company by its profit margin; i.e., the return on their investment. This can be dramatically different than the actual profits in a dollar amount.

The fourth piece of this puzzle is “Inventory Turns.” This is, essentially, how fast inventory moves through the system. Consider the proverbial grocery store with the proverbial-and-often-quoted 1% profit margin. They buy a can of soup for $1, and sell it within a week for $1.01. That’s a 1% profit margin. They then take that dollar, buy another can of soup, and the cycle repeats weekly.

From a pure accounting standpoint, the profit margin is, in deed, one penny for each dollar invested. A lousy return. But thanks to the miracle of rapid Inventory Turns, that original dollar invested returns a much nicer 52 cent profit at the end of the year – remember that the subsequent cans of soup are purchased not with that start-up, original dollar, but with the gross profit of the sale.

Take-away #4: The faster you turn your inventory, the more profit you make. That's why there's so much interest in lean manufacturing and just-in-time inventory schemes.

I’ll save the fifth point, volume, for last, strictly as an arm-waving exercise. In the meantime, let’s look at an example.

Big Evil Oil Company (BEOC for short) purchases 1,000,000 units of raw oil at, for the sake of argument, $1 a unit. And they sell it directly to end users for $1.10 per unit. The profit per unit is 10 cents; the profit margin is 10% (which, if you investigate, is pretty close to the actual profit margin of most oil companies). Ten cents times 1,000,000 yields a total profit of $100,000.

Let’s assume that Inventory Turns are almost weekly – for the sake of round numbers let’s say 50 Turns per year. I don’t know what the real numbers are, but judging by the number of gasoline trucks I see, I think that’s a realistic SWAG (scientific wild-ass guess) for a delivery cycle. Remember the can of soup example? Each time BEOC Turns inventory, they are purchasing 1,000,000 raw oil units and converting it to gasoline, for a profit margin of 10%; they are also making a profit per Inventory Turn of $100,000. Multiply that by Turns per year, and we get $5 million in profit per year.

Note that there’s nothing untoward here. No accounting tricks, no nothing. Each time BEOC Turns Inventory, they earn a 10% profit margin. They buy $1 million in oil, they refine it and sell product for $1.1 million. Period.

Now, let’s suppose that the price of that raw material doubles to $2 per unit. To maintain a profit margin of 10% - a number that is often demanded by investors who read the financials to determine where to put their money - the price to the customer is $2.20. Since the price has doubled, but the demand is inelastic with low substitutional elasticity exacerbating the inability to reduce demand, the end users can only reduce demand by 10%. People still need to drive, they still need to go shopping, take the kids to school, etc. Because of this only-slightly decreased demand, delivery cycles fall to 45 times per year representing that 10% drop in volume.

Each cycle the company purchases 1,000,000 units, as before, transforming it into gasoline, and selling it. Each time BEOC’s inventory turns, they earn 20 cents on 1,000,000 units – remember that the profit margin is still 10%. This is critical to understand: the profit margin remains the same, the actual dollar profit per unit doubles.

So now we have a profit per Inventory Turn of $200,000, not $100,000 as before. Profit per unit has doubled (note again that profit margin has not changed!). Factoring in 45 Turns, we have 45 times $200,000 equals $9 million profit per year. And, of course, the wailing and gnashing of teeth starts... over what, precisely? The unfairness of a company wanting to make the largest profit it can? Isn't that why every company is in business?

Had there been price elasticity, demand could have fallen faster than the price increased. Profits would have gone down. Because people cannot reduce their usage easily nor can they easily substitute other fuels, the net profit goes up. This is Microeconomics 101. I remember my coursework; one of the things pointed out was that for a product with an inelastic demand, you increase prices to increase profit. It is competition between companies in the field that keeps things in check - that, plus the threat of new technologies or products that can substitute.
(As an aside: There are many technologies being developed that could break our addition to oil, particularly imported oil. Many of these are only economically viable now, at the R&D stage, competing with oil at current day prices. It's been supposed that once some technologies really start looking good, OPEC will cut prices, burning investors and destroying the competition. I do recommend looking at the website for Changing World Technologies - I like the idea and would put my own money in to invest if I could!)

Now, let’s look at that last factor, volume. Just how many gallons of gasoline get sold? Lots. Lots and lots. Lots and lots and lots. Millions of gallons every day. It doesn’t take that many billions of gallons times, say, 30 cents per gallon to yield enormous profits. Just keep in mind the enormous expenses of having to find new supplies every day, the incredible overhead in logistics, not to mention the fact that we've not build refineries to keep up with the burgeoning demand. Oh, and did I mention that other countries are now drinking oil feverishly too, adding to the demand on the world supply? Countries like China, who has now taken over as the largest CO2 emitter, and India who, 20 years ago, used only a fraction of the oil they do now?
One more thing. Oil prices are set by speculation, not pure trading. When speculators get nervous, the price goes up even if the supply has not changed. It is this price we pay, not pure supply-and-demand, that determines the cost of raw oil going into BEOC.

Lastly, I’d like to observe that profits are not evil. They are the engine that drives the economy. Nobody would start a business if they didn’t think they could earn the most they could make. Nobody would remain in business if their profits, and profit margin, didn’t meet their needs.

Imagine you run a grocery store; your supplier prices go up. Thus, your prices have to as well. Would you accept the local community saying that, because food is another inelastic good – people need it regardless of price – that you should cut your profit margin just to make people happy? You might do so out of the goodness of your heart, but not from a financial standpoint.

So, how do we solve the energy crises? Here are some of my recommendations:

1. Drill for oil in ANWR and the Gulf of Mexico. And anywhere else we can, domestically. Every dollar we send overseas risks funding the terrorists who attack us… and by increasing the available supply, we should see prices drop. We'd also bring a lot of jobs back to America.

2. Implement a mandatory flex-fuel option for cars. Thus will ethanol have a much larger potential base of customers, giving incentive to develop better ways for production and distribution.

3. I also do like some of the great progress shown in diesel technology, and biodiesel is – I think – a lot more easy to generate than ethanol.

4. A lot of oil gets burned to create electricity. There are better ways. Solar & wind have potential and should definitely be encouraged; but more importantly, there are many new nuclear plant designs. Fuel cells can be run off landfill or sewer waste, and can generate electricity for facilities plus generate heat too. Other companies are focusing on smaller cell systems, cars and even hand-held electronics. Save oil for fuel.

Sunday, February 10, 2008

Diversity of what?

I miss my job in Ohio – no, really! Well, what I really miss are the people from work, and the discussions and arguments during lunchtime. We always sat together and would argue about varied topics; nor were we politically-correct, which was a refreshing change from today’s ever-so-careful workforce. Some of these friendships still remain, despite my now being in New England.

In one such conversation, I was asked – as an “Evolutionist” – what I thought was the biggest innovation in the history of life aside from the start of life itself. That was a difficult question. Could it be photosynthesis, without which life would eventually have used up the food supply – never mind its creation of an oxygen atmosphere? The conquest of land? Intelligence? I finally realized that the single biggest “innovation” that had the largest impact on life was – sex.

I’m not trying to jazz up a column with tawdry material; this column is family-friendly. But biologically, what is sex? It is the exchange and mixing of different genetic materials with the resulting increase in variation – i.e., trying new things. This variation, coupled with competitive forces (e.g., the need for energy, environmental change, disease resistance, competition, etc.) selecting on the advantages and disadvantages of those variations, drives evolution at a rate much faster than evolution-by-mutation, which had been sole previous engine of change. (Indeed, it’s been posited that much of the subconscious attraction between couples dating comes from scent, and the scent-based cues that the other has different immunities from oneself, with the resulting desire to co-mingle those immunities for offspring with healthier prospects.)

Indeed, the science fiction writer Isaac Asimov wrote about this in his classic sci-fi short story, “What Is This Thing Called Love?” In this tale advanced aliens who have evolved purely by mutation – thus ponderously slowly – discover Earth. The alien’s chief scientist sees the enormous diversity of life on Earth and realizes that it springs from the variation created by sexual reproduction – a notion scoffed at by the ship’s commander. The story’s – um, climax – is left as an exercise for the curious reader, but the theme is that the scientist recognizes that the rapid evolutionary pace on Earth fueled by the genetic variation from sex will enable humans to rapidly out-evolve his own species – with obvious implications to his own species’ survival.

So how does this apply to business? Simple. Today’s economy is hyper-competitive; companies are competing not only for business with domestic rivals, but are facing challenges from foreign sources as never before. The pressures to develop new products, services, and processes just to remain viable are staggering. So how are many of today’s companies reacting to this enormous threat? By reducing variation in their “innovation genes.”

In my email, I have a catch-phrase: “The best place to find an ‘out of the box’ thinker is – outside the box!” Yet, as I’ve written about before, companies searching for people hire with laser precision. Job requirements are exhausting lists of “must have” qualifications, often to the point that the only person who could apply for the position is the person who just left it.

A few years ago I read an article in a medical device trade magazine. It talked about Design for Manufacturing and Assembly (my Master’s thesis topic, actually) in glowing terms, and touted the concept of designing products to take into account capabilities of the manufacturing processes that would be used to make the product. I was confused as the tone of the article conveyed that these were new concepts, while I’d been doing - developing! - these self-same concepts for years. My point, of course, is that when you only look internally within a company or industry, you miss what’s happening outside. Just because your industry has specific requirements doesn't mean there aren't opportunities to learn from outside - which, alas, seems to be the mentality of several industries.

Yet, in my career, the best and most revolutionary ideas have been concepts developed because I didn’t know it couldn’t be done yet. Naivete has value; experience breeds complacency. This is not to say that people should hire engineers to become doctors, or accountants to be engineers, etc., but rather to point out that “fresh eyes” from outside the discipline or industry looking at a problem are often a great source for challenging the status quo and driving the creative process that results in innovative processes. And often in the process of learning the details of the product or service, people from the outside see a different path to eliminating problems.

One example comes from my experience in automotive climate control – the car’s air conditioning system. Parts of the system protruded into the engine compartment. To keep the heat from the engine from melting the plastic, these pieces were covered with a heat shield. These heat shields were typically made from formed fiberglass panels –fiberglass encased in resin, really – and covered with an aluminum foil… they were heavy, expensive, and the workers hated them because no matter what the supplier did to try and smooth the edges, glass fibers would get into their hands. Or they’d wear gloves, which was also very uncomfortable and/or inconvenient given the other tasks at the station.

I’d recently transferred in from automotive lighting, and was assigned the task of cost-reducing these heat shields. I played around with a number of possibilities, invited new suppliers in, and was evaluating the possibilities when it occurred to me to ask: What did this heat shield do? What was its function?

This was the core question, and the answer was not easy to find. Indeed, these things had been in cars so long it was just carried from vehicle line to vehicle line with the implicit assumption they were needed. In due time, however, I had my answer: they did not really provide a physical insulation, but only served to reflect radiated engine heat.

Aha! The light (pardon the pun) dawned! I came from automotive lighting – reflectivity is what we did for a living. So I proposed that we make the case out of a higher temperature material, and coat it with a reflective coating. I did a slew of heat transfer equation studies that showed that this, in fact, would work. What was the response of management to my innovative proposal? “That won’t work, but go ahead and get those 'science-project' impulses out of your system.”

I went ahead. In cooperation with the company’s R&D labs, who live for this kind of abstract project, we converted a small oven into an engine compartment simulator. We tested the current heat shield, varied coatings and base materials, and found - - can you guess? - - that the concept did, in fact, work. I had the data, blessed by people with Ph.D.s in the company’s own research lab.

The skepticism was still rampant, but now that my ideas were Ph.D. approved ideas, I could not be shunted aside so easily. I refined my cost models, showing that not only was the idea a net benefit in total material cost, but eliminated labor, the fibers, and reduced part storage requirements at the line with the associated reductions in material handling. Full-scale prototyping was grudgingly approved. (With, I might editorialize, a lot of behind-the-hand scoffing that this would actually work in real life.)

I arranged for a “Pull Down” test; the harshest test available for the performance of an air conditioning system: Soak the car under a simulated sunload, mimicking the Arizona summer, and then turn on the car and – at idle, the worst condition for air flow – see how fast the car cools, and at what temperature the inside stabilizes.

So what was the result? Can you guess? My idea matched the performance of the existing design. My cost models showed that, rolled across every line in the plant, we’d have saved over $750,000 annually in materials and labor. That number didn’t include the softer numbers such as safety, floor space, material handling, etc.

I didn’t know it couldn’t be done, so I went ahead and did it. Fresh eyes, and a willingness to try something completely new based on experience from a different product family.

That company was, actually, very good at training. One of the things they trained us in was in the proper formation of teams. What was important in a really effective team? Diversity.

No, not the PC-esque diversity that pays attention to skin’s melanin content, ovaries vs. testes, or how many handicapped people can be hired to fill out a quota. I mean real diversity: of experience, of perspective, of thought, and of personality. (Which, being corporate America, was a shining example of do-as-I-say-not-as-I-do, but that’s another posting entirely.)

So what do a host of other sources say about forming truly effective teams?

Cross-pollination of perspectives, ideas and skills enables a business to profit from what is today known as ‘our greatest asset — our people.’" - Nick Corcodilos, (Please note that I’ve linked to Nick’s site, Ask The Headhunter, and highly recommend everything he’s written.)

“Effective teamwork is based upon … people who exhibit a variety of styles or approaches...” Successful Work Teams – Ex-employer’s Team Training Manual

“Even an [experienced] engineer who knows nothing about your industry should be able to find something amiss or a potential cost saving.” - Dirk Willard, Old dogs can learn new tricks, Chemical Processing magazine, November 2007

“Diversity of thought matters. Many of us have a tendency to seek answers to our challenges by confining our search to established expert resources... Paradoxically, qualifications can act as constraints to creativity… [N]ovel answers frequently come from the fringes...” - Alph Bingham, CoFounder of Innoventive, Interview in CIO Magazine, July 15, 2007

“A workplace is the most interesting, the most creative and the most apt to be cutting edge when it's diverse.” - Sam Polcer, “Seeds of Talent”; GO Magazine, Nov. 2007

Remember how I said companies were not seeking real diversity of their team members? Let me tell you about an experience I had when I was job searching. Well, actually, two experiences.

The first was my attending a convention for Human Resources. Yes, I use that term deliberately – not following my previous post’s admonition because, to a person, every attendee was typical of the current people-are-things mentality in today’s corporate jungle. Notable among the day’s events were the breakout sessions, one of which discussed personality testing of candidates as a screening mechanism. Naturally, it was being run by a company that provided such on-line testing, but that’s an aside to my point, which is this: Personality testing was touted not just to identify potential strengths and weaknesses of a candidate, or as a way to help find good directions to guide a current employee in further development, but to choose and screen out candidates who did not closely match the idealized personality profile of the position being filled.

Just think about how insidious this is. Companies are screening out people based on the ability or inability to show the proper personality for a given position. Just imagine – a group of Accountants who all think alike tasked with developing a new way to achieve a faster end-of-quarter closing. A team of Engineers who all think alike assigned to brainstorm, create, test, and launch an innovative new product. And so on.

More terrible, the hidden implication is that by hiring a person to be the "perfect engineer" (or whatever) a company is hiring to fill that slot with little-to-no consideration of the person's future potential. Sure, companies have a need for an engineer, but one of the roles of Personnel (note, I used the right word this time) is to work to bring on board people who can grow and develop in the organization in addition to helping fill the immediate needs.

“If we’re all thinking alike, then somebody isn’t thinking.” General George S. Patton. I love this quote., and I'd like to add to it: "If we're not all thinking, then it won't be long before all of us are no longer needed."

Real creativity, I believe, comes from conflict. Yin and Yang, ideas being challenged and sacred cows barbecued. It comes from people butting heads, arguing, and yes, sometimes getting a little hot under the collar. In my experience, every time – and I mean every time – such teams find better solutions. But, of course, there’s a flip side to that benefit: The need for direct management involvement.

You see, managers of truly diverse teams that focus on creativity and its application innovation have to wrangle, shape, guide, and resolve conflicts. All of these things take work. Far easier, organizationally- and workload-speaking, to jimmy the hiring process to hire only people who think and act alike… because then managers don’t have to do these things. The departments seem to function smoothly, indeed, the whole organization does. Because everyone is approaching everything with the same mindset, personality, and experiences. Thus does discord vanish and harmony appear at the price, hidden, of losing that conflict from which creativity flows. I’ll opine that any department that truly functions well with no conflict is one missing out on its potential.

Here's where personality testing can help. It can help the people understand their strengths and weaknesses, in how they behave as an individual, as well as how they interact and work with others. I've learned enormous things from the MBTI, DiSC, and other varied indicators of my own personal style and how I interact with others.

I promised you a second story, and I’ll keep it short. Back in 2005 I networked my way to the hiring manager of a medical device/biotech company. They were forming a new department, one dedicated primarily to disposable plastic medical devices. That hiring manager and I had a couple of great phone conversations (this was when I was living in Vermont, so meeting in person was not convenient). He asked for and was wowed by my resume. But before he could meet with me, even just for a chat, I had to go through a personality test.

Obviously, I failed that test. Most of the questions were either-or, when the real answer was inevitably “it depends on the situation”. There was no room for human judgment, the situation, or anything other than whether I matched closely enough to their idealized engineer.

So what’s the conclusion? There are several.

First, personality tests as a screen, let alone the determining screen, during the hiring process are tools for the lazy. They provide a convenient way for HR people to avoid having to actually weed through resumes in favor of letting an internet program do it for them. (As opposed to a useful tool once the person is on board - what matters is the ability to do the work, not work harmoniously all the time.) Let me caveat this by saying I've met many great Personnel people, who understand that since people are their business, they need to invest the time in truly assessing those persons as individuals, not using coarse screens that weed out far too many gems simply because they don't pass one filter or another.

Second, they are tools for management to look good by avoiding conflicting personalities; the cost, however, is a team that will always perform poorly compared to a team formed from disparate – diverse – personalities, experience sets, etc. Again, I've met a number of really good managers; one of the best understood that my personality and interaction with people needed work, and rather than shunt me aside, challenged me to develop and grow. And here, such testing can be extraordinarily useful in helping to shape that growth path as well as show stronger routes for professional development within the organization.

Third, by focusing on candidates who are the perfect experiential fit, companies lose out on that “fresh eyes” perspective that can be so critical to developing truly innovative solutions to product and process problems. As a corollary, companies that only hire incestuously from within the chosen population miss out on best practices from other industries – practices from which they could learn and thus gain a competitive advantage.

Lastly, people don’t want to do the same thing over and over. Most people want the challenge to grow and develop new skills. Hiring the “imperfect fit” gives people that chance, resulting in more motivated, grateful, and loyal people.

Saturday, February 2, 2008

The Words We Choose

Stop me if you’ve heard this one: A capital walks into a bar, and… Wait, you’ve never heard of a capital walking around? OK. A talent walks into a …. You’ve not heard of a talent walking either? A resource? No? Of course not! People walk into bars.

And this is a terrible secret in today’s workforce. We have Human Resources discussing Talent Acquisition and reading articles about Human Capital retention; these terms obfuscate that there are people involved. On a visceral level the use of such dehumanizing euphemisms has an extremely corrosive effect on multiple facets of the relationship between company and employee.

Take-away 1: The words we choose define our thought processes. Choosing to refer to people by terms more typically associated with things disconnects managers from the fact that people are being discussed. Companies employ people, they should have Personnel departments. They hire and seek to retain people, so they should search for and keep people, not “talents,” “resources,” or “capitals.”

Nowhere is this more evident than in the hiring process itself. Companies no longer look for talented people with capacity for growth; rather, they seek persons with specific skill sets, often to the point of writing job descriptions so razor-sharp in specificity that, seemingly, the only person who could get the job is the person who just left the job. My favorite example reads “Wanted: Urinary Catheter Design Engineer. Must have at least five years of experience designing urinary catheters.” Needless to say, this is frustrating to job seekers who, based on the overall job description, believe they are up to the challenge and are eager for the chance to grow.

So what drives this? There are several causes working together. First, today’s companies run so lean that there is no time for a traditional learning curve, either in the company’s projects’ timelines or on the hiring manager’s calendar. Indeed, the catchphrase of modern hiring managers is “hit the ground running.” Never mind that this is impossible; even subject matter experts need weeks just to learn the company’s systems – a process lengthened considerably by most companies not having formal new-hire integration processes, let alone a mentor with the time to take hew hires “under their wing.” At one employer over 500 man-hours went into installing each new piece of equipment; my own “installation” consisted of a 20-minute orientation and being handed assorted manuals to read.

Take-away 2: The best way to have someone “hit the ground running” is to proactively implement a formal process of integrating someone into the company under the auspices of a mentor, most effectively a joint task between Personnel and the hiring manager. Anything less wastes the potential of the new hire.

Second is the risk-aversion in today’s corporate world. If a “perfect fit” hire does not appear, hiring managers can always blame the candidate pool for not spontaneously producing a superhero. But should a hiring manager hire someone who did not fit every bullet point, they expose themselves to blame should the new hire not work out. It’s easy to blame the “shortage of talent” when the pain of understaffing is diffused over the organization, but far riskier personally to take a chance if not hiring a Superman. However, that diffuse pain of not hiring anyone has costs as well: unhappy customers and stressed employees. These should prompt company executives with perspective to act to protect the company as a whole.

Last, and most significant, is the mental thought pattern created by the dehumanization of corporate terminology. Employees are no longer people, they are “assets.” Companies don’t hire people, they “acquire talent.” By describing people with the same language as equipment, hiring managers combine project pressures, risk-avoidance, and dehumanization to create job descriptions resembling machine specs. The slightest deviation from the requirements is grounds to rule out candidates, as many seeking jobs complain. A few years ago I experienced this first-hand when I easily met every listed criterion but one: I didn’t know the right CAD package. It didn’t matter that I had been doing CAD work for longer than they required and could easily learn a new software program. I didn’t meet the spec, so I was off the list.

Whether consciously or not, hiring managers act as though there are vendors somewhere cranking out people with precisely defined skill sets. In the real world, though, most careers are the product of changes in path imposed from the outside, especially given today’s layoff-willing world. In my career I’ve only voluntarily changed positions twice. The specific skills that I’ve developed are, for the most part, not part of a deliberately planned progression but pure necessity in having to survive involuntary changes and the need for an income.

Take-away 3: No job description should have more than 3-5 “must have” requirements. And all points, whether needs or wants, must be made as generic as possible (e.g., think “thought process of the person” rather than “specific software package”). Software can be learned – the ability to think is the real requirement.

Another consequence of using these dehumanizing terms is the treatment of candidates during the job search process. It is now typical for companies to use automated resume submission systems; but some automated systems don’t even acknowledge receipt or completion of the application. Companies such as this are referred to as “black holes,” and they are plentiful. The fact that companies don’t specify an automated response from an automated system is a clear indicator of how much these companies truly value a candidate’s interest in them.

Of course, nobody expects a hand-written reply to a resume. But in my last job search I learned that companies do not reply after interviews – never mind resumes! My experience is not atypical. Indeed, most companies seem to treat applicants as supplicants, begging for scraps from the master’s table. While that seems melodramatic, it’s born out by experience. A company VP I knew through networking invited me to interview for an open position before it was publicized: The Holy Grail of networking! Yet after an interview visit in which every discussion ran long (a very good sign according to “conventional job search wisdom”), and their adding to my schedule (another very good sign), I heard nothing. Only three months later, when I managed to catch my contact on the phone, did I learn they had a hiring freeze. Neither my contact nor anyone else was bothered to spend two minutes to contact me.

Abraham Lincoln said that if you want to test a person’s character, give them power. By that standard, many companies are lacking. Not responding to resumes, let alone interviews, is the norm; but this can backfire. How companies treat persons applying for work is a common topic in every networking group I’ve ever been in, including the one I run, and doubtless affects decisions to pursue specific companies.

The foundation of this new attitude towards candidates lies in the subconscious reaction to the use of dehumanizing terms and its logical extension that people are interchangeable units and thus instantaneously replaceable. The less we refer to or view people as people, but rather as things, the less likely we are to consider them as worthy of respect or courtesy. Such terminology creates an emotional distance between manager vs. subordinate, as well as company vs. employee and candidate, and is akin – though not as extreme – as the infamous “Prisoners vs. Guards” experiment done at Stanford University. My argument is not that there is no need for authority, but rather that authority and power are magnified by the emotional distance created by dehumanizing terms, and can lead to the very behaviors too-often seen in today’s workplace.

Take-away 4: How you treat candidates will enhance or hurt your image in the marketplace. If your company is not communicating with candidates in a timely way, bank on the fact that they are telling other potential candidates about your company. Remember that there are far more people that you reject than you hire, and imagine how many other job seekers they meet!

There is a final consequence to the subconscious corrosive effects of using such terms: how managers view and interact with rank-and-file employees, and the resulting effects on employee trust, performance, and retention.

No less a person than GE’s Jack Welch admitted in his book, Winning, that corporate handbooks and other materials discussing a company’s respect for “work life balance” are mostly marketing tools to get potential candidates’ attention. Yet handbooks don’t spring from the ether – they are written by people, and more importantly approved by people in top management. By approving a handbook where what is said clearly differs from what is done, dishonesty is codified as tacitly approved by the upper echelons. And people take note of this, with rank-and-file trust in management decreasing with the level of the manager. (1)

Take-away 5: If you communicate, mean it. No matter how well disguised, deception and hypocrisy will come out. And once out, the genie will never go back into the bottle. The situation is not symmetric: it can take months to build a reputation as trustworthy, but a single comment to destroy that trust.

For example, filed under how-stupid-do-you-think-we-are, several years ago a senior executive casually made a comment to a Q&A meeting I attended – a comment that brazenly contradicted earlier official statements by the company’s management and gave lie to those earlier statements to boot. By his offhand comment, it appeared he didn’t conceive we could fact-check his statements against those previous official statements. His unwitting admission of official mendacity displayed management’s contempt for us rank-and-file people, and sparked a smoldering grass fire in the plant eating away at our already-low morale.

Trust is one of the most important commodities managers have, with tremendous leverage over their ability to lead people successfully. (2) A liar once exposed cannot be trusted; in one impending layoff situation I was in, the department manager swore that he did not know who was to be let go. But he knew and we all knew he knew. Had he announced that he “could not discuss it, I’m sure you all understand,” that would have sufficed. The fact that he lied to our faces destroyed his credibility and his ability to lead. We later found out that he had been ordered to lie “or else” – thus placing him in an impossible situation – and the twin revelations of the order itself plus what should have been its predictable effect on his leadership position also demolished the credibility of those above him. As a direct consequence the bleeding of people to competitors accelerated.

Take-away 6: Just because someone isn’t a senior manager doesn’t mean they can’t check what you say against other information. Count on the fact that they will, especially if they are nervous. Remember that many of them are just as shrewd as you were in your early career, perhaps even more so.

The words we choose directly shape our perception of what is being discussed. Using terms like “resource,” “talent,” and “capital” to describe people subconsciously transforms people into things. The effect is corrosive in multiple areas – from interviewing and hiring, to trust and the ability to lead, the dehumanization of people in corporate vocabulary has multiple negative effects on how people are viewed and treated. Those attitudes and treatments are predictably reflected back by rampant cynicism, low retention, and poor organizational performance.

Take-away 7: What goes around, comes around. If you treat people as expendable assets, don’t be surprised that they treat you as a stepping-stone to be exploited in their individual career growth goals. They will prioritize themselves over the organization they’re in, performing their jobs until they wring all they can from your company to aid in their jumping to another stone that looks better.

[1] “Many employees don’t trust their boss,” Machine Design, September 13, 2007
[2] “The High Cost of Lost Trust”; Harvard Business Review, September 2002