Managers own the job of creating great teams
This means your partners. Don’t let them pass with the complaint that the associates or non-equity partners they have aren’t great. Nonsense. It’s up to them to change those people. Former Secretary of Defense Donald Rumsfeld famously remarked that you go to war with the army you have, not the army you wish to have—but he could as well have added that you can shape it into the army you wish to have with foresight and discipline.
In other words, the army (the team) you have is a given: It advances nothing to complain about it. Your job as a manager/partner is to fix it. And yes, this includes having frank conversations with people who are mismatched where they are.
This also has enormous implications for compensation: At Netflix, there’s no such thing as a performance bonus. Radical? (By now, you should be getting the feeling that a lot of what they’re doing is radical in terms of how rank-and-file HR views the world.)
But they eliminated bonuses because they believed in paying market-based pay and didn’t think that the “fully formed adults” they hired would be motivated to work harder or smarter by an annual bonus. Now, if you’re in a world where firm-by-firm, blow-by-blow annual associate bonuses are fodder for untold barrels of online ink, this might strike you as suicidal—and many of you are in that world. But the philosophy remains refreshing, and true, you have to admit.
Another unconventional idea: Rather than discourage people from taking recruiters’ calls, they told employees it was smart to interview with competitors in order to get a sense of the market for their talent. Just promise to send the compensation numbers under discussion back to your own firm’s people, as valuable market intelligence.
Make sure people understand what metrics drive your business
At Netflix, the issue was software engineers who didn’t understand finance; with you, it’s lawyers (all the way up and down the food chaing) who don’t understand finance. For example, how many of your lawyers know that not all revenue is good revenue? Here’s Netflix story:
I recently visited a Texas start-up whose employees were mostly engineers in their twenties. “I bet half the people in this room have never read a P&L,” I said to the CFO. He replied, “It’s true—they’re not financially savvy or business savvy, and our biggest challenge is teaching them how the business works.” Even if you’ve hired people who want to perform well, you need to clearly communicate how the company makes money and what behaviors will drive its success. At Netflix, for instance, employees used to focus too heavily on subscriber growth, without much awareness that our expenses often ran ahead of it: We were spending huge amounts buying DVDs, setting up distribution centers, and ordering original programming, all before we’d collected a cent from our new subscribers. Our employees needed to learn that even though revenue was growing, managing expenses really mattered.
Good HR people think like businesspeople first and HR people last
Here’s something I never thought I’d hear an HR person say:
Although I like [other HR people] personally, I often find myself disagreeing with them. Too many devote time to morale improvement initiatives. At some places entire teams focus on getting their firm onto lists of “Best Places to Work” (which, when you dig into the methodologies, are really based just on perks and benefits).
During 30 years in business I’ve never seen an HR initiative that improved morale. HR departments might throw parties and hand out T-shirts, but if the stock price is falling or the company’s products aren’t perceived as successful, the people at those parties will quietly complain—and they’ll use the T-shirts to wash their cars.
Now then, what do we think of all this?
This approach to talent management will no doubt produce great results in the short term, but I wonder if it will really improve a firm’s talent pool for the long term.
The premise of this approach is that technology is ever changing, and the company should not be bashful about moving people in and out in order to keep humming at the highest level as the process of change takes place. So new employees come in ready to use the latest tech and contribute at a high level right away, and they leave as soon as they are no longer able to contribute.
But does a law firm work that way? Do your associates come in ready to contribute at a high level right away? Clearly not! Do they reach a point where they can’t contribute anymore because the substance of their work has changed and they can’t keep up? Some yes, but this is rarely the case when speaking of associates – often firms lose talented associates who can still contribute, but they are asked to leave for other reasons (i.e. they are not on the partner track, and probably because the partnership has not made an effort to get them onto it). If you’re talking about partners, then of course this happens, but they are the ones making the personnel decisions and are highly unlikely to choose the exit for themselves.
Reducing useless bureaucracy will assist any organization (especially those that have implemented it in order to avoid facing the hard realities that it does such a good job of obscuring). But I have zero confidence that managing partners will take that message away. Odds are, they will read an article like this and respond by (a) increasing bureaucracy in order to “measure performance” better (has there ever been a more futile refuge for the ineffective?) and (b) wringing ever more hours out of their already overworked associates while reducing what little job security is left for them (after all, aren’t they supposed to “cull to keep only the A Team?”).
If you want to reinvent HR, you have to start by knowing what you want to achieve with your talent. Do you want to build a lasting business by putting in the hard work to train the next generation, or do you want to pick the last bits of meat off the bone before you retire? Make sure your talent management matches what you’re trying to achieve.
A friend I’ve known for years but who prefers anonymity writes from Europe:
Thanks, David! I know who you are….