In the face of a century of well-entrenched management science perfected in an industrial age, turning the Titanic of management toward practices better suited for a knowledge and creative economy has come slowly for many veteran businesses.
I sat down with noted author David Burkus, a self-proclaimed writing nerd, to discuss the radical ideas in his new book, Under New Management. The highly engaging, entertaining, and at times provocative read offers some basic shifts in managerial behavior already in place in thriving organizations. He says, “I recognize that for many veteran corporate managers, the things in this book will sound ridiculous, – but they do actually work and are backed by social science. These things seem crazy because our understanding of how to manage people are based on how to run factories and industries, not how you lead people to ideas and decisions. I wrote this book to start a very different conversation and so we can all get better at managing in ways that match our current reality.”
Of the many eyebrow-raising ideas David offers in his book, here are three we explored in our conversation that I found particularly fascinating. They overhaul two vital moments in the lifecycle of people working in organizations – how they start, and how they finish.
Hire as a Team
The selection and onboarding processes for employees have gotten heaps of attention – mostly for their abysmal results despite the money spent. “Both companies and prospective employees are assuming great risks that we don’t mitigate well enough to make sure both make the right decision.” Burkus points out that conventional management wisdom, even in recent years, has believed that performance is largely an individual matter, and that knowledge workers have portable skills. “It turns out, it’s not so easy to separate individual performance from team performance, and it’s even harder to spot the potential for performance in an individual candidate.”
Citing Whole Foods’ deeply held practice of team hiring, Burkus describes the importance of why selection by a team, who then take ownership of the success of chosen candidates, yields far faster assimilation than when hiring decisions are made by a series of disconnected individuals. “Being given the authority to welcome or to veto a new team member helps everyone on the team take ownership for their performance. Since the majority of hires are welcomed onto the team, rejecting a hire is an important moment for the existing team.” The 60-day intensive series of interviews for every associate, including a trial stint on the floor, is a distinguishing feature of Whole Foods’ legendary team culture where performance and compensation data are transparently shared with everyone. “Even their mission statement is titled ‘The Declaration of Interdependence,’ which signals the primary focus of the organization is team performance.” You can’t argue with the results. Whole Foods’ stock has increased nearly 3,000 percent as it has scaled to more than 60,000 employees. Its team-based hiring has played a vital role in that growth, ensuring the company’s deeply unique DNA effectively transmits even through merger and acquisition growth.”
Pay People to Quit from the Start
At some point, most of us have read about the fabled “offer” every employee at Zappos receives sometime within their first few weeks of employment: “We’ll give you $4,000 to quit.” Who in their right mind would do such a thing? Burkus spoke with Zappos leader Tony Hsieh, who said, “If they want the money more than they love the culture of our organization, they probably weren’t the right fit for us anyway.” Only 2-3% of all employees who get the offer actually take it. As is the case with Whole Foods, much of the reason behind why so few take the “easy money” is the rigorous selection process people undergo when being considered for employment at Zappos. “Paying people to quit screens out people who probably would have ended up quitting anyway.” Citing the sunk-cost bias of sticking with even bad decisions once we’ve made them, Burkus says, “It takes a lot of time and effort to find a job, and after you’ve done the work, gotten halfway through your training, and realize it’s not the right job for you, your sunk cost bias puts a lot of pressure on you to ignore what you’ve realized and just continue on.” The other benefit of the quitting bonus is the psychological impact on those who don’t actually take it. The “cognitive dissonance” created by getting an offer to quit can “increase the full engagement of those who decide to stay.” They wake up thinking, “I must really love this company if I turned down all that money to leave it.” When Amazon acquired Zappos, they adopted the practice but upped the ante. Fulfillment center employees get the offer annually, and each year the amount goes up. Jeff Bezos, Amazon founder and CEO says, “We want people to take a moment and think about what they really want. In the long run, staying in a job you don’t really want isn’t good for employees or employers.” Burkus notes, “In a way, it’s like Amazon is asking employees to give the organization a performance appraisal once a year.”
Celebrate Departures
Too often, departures from organizations, regardless of whose decision it was, induce awkward feelings of estrangement and loss. Sometimes people who quit are treated as disloyal “persona non grata,” lepers whose names aren’t to be mentioned again. The shortsightedness of companies who don’t understand how critical it is to effectively manage, even celebrate, when an employee’s tenure comes to an end are missing a critical opportunity. Of course, this doesn’t apply when an employee is terminated for reprehensible causes, but the majority of separations don’t occur that way. Celebrating the fact that people are moving on to something else is a milestone that should be done intentionally for the health of the community, and more so, for the performance of the organization. McKinsey & Co. is renowned for its alumni network, exporting talent to all corners of industry and government. “They even make a point of telling people in the recruiting process that being from McKinsey is as great as being at McKinsey.” Company alumni networks are an increasingly important aspect of managing both reputation and industry connection. “Companies that maintain alumni networks are in a better position to leverage a principle sociologists call embeddedness. Every industry is a network of connections, and research shows a company’s relationships to other entities in the network directly affects that company’s financial strength.” LinkedIn, Microsoft, and Proctor & Gamble also have robust alumni networks, hosting annual events, major learning conferences, “fellows” networks, and other relationship-strengthening features that sustain important ties and celebrate past tenures of employees that have moved on. By sustaining ties to employees that move on, companies turn the otherwise often clumsy and inelegant moment of an employee’s departure into a celebrated transition that sustains important connections despite changes in employment.
Of the practices he offers, Burkus notes, “Only 30% of the fuel in a car engine is used, the rest is wasted. So sure, ‘it works,’ but is it optimal? Management’s old ways only capture 30% of employee engagement, and people want to bring more than that to work. While they once worked, we know they aren’t optimal. If we are willing to experiment, we can leave old ways for new ways and maybe we can move the needle from 30% to something much better.”