17 Developing a World Class Organization

Today many organizations operate in a global environment and must be world class to survive. Even if your organization doesn't operate in a global environment it should have a goal of being world class for the benefit of its stakeholders. The topics to be discussed for developing a world class organization include:

•        Recruiting to build strengths

•        Achieving low staff turnover

•        Developing your successor

•        Matching people to jobs

•        Managing the manager’s time and helping the workers manage their time

The first three topics are included in this lecture and the third and fourth topics are covered in Lectures 18 -20.

Recruiting to build strengths and Achieving Low Staff Turnover

Your recruiting objectives should be:

•        To “raise the batting average” of the organization

•        To achieve low staff turnover

Your organization deserves a “raise the batting average” objective. (Here the term “batting average” refers to the average capability of the organization so that to raise the batting average means hiring someone with skills and/or experience that exceed the average of the organization.) It leads to a more successful organization and thereby supports all stakeholders. People like working with highly capable people so such people are generally welcomed into the organization, which helps satisfy the new worker’s need for belonginess. People are inspired and often mentored by highly capable people so that highly capable people help lift performance beyond just their own contribution. If everyone is treated fairly and there is a sound career development process there should be few ego problems or career concerns over bringing in people that raise the batting average.

I believe building a world class organization by recruiting exceptional people that strengthen the organization is a superior approach to Jack Welch’s approach of firing those whose performance lowers the batting average of the organization. (Jack Welch, the former CEO of General Electric required his senior managers to get rid of the bottom 10% of their subordinate managers each year.)This is because Welch’s approach promotes competition to survive, which inhibits teamwork and diverts worker’s attention from their job to their survival. This results in a fear environment, which appears to have high performance, but actually has lower performance than the organization is capable of if fear is removed and replaced with an environment of cooperation and commitment.

Let’s now look at why achieving low turnover is important. Let’s take a very conservative example of an organization where the average wage is $25 per hour. The recruiting and orientation training costs for a knowledge worker is typically about equal to one year’s salary. Figure 6 shows the costs for typical turnover rates as a function of the organization size assuming the cost of replacing a worker is equal to one year’s salary.

Figure 6 Annual turnover cost for organizations with turnover rates of 2, 4, or 6%.

The difference between a turnover rate of 2% and 4% for an organization of 100 people is $90,000 per year. That difference is equal to spending $900 per person on training or new software each year. This example is conservative because it ignores the hidden costs related to disruption of work, the diversion of manager’s attention from other critical activities and the diversion of workers attention associated with people leaving and new people being assimilated.

An effective leader has a goal of maintaining turnover close to the limit imposed by retirement, promotions out of the organization and the occasional need to replace a bad worker. This limit is usually between 1 and 2 % and it can be achieved if the managers are truly effective as defined in this course. Turnover rate is also dependent on effective recruiting. A low rate cannot be achieved if an organization is growing and the recruiting process doesn’t add workers that match needs and stay with the organization for the long term 80% of the time or more.

The recruiting process is dependent upon the style of the manager and the culture of the enterprise so I cannot claim to describe the only correct way to recruit. I can however describe a recruiting process that has proven to work and to support low turnover in organizations I have managed.

Example of Effective Recruiting Process

–       Discuss open positions thoroughly with human resources so that they can determine if normal job applicants are likely to fill needs, or if new ads are needed, or if help from professional staffing organizations (headhunters) is required

–       Manager must prescreen resumes provided by human resources to identify high potential candidates

–       Manager or designee should prescreen high potential candidates via phone calls before they are brought in for an interview

–       Does candidate understand job opening and local area?

–       Does the manager receive positive “vibes” from the conversation?

–       Will candidate likely accept if ultimately given offer? (e.g Can the candidate relocate if necessary or does a divorce decree prevent relocation?)

–       After human resources meets the candidate begin the in-house interview with a group interview to cover common questions- this should take 45 - 60 min and involve all workers and managers scheduled to interview the candidate.

–       Responsible manager defines the open job for the candidate and the group so that everyone understands what is expected of the candidate

–       Candidate answers general questions about education, experience, etc. so that these questions are ask and answered only once and everyone hears the same answers

–       Individual meetings with at least four managers and likely coworkers

–       Typically 45 - 60 minutes each

–       Lunch offsite with two or three senior people

–       This is critical as it often leads the candidate to reveal information that would never be provided in formal interviews

–       Hold a group discussion at end of day with all the interviewers to discuss what each has learned in the private interview and make an offer/no offer decision

–       Reach consensus or don’t hire

–       The senior manager must be responsible for preventing the group from only hiring clones of themselves. Diversity of many types is necessary and the group will accept diversity if it is discussed and a consensus is reached

–       Human resources verifies resume (e.g. Claimed education and former employers) and references, works with the manager to determine an appropriate salary and makes formal job offer or informs candidate of rejection

My experience indicates that the group meetings at the beginning and after the interview and the offsite lunch are critical for the reasons explained in the description above. It is also essential that the interviewers not be working in a fear environment. Otherwise they may provide the feedback they think the manager wants rather than being objective and speaking up when they disagree with the manager or each other.

The need for diversity needs further explanation. Here diversity means diversity in thinking and working style as well as diversity of race, gender and national origin. In general, organizations of people that have similar cultural behavior work smoothly but if there is no one to offer different views then the organization tends to be restricted in thinking. Such an organization of cultural clones isn’t as effective as an organization having a few members that provide alternative views that are outside the bounds of the homogeneous culture. Hiring people whose thinking and working style deviate from that of the rest of the organization is always a risk. The wrong person can create dissention and some people just won’t be happy being in a culture different from their own. The objective is to find a few people that are able to work well with the group and yet offer views divergent from the group’s usual thinking.

A key element in recruiting the very best people over the long term is to develop a network of people that are always on the lookout for exceptionally capable young people. The network typically includes people in the organization with a wide circle of friends and associates in other organizations, consultants (particularly university professors), customers, suppliers and others that have the opportunity to interact with young people having the skills needed by your organization. Developing and tending such a network takes time but the payoff is finding the exceptional young people that can lift your organization’s performance to world class levels almost by themselves. Once you have attracted a few exceptional people and provided them a positive environment for their work they attract other exceptional people.

You must be well on your way to developing a highly effective organization in order for people in your skills identification network to feel comfortable in recommending exceptional people to you and for you to be able to recruit such people. If your organization doesn’t have a good reputation then it is difficult to recruit top talent until you have fixed many of the organization’s problems. You can still attract top people by being honest with them, convincing them you have a plan to fix the problems and giving them an incentive to be part of your plan. Don’t settle for less skilled people because your organization has problems; work harder to attract top people that become part of the solution.

Developing your successor

Demonstrating effective leadership of a successful organization is one ingredient in preparing yourself for promotion to more responsible positions. Another is having an obvious successor so that your current organization can continue to be successful if you move on. An effective leader is proactive and prepares a successor so that it is apparent to others that the candidate is ready. A way to accomplish this is to give the candidate leadership tasks once you are convinced they are ready and can succeed in leadership tasks.

You can develop a successor via recruiting, mentoring or the natural maturation of one of your subordinates. The path isn’t important unless the culture of your enterprise favors one path over another, e.g. some cultures prefer to promote only from within. If your enterprises has such a culture and you recruit your successor you must be prepared to mentor this person for the time it takes for the new person to be considered eligible for promotion.

The most important advice I can give from my experience is to make sure the person you pick is as capable of managing your organization as you, or preferably more capable than you. Giving your candidate leadership tasks enable you and others to evaluate the candidate’s capabilities and readiness for promotion. If the candidate fails to meet your expectations in two or more such assignments then review both the assignments and your assessment of the candidate’s capabilities. If the assignments were reasonable and if you decide the candidate was as well prepared as he or she is likely to be then you must pick a new candidate and prepare them. Do not compromise in hopes that the candidate will grow into the job after promotion. Whereas that might happen you shouldn’t count on it. Remember that the failure was failure of your judgment so do not punish the candidate.

Exercise

1.     Without looking forward, write a list of what is necessary for achieving a low turnover rate besides an effective recruiting process.

2.     Develop a mathematical model to define the time required to recruit a new employee in your group. Your model should include time for deciding a new employee is needed, preparing, submitting and defending a requisition to hire, discussions with the Human Resources people before they begin collecting resumes, screening resumes, phone interviews, on site interviews, post offer discussion with the candidate and orienting the new hire once on board. Assume percentages for resume screening, other screening steps and offer acceptance rates appropriate with your experience.

3.     Assume an organization of 100 people and a growth rate of 15%. Run your model to determine how much time is required of top managers to grow their organizations by 15% per year.

4.     Review your staff for candidates to succeed you. If one, or hopefully more than one, is available then begin to develop a mentoring plan to prepare the candidate(s) for your job. If none are available then look for the opportunity to recruit a candidate.

Discussion of Exercises

If your experience with the time it takes to be effective at the various steps in recruiting is similar to mine you will have learned from exercises 2 and 3 that growing an organization effectively takes a surprising amount of time. Inexperienced mangers often fail to allocate enough time for recruiting and end up chronically understaffed for much longer than necessary. In addition such failure can lead to an organization not achieving the growth it could because there simply isn’t enough staff to execute the work. If you have subordinate managers you must make sure they are spending the time necessary for effective recruiting if your organization is growing. Most mangers don’t like recruiting as well as their other work and their other work always seems more time critical so they tend to put off recruiting.

Your model also likely predicts that there is a limit to the growth rate that can be accomplished and still have time to execute other required work. Watch what happens when a new hot shot CEO announces that his or her enterprise is going to double in three to five years. Often such a strategy causes the enterprise to implode. There simply isn’t enough time for the employees to win new business, execute the high quality work that enables growth and develop the staff fast enough to handle work well. (Exceptions occur in business areas that are very new and therefore can tolerate growth problems better than a highly competitive established business.)

Your answer to exercise 1 should have included such statements as:

Satisfy Maslow needs

Fair salaries, Security, Fair treatment, Help belong to team

Opportunity for self-esteem and self-actualization

Career development that is constructive and meaningful

 Managers that “removes rocks from path” so workers can do their jobs     (“Rocks” include poor processes, defective equipment and oppressive policies and procedures)

Low Fear environment

Effective Time management; e.g. no long, non-productive meetings

If so, you successfully understand this part of the training.

  

If you find that the pace of blog posts isn’t compatible with the pace you  would like to maintain in studying this material you can buy the book “The Manager’s Guide for Effective Leadership” at:

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