The Fatal Flaw with 360 Surveys

by Marcus Buckingham




I should love 360 degree surveys. I really should. After all, my research, and that of many others, reveals that the best managers and leaders are aware of their strengths and weaknesses, and have taken steps to capitalize on the formerand neutralize the latter. And the ubiquitous 360 degree survey — our reality check of last resort — can be a powerful tool for increasing this self-awareness.

And yet I still think all but a very few 360 degree surveys are, at best, a waste of everyone's time, and at worst actively damaging to both the individual and the organization. We could stop using all of them, right now, and our organizations would be the stronger for it.

My problem with 360s is not the quality of the feedback given to the leader. On the contrary, I've seen some extraordinary coaches use 360 results as the jumping off point for insightful and practical feedback sessions. Nor is my problem that most 360 feedback focuses predominantly on the gaps between what the leader thinks are his strengths and what everyone else thinks. We know from a wealth of applied psychological research that the group of people whose own self-ratings match up most closely with others' ratings are people who are clinically depressed. (The best leaders always slightly inflate their scores, a finding called "benevolent distortion.") Nor, finally, do I much care that most 360 surveys are built on a logical non-sequitur: namely that since a particulargroup of exemplary leaders possesses all the competencies measured by the 360, therefore the best individual leader is she who possesses all of them.

No, my beef with 360 surveys is more basic, more fundamental. It's the data itself. The data generated from a 360 survey is bad. It's always bad. And since the data is bad, no matter how well-intended your coaching, how insightful your feedback, how coherent your leadership model, you are likely leading your leaders astray.

What do I mean by "bad"? Well, think about the most recent 360 survey you participated in, or pull it out of the drawer if you have it handy, and look at it. Virtually all 360s are built the same way. They measure a set of competencies by breaking these competencies down into behaviors, and then various colleagues — your peers, your boss, your direct reports — rate you on these behaviors. For example, to measure the leadership competency "vision," your evaluators score a list of behavioral statements such as, "Marcus sets a clear vision for our team" and "Marcus shows how our team's work fits the vision of the entire company."

On the surface, breaking down a complex competency such as "vision" into specific behaviors, and then rating me on these behaviors makes sense. But probe a little deeper and you realize that by doing so we ruin our survey.

Why? Because your rating reveals more about you than it does about me. If you rate me high on setting a clear vision for our team, all we learn is that I am clearer on that vision than you are; if you rate me low, we learn that you are clearer only relative to me.

This applies to any question where you are rating my behavior. You rate me on 'Marcus makes decisions quickly' and your rating reveals simply whether I make decisions more quickly than you do. Rate me on "Marcus is a good listener" and we learn whether I am a better listener than you. All of these questions are akin to you rating me on height. Whether you perceive me as short or tall depends on how short or tall you are.

The bottom line is that, when it comes to rating my behavior, you are not objective. You are, in statistical parlance, unreliable. You give us bad data.

"Well, that's alright," you may say, "because I am not the only rater. There are others rating you, Marcus, and whatever objectivity I may lack is compensated for by all those others."

Again, this sounds right, but it still doesn't hold up. Each individual rater is equally unreliable. This means that each rater yields bad data. And, unfortunately, when you add together many sources of bad data, you do not get good data. You get lots of bad data.

The only way to avoid this effect is to ensure that your group of raters is a perfectly representative sample of the competencies you are trying to measure. This is what polls do. They select a sample — usually a little over 1,000 people — that is nationally representative of ages, races, regions, genders, and political affiliations. This carefully selected sample then proves to be a far more reliable measure of national opinions than a random group ten times as large.

But the raters of your 360 survey are not a sample carefully selected to represent the competencies being measured. Nor are they a random sample. Instead, your raters are a non-random group of people who happen to work with you or report to you. In statistics we call this a "skewed sample." Add up all their ratings and you do not get an accurate, objective measure of your leadership behaviors. You get gossip, quantified.

Thankfully, the solution to this problem is simple. Although you are not a reliable rater of my behavior, you are an extremely reliable rater of your own feelings and emotions. This means that, although you cannot be trusted to rate me on "Marcus sets a clear vision for my team," you can be relied upon to rate yourself on a statement such as "I know what the vision of my team is." Likewise, while your ratings of me on "Marcus is a good listener" are bad data, your ratings of you on "I feel like my opinions are heard" are good data. This is true for any statement crafted so that it is asking you to rate you on you.

So, to create a reliable 360 survey, all you need do is cut out all the statements that ask the rater to evaluate others on their behaviors, and replace them with statements that ask the rater to evaluate himself on his own feelings.

Doing this will transform your 360 survey into a tool everyone can trust. But until then, it's just blather.

Payroll Outsourcing, HR’s new mantra

Payroll outsourcing can ensure organisational effectiveness and good use of manpower 

With compensation and benefits becoming a top priority among the professionals of today, creating schemes to satisfy their varying needs is no longer a piece of cake. This has led the companies of today to look for alternative methods to make this task easier. Payroll outsourcing is such a measure that has revolutionised the management and provision of compensation to employees. It has made the process much more efficient as compared to conventional methods and a large number of companies are now opting for it because of its numerous advantages. 
Rahul Kulkarni, head HR, Kale Consultants, explains the process, "Payroll outsourcing has taken a big jump in the last few years with many large organisations embracing it. Companies are using this concept to bring in greater transparency and also spare their administration from any hassles. Payroll outsourcing basically involves an outside agency doing the work of managing the salaries of employees, its calculation, payment and disbursement, along with other related functions. Using an outsourcing service makes it possible for an organisation to manage the payroll process for their employees without the need to maintain a large payroll department or involving the in-house HR department." 
Payroll outsourcing provides the company with numerous benefits that are absent in the case of internal methods. Harinder Singh, HR & strategic head Vigneshwara Developers, highlights the advantages, "The strategy of outsourcing is to firstly identify the core activities, which are the essence of the business and turn the management's focus on these, while concurrently transferring the other activities on a recurring basis, to a service provider who specialises in them. 
The key benefits from payroll outsourcing are -
•       Cost savings for the company on outsourcing payroll processing are extremely significant and can go up to 50 per cent at times;
•       Cost reductions and cost effectiveness can be achieved;
•       Productivity is improved, as service quality provided is excellent and this frees the company from non-income generating tasks;
•       Latest technology and software for payroll processing are used;
•       Indian payroll processing service providers have a very highly specialised and expansive knowledge base in finance and accounting, which would be of help to businesses globally. 
Outsourcing of compensation management enables the staff of a company to focus more on business activities and save time and efforts. Manisha Kadagathur, head talent, AEGON Religare Life Insurance, elaborates, "Payroll is a once-a-month activity and timelines are accordingly set. Therefore, companies do not need to employ full-time resources. Through outsourcing, companies benefit by being able to deploy resources with the right skills and knowledge to focus on core HR issues like talent management, quality of hiring, etc that need attention, instead of routine tasks." 
What is the scope of the payroll outsourcing industry in future India? Devendra Singh Chauhan, VP HR, BS Transcomm Ltd., answers, "From a foundational role to a more strategic one, the potential and scope for payroll outsourcing is huge. From web-based technology, data maintenance services, tax management, reimbursements and payslips to operating model definition, job evaluation, survey management, compensation benchmarking, best practices research and trending, compensation effectiveness, incentive plan design and communication, this industry has a lot to explore and offer in India." 
Thus, payroll outsourcing can truly enable companies to use their resources and manpower in a much better manner and increase their productivity as well as efficiency. 

Favouritism still an issue in the workplace

09 Sep 2011

Managers agree that favouritism is a big factor in deciding who gets promoted although not many will admit to being biased in any way.

A survey by Georgetown University’s McDonough School of Business and research firm Penn Schoen Berland, found 84% of business leaders admitting to favouritism at their workplace. However, only 23% acknowledged practicing it themselves. A mere nine percent said it was a determining factor in their last promotion.

This figure of nine percent was higher than what the author of the study had expected. "No one at this level of executive was going to admit it blatantly," Jonathan Gardner said.

Although three-quarters of survey respondents said that there are procedures in place to ensure fairness in the workplace, there are other subjective criteria such as whether the candidate “fits” into the corporate culture which make the lack of prejudice highly questionable.

Productivity and morale can suffer because of favouritism. "They're now playing office politics instead of focusing on organisational objectives," Lamar Reinsch, a management professor at McDonough and Gardner’s advisor on the paper, was quoted as saying in the Wall Street Journal.

Happy Teacher's Day - Don - This is for you

Dear Don,

 

On this special day, we Skiers would like to express our gratitude to you for been our Mentor and Guide. Here is a short poem especially for you:

A Mentor for All Seasons
A Mentor is like Spring,
Who nurtures new green sprouts,
Encourages and leads them,
Whenever they have doubts.

A Mentor is like Summer,
Whose sunny temperament
Makes learning a pleasure,
Preventing discontent.

A Mentor is like Fall,
With methods crisp and clear,
Teachings of bright colors
And a happy atmosphere.

A Mentor is like Winter,
While it’s snowing hard outside,
Keeping Mentees comfortable,
As a warm and helpful guide.

Mentor, you do all these things,
With a pleasant attitude;
You’re a Mentor for all seasons,
And you have our gratitude!

Lotsa Love
All skiers

What's Your Power Style?

Have you ever wondered if a person's childhood experiences influence the way they operate as a professional later in life? Did that boardroom bully who intimidates others in order to make a point shove people around on the playground as a kid?

Whether you are trying to get ahead at your existing firm or land a job in a new organization, it's helpful to understand that many of your instincts for giving and taking power stem from ways you were conditioned in the first system you experienced in life — your family system. Through my research for my upcoming book Power Genes, I discovered that the building blocks of anyone's signature power style are rooted in the ways they have been conditioned to respond emotionally and behaviorally to the first authority figures they encountered in life, namely, their caregivers.

To get a sense of how you may be emotionally conditioned to respond to power in the workplace, reflect for a moment on the predominant way that your caregivers exerted authority in your family system. Did they motivate you by considering your feelings, or did they issue orders they expected to be promptly obeyed? If you were raised by caregivers who asked your opinion when making important family decisions, you probably react positively to colleagues who take the time to connect with you at a human level. This type of reaction indicates that the emotional dimension of your signature power style may be trust-based.

In contrast, people who were raised by caregivers that were either rigidly authoritarian or highly permissive often find that the emotional dimension of their power style can be fear-based. They may react negatively to consensus building on the job and gravitate towards leaders who operate independently and exude an aura of confidence.

But there is another level of your power style the needs exploring. The behavioral dimension of your power style stems from the way you learned to deal with your caregivers as a unit to get what you wanted in childhood. Did a more informal approach win the day, or did you learn to operate more formally with them?

If your childhood experience taught you that you could sometimes get one parent to agree to a request that had been refused by the other, the behavioral dimension of your signature power style may be predominantly informal. People with a strong informal dimension to their power style prefer one-on-one interactions on the job when they are trying to influence others. For example, even when they know they will need to present an idea or proposal to a group, they will tend to run their ideas by key individuals privately before the group meets.

In contrast, clients who report that their caregivers stuck together when disciplining or rewarding them often exhibit a preference for dealing with groups to further a professional agenda later in life. People whose behavioral preferences indicate a formal dimension to their signature power style prefer to orchestrate an open debate around contentious issues with a group than negotiate individual agreements in private.

Comparing the ways my clients learned to adapt to get their needs met in childhood with the challenges, these same clients were facing in their current jobs unearthed some important trends. For example, Jeff, a senior executive in the advertising industry, was about to be passed over for promotion because his tendency to talk over others in meetings made him appear too anxious to lead a creative team. Jeff had worked with presentation coaches, but his urgent need to be heard held sway.

Jeff grew up in the shadow of an older sister who was a champion figure skater. His parents, who loved and supported him, had been so preoccupied with his sister's athletic career that they had inadvertently left Jeff starved for attention. Jeff longed to capture and hold his parents attention. This longing drove Jeff to created advertising campaigns that successfully grabbed the attention of families around the world. As Jeff began to understand the way that his fear of losing attention as a child was undermining the tone he set internally on the job, he was able to become a more powerful listener and land the promotion he deserved.

The first step in making change is to identify your own power style. You can evaluate your signature power style by examining your dominant emotional triggers and behavioral patterns. Most people find that their signature power style is a blend of at least two of these four core power styles:

• The Pleaser — Due to outside stressors, Pleasers often didn't get the attention they craved from their caretakers early in life. Pleasers often grow up hungry for validation and are hardwired to take care of others. Pleasers often wield power by attempting to connect with others at a personal level.
• The Charmer — Charmers were often required to soothe an emotionally needy parent early in life. As a result, they sometimes have little respect for formal authority and may manipulate others in order to get their needs met. The Charmer power style is exemplified by people with an intensity of focus that both intimidates and seduces others into compliance.
• The Commander — Often, a Commander has grown up in a family system devoted to sports, religion, the military, or any larger system that reinforces discipline and a strict code of conduct. Commanders operate with a results orientation and tend to foster a sense of urgency in others.
• The Inspirer — The family systems that foster Inspirers often value self-expression over conformity, and the caregivers in such systems are often willing to make personal sacrifices to achieve excellence in areas such as artistic expression or scientific inquiry. Inspirers tend to be innovative thinkers and operate with a consistent commitment to the greater good.

Each style has inherent strengths and challenges, and each presents us with important lessons about power in the workplace. Jeff discovered that his approach to wielding power reflected a blend of the Pleaser and Commander and was able to use that knowledge to adjust his habits and behavior.

As you identify your own power style, it's important to bear in mind that there are no "good" or "bad" power styles, and remember not to make snap judgments about others or about yourself. Most of us employ more than one power style, and you may even switch styles depending upon the situation. To assist you in better identifying with a specific style, I will be exploring case studies based on each of the four core power styles in future blog posts

Five Tough Questions Every Entrepreneur Must Ask about Growth

Getting a venture underway is often easier than keeping it going and growing. At each major stage from start-up to sustainable success, entrepreneurs face tough questions about shifting gears, making major changes, and letting go of people, partners, and products. For new businesses, inability or unwillingness to change can land them in the statistics about high failure rates at the five-year mark. For non-profits, clinging to the past can lead to marginality and stagnation.

To keep an enterprise on track while facing the often-pleasant challenge of growth requires making sometimes-painful adjustments in these five areas:

The People. One of the hardest questions is when to change the people — not just individually, but the whole mix. Founders often start with friends and true believers who work hard because of zeal for the cause or hope for future returns.They occupy multiple overlapping roles. But do the people with single-digit badge numbers or members of the founding generation have the skills the organization needs as it creates routines and requires depth in every specialty? Who can make the cut? A winery I knew from its beginning kept the original group longer than the business could afford, and loyalty got in the way of bringing in experienced people "above" the people who felt they were founders and thus privileged to call the shots. Raise a glass to courageous leaders willing to tell people they must either grow or go.

Finances. Whether the original source of funds is venture capital or venture philanthropy, an investor base or a donor base, each growth phase challenges organizations to shift assumptions and thus change practices. Perhaps investors expect customers to take over as funders of growth by paying more (or paying at all), a challenge dot-com companies faced in the first Internet wave and social media companies face now. Non-profits also outgrow friends-and-family angels or local sources and must find sustainable revenue and capital sources. How do you move from being discretionary nice-to-have in a portfolio to essential-to-fund? Where are the new sources appropriate to a new, larger size? A multi-site non-profit went from local businesses close to the founding city to national funders in government and foundations to a revenue model replicable in every site through ongoing school budgets on a fee-for-service basis.

Partners and Allies. The best organizations are attuned to the need for key external relationships that provide resources and support. At the same time, entrepreneurs do not want to be captive to the needs and desires of their first distribution partners, component suppliers, source of talent, or marketing allies. It is tricky to know how to nurture and draw benefits from key partners without being subsumed by them — or subject to damage if they stumble — and, at the same time, add to a partner set without creating conflicts. Which partners should be downplayed or replaced as the organization grows? How can key relationships be managed to lessen dependence while seeking new, more relevant, allies? And with growth comes the need for entirely new types of relationships — which is why Facebook now has an enlarged Washington office.

Organizational Culture. Are you making explicit what the organization stands for in tangible ways that can be transmitted and endure? Are you on guard against drifting away from the culture? Numerous studies, including my own, show that an emphasis on organizational culture is associated with continuing excellence. Values, stories, artifacts, and rituals provide a source of identity that makes the organization feel the same, in pursuit of the same mission even while everything else changes. Culture provides internal glue. As an organization grows, what was once informal must be documented, codified, memorialized, and passed on to new people. Savvy entrepreneurs ensure that their organizations are built to last by stressing culture. At every stage, they invest in preserving fundamental values and principles while adding new iconic stories that reflect them.

Outcomes and Impact. What results are being produced, for whom, and are these sufficient? In the beginning it's enough to show that it can be done at all — to address a good cause or to prove that something works in a handful of markets. In the next phase, you might look at growth indicators — we did more this year than last year. Recall the signs that McDonald's posted outside its stores during its rapid growth phase, heralding how many millions of hamburgers had been served. Sooner or later a new question arises: Are you making a difference that makes the venture more essential?

Ventures that go from proof of concept to "permanent" player have become icons, household names, or must-have players because they can show differentiated user, recipient, or national benefits — that they have impact not just on their immediate customers but on the entire industry. We all know that success provokes imitation. As the organization grows, its distinctiveness gets harder to maintain. But often many in and around the organization come to believe that existence is a sufficient sign of importance — a trap particularly for non-profits. Asking the "so what if we weren't here?" question about making a difference can provoke soul-searching and strategy change.

The bottom line: In addition to the challenges of innovation to ensure new offerings and new capabilities, entrepreneurs and organization founders must also be alert to the ways that the organization itself changes as a result of growth. It is important to anticipate those developments and ask the five big questions at every stage in order to get ahead of change and master it.

It's Time to Fire Some of Your Customers - Anthony Tjan - Harvard Business Review

It's Time to Fire Some of Your Customers - Anthony Tjan - Harvard Business Review

As we move into volatile times (again), business leaders more than ever need to maniacally focus on the few customers that matter most to them — and spend much less time on the rest. The customer may always be right, but not every customer is right for you.

Some years ago, when our venture firm was starting one of its first retail ventures, I met with a highly successful CEO in the retail services industry to better understand how he did so well across all of his stores (he had some mind-blowing numbers). It was abundantly clear when you walked into any of his stores that his customers were genuinely delighted. I asked him for his secret. His response surprised me and has therefore stuck with me: "When we open a new location we quickly grow to a database of 8,000 customer names — and then work hard to get it down to 1,500 names."

At first I was taken aback, as it seems counter-intuitive to shrink rather than build your customer base. Upon a little reflection, however, it made absolute sense: ultimately, business is not about growing revenue, but about growing profitable revenue with the right target customer. To get that right customer, you sometimes need to start by casting a wider net, figuring out which customers are the most attractive, and then temporarily shrinking the business before you grow it again. With each iteration, you get smarter and more targeted towards the ideal customer profile.

By focusing on customers with the highest potential in terms of repeat purchases and larger average transactions, one is able to create a more successful business because marketing and customer service efforts (and costs) can be allocated where they matter most. But for many CEOs and founders, the mandate for growth creates a bias for quantity of revenue over quality of revenue. At our venture firm, when we evaluate a business model we think very differently about a dollar of revenue with a high probability of recurrence (i.e. a customer who will buy again, making it high quality revenue) versus dollars of revenue that need to be constantly be replaced with new customers. We believe the threshold for a high-quality-of-revenue business is a revenue recurrence rate of over 85%, meaning losing no more than 15% of a customer base each year. Such businesses have higher predictability in their business model and greater leverage in their sales, marketing, and customer service. A higher quality of revenue means a better long-term business.

If you look hard at who is buying your wares, you can quickly get a sense of where the money is coming from and where your money is being spent. Some businesses exhibit the classic 80/20 rule, with their top 20 percent of customers making up 80 percent of the revenue. We have also seen a good number of firms with even more skewed revenue distributions that are closer to 90/10. Yet organizational efforts and resources are often poorly mapped to, or unaligned with, that revenue distribution pattern. In fact, it is often the opposite. That is, the bottom customer quartiles take disproportionately from a company's sales, marketing, and customer service resources. Some of the most challenging customers are those who in the "low-middle" bucket, buying relatively little, but needing very high touch and maintenance.

Why do so many of us fall into the trap of spreading our efforts evenly across our customer base, or even skewing them towards the lowest-potential customers? It is tempting to embrace every customer equally — and we naturally want to understand why the lower customer deciles are not behaving like the higher deciles. We want to believe that we can nurture and develop all customers to reach high potential levels over time. However, in the companies in which we have been involved, the data do not support that thesis. It is always tougher to change customer behavior than to find new customers similar to your existing top-buyer profiles.

The top priority for a business that wants high quality of revenues starts with understanding everything possible about the top customers. Drill deep to understand their demographics, psychographic, and purchase behavior preferences of your "super loyalists." Where do they come from? What is their attitudinal profile and what bundles of goods do they like best and at what price? Getting an intimate clustering of your top customer base is the foundation for a high-quality-of-revenue business.

By directing more customer acquisition and loyalty costs towards that top cohort, you will be implicitly de-focusing or "firing in advance" the less valuable customer segments. Yes, the term "fire" is a little melodramatic, but it is a clear reminder that limited resources need to be carefully allocated — and that just because you sell something to someone it does not necessarily mean it is a good thing.

Firing your customer does not mean to literally bar the door, but to set conditions whereby lower- priority customers self-select out and higher-potential ones self-select in. For example, for many businesses, first purchase order size is a good leading indicator of future purchases. If you knew that $50 was the average of your top loyalists and $30 was the average of lower tiers, you could simply raise minimum price on an opening order, or only offer free shipping on orders of $50 or above. As another example, for current customers who spend little but cost dearly in terms of customer support or other costs, consider a new pricing structure where higher support services are only free for accounts of a certain size. In effect, you can offer customers the choice to become profitable cohorts or to leave.

Your top-cohort customers are super fans who have voted with their wallets. They are the ones who will recommend you more often than other customers and would miss you most if you no longer existed. Find more people like them, and spend less time trying to turn others into people like them. Thank your best customers to death for their great patronage and worry less about — or simple "fire" — the others.