Hiring free agents (and others)

The noise created by the San Francisco Giants signing former Oakland A's pitcher Barry Zito for $126 million over seven years may seem to be a product of major league baseball's parallel universe; where salaries are viewed more as a way to prime the overall revenue pump than to reward personal productivity.

Sign a big name player, history shows, and the benefits begin before the games are even played. Season ticket sales go up, logo merchandise sales go up, fans' spirits rise and all to the benefit of obscuring what might still be wrong with the team overall. That will play out later, one the season starts.

But as specific as these elements seem to be linked to the idiosyncratic economics of major league baseball, they are just as much a part of the real world in which the rest of us live.

The factors leading to a decision to extend the offer, anticipate its effect on the team and calculate the added burden of heightened expectations among fans differs little from the factors that affect the way most businesses approach hiring. The persistent fretting of how new people change a culture, raise the already high demands of customers and change the economics of personnel by adding new people are key factors facing any business when it seeks to add to its team -- and at any level.

o When a colleague resigns, they leave a hole that must be filled. Even if it comes from within (and it should whenever possible), it creates a domino effect which merely moves the "hole" around.

o When opportunity arises, new resources -- people -- need to be added, not just anywhere, but in jobs and at a level that makes sense to the team already in place. The positive effect of expanding is quickly undone if it is perceived as coming at the expense of a current colleague's opportunity to advance.

o When good people present themselves absent a need or opportunity, there ought to be a way to add them to the team, with the understanding that the return on that investment must, in part, offer a short-term return. New colleagues who don't add to the mix come to be seen as a "bad bet" and, as they might say in baseball, bad for the clubhouse.

o And when we need to fill the special spot with a big-time performer, there is robust retained search industry to serve in ways quite similar to players' agents. These are the signings or hirings that get all the attention, but they are only a part of a proper mix.

Recruiting needs to be as persistent a corporate function as career development. Even here that there is only a little divergence between Major League Baseball and rest of business. The free agent signings make the biggest splash, but championships are won by developing talent in their extensive farm systems (of which college baseball is an affiliated part).

A new CEO, lured from a bigger or competing or better run company, can boost the share price, but it is the persistent recruitment and retention of quality people that will make the options pay off.

The art (or science) of business momentum

Is this a photo or a painting? It is art or science? It can be either or both. Our bias is to split the difference or "go along to get along" on the tough questions so as to not affect momentum. In life and in particular in business, momentum is the signal difference between success and failure. As a mentor once told me to great effect, "no one wants to work for a company that is not growing." Growth and momentum are complementary and active.

Growth is what pushes people to seek to reduce business to formulas. If the seemingly random mix of employees, products, partners, marketing and distribution can be reduced to an equation that equals sales, then targets can be met or beat by just doing the math. The math will equal momentum and successfully "closing the quarter" will require only a sharpened number 2 pencil.

Currency trading looks like a business built on science (mathematical algorithms, really) and network security is another. But it remains a short list even though we keep trying to make longer.

At the root of our failure to see lab experiments replicate and root in the field is the fact that a successful business can be built in a hundred different ways. Science abhors such variability, business rewards those open to it. Sure, it is often true that "if we can measure it, we can manage it," but it is always true that business allows work-arounds and science does not.

Just consider the decisions made in any given day. It can be built or bought. It can be owned or affiliated. Sales can be direct or by way of a channel. It can be manufactured or outsourced. We can hire full-time people or rely on independent contractors.

This is not to say that business is not absolute because it is binary, but to illustrate the point that at every turn in the business day there is a dense forest of decision trees confronting us. It clearly makes success more a product of art than the output of a formula.

A recent debate erupted about expanding licensing of certain business professionals. Lawyers, CPAs and such are among the professions so regulated now. Perhaps, it is argued, the rest of them should be, too. That's science talking. There is black letter law and the numbers must add up, but who is able to assign the steps leading to what new might come from the garage or university lab or a cross-country drive with time to think and plan? That's the art of it.

It is indisputable that business -- any business -- is part art and part science. But, to paraphrase Thomas Jefferson on the relative value of newspapers and government, if I had to choose between art and science, I would choose art. It is a powerful innovation engine, essential for growth and the raw material for momentum. Most of the science a company needs to project itself can be found in common software, readily available and easily installed.

But It is art that allows me to see a photo of a row boat floating on a lake in Maine and see a painting of how the weather was and how the chowder tasted.

Eavesdropping is not listening

Given the choice between more or less communication in building a business, most managers, whether new or long-standing, would say “more.” It is the prevailing view.

That commitment is tested daily, when events occur, initiatives are hatched or almost anything changes. Change not only requires communication, but it can give managers second thoughts about saying anything at all. That’s because change can be unsettling. Consider the loss of a customer or resignation of a colleague. The initial reaction is more likely a question, “What do they know I don’t?,” than it is an answer to what comes next.

Compounding the problem is that over the last five years, companies have become leaner, less hierarchical and more flexible so as to take advantage of subtle market shifts. In such an environment, communication is the key to developing the kind of coordination that helps a company do more with less. But is it also an environment less able to withstand even modest bumps in the road.

The management dilemma – the need to communicate and the need to maintain stability – has led to a handful of approaches. Some rely on a handful of insiders with whom they counsel and decide a course of action. In this way, others always know, so the burden is shared. Some rely on the fact that what is to be known will get out anyway, so why not get it out first and under control. Still others take each instance on a case-by-case basis; viewing each event in its time and to its near-term consequence.

The first two courses are defensible, though incomplete solutions. Simply, they create differences that can get in the way of productivity or ignore the need for perspective. But the third way is a real recipe for disaster. As a successful company is built on a set of persistent values, a theory of “communications relativity” does more to undermine its ability than to promote it. Equally damaging is a key feature of this last approach. Too often it relies on "keeping an ear to the ground” or eavesdropping.

For managers who seek to cultivate relative calm by editing the news, eavesdropping is viewed as important to knowing the mood of the company. What better way than unobtrusively dropping in on the hallway and lunch room chatter that fills the time between assignments? However, what is said when colleagues don’t think anyone is listening is far from unvarnished sentiment.

Eavesdropping earns only a fragment of a conversation among others. It offers none of the history or context for what is heard and gives equal weight to things that are either essential or unrelated to the team. Eavesdropping also presumes that what is said among colleagues carries more decision-making weight than what is said directly. It undervalues the desire of employees across the board to participate in their companies’ success. The structural changes in companies have encouraged this commitment – it is necessary to survival.

All this makes eavesdropping a poor substitute for listening. Listening requires a back-and-forth, freighted (thankfully) with history, rank and opportunity, which can make communication more a default than fault while leading to decisions more fully embraced.

When a long-time colleague resigned recently it led to concerns over work reassignment, customer notification and an internal announcement. Seen one way, it could be viewed as a link in too heavy a chain. Seen in another way, it could be a market comment on the company's likelihood of success. Yet in another, better angle, it could be seen as part of the normal retrenching and revitalization that marks a healthy business.

So, how to focus attention on our “better angle?”

By talking to a couple of people, and not just managers, the key questions and anxieties were identified and able to be addressed upfront. Just because communications is necessary does not mean it should be without thought or perspective. It also needs to be timely; better to hear it from your boss than the customer.

In each case -- certainly in this one -- listening is far more effective than eavesdropping when it comes to providing perspective.

Managing in public: the strength of thread

Managing in public – where executives admit that everything they do or say will likely be public one day so why not make it so yourself -- is a 24-hour-a-day, seven-day-a-week assignment. To effectively manage in public, personal choices must be seen to complement or align with professional ones.

Communications skills are paramount. Not just being able to speak clearly and consistently, but to be willing to listen and to prove the point by integrating the best of what is said into management’s point-of-view. And not just being willing to listen, but being good at asking questions to draw out what others think – and adding the best of the answers into the point-of-view; all in support of the “thread.”

The thread is the unbroken (though not necessarily straight) line which runs from a company’s origin to the current state of its business leading to its aspirational goals. By its consistency and the company’s commitment, it confers an authenticity.

That’s because it is a combination of a company’s values, business model and approach and its goals. It informs and explains a company’s decisions. And just like the plot of a novel makes it easier to create characters that propel the story, the thread allows companies to showcase an authentic commitment and accelerate their success.

If the external benefits are clear (trial, loyalty and a bit of slack when mistakes are made), the internal benefits are equally significant. Lower turnover, a deeper recruiting pool, a well-understood mission and a clear commitment to its success can all derive when employees feel they have the full picture. It also seems to be true that when employees have the full picture, they are more willing to agree that there are some things – some few things – it is OK for them to not know because they are more willing to accept an organizing hierarchy.

Ironically, it is not the big issues that make managing in public hardest; it is the smaller, day-to-day things that can drive a manager to a bunker, a customer to blog or an employee to wonder what else they don’t know. For some managers, schooled at a time when the dominant management theory was, "if you want to be loved, get a dog," the shift can be disorienting.

Now having to be attuned to each individual's reaction to news of a finance-driven health policy change, a resignation, a request for special treatment (legitimate or otherwise), a promotion or pay raise or a team or sales lead assignment tests the willingness of managers to trust their people and, ultimately, themselves. In the air is the question: “Why do I need this grief?”

Well, because it’s not grief. It is a window into the ambitions of the staff -- what motivates behavior -- and so this day’s raw material for commerce. It is what makes managing in public a powerful company and business development strategy.

Managing in public: the expectation of authenticity

The development of digital technology and tools continues to make the internet increasingly important and disruptive. “Important” because as a method of communication it eliminates time and distance and reduces costs to near-zero. “Disruptive” because not only can email easily be sent, there is an expectation that it will be received, read and get a response in near-real time.

 For people with the time and the passion, the technology and tools allow them to express themselves, identify like-minded fans and add another level of enthusiasm.
 For people with a new idea, the technology and tools allow them to find a market and fund its development.
 And for people with a desire to pass along what they know, what they’ve experienced or the best restaurant in Prague, the technology and tools gives them access to an audience beyond the sound of their own voices.

This last group of online advocates or bloggers will likely be the most significant agents of change. Their ability to lodge complaints, organize boycotts or point fingers at bad corporate actors without a check or filter has already begun to instigate a reaction from companies, institutions and individuals who are the subject of their web posts.

Some companies have sought to talk to these folks, to build a relationship that can be the check or balance that does not now exist. For these companies, creating their own blogs might be a key part of the program. Other companies are just now studying the landscape. Still others do not yet know what is about to (or already has) hit them.

What those already engaged know and what the companies studying will learn is that business today is increasingly being conducted in public. In a real way, the legal concept of transparency is being one-upped by what the digital technology and tools have done to free up information.

There is no way to say one thing to one audience segment and something else to another. There is no way to ensure that internal communications will not become public. And there is no way to command or control what is said about any company that sells anything. As a result of being exposed to everyone all the time, it has put a premium on the truth and presenting yourself as you are.

If natural resources were the coin of the industrial realm and it is not knowledge so much as authenticity that confers power in the information age; it is authenticity that is the basis for the authority to lead.

The evidence can be seen at every level. In politics, it explains why people seem to vote against their own self-interest; in sports, it leads to the size of the endorsement; and in business, it is the basis for product trial, brand loyalty and corporate second chances.

But rather than feeling we are being forced to live as if every word and action were being web cast (recall “The Truman Show”), it may be time to develop, reward and promote the skills that will allow people to take advantage of the need to “manage in public.”

If all information that can be shared, let it be shared. If behavior is consistent; if values are clea and mistakes admitted and addressed in full view, there is a real chance to not just find customers, but build a community.

What comes first, the successor or the succession?

At a recent conference of business executives and their advisors, the focus was on leadership. Can it be learned or is it innate? Is it serf or master to managing? Is it the product or result of innovation?

The arguments on each point revealed less about which path was correct than it did to confirm the essential role of leadership in creating economic value. The truth of that is seen most clearly at times of succession.

New leadership poses serious risks to the organization as much as to the man or woman stepping into the seat. For the person, there is the need to live up a legacy even as it needs to be put behind. For the company, there is the need to keep what works working well even as new ways are sought to fix what’s broken or improve what's not yet good enough.

The last guy – who retired or was recruited or left to spend time with the family – was, no matter what the economic circumstance, a “comfortable” option; they always are. It has something to do with the time-honored "devil you know."

Yet succession, whether forced or practiced, is an inevitable element of leadership. And it is not limited to change at the top. Within the hierarchy of any company, there are leaders at every level. And when they change, there is just as much a potential danger.

The line manager who knows and gets the best out of his or her teams, the regional sales lead whose merry band consistently beats the targets or the local office manager who keeps the vibe positive and the lights on are all on their way somewhere -- up, out, over -- and when they go, they leave behind an open spot. A leadership opportunity to be filled by succession.

And if every change is an opportunity to grow or recede, how do you know the best choice?

One way may be to look at the dynamic of a company in the way companies look at the dynamic of the markets they seek to serve. For those companies, it is taken as an article of faith that “new” is an essential element of market success. This might lead you to look far afield inside a company or outside for new leadership.

There is a smaller, smarter set of companies, thought, that know that “new” is not enough; in fact, “new” all by itself may never be accepted. What works best and most is to combine what’s new with what's familiar. In this way, what works for products and services also works with people.

This is not to say that openings should only be filled from within, but it does say new people need to carry or reinforce the culture of the company. They need to reflect the values of their colleagues and buy-in to the mission, even if they seek to change it. Familiar and new is an important one-two punch when leaders' seats need to be filled.

And the balance is very important. Baseball managers who seem to go from one team to the next without seeming to have to worry about winning benefit from owners who lean too much to the familiar. Companies that want to move into new markets often draw upon the new talent pool where they want to go, downplaying the value of a sense of where they've been. Still others continue to restructure the leader's role to keep him or her on the job -- long after a change would have done each some good.

With change always on the horizon the only way to keep that balance is to keep the possibility of new leadership on the daily agenda. Cultivating successors guarantees a chance to get the benefit of succession. Wait and the pressures of time and expectation may eat away at the strength of the balance sheet.

Sounds familiar; and not so new.

Holiday parties can be a real mixed-bag

It is that time of year when companies, or local offices at least, gather to mark the end-of-year holidays. The focus is generally on the logistics and cuisine -- the "how" of it. Far less attention is given to the "why" of it. There is good reason to begin there before picking the food and wine pairings.

First, there are pitfalls for the host, whether the events be low-budget affairs (I went to one once where upon arriving each guest got two drink tickets -- guess how many people stayed for a full-fare third?) that test the bonds of the team or spreads so lavish they make the employees on hand wonder why some of it couldn't be spread over them during the year.

Second, there are pitfalls for the employees, beginning with whether to bring a date (and doubling the chance that the wrong thing will be said or a confidence revealed) and running to making a bit too merry and doing or saying something in the spirit of the season that keeps on giving throughout the year.

To avoid these (as well as for other reasons), some companies pass on the opportunity to gather to mark the season; offering a charitable contribution or time off instead. Other companies gather, but for team-building activities and during the day. Yet many persist in holding a "holiday" party (catholic, not Catholic nomenclature), viewing it more as a "thank you" for the past year and to mark the coming one than it is notice of the season, either secular or religious. From a company's point of view, it is an attempt to boost the coming year's productivity by making work personal.

The flaw in that thinking, though, is that work isn't personal. If it is managed as if it were, even terrific bottom line results would always be colored by disappointment. In fact, the best argument against a holiday gathering -- any gathering, really -- is that while individuals may want to know they are a part of a larger whole, their daily focus is on how their contribution affects their personal standing. Get-togethers add more than a little tension to the equation by forcing people out of the solitary and into the social.

That is not to say that small groups, meaningful groups don't form inside companies. They always do. Sometimes built around an interest or gender or business focus or life stage, these groups are helpful in promoting careers and instilling productive behavior. Full-scale get-togethers, built not from the ground up, but from the top down; or ad-hoc around an event or holiday can throw together people who would not otherwise seek each other out. Adding unfamiliarity to the expected bonhomie a holiday party creates a a cocktail that can be explosive.

So, as you dress for the holiday party, remember that it will be a few hours that can have a disproportionate effect on your workday reputation. On one hand, you may find common ground you did not know existed. Great things can be built on such plots. On the other hand, you may find your views validated thereby, at least, raising your confidence level. But on the imaginary third hand, you may have a good time outside the concerns of hierarchy or history.

That is why as the parties are planned for this year's end, I am reminded of something Jack Nicolson as "Frank Costello" said in "The Departed," the Scorsese movie: "Act accordingly."

The failure of collaboration

We are all geographic recidivists. It reveals itself in the fact that, despite the mobility that modern life supports, so few of us stray too far from home. And it is why, even when we do create new orbits, we return so often. Some of it is place, some of it is family and some of it is the comfort of what is familiar.

But what is laudable during the holidays, can be limiting in business. The same urges that make us like homing pigeons, make us resistant to an essential element of professional success – collaboration.

This can be particularly acute when viewed from the perspective of a geographically distributed professional services firm where what people know trumps the length of the lever. In such settings, collaboration is a “must have.” The more complex the client problem, the broader its reach, the larger the pay-off and the fewer the analogies, the greater the need for firms to call upon the right people no matter where they work or to whom they report.

Adding to the importance of collaboration is that, again, especially for professional services firms, in such businesses there are only two essential costs to be managed, people and place. And without a commitment to collaboration, both are bound to get out of control.

And that commitment, uttered as an oath, is often unmet. Why?

First, consider people. They are often slotted geographically – New York, Chicago, LA – and functionally – finance, manufacturing, consumer. This alignment can work against a system wide approach to problem-solving. If people are judged – and rewarded – for work as measured by those geographies or functions, there is little encouragement to look beyond those groups.

This is a recipe for disaster when client needs wax and wane. It hoards too much of the benefit in good times, burdens too few in worse times and leads to hiring people with overlapping skill sets; replicating capability rather than expanding it..

And with the cost of people understood as to sum total of compensation, benefits, perquisites, even the bagels on Friday as well as the occasional free lunch, the more people you have, the higher these costs. People don’t scale; neither to people-based businesses.

To squeeze these costs below market is to create turnover, the biggest problem a people-driven business can endure. Another common problem is paying a premium to keep the staff together. This, too, can crater the bottom line.

Collaboration guarantees the best client service teams, allows the staff to be comprised of fewer people (therefore less susceptible to short-term financial shifts) and with a better sense of community (leading to lower turnover and higher innovation).

Second, consider place. It has been said that form can dictate use. And the form of most companies is a distributed set of offices in key market locations. In a business where it is imperative that cost of the square feet, heat, light, desks and the rest be kept as low as possible so as to drive investment in people; the size, shape, number and location of a company’s places can inhibit collaboration.

In an attempt to grow any single place, the whole place can suffer. And even if costs are controlled by balancing Spartan digs and creature comforts see point one above: People. When teams are built locally, whether in one office of a network or one functional unit of a single location, they circumvent a commitment to collaboration and undermine the success of the firm.

Some changes to business models and compensation triggers can encourage collaboration. But these are merely checks on natural behavior; we manage best what we can touch. The trick is to create the sense that our reach really is beyond our grasp.

We need to know our colleagues as if we worked in the same place. That’s why the investment a company makes in bringing its people together – group meetings, secondments, re-location and the rest – help create a relationship, a link that eliminates time zones and distance. Smart companies know that creating this sense of kinship will create real value for clients, colleagues and the firms themselves.

If we don’t, we will be unable to deliver on our promises, hold on to our people or control our costs. That is a terrible trifecta.

Can communications save democracy?

The new Congress, a product of Election Day 2006, is not yet sworn in and the daily media drumbeat – on broadcast, cable and the blogosphere – is “enough already” with that; who’s going to run for President in 2008? This focus on the future may be part of our make-up or it might merely be a made-up agenda to cover the fact that most of us don’t care much about policy, only politics. Communications – from campaigns, corporations and media, too – have helped create the problem. It may also be part of the solution.

First, as they say, let’s look at the numbers. In San Francisco, where I live, a city that gets high marks for social and political activism, the latest election showed that very few of us who can vote, do vote. Of about 630,000 eligible voters only 420,000 are even registered and of those, only 156,000 voted. That's 37 percent of registered voters, 25 percent of eligible voters and 21 percent of the total population.

That a mayor can be elected here, as Mayor Gavin Newsom was here, with about 130,000 votes is bad enough. But that a supervisor can be given the opportunity to affect this entire City on the basis of as few as 5,000 is painful. Even when a supervisor's total vote count hits five figures, it still represents, at best, 20 percent of the eligible voters in his or her district. And this city is a reflection of the country.

NYC Mayor Bloomberg was re-elected in 2005 with 750,000 votes in a City of 8.1 million – and that was 5,000 more than he got when he won a contested battle in 2001. The numbers say we have gone from a participatory democracy to an observational one. It is clear that de Tocqueville, who called America “a nation of joiners,” wouldn’t recognize our bite-sized approach. But what changed first, the public appetite or the media recipe?

You could pin it on “60 Minutes” for showing the networks that news shows can generate a profit and forever linking news to ratings points; you could pin it on “USA Today” for shortening the need for an attention span, not offering a meal but McNuggets; you could pin it on Walter Winchell who pioneered celebrity journalism and embedded voyeurism in our day-to-day.

You can blame it on the disconnect that marks too much of what companies say and what they do; or you can hang it on the campaigns themselves that arrive exhausted on election day, as if that is the finish line. Recall Robert Redford’s line at the end of “The Candidate,” having won his race and hiding in a broom closet from exuberant supporters, he says: “What do I do now?”

First, you can take some short term lumps to make a long term case. True, the quarterly demands on public companies and the zero-sum guidelines prevalent in the business media make it hard to manage in public, but that is what needs to happen more and more because,

Second, the value of authenticity is more highly-prized that ever before. The market is hyper-sensitive to gamesmanship (evidence the standing of Jon Stewart and Steven Colbert) and so is drawn to people and companies that remain true to themselves.

And, third, it is not just marketing that is a conversation, success itself is now linked to a willingness to engage. Just as the arrival of the digital watch led us to re-brand those with a sweep hand as analog (thanks to William Safire for coining “retronym”), the empowerment of the customer made possible by the internet has become the standard for all company communication. We expect to be able to talk to those companies we deal with, and expect to hear back.

Any of these three steps is hard; in combination they have caused too many to shrink. And, if talking at all means talking about it all, then it is easier to say nothing at all. It is easier to play to the biases of the market than it is to buck 'em. It is easier to fly high on the wings of generalities than walk among the reality of the ground level terrain hard.

The result is that communications feeds a public discussion about the color of the problem but not the problem, political debate focusing on the presentation of the candidate but not whether a plan is presented and corporate marketing that delivers emotional impact but little differentiation -- all with a time horizon of hours, maybe days, but not a generation.

By letting or asking people only to react, we make it easy on them and easy on ourselves but more difficult for tomorrow because by diminishing perspective, we marginalize the past and reduce the importance of the future. If change it to come, it may fall to the subversives among advertising, marketing and public relations people to begin to seed the prevalent two-dimensional debate with a third -- the role each of us can play in the outcome.

Not how a story affects us individually, but how each of us -- individually -- can affect the story. Make the distant acts of government and business deeply personal and activism can follow.