Excellence Isn’t What You Think It Is

Posted on by Stuart Murray
DSC08778 by Yasunobo Hiraoka, (=)
DSC08778, courtesy of Yasunobo Hiraoka.

In human resources you might spend a lot of time talking about employee performance and what it means to be excellent, average, and under-performing.  But your conversations about performance might be trapped in a decades-long mathematical error which skews your subjective judgements.  It’s worth exploring assumptions about the bell curve performance distribution, if only to be a little wiser when you “use your words.”

You will often hear that high-performing employees are three times as productive as an average performer.  I looked into it, and it’s not true.  The differences in performance are far greater, in some cases six-to-one or more.  I tracked down a good academic article by two Organizational Behaviour academics, tucked behind a paywall.  The paper is “The Best and the Rest: Revisiting the Norm of Normality of Individual Performance.”  Ernest O’Boyle Jr. and Herman Aguinis.  Personnel Psychology 2012, 65, 79-119.

The authors note there is a decades-long consensus that employee performance is distributed on a bell curve.  However, this consensus might be way off base.  Through a series of studies, they show that the distribution of performance more closely resembles a power-law distribution.  Here’s what the two distribution curves look like side-by-side.

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The blue diagram should be familiar to most people as “the bell curve.”  There are a bunch of proper names for it, but the features are well-known.  The largest number of people is really close to the peak in the middle, which in this case is the average performance score.  A bunch of people are a little to the left or little to the right of the average, and those are your below-average and above-average performers.  Then there are tails on either side of the curve; those are the rare low and high performers who are often about to get terminated or promoted.

There’s another way to look at it.  The rose-colored diagram is called a “power-law” distribution.  (Note that in this case the axes are reversed so that performance runs up-down and percentage runs left-right).  This diagram can reflect the likelihood that you will buy a rock album, with you and millions of others buying Beatles and Broken Bells on the far left of the curve, and dozen people buying albums from your own band on the far right.  The important thing to notice about the power-law distribution is that there’s a lot of activity on the far-left side of the diagram where the high performers are satisfying customers.

Researchers tested employee performance in a number of fields and found that performance more closely resembles the rose-colored diagram, the power-law distribution.

The research isn’t supposed to turn out that way, according to mainstream thinking.  The authors get into why we assume that performance fits this bell curve, and it’s not flattering to the legacy of social scientists.  Their zinger is that this is a “received doctrine” passed down from one decade to the next.  Yet if you trace the doctrine back to earlier sources, nobody can name that one study where they proved that the bell curve made sense in the first place.  Rather, there is lots of evidence of people fudging their data and throwing out the “outliers” to get their model to fit the doctrine.

The areas of performance that they studied were entertainers, university professors, politicians, and athletes.  There’s a small vulnerability (which they acknowledge) that these industries might not reflect all sectors.  In my opinion these are all star-system fields with a winner-take-all rewards system, and that system isn’t true of all types of work.  But on the upside, they have chosen fields with lots of data, and where our personal perceptions match the data.  We have heard of Sinatra, Einstein, Reagan, and Babe Ruth.  We understand that people just below the top ranking in these fields are barely known.

According to the math, the power-law distribution implies that top performers deliver the goods to a far greater extreme than originally thought.  People who perform at two standard deviations above the mean – a common measure for high performance – would be four times as productive under the bell curve.  Looking at actual performance, which more closely matches the power-law distribution, the correct multiple is seven times as productive.  At the top one-tenth of one percent of performance, the bell curve says they are six times as productive but power-law says they are twenty-five times as productive.

What about people who are below-average?  With the bell curve, the below-average people are one-half of the population because the average cuts the distribution in half.  It’s almost like a democracy.  But because superstars deliver so much more under the power-law distribution, it skews the average and creates a larger pool of people who are below average.  With a power-law distribution, below-average performers are 66% of academics, 83% of actors, 68% of politicians, and 71% of professional basketball players.

This research has many implications.  For example, those who have excelled might want to keep all of the gains for themselves, opening a controversy about the distribution of the spoils.  However the authors flag that excellence does not exist in a vacuum and all of these people are surrounded by support systems that cause them to be great.  Perhaps the gains from high performance need to be re-invested into these support systems to sustain excellence over the long-term.  Some superstars also engage in anti-social behaviours because of fawning admirers and their employer’s reluctance to terminate.  These behaviours make great gossipy television, but it doesn’t look good during lawsuits.  It is also unclear what traits cause these people to be superstars and whether these traits can be developed. Could we choose to create superstars then cast them aside every few years and start again?  Isn’t that what boy bands are all about?

I have worked in a couple of fields with a number of employers, and I have experienced diverse feedback about my own performance.  Let’s give others the benefit of the doubt and assume that the feedback is accurate.  Could it be that each of us is exceptional at one or two things, and mediocre at the rest?  Does it sound about right that we are more exceptional in some environments than others?  There is over a thousand professions on this earth and there are many workplaces.  How do you find that one skill and that one workplace where you rock the world?  …but enough about me and you.

If you work in human resources, how do you help other employees find that one thing?  If you’re in public policy, how do you organize a modern economy so that more people can find that perfect fit?  Would you ear-tag individual employees by type, place them into known jobs, prescribe what they ought to learn, and judge them against the average?  Or would you assess employees for their past moments of magic, foster intrinsic motivation, cultivate them to experience bursts of growth, build the work around their talents, and encourage them migrate into roles that are best for them?  As you can see, core mathematical assumptions have a big impact on how we talk to one another as humans.

Beating Bias with Blindness

Posted on by Stuart Murray
Blind Justice. By Tim Green.
Blind Justice.  Photo courtesy of Tim Green.

Managers and human resource professionals are supposed to have non-discriminatory hiring practices.  Yet we are only in the early days of seeing job applicants neutrally.  There are several new (and not-so-new) methods for considering applicants fairly.  There is also the possibility of using good math to prove and reduce bias.

Canada’s federal public service announced on April 20, 2017 that it is starting a pilot project to recruit job applicants on a name-blind basis.  The minister responsible said “research has shown that English-speaking employers are 40 per cent more likely to pick candidates with an English or anglicized name…”  At the end of the pilot they will analyze the two sets of candidate shortlists, both name-blind and traditional-method.  The results of the experiment will be ready in October, for possible roll-out to the entire public service.

What is worth noting is that the Canadian government is running a formal experiment for a limited time.  This raises hope that the eventual course of action will be determined by evidence, not speculation.  They will measure the discrimination before attempting to remedy it, which could bolster support.  The approach also implies the pilot has permission to fail.  After all, they might find something totally different from what they expected.  But that kind of thing that happens when you care about science.

Of course this pilot addresses only one part of the discrimination puzzle.  I would speculate that résumés that still indicate the year and city in which a degree is attained will tip-off employers about age and ethnicity.  An obvious next phase of analysis is to block-out the graduation date and the name of the University.  After all, you only need to know if they finished their degree, plus the degree’s level and academic major, and a broad sense of the school ranking (i.e. top-100, top-400).

Job applications also reveal writing style, which should be good.  But there are differences between the sexes in the use of words.  In the book The Secret Life of Pronouns by James W. Pennebaker the author reveals the findings of high-volume statistical analyses revealing (amongst other things) that men make bold pronouncements without referring to themselves in first-person.  Women, by contrast, attribute their story to themselves, which is more clear, social, and modest.  I personally think that confidence, and willingness to boast, are unreliable indicators of competence.

In classical music, blind auditions are now commonly used to select new hires onto symphony orchestras.  They’ve been doing this for years.  The musicians submit recordings of their auditions and provide live performances behind a physical screen.  I have heard that judges gossip “you can tell” if the candidate is a man yet when the winner steps out from behind the screen it is often a woman.  In this not-so-new paper from 2000, authors Claudio Goldin and Cecilia Rouse conducted an analysis of 7,065 individuals and 588 audition-rounds to see what impact blind auditions had.  They identified that the blind auditions work.

When you’re fighting the man, words are important.  When you’re putting change into effect, math is importanter.

Retail Gets a Knockout Punch

Posted on by Stuart Murray
IMG_0110, by Robert Starkweather, edits allowed
IMG_0110, courtesy of Robert Starkweather

Employers are increasingly concerned about whether their current business model is compatible with a fast-changing external market.  With technological change increasing its pace, employers are worried that they don’t have the right staff or technology to adapt to the new economy.

This New York Times article from April 16, 2017 describes a sharp turn of events in the retail sector in the US.  Online shopping is savaging the bricks-and-mortar retail sector.  There has been a gradual, decade-long shift from physical retail outlets to sites like Amazon.  But right now things look more dramatic.

In labour economics there is a key concept that labour demand is a derived demand.  When the demand for certain business outputs increase, the demand for workers who deliver those outputs also increases.  It is not so in this case.  The technology of online shopping gets products into your home while employing fewer workers.  This means that shopping revenues can increase while retail jobs decrease.  From October to the time of the article, 89,000 people had been laid off in the retail sector in the US.  The job losses themselves are larger than total employment in the coal sector.

The article poses the concern that “job losses in retail could have unexpected social and political consequences, as large numbers of low-wage retail employees become economically unhinged, just as manufacturing workers did in recent decades.  About one out of every 10 Americans works in retail.”

This situation raises more questions than it answers.  Will we be able to employ former retail workers in a different part of the economy?  For those businesses that are thriving in the current environment, what will be the onus on them to cover the cost of the downside?  What if you lost your job and went to find temporary work in the retail sector, and discovered you couldn’t even find that kind of work.

Disgruntled workers are already sending mixed signals at election time.  That blowback is arising from two decades of job losses mostly in the manufacturing and resource sectors.  Now the disruption is making its way into more sectors and the change is happening more quickly.

Could it be that the dynamic between technology, globalization, dis-employment, and volatile voting patterns is going to become even more dramatic?

Let’s Just Pretend This is Normal

Posted on by Stuart Murray
cocoa #22, by nao-cha
cocoa #22.  Courtesy of nao-cha

It’s important for employers to watch labor market trends because it gives us a glimpse into the workplace culture of the near-future.  Between the rows of statistics we see an emerging screwball comedy which could play out in selection interviews and corporate back-offices.  Following the plot is important for our own careers, but it’s also important for keeping amused.

There are forecasts that the second quarter of 2017 will see a jump in new hires in the US.  This interesting article by Scott Scanlon of Hunt Scanlon Media notes that employers had been waiting-out the hype of a change of US President, and are now choosing to hire more staff.  It’s partially a result of a few quarters of employers standing pat through the election period.

Regardless of whether one agrees with Trump’s policies you have to admit that he is provoking activity.  Whether it’s the sporadic cancellation of plans to relocate plants outside of the US, or the increased activity at law-enforcement agencies, or the growing likelihood a wall will be constructed on the border with Mexico, lots of people are running around doing more work.  Whether the changes are good or sustainable is not relevant to the fact that increased activity creates jobs.  And job growth has a knock-on effect on consumer confidence and housing starts.

Employers anticipate an emerging talent shortage.  However, the employers themselves are partly to blame.  Hiring managers expect to hire the very best people when they open a posting.  Can you think of any solutions?  I have an idea; how about we get rid of perfectionism amongst hiring managers?  After several decades of employers always having the upper hand, organizations might have developed a management culture that is incompatible with job-seekers calling the shots.

Also, employers have been reluctant to hire candidates to grow into a role, or to invest in developing talent.  What ever shall we do?  Change gears by hiring candidates who can grow into a role, and then invest in their talents?  It seems like such a strange thing to do!

There are “job seekers looking for 20-plus [percentage] increases in salary to make up for the lack of raises and increases over the past few years…”  Employers are responding by shifting to an on-demand workforce, referred to elsewhere as the Gig Economy.  But people taking gigs will often charge double or triple the rate of a salaried employee.

Employers can’t handle the humiliation of acknowledging that union representatives and millennials have had totally reasonable expectations all along.  We’re obliging people to triple their wage, come up with a company name for their services, and then skip HR and just talk to supply management about their vendor contract.  Business leaders aren’t in this for the money anymore; they have to maintain composure.

All that’s missing is an economy where all of these contractors collect receipts to reduce the taxes on their business.  So… who’s going to pay for that wall?

Oh Boy, Here Comes the Future

Posted on by Stuart Murray
Dungeness Beach, by Gareth Williams
Dungeness Beach.  Courtesy of Gareth Williams.

This emerging trends review by Josh Bersin from December 2016 provides some forecasts about work in the future. You’ll have to click past a pop-up screen from Forbes.com to get into it (be nice, that’s how they pay for it).

Bersin notes that business models are changing to adapt to new threats like Airbnb and Uber.  Meanwhile software companies are shifting to fee-for-service models, where you don’t buy Microsoft Office, you rent it.  A lot more things are touch-and-go.  Seventy percent of CEOs think that their core business model is under attack.  They are concerned they don’t have the right leaders or technology to adapt.

Bersin goes on to say that the company of the future, the “digital organization,” will need to reverse the pecking order of investor, customer, and employee.  The engaged and fully performing employee creates satisfied and returning customers.  Customers drive cash-flow and set up investors with success.  It is not really the investors who drive the business.  It’s the front-line staff causing business success or not.

To make this work, employees may need to develop hybrid skills.  They will need their current core skill fused to one other skill.  An example could be sales skill plus the ability to interpret the client’s business model, two abilities not always found together.  I have always thought that all of the cool stuff happens at the boundary between categories.  If you’re great at five random and un-related skills, that moment when you bring two strengths together can truly make you special.  If one such skill is your ability to take advantage of a new gadget or app, that’s in the mix also.

There is also a shift from “jobs” to “work.”  With jobs, there would usually be a job slot into which you place a person with a skill-set to conduct duties that are clearly defined.  Those of us who have worked with a lot of formal job descriptions know that they are just frameworks.  Job descriptions have a wooden walk, like intoxicated teenagers trying to sneak past their parents.  Yet real work involves a flurry of micro-skills, attitudes, connections, and organizational knowledge.  “Work,” by which we mean the actual work performed, is shifting more quickly as products and services change.  It is far more important to staff the business with general skills, capabilities, cultural fit, and the potential to get new work done in an environment of change.  And don’t forget those hybrid skills.

These shifts are dawning on CEOs as having a massive impact on how they will conduct business in the future.  And all eyes are on the human resources team.  In order to ensure individuals adapt to changes in skills, technology, and work definition, Human Resources teams have to be able to make it all work on the larger scale.  The way we design jobs, pay for them, ensure performance, develop skills, and adapt to new tools and models, will become critical for organizations that want to get ahead of the pack.

At least that’s what I thought he said.

Buckets of Badly Stereotyped Millennials

Posted on by Stuart Murray
Buckets
Buckets.  By Randy Heinitz.

There has been a lot of discussion about the increased importance of Millennials, and their impact on the multi-generational workplace. One of the more influential sources is a book called The 2020 Workplace by Jeanne Meister and Karie Willyerd, published in 2010.  There’s a generous “look inside” option on their Amazon.com page right here.  It’s a good book, and it’s true that there are a lot of generations in the workforce right now, expressing their perspectives in different ways.

However, I need to express some respectful disagreement.  I think the notion of a multi-generational workforce in 2020 is an anomaly in terms of how labels have an outsized impact on how we treat people.  This is important because labels such as “millennial” could be nonsense to begin with.  Also, we need a sober sense of what current topics are only temporary.  Predicting the future often involves the reading of known short-term trends and envisioning a future where the trend goes to extremes.  I think this will not be the case with the multi-generational workplace.  So, don’t worry about it.

To put things in perspective, I need to provide a clear definition of Millennial.  In my opinion, Baby Boomers are those born from 1946-1964, Generation X (Gen X) are those born from 1965-1974, and Millennials are those born from 1976-1995.  There’s some disagreement about the definitions and that’s your first clue that externally-imposed labels might be a problem.  I’ll get to that in a minute.

A key detail is that Gen X is a 10-year cohort, whereas Baby Boomers and Millennials are 20-year cohorts.  Gen X was born at a time when Baby Boomers were in their child-bearing years but chose to postpone having kids, for about one decade.  Then beginning in 1976 Millennials, who were the children of Baby Boomers, started to arrive.  In all discussions of what matters on a generational basis, the math suggests that Gen X would always be halved in their importance, because of their 10-year cohort.  Also, Gen X is a generation Baby Boomers don’t think about as much because there’s no parent-child dynamic.

A key detail about the labour force is that overwhelmingly it is made up of people age 25-65.  Yes, there are people working before the age of 25.  However, many of them are busy with postsecondary education, travelling, struggling to get their first job, and, in some cases, raising children.  By age 25 people are largely working, with the occasional maternity leave or brief spell of unemployment.  Those over 65 may work as well, however, it’s not a universal experience.

Whenever we talk about humanity as “the workforce” we’re actually choosing a 40-year age bracket (aged 25-65) of people who would normally live for 80 years.  The workforce is about half the population.

When we drop a generational definition into the middle of this 40-year age range of “the workforce”, it can be hit-and-miss.  It is possible to fit an entire 20-year cohort into the workforce, such as in 1995, when Baby Boomers were aged 30-50.  Indeed, Baby Boomers were very important at that time.  Today Baby Boomers today are age 51-71.  A lot have retired already, and a few more retire every year.  They contribute strongly as individuals but their club isn’t so impactful.  Gen X would feel their pain, if they had it in them.

The reverse dynamic is happening with Millennials.  In 2005, Millennials were age 10-30, fewer than half of them truly in the labour force.  They were not a small population, it’s just that the 40-year age bracket called “the workforce” ignored the youngest half of this crowd.  Fast forward to today and they’re age 22-42, largely working, making up the largest fraction of the workforce.  They are ambitious and they say what they want.  They are the second-most-entitled population to ever walk the face of the earth.  Gen X is strangely calm working with Millennials.  It’s hard to explain.

The fuss about the multi-generational workforce is just an experimental perspective in which we have split categories in half and caused some numbers to pop more than others.   In a few years the population born after 1995, Generation Z, will start finishing their master’s degrees or get their full credentials in the trades.  For a brief moment, in 2020, there will be four generations in the workforce.  Then the Baby Boomers will fully retire, leaving us with three generations in the workforce.  Then, ten years after that, Generation X will retire.  In 2040 there will be two generations in the workforce because we’re back to two, twenty-year cohorts straddling the 25-65 age range.

It is not how big these generations are that makes them important.  It is whether they are in a 10-year or 20-year cohort, and whether the generation is fully or partially in the labour force.

Is it just me, or does this sound like we’re figuring out what colour of metal ear-tags to put onto our cattle?  I think it would be far easier to talk to everyone as individual people, with their own perspectives and unique hopes and dreams.  Isn’t that what the human rights legislation tells us?  Isn’t that what compassionate leadership is all about?

Isn’t that what we have all learned from one another as colleagues and friends?