It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.

Golden Oldies is a collection of what I consider some of the best posts during that time.

I’ve changed a lot since I wrote this in 2006, as has the world. For one thing, if I was writing it today I wouldn’t say “respectfully.” I don’t respect Welch or consider him a sterling example of either management or leadership. Under his watch, GE profits soared — generated by the financial engineering employed by GE Financial.

Welch instigated a review system based on forced rankings resulting in a culture of fear and mistrust, which spread through major corporations like the flu, damaging moral and trashing talent. And he believes that careers take precedence over family, marriage and life in general. If you are a boss in the 21^st Century he is definitely not a role model.

Read other Golden Oldies here.

Today I take my (professional) life in my hands and disagree with an icon. Jack and Suzy Welch write a column in Business Week called, “Ideas The Welch Way” that I’ve been ambivalent about since its inception. Jack Welch is one of the gods of the business Parthenon and for a “nobody” to publicly disagree with him—well, fools rush in and all that.

The July 17 column is about what HR is and should be. My disagreement is that they seem to feel that HR should orchestrate, and even do, line management’s job. In the second paragraph they say, “Look, HR should be every company’s killer app. What could possibly be more important than who gets hired, developed, promoted, or moved out the door?”

Agreed, nothing is more important; those four actions are critical, but there is no way that the most brilliant HR person can make the call on any of them. They are neither close enough to the day-to-day actions of each department or knowledgeable enough of the work and its technical requirements to determine

• what skills should be strengthened or what skills-hole needs to be plugged most urgently based on upcoming projects;
• the subtle competence, latent leadership or intuitive flashes of brilliance that would bloom with effort—or what efforts would produce the best growth;
• the level and quality of leadership and interpersonal skills in action;
• whether/when to terminate (unless the company uses some variety of forced ranking, a practice I really detest!)

These are not only the responsibility and decisions of line managers—it’s what they’re paid for!

I’m not saying that top flight HR can’t play a real role in a company’s success. I am saying that it can’t substitute for excellent managers and that the smaller the company the less need for HR talent or, in many cases, any HR beyond benefits administration.

Look, without people there is no such entity as a company (Welch and I agree on that). In my headhunting years I saw stars at all levels change companies and dim under different management; by the same token, I’ve seen people who were terminated for poor performance become internally (and externally) recognized stars under different management.

It’s great line managers at all levels that attract and retain talent.

Managers are the reason that

• within the same company (or division) one department has high turnover while another doesn’t;
• within a department one manager promotes from within and fills her openings while another doesn’t.

It’s managers that raise productivity, promote innovation, and set the company on the road to success.

And it’s the CEO, supported by his senior staff, which, as Welch says, should include HR, that is the font of the culture that allows and encourages all this to happen.

According to Kentaro Toyama, the W.K. Kellogg Associate Professor of Community Information at the University of Michigan School of Information and self-described “recovering technoholic,” technology isn’t the panacea it’s cracked up to be.

“Technology works best in organizations that are run well to begin with. (…) The technology industry itself has perpetuated the idea that technology will solve the world’s problems. (…) Everyone wants to believe the work they do is good for society. But a lot of people in the industry have drunk a little too much of their own marketing Kool-Aid.”

What is often ignored is that people are a necessary ingredient for the Kool-Aid to actually work.

The tech eco-system forgets a lesson driven home by Bill Gates in the 1995 book The Road Ahead.

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

Aetna Insurance found this out when they first equipped their claims processors with their own terminals connected to the mainframe (before the advent of personal computers).

The effort was considered ground-breaking and was touted as a way to streamline the claims process.

It failed miserably, because the process itself wasn’t redesigned.

In short, claims had multiple steps with approval required at each. Because the process stayed the same, i.e., claims stalled in electronic form when someone in the approval process was on jury duty or out sick just as they did in the paper version.

Once people redesigned the process the desired efficiencies were reaped well beyond expectations.

Technology is a tool, not a silver bullet; the only real silver bullets are found within the human mind.

Ultimately the right thing is for us to find the optimal use of technology — not to eliminate it, but also not to assume that it can replace human skills.

Flickr image credit: Jason Rogers

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Whether your goal is to be a horse or a unicorn, raising round after round of funding for a higher and higher valuation may do nothing more than give you a false sense of success and security.

Y Combinator’s Sam Altman summed it up in an article focused on the $1M-plus burn rate that is getting more and more common.

…it’s never good to be at the mercy of investors.

If you’re a founder, you shouldn’t want that,” he says. “If a company is profitable, the founder is in control. If it’s not, investors are in control.”

One tip he often offers Y Combinator founders: Treat every round of financing like it’s your last.

There’s a reason that popular wisdom, the kind that comes from experience claims that companies that start in moderate-to-cool and even bust economies fare better in the long-term.
As do hundreds of startups that aren’t on the receiving end of current largesse because their founders aren’t connected.

Bootstrapping or working with minimal funding forces founders, especially young ones to

• be savvy money managers;
• put financial controls in place;
• focus on productivity (not perks);
• monitor and constantly reduce customer acquisition cost (CAC); and
• become profitable or, at the least, breakeven as quickly as possible.

The founders who will be best positioned when the startup eco-system cools, as it always does, and funding is restricted are those who master the first four points and whose companies have embraced the fifth.

Image credit: HikingArtist

To build a solid culture that will stay true to its values, yet flexible enough to grow with the company you need get past the idea that positional leaders don’t need management skills or that managers don’t lead.

Jim Stroup, who wrote a blog called Managing Leadership, the archives of which contain tremendously useful information on leadership and management for bosses at all levels, used to point out in numerous posts the absurdity of separating the two.

“No one has proven that leadership is different from management, much less that it is a characteristic inherent in individuals independently of the context in which those individuals operate, one that they carry with them from one organization to another and which they then instill into groups otherwise bereft of it.”

A comment left on a 2008 Washington Post column by Steve Pearlstein regarding the leadership failure that led to the economic crisis neatly sums up the problem with defining leaders based on their vision and skill at influencing people to follow them.

“What a great summary of the economic problem. However this was not a lack of leadership. Defining leadership as influencing people to move in a specific direction, the financial and economic elite successfully led the country into the economic disaster. The problem was a lack of management that failed to identify the signs of the pending disaster.”

Honing the skills to only do one or the other well short-changes your people and your company — but it’s how you win.

Being proficient in both leading and managing will

• prevent visions from blindsiding you;
• provide strong motivation;
• increase productivity and creative thinking;
• create an environment in which people are challenged and grow to their true potential;
• ensure a higher level of personal satisfaction; and
• increase your tangible rewards.

And if those 6 results don’t motivate you, the sophistication and mobility of today’s workforce certainly should.

Image credit: Rodney Campbell

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

“Culture eats strategy for breakfast/lunch/dinner” has become the byword among the startup community and for good reason.

Culture is what attracts talent; it’s why they stay and when it changes it’s why they leave.

Of course, that refers to good culture.

Many founders buy into prevailing myths, such as programmers live to program and allow 80+ hour weeks to become the norm.

The founder who got trounced on Quora is a good example of problematic values.

1. He calls himself a CEO, but “manages a startup” with one employee.
2. His employee is a new dad and always leaves between 6-7pm, but he also indicates that the work is getting done.
3. He says “it’s hard for a startup that the commitment lasts for work hours only,” but gives no indication that there is founder or any kind of equity on the table.
4. He disregarded the negative feedback and defended his concerns, basically saying ‘you’re all wrong and the problem isn’t me’.

He ignored the research that shows productivity takes a nosedive after 40 hours.

 …employees simply become much less efficient: due to stress, fatigue, and other factors, their maximum efficiency during any given work day may become substantially less than what it was during normal working hours.

I’ve know thousands of programmers over the years and not one has ever claimed that the code written after 12+ hours was particularly usable and code done during all-nighters often wasn’t even salvageable.

Much worse, and predictive of serious problems to come, was his refusal to entertain the idea that he was wrong.  

I especially appreciated the response from Drew Austin, Co-Founder of Augmate, who took time to explain how he had been there/almost done that and thanked his lead engineer for helping him change.

**Special thanks to our lead engineer Alex. If it wasn’t for his patience and ability to communicate, I would have been the one writing this question, instead of responding to it.*

I hope you take time to read the whole thread; it’s a crash course in how to build a great culture.

Because great cultures pay off in real money.

Image credit: HikingArtist

 Would you be surprised to know that interruptions cost business $650 billion dollars a year.

“A typical information worker who sits at a computer all day turns to his e-mail program more than 50 times and uses instant messaging 77 times… data from 40,000 people who have tracking software on their computers, found that on average the worker also stops at 40 Web sites over the course of the day…”

Would you be more surprised to know that was in 2008?

650 billion dollars in lost productivity.

And that was before smartphones, texting, Instagram, Facebook, Twitter, Reddit, Tumblr, Angry Birds, Candy Crush, etc., etc. (These days bosses are worse.)

Can you imagine the cost in 2014?

Flickr image credit: underminingme

There are two types of managers, those who believe that productivity improves through constant oversight and those who don’t.

And for those who do there is an abundance of new technology that fosters increased worker surveillance.

Until now it’s been more of a philosophical argument, but new research is working to quantify it and so far it seems that less is more.

Trusting workers to help each other, be creative, solve problems and find better ways of doing things has typically been the province of knowledge workers.

But Ethan S. Bernstein, an assistant professor at the Harvard Business School, did his initial research with workers at a giant factory in China and the results were surprising.

The small amount of privacy the experiment created yielded a 10-15% percent productivity hike against other workers in the same factory.

“Creating zones of privacy may, under certain conditions, increase performance.” The right degree of privacy, he added, can foster “productive deviance, localized experimentation, distraction avoidance and continuous improvement.”

Bernstein’s research will only get more interesting and relevant to higher-level employees.

Since the factory project, Mr. Bernstein has conducted research studying the privacy-transparency trade-off in other settings, including biotechnology labs and service businesses. That research is not yet published, but Mr. Bernstein said the results so far point to “larger effects” than in manufacturing.

This isn’t rocket science to good managers, but it’s always nice to have your methods validated by Harvard research.

What it boils down to is that you should give your people all the information, authority and support necessary to do their job well and then get the hell out of the way and let them do it—often more efficiently and with better results than expected.

Flickr image credit: laurawashere95

Yesterday was the first day of the SIIA Maximize Conference (Software and Internet Industry Association) and it was fantastic, in spite of starting with an apparent mistake.   Mine, not theirs…

I thought I had registered for Software Pricing’s 4-hour seminar with Jim Geisman, an expert in how to price software products, both SaaS, on-premise, embedded and other models.  Apparently I hadn’t, since I wasn’t on the list, but In spite of that I was allowed to participate.

The session was intimate and excellent and Jim provided a lot of deep information and practical advice for how to think around the price-setting challenge.   The audience was comprised of CEOs, CFOs, VPs of Marketing and Sales from large companies and startups alike.  It was exceedingly interesting to see how pricing is a problem across several different sizes of companies and industry segments.

There is no question that Jim and his partner Chris Mele are the most knowledgeable people with regards to software pricing I’ve come across after more than two decades building software companies.  The importance of pricing optimally—setting the price in a way that entices the highest number of customers without leaving money on the table—is a discipline that I’ll definitely pay more attention to in the future and I’m sure to use Jim’s services to ensure we don’t make any mistakes in this important area as we go to market.

SIIA’s Rhianna Collier and her team from the software division put together tremendous networking opportunities with both arranged meetings and speed dating sessions.  It was some of the best networking I’ve experienced, yielding several additional companies to round out a set of initial test users for the system we’re launching in September.  This is very exciting, as finding initial customers is one of the most challenging parts of releasing an enterprise product. 

When selling to organizations, the challenge is to have managers and executives allocate their and their teams’ time and resources to iron out the wrinkles in a new product.  This is not a trivial challenge for a startup. 

The networking was valuable not only for me, but also for people from companies such as HP, InformationBuilders and SAP, with whom I spoke.

I’ll end with a story that proves once again just how small the world really is.  As I was standing in the first part of the arranged networking I started speaking to Shannon Murray from Totango who was surprised when I knew of the company.  It’s a small series B company that just raised 15.5m and are in an interesting space called Customer Success software. 

I explained that I followed their blog, as probably thousands of others do.  The blog is written by Ellis Luk who, together with their CEO Guy Nirpaz, has created a company blog that is helpful and instructive by enabling their customers to speak about their problems and how they are dealing with the challenges around enabling their customers.  This is crucial for a SaaS business to get right as renewals are completely dependent on this.

The first day was very good and I’m looking forward to the following two.

Harley-Davidson is my hero.

Not because I’m a motorcycle nut, but because they do everything I believe makes a company successful—not to mention all the stuff about which I know nothing.

What I do know is that Harley proves there is more than one way to skin a cat.

They didn’t outsource manufacturing; they didn’t bust their union; they didn’t dump people for robots—in fact, there are no robots on the main assembly line.

They did redesign production to take advantage of the knowledge inherent in line workers with an average tenure of 18 years.

There are around 1,200 different configurations, and a new bike starts its way through the production line every 80 seconds. Virtually each one is unique, and workers have no idea what’s coming 80 seconds later. Surprisingly, robots can’t adjust on the fly like that.

They did spread 150 problem-solvers through the 5-6 man production teams that hand-build each bike.

Every time a new bike came down the line, it took a few extra shoves to push it into place. In fact, it took an extra 1.2 seconds. But Dettinger, who had spent some 20 years at the York plant, knew that every second counted. With 400 motorcycles built each shift, on two shifts a day, an extra 1.2 seconds per bike added up to 2,200 lost bikes annually. Millions could be lost in revenue. Maybe it wasn’t such a small problem.

Each problem-solver has the same core mission: “to monitor his small section of the production line and search for better ways to make motorcycles.”

For decades, management and economists have driven a mantra that to prosper manufacturing in the US meant no unions, low wages and no benefits.

At Harley, costs have fallen by $100 million and the stock is trading around $62 (it was around ten in January 2009).

Most importantly, from a customer’s viewpoint, what used to be an 18 month wait from order to pick-up is now two weeks.

Harley went against the tide and the results are proof that the “experts” aren’t always right.

Flickr image credit: Gonmi

Company culture has been jerked around ever since a few pundits decided that “fun” was the primary component to having happy employees.

Worse, “fun” was equated with silly stuff, such as games, pranks and goofs.

While these things do energize some employees, they don’t do it for long and certainly not alone.

It’s well-proven that happy employees are more productive, but creating happy requires substance.

The components of long-term happiness are things such as challenging work, continued learning, opportunities to grow, clear communications, fair bosses, etc.

All of these require more thought, effort and skill from managers than installing a few foosball tables or gamifying the project.

Flickr image credit: CityLineSouvenir