Pilar Jerico

If the current crisis is achieving one thing and nothing else, it’s bringing out the best in some people and, unfortunately, the worst in others. For example, only a few months ago the mantra in the business world was that talent and innovation were priority areas, and office walls were covered with slogans to that effect; however, now that things are getting more difficult, rather different attitudes are making an appearance. In many teams innovation has been shelved out of fear of failure, and the mere thought of questioning anything the boss says makes our hair stand on end, and any desire to be different from the rest of the crowd is discreetly buried.

“Why are companies in Spain not more competitive?” is a question I’ve often asked myself. I think it is partly due to our dislike of change, and partly to the fact that too many organisations are run by people who are afraid of talent, for all that their marketing departments try to sell exactly the opposite idea in Internet forums and on the company’s own website. Gary Hamel, in his book “The Future of Management” (which I highly recommend), explains that companies such as Google, Whole Foods (supermarkets that specialise in organic food), or Gore & Associates (the creators of Gore-Tex) are market leaders precisely because they have ground-breaking policies. For example, the remuneration of the teams in Whole Foods is based on their results relative to other stores in the same chain. This means that when teams take on new staff, they think about the person’s ability to help them win, in the same way that a football or basketball team would. In Gore & Associates the managing director is elected by the employees of the company; and Google has innovation policies that would put most European companies to shame.

Obviously, not all companies are the same, and neither are the managers that run them. Extraordinary companies and exemplary managers do exist. However, there is also a sombre reality (which we don’t always want to talk about) that many people have to live with on a daily basis, and which runs counter to the official pronouncements of managing directors and company chairmen. The sad fact of the matter is that there are many companies where employees merely try to maintain the status quo, keep on the right side of the boss, and avoid anyone having a bad opinion of them. Unfortunately, in the current very tough times, we are losing a golden opportunity to change obsolete systems based on power (without any added value) and/or fear (without a shred of talent). Transparency -by which I mean acknowledging who contributes what- is one of the best ways forward out of the current crisis, but it requires courage on the part managers to implement it. However, if we carry on with the opaque system prevalent in many companies today, we will continue to ignore the contribution of brilliant people, and even end up firing them (I have personal knowledge of several sad examples of this); and mediocrity, which does us so much harm both in the professional and social sphere, will still be king.

What lies in store for people management in the coming year? In this post, I’d like to share those ideas which I think will have the greatest impact on human resources management this year. Of course, some of these ideas will be more appropriate for some sectors than for others; and only time will tell if these predictions turn out to be prescient…

1. Leadership 2.0: A new style of people management, more open and less distant, is gradually making headway. The creation of this new culture is being helped by Web 2.0 applications that focus on cooperation, new ways of perceiving value in companies, and the presence of a digitally literate workforce. However, this culture change will not be achieved primarily because of technology, but because of a different conception of managing people; in particular, a more cooperative, transparent and less distant type of leadership. As happened with Internet at the beginning, some companies will be quick to embrace new styles of management facilitated by technological advances, while others will be mere passive observers. When we talk about a 2.0. approach, we do not just mean having a blog (!), but far more profound changes in management style.
2. Change and transformation management: Many companies are embarking on profound changes, and will need to implement a shift in the company culture for a variety of reasons: they are entering the 2.0 world, they will have to keep on downsizing their workforce, or they’re trying to recover after a bad 2009. No one knows what will happen in 2010, but one thing is for sure: we won’t go back to where we were before the crisis. Therefore, the need for change and transformation is inevitable.
3. A NoFear style of management: Many people are feeling dejected because of the crisis, and it will be a real challenge to manage them in such a way that they stay motivated. Unfortunately, fear is on the increase, and many managers who previously nurtured their staff’s talent are now returning to more coercive practices. However, such a management style is incompatible with creativity and with a state of mind which allows people to give the best of themselves.
4. Mentoring: Many less-experienced managers are finding the current exacting circumstances very difficult to negotiate. For this reason, companies such as Banesto are implementing talent development programmes which use more experienced members of staff as guides, or mentors.
5. Informal learning: A few years ago, one of the difficulties of e-learning was the lack of access to Internet, or people’s lack of ability to use it. This problem largely no longer exists, and we now have the opportunity, and the challenge, to provide cooperation-oriented resources which enable people to develop professionally.
6. A client-focused approach: Human resources departments need to fully understand they are at the service of external and internal clients; they should also think about using basic marketing skills in their communications with the rest of the company, as their internal image often leaves much to be desired. All of the foregoing will serve to place the human resource department more in line with the basic aims of the business.
7. 2.0 communication: Social networks are assuming increasing importance in intra-company communication. Indeed, some of the more innovative companies are now replacing intranets with this type of tool. Communication needs to be increasingly horizontal, and in all possible directions, both within the company, and externally.
8. The end of rigid demarcation: Divisions between departments will be gradually diluted thanks to technology and the need to work as a team. As complexity grows, rigidly separated departments make less sense. Detailed lists of functions that are set in stone will gradually become meaningless owing to the rapid pace of change.
9. More performance-related salaries: The percentage of total remuneration which is allocated to meeting objectives may increase, especially in times of crisis like the present. While it is true that companies cannot afford to lose talented people, it is equally true that they are not in a position to pay the salaries offered before.
10. A better work-life balance: An increasingly popular way of improving employee motivation is to implement policies that help staff meet the demands of their professional and personal lives. Such motivation-enhancing policies are all the more important in an environment where salaries may well stagnate.

Control for control’s sake could well be the motto of many companies. A friend of mine, who has just been appointed as the managing director of an American multinational corporation, told me about his own frustrating attempts to improve the people management in his own company. He had aimed to present his strategic plan in person at the main offices of the company around the world. However, owing to the demands of innumerable meetings and videoconferences at the company’s headquarters, he was barely able to move from his seat! I fear that his experience is very much the rule, rather than the exception.

We’ve been speaking for years about managing people from a humanistic, rather than mechanistic, perspective. However, the fact of the matter is that very few companies have been impregnated with this person-centred approach. Instead, many companies are overwhelming their staff with demands for more and more information. No one would deny that information is crucial for effective decision-making. However, how much information do we really need? What is the opportunity cost of swamping different departments with demands for all kinds of reports? Time is a very precious commodity. If people are spending their time cranking out reports, as is the case in many organizations, then they can’t be devoting it to the customer. Quantum mechanics tells us that the observer affects what he observes. So, if as managers we are geared towards analyzing endless streams of data, we will most definitely influence the day-to-day work of our teams.

Years ago, I worked with a manager who insisted that all the purchase orders were input manually into the computer, simply because he couldn’t wait till the next working day to get the automatically generated report! His impatience meant that some poor soul had to spend three hours a day inputting duplicated information. Completely absurd, but all-too-common in many companies even today.

If we want to eliminate this control mania, we need to overcome two main obstacles. First of all, the fear experienced by many managers in these difficult economic times: the greater the crisis, the greater the need for control, which in turn leads to increased stress levels. Secondly, the large number of departments whose raison d’etre is purely to produce and analyze information.

Does control produce genuine added value for companies? We can only hope that the current crisis leads many organizations to re-think the systems which they use, and that they decide to prioritize those areas which create real added value, and not those which merely serve to sooth the anxiety of managers or to justify certain jobs.

Twenty-five centuries ago, the Greek dramatist Euripides remarked: “The expected does not happen, it’s the unexpected which comes to pass”. This is indeed often the case, both in the economic and social realm.  All of a sudden, unexpected events occur which radically change our outlook and leave profound consequences.

The writer Nassim Nicholas Taleb calls these events “black swans”. He takes this metaphor from what happened in Europe in 1697. At that time, everyone thought that swans were only white; however, the first explorers to return from Tasmania brought black swans back with them. Thus, the white swan paradigm was consigned to history. Before the appearance of the black variety, nobody, understandably, was able to foresee the existence of swans which were other than white.

A similar lack of foresight afflicts economists, entrepreneurs, political leaders or managers when a crisis or a pandemic arises (or Google, or the Internet, or any number of other black swans). As Taleb points out, economists are brilliant at explaining what has already happened, and extremely bad at predicting the future. As a curious sidenote, when Taleb presented his theory at the World Bank, some members of the audience were none too pleased.

Why are we so bad at foreseeing the future? There are many reasons which help to explain this. The first is purely biological: our brain is hardwired for survival, and not for complex decision-making and calculating probabilities. In the distant past, you had a better chance of survival if you ran a mile when you saw a lion than if you stopped to contemplate the various courses of action open to you (basically because the lion wouldn’t wait). Secondly, our educational system is based on committing facts to memory, and not on identifying patterns. Third, we live in an increasingly complex world, which makes it more difficult than ever to predict what will happen in the coming months, let alone years.

So, if a black swan event is capable of shattering all the strategies which we have carefully developed over months and months (as occurred on September 11^th,, and as  tour operators in Mexico are now finding out), we would be well advised to approach decision-making from a different angle.

The first challenge we face is “learning to learn”. By this, I mean that managers need to focus not so much on what they know as on what they don’t know. We need to contemplate scenarios which take us radically out of our comfort zone, and then take these scenarios into account when defining possible strategies.

The second challenge for companies is to increase their chances of producing “positive black swans”, or in more conventional terminology, of bringing about market-changing innovation. (It’s worth noting in passing that Archimedes’ Law, the discovery of penicillin by Fleming, 3M’s Post-its or Pfizer’s Viagra all came about “by chance”.) However, if we want to produce the next “big thing”, we need to create a favourable environment which facilitates such a breakthrough. Google, for example, implements an innovation-friendly policy in the form of the 70/20/10 rule for the use of staff time: 70% of work time devoted to the core areas of the business, 20% to projects related to the business, and 10% to new ideas where “anything goes”.

Last but not least, we need to address fear of failure. It is evident that, in such a complex world as ours, no one can guarantee immediate success. So the key to paving the way for future innovation is to give people the freedom to experiment: to try out new ideas, to be wrong, and to be continuously learning.

Black swans wait for no man (or woman); either we take the initiative, or we disappear.

How do we choose our leaders? The Spanish broadcaster Eduardo Punset tackled this question with the evolutionary social psychologist Mark van Vugt of the University of Kent in his programme Redes (“Networks”). (For those of you who understand Spanish, I’ve inserted the video of the interview. If you want to read the interview in Spanish, the transcript is here). Among the many ideas discussed, I found the following especially interesting:

• Who comes first, the leader or the followers? In the animal kingdom, it’s the followers who come first. To increase their chances of survival, animals stick together in a group. When the strongest animal goes in search of water or food, the rest follow it. According to van Vugt, leadership among humans developed in a similar way: first came the followers, then the leader.

• We can identify three types of leadership on the evolutionary ladder. First we have “democratic leadership” which existed in hunter-gatherer societies around 2.5 million years ago. In this type of society there was no overall leader. Instead, there were different leaders according to the “area of expertise”: war, hunting, etc. Next appeared the phenomenon of hereditary leadership, around 10,000 years ago. Hereditary leadership was typical in societies based on farming, and led to the creation of a monarchy and aristocracy which passed from one generation to the next. Finally we come to the concept of leadership prevalent in more “developed” countries today, where followers have much more freedom than before and demand leaders who are closer to them. This type of leadership shares certain characteristics with leadership in hunter-gatherer societies.

• In the opinion of van Vugt, we choose female leaders when we want someone to smooth over conflicts, and male leaders when we are more interested in protection and defence from outside threats. This paradigm makes it difficult for women to become leaders of countries (as was the case with Hilary Clinton, according to van Vugt). This male/female dichotomy is based on attitudes we had in the past but, unfortunately, it still influences our way of thinking today. (As an aside, we usually choose older politicians in times of stability and younger politicians in times of change, so Obama got the slogan of his campaign right!)

• Finally, studies in companies have shown that leaders who are chosen by their colleagues demonstrate the same qualities as the leaders of our distant ancestors: they are reliable, trustworthy, not overly ambitious, and, interestingly, taller. I will elaborate on these ideas in another post.