Jack Ma – The Magician that Conjured Alibaba

It seemed appropriate that after profiling Jeff Bezos I should take a look at Jack Ma, the Chairman and founder of China’s answer to Amazon, Alibaba.

Jack Ma (real name Ma Yun) started Alibaba in 1999 as a means to harness the power of the internet to link Chinese exporters to local and international business customers – including in the West.

Jack Ma

A charismatic leader

It is harder to say which is bigger, Jack Ma’s bank balance (his personal worth is estimated at $29.5 billion1) or his personality. He is a natural entertainer and you can’t help but be enthralled by his rags to riches tale of growing up in communist China as the son of poor musical storytellers. In his many speaking engagements, Ma inspires his audiences with his never give up attitude and boasts of being refused entrance by Harvard 10 times and rejected for dozens of jobs. Watch “How to become a Billionaire”.

Globalisation and embracing the West

Ma’s intimate understanding of how to do business in his homeland has been a competitive advantage. But perhaps greater than his knowledge of China has been Jack’s curiosity about the West; starting when he was a teenager giving foreign visitors tours of his hometown Hangzhou in exchange for English lessons.

In my blog “How to build a future-ready workforce”  I discussed the importance of cross-cultural competency. Jack Ma’s fascination with western culture has seen him build and leverage relationships with powerful people across the world and turned Alibaba into a global player.

Innovation through improvement not invention

Ma attributes his success to identifying and seizing opportunities that arise out of problems. On his very first encounter with the Internet, Ma searched on ‘beer’. When he saw that no Chinese beers turned up in his search, his instincts kicked into gear and he decided that China needed an Internet company.2

Ma has also shown that innovation is possible without personal expertise and without creating something entirely new. With no coding or computing skills to speak of, Ma adapted existing online retail concepts specifically for China by engaging staff with the technical skills and know how to carry out his vision.3

The employees who became millionaires overnight

Like other billionaire success stories, Jack has his own set of wisdoms and mantras which are chronicled in books and videos like “Jack Ma’s 10- Rules for Success”. One of his rules for success is to focus on the culture of the company.

Alibaba’s values are enshrined in something employees call the Six Vein Spirit Sword – a shout out to Jack’s favourite martial arts fiction writer. Half of an employee’s annual performance appraisal depends on how well they embody Jack’s ‘kung fu’ values.4

Camaraderie is at the heart of teamwork at Alibaba. Every employee adopts a nickname, and it is not unusual for staff to take a break during an intensive work day to swim, do handstands or play video games. During Jack Ma’s years as CEO, tens of thousands of employees and their families would also attend Alifest, a stadium sized annual employee talent show where workers would sing, dance and perform skits. Even Ma could be seen at these events in crazy wigs and costumes singing Chinese pop songs.5

But it would seem Alibaba took the saying ‘work hard, play hard’ to extremes in the early startup days. It is suggested that the first employees earned barely $50 per month and worked seven days a week, often sixteen hours a day. Reportedly Ma required employees to be on call at all times and implemented a policy that new hires were to live no more than 10 or 15 minutes from the office.6

That said, the hard work paid off for many employees when the company shares they had been given as bonuses turned them into instant millionaires after Alibaba’s IPO in 2014.7 Today, Alibaba continues to tie new employee remuneration to stock in the company as a means of linking individual pay to company performance. (Read more about the relationship between talent management and company share price in my article).

Diversity and the empowerment of underrepresented groups

While Silicon Valley remains male dominated, Jack Ma is a vocal advocate for women calling them his company’s “secret sauce.” 8 Women make up 48% of Alibaba’s workforce, around 34% of Alibaba’s high-level managers, and a third of its founding partners.

Jack Ma also promotes the importance of empowering young people – particularly with technology. He recently established a $26 million scholarship programme with the University of Newcastle; a merit based scheme favouring indigenous and disadvantaged students and emphasising global and social awareness.9

Connecting people

At Cognology our purpose is to bring people together and help them achieve great things. We understand that by harnessing technology, we can help people collaborate at work more seamlessly, productively and successfully.

In many ways, Ma’s goals are similar. Jack Ma believes that technology and the internet has no limits and has devoted his adult life to connecting people and businesses across the world to make it easier to do business anywhere.

Works Cited

  1. “Jack Ma.” Forbes. Forbes Magazine. Web. 09 Apr. 2017.
  2. Stone, Charles Clark and Madeline. “The Incredible and Inspiring Life Story of Alibaba Founder Jack Ma, One of the Richest People in China.” Business Insider. Business Insider, 02 Mar. 2017. Web. 09 Apr. 2017.
  3. Zakkour, Michael. “How Jack Ma’s ‘Crazy’ Management Style Built a Technology Empire.” Entrepreneur. 29 Sept. 2014. Web. 09 Apr. 2017.
  4. “Magic Jack Ma and the Six Secrets behind the Success of Alibaba.” Financial Review. 21 June 2016. Web. 11 Apr. 2017.
  5. RPT-The Alibaba Culture: Kung Fu Commerce with a Dash of Theatre.” Reuters. Thomson Reuters, 08 June 2014. Web. 11 Apr. 2017.
  6. McFarland, Matt. “This CEO Banned His First Employees from Living More than 15 Minutes from Work.” The Washington Post. WP Company, 22 Apr. 2016. Web. 10 Apr. 2017.
  7. Daily, China. “Alibaba IPO Creates Thousands of New Millionaires in China – The Boston Globe.” BostonGlobe.com. 19 Sept. 2014. Web. 11 Apr. 2017.
  8. Kokalitcheva, K. (2015) “Female Executives are Alibaba’s ‘Secret Sauce’” Fortune. 20 May 2015 . Web 10 April 2017
  9. Low, Catie. “Alibaba’s Billionaire Founder Opens Australian Headquarters.” The Sydney Morning Herald. The Sydney Morning Herald, 03 Feb. 2017. Web. 09 Apr. 2017.
  10. “TIME Person of the Year 2014 Runner-Up: Jack Ma.” Time. Time. Web. 09 Apr. 2017.
  11. Barboza, David. “At Alibaba, the Founder Is Squarely in Charge.” The New York Times. The New York Times, 06 Sept. 2014. Web. 09 Apr. 2017.
  12. Image: https://upload.wikimedia.org/wikipedia/commons/3/38/Jack_Ma_2008.jpg

Elon Musk – Leading a quest to save the future

Elon Musk – Leading a quest to save the future

47 year old South African born entrepreneur Elon Musk founded X.Com in 1999. X.Com later became Paypal and was sold to Ebay in 2002. After making a cool $165 million out of the deal, Musk turned his focus to new and more ambitious ventures. First he founded Space X, a company designing and manufacturing spacecraft with goals to commercialise space travel and colonise Mars. Then in 2003, he commenced Tesla Motors and started producing zero emission electric sports cars. More recently, Musk convinced Tesla shareholders to acquire his third passion project, Solar City; a business owned by Musk’s cousin, specialising in powering homes, businesses and eventually cities with solar power.1

Elon Musk - Leading a quest to save the future

The lure of a strong vision

Musk wraps all of his companies up in a larger than life vision that attracts and inspires his employees.2 At Tesla Group, people genuinely believe they are saving the planet. At SpaceX, they are on a crusade to give humans a second chance on another planet if earth gets into trouble.3

Musk intimately understands the heady attraction of such ambitious work for highly skilled people. When releasing his electric car patents to the world, Musk openly taunted his competitors: “My vision allows me to hire and retain better people than you will ever be able to hire for any amount of money. They will be smarter, they will work harder and they will stay longer.3

I wrote about the positive effect of workers feeling a higher sense of purpose in my blog ‘Work and Happiness’.

Selecting the best talent

Musk has a reputation for hiring only the best people on the planet to work for him – whether to build a rocket or cook in the cafeteria.4 He believes that bringing on a few leading minds in the field and giving them the freedom to accomplish their responsibilities is better than hiring a lot of people to get a complicated job done. According to Musk, numbers just slow down progress and make a task more expensive to complete.

Apart from wanting the best, Musk also values a positive attitude and an easy to get along with personality. (Watch ‘Elon Musk talks Talent vs. Personality in Employees’).

Musk personally interviewed the first 1000 staff for Space X and even today still interviews every engineer. However, he encountered unique challenges sourcing talent along the way. In particular, it was difficult to entice experienced people away from established aerospace players like Boeing and Airbus. So he went after younger talent; personally scouring PhD programs from a range of universities for individuals who had built something, or had been on a team that had made something from nothing.2

At Tesla, the experience was a little different. Cars hadn’t been done in Silicon Valley before so there were a number of software engineers excited about the prospect of applying their skills to an entirely new product. Tesla also had the backing of a Silicon Valley legend – Google Founder Sergey Brin – to boost the project’s appeal and the credibility of the Tesla brand amongst target applicants. Once again, Musk stayed close to the recruitment of talent,2 even taking to Twitter himself to advertise for engineers for the autonomous vehicle division.5

Recruitment techniques

Musk makes applicants write essays about why they want the role. He also gives them a riddle to solve to test critical thinking. In the interview, Musk is known to play mind games; he barely pays attention to candidates and sits with his back to them2 before spinning around to drill them with questions.6

Musk is a proponent of behavioural interviewing techniques. Unless a prospective employee can break down the solution to a problem in granular detail, he will conclude that they do not really know the answer or have embellished the level of their involvement.6

Intense culture

Job ads on the Tesla careers website come with a warning: “These jobs are not for everyone, you must have a genuine passion for producing the best vehicles in the world. Without passion, you will find what we’re trying to do too difficult.”6

According to Dolly Singh, former Head of Talent Acquisition at Space X, working with Musk is not a comfortable experience as he is never satisfied. He pushes his team so hard they sometimes feel like they are “staring into the abyss”. However, this pressure on performance is deliberate. Musk knows that his staff will exceed even their own expectations if he keeps the heat on.7

And, as Singh points out, “you don’t get to Mars with a bunch of softies.”

Musk describes himself as a nano-manager. Even more intense than a micro-manager, he maintains a hands-on obsession with the tiniest operational and design details.1 And when there is a pressing problem preventing progress, Elon will devote the majority of his time and energy to it.2

Structure and communication

The Musk businesses run on flat structures. Staff are free to contact anyone directly, including Elon.2

At Space X, the engineers (including Musk) physically sit on the manufacturing floor in giant glass cubicles. They have to walk through the floor to get to their office so are forced to look at everything going on and interact with staff.2

Is Musk a modern day superhero?

Musk has been described as a modern day Howard Hughes and even compared to comic book hero Iron Man (aka Tony Stark). There is no doubt he is a physics genius. And, if popular media reports are to be believed, has a penchant for fast cars and beautiful women. However, Musk knows that to achieve his ultimate goal of saving the planet and establishing interplanetary colonisation, it will take a team of superheros. To this end, his approach is quite simple: seek out people who are as talented and driven as he is; ensure that the work environment is as motivating and meaningful as possible; and, establish clear and measurable objectives. Sounds easy, right?

Works Cited

  1. Wartzman, Rick. “Admire Elon Musk All You Want, but Please Don’t Manage like Him.” Fortune.com. Fortune, 21 Jan. 2015. Web. 21 May 2017.
  2. “How Elon Musk Builds Organizations That Can Achieve Anything – Recruiting & Training, Remaking R&D, Setting Strategy.” Innovation Leader. 13 Feb. 2017. Web. 21 May 2017.
  3. Lavoie, Andre. “Want to Hire the Best Talent? Be Like Elon Musk and Set a Strong Vision.” Entrepreneur. 22 July 2014. Web. 21 May 2017.
  4. Carson, Biz. “Elon Musk Is so Obsessed with Hiring, He Even Poached the Best Yogurt Shop Employee from Pinkberry.” Business Insider Australia. 02 June 2015. Web. 21 May 2017.
  5. Burns, Matt. “Want To Work For Tesla? Elon Musk Turns To Twitter To Recruit Engineers.” TechCrunch. TechCrunch, 19 Nov. 2015. Web. 21 May 2017.
  6. Tovey, Alan. “Elon Musk: Have You Got the Drive to Work for Tesla?” The Telegraph. Telegraph Media Group, 20 Nov. 2015. Web. 21 May 2017.
  7. Feloni, Richard. “A Former SpaceX Employee Explained What It’s Like To Work For Elon Musk.” Business Insider Australia. 24 June 2014. Web. 21 May 2017.

Elon Musk image By Steve Jurvetson [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Can you teach leadership?

Jon Windust

This is the wrong question. It should be “what is the most effective way to learn leadership?”.

I advocate an apprenticeship-like approach which I introduced briefly in the article Disrupting Human Resources. I’ve been interested to read about an increasing emphasis that apprenticeships in general will take in the US in a similar way that they currently do in Europe. While they aren’t talking about apprenticeships for leaders, I believe organisations should be setting up apprenticeship-like processes that take aspiring leaders through a multi-year learning journey as they progress from team leads to senior leaders.

Why? Apprenticeships exist because some skills are difficult to master without repeated application in a real-world setting. Some knowledge can also be difficult to codify, which means that the only way they can be taught is by the learner experiencing something with the assistance of a more skilled guide. These situations describe leadership precisely. Human beings aren’t logic machines, we have emotions and social rules. Thinking that leadership can be taught is a mistake. You can provide a framework, but then a person needs to experience it, over and over with guidance from an experienced person. This builds the tacit knowledge needed to become a great leader.

Can you teach leadership?

Let me give you an example. Autonomy is great right? But what do you do if you’ve provided autonomy and your team isn’t getting results or even putting in much effort? I’ve seen inexperienced leaders in these situations. They do the best they can, but when you’re confronted with something that doesn’t work as it is described in theory, a person’s belief in leadership method can crumble. The natural reaction is to take either the passive route and put your head in the sand or use the aggressive option and demand action. Neither of these resolve the problem. What’s needed in these circumstances is for a more experienced leader to coach the less inexperienced leader. Through exploring what they’ve done, haven’t done and what foundations were put in place they will come to an answer. Any answer is just an initial answer. Solving this sort of situation takes time and many adjustments.

Human beings aren’t logic machines, we have emotions and social rules.

My view of the leadership apprenticeship is mixed mode learning. That is formal training and learning materials to provide a leadership framework on top of which experience is added. Experience is first gained by shadowing leaders, then short duration projects in which they take responsibility and lead a group of people. Managing freelancers on a project is an ideal opportunity to start learning how to set clear expectations, provide feedback and keep things on course.

Next is a team lead role. Why? Because this role is characterised by the person still doing some of the work directly. They lead by example and work with the team. This phase helps a person to start making the transition from achieving things individually to achieving things by leading a group of people to collectively do them. The team lead role can be challenging for highly skilled and talented people who have internalised standards for how things should be done and to what quality. Working with a more experienced guide during this phase can help a person recognise how they need to change their thinking and approach. Without this, a new leader is at risk of making damaging mistakes such as micromanagement.

As a person progresses into more senior leadership roles they completely transition from directly doing end work activities to leading others to do end work activities. New and more advanced skills are needed in this phase that focus on strategy execution. Any apprenticeship should continue through to senior roles to help a person recognise and adapt to the more strategic and less hands-on nature of their role. While some will thrive and love the changing nature of the role, it should be recognised that some will not enjoy the less hands on nature of it. A guide can help a person recognise this and avoid career damaging moves.

For more insight on leadership skills see my article on the five keys to leadership you need to know.

What is the most important thing you have learned about leadership?

Jon Windust

“What is the most important thing you have learned about leadership?”

Leadership is a skill, the mastery of which takes many years. Don’t assume you’ve learned it. This is particularly true for “natural born leaders” who are most susceptible to thinking they have it covered.

When people say someone showed great leadership they usually mean one or all of:

  1. A person set a great example for others to follow.
  2. A person made a tough or even courageous decision to change something for the better.
  3. A person was able to motivate a group of people to cooperate and achieve something substantial.

It is true that some people will naturally exhibit the first two points above. Some will even perform some of what is needed for the third point by force of their personality. But, I am yet to meet someone who possesses all of the skills out of the box to get people to cooperate to achieve something substantial. Some people get a head start because of their competence, courage or social skills. But it takes time for anyone to learn how to lead well.

I’ve previously written about some of the most important aspects of leadership. As a person progresses over their career from team lead to senior leader, new skills and levels of capability are required. Read leadership theory, certainly, but seek out those who have done it successfully and learn from them.

One of the most effective learning experiences I have had is regular formal catch-ups with other CEOs where the more experienced help the less experienced understand how to handle specific situations. In these discussions there are normally a number of options put forward by the different CEOs. From this, the person learning is able to choose their path. But once the path is chosen, the learning hasn’t really taken place until it’s put into action. Once done, positive or negative reinforcement will tell the CEO whether to take the same action next time or try an alternative route. Much of leadership is learnt this way. Theory provides a foundation. Natural ability provides a partial foundation. But true learning takes time and a myriad of experiences.

Zhang Ruimin – the would-be unknown leader

Zhang Ruimin took the helm of a struggling refrigerator manufacturer in 1984 when he was just 25. As a leader he won the confidence and goodwill of his workers and reversed the company’s dismal quality record. Since then, Zhang has turned the Haier Group into the world’s fastest growing appliance maker with the largest market share in white goods world wide. 1

Management without bosses

“A leader whose existence is unknown to his subordinates is really the most brilliant one.”
(Ruimin, Zhang)2

Zhang Ruimin

Prior to 2005, Haier’s 80,000 or so employees worked in traditional functions like manufacturing, sales and marketing. However with the advent of the internet, Zhang knew that the existing departmental/functional/silo organisation would be too slow to respond to customer needs into the future. So he began reorganising the way employees worked. 3

Zhang believed that if the company wanted to intimately understand and meet consumer needs, staff needed to be directly connected with the customer. Instead of complying with rules and following a manager, he decided that workers should have the freedom to make decisions led by the users of the things they make – the consumer. 2

ZZJYT’s

No, I’m not cursing in code.

Zhang split staff up into self-managed work units call ZZJYT’s (zi zhu jing ying ti – which roughly translates to independent operating unit) and by 2012 had almost done away with middle management completely. Today each ZZJYT comprises 7-10 people from various functional roles.

These microenterprises operate as independent ventures. Each is responsible for its own hiring, procurement, strategy, production and ultimately profit and loss.

The ZZJYT’s are not permanently assigned to a particular product or role. Instead they are formed through internal competition. If an employee identifies an opportunity for a new product or service, they are free to propose their idea. A vote involving employees, customers and suppliers determines whether the project goes ahead. The winner becomes the project leader.

Once a leader is appointed they can independently handpick a team and find their own manufacturers and distributors (either internally or externally) to produce and sell their product. 3

Beware the catfish

The project leader must work hard to stay ahead of the catfish. That is what the firm calls the person with a rival idea with the second highest number of votes. 3 Once a leader is in place, his or her team appraises the leader’s performance every quarter and votes whether they want to keep them in the position or replace them. 4

Zhang believes this structure creates competition in the organisation while also fuelling entrepreneurship. 3

Remuneration

Zhang believes that employees in traditional organisations tend to focus too much on what their bosses say or think because their pay is determined by them. This is why there is no position-related remuneration at Haier. 5 Instead employees are paid solely based on performance and the results their team achieves.

Ecosystem of talent

In the new generation Haier, talent is provided through an open labour market. Each ZZJYT is given the freedom to innovate by reaching out to customers, prospective employees, collaborators and even competitors.

Employees are free to leave or join ZZJYT’s, however a unit will dissolve after the project is over and talent goes back to the marketplace.

Whilst many businesses will find this concept foreign and unmanageable, for industries like Hollywood, bringing skilled workers together for the length of a project is nothing new. (See http://www.cognology.com.au/are-terms-like-hollywood-and-gig-spelling-the-end-for-the-traditional-employment-model)

The platform

Instead of offering jobs, Zhang says Haier offers everyone a continuing series of opportunities to find jobs via an entrepreneurial platform.4

By definition, platform companies form ecosystems by partnering with, and incorporating technology from multiple corporations to drive innovation and performance. Haier’s powerful internet platform enables limitless collaboration with suppliers, customers, universities, competitors, and other stakeholders.

According to Zhang, eventually there won’t be employees at all. There will only be a platform. 1 (I feel like Keanu Reeves might pop up any second now….)

A natural evolution in the internet age

Zhang Ruimin has been lauded for his accomplishments in management innovation, and yet by some he is still seen as a radical. Haier’s goal of becoming a facilitative platform without traditional employees seems consistent with broader global trends towards open collaboration, greater connectivity and on-demand workforces. I wrote about this last year in my blog http://www.cognology.com.au/what-skills-will-be-most-in-demand-in-2025

We are seeing the dawning of a new age of organisational agility and innovation. Employers and skilled workers alike have much to gain from embracing new ways of working. But it will take a willingness to change and adapt.

References

  1. Kleiner, Art. “China’s Philosopher-CEO Zhang Ruimin.” Strategy Business. 10 Nov. 2014. Web. 08 May 2017
  2. Ruimin, Zhang. “Raising Haier.” Harvard Business Review. 31 July 2014. Web. 08 May 2017.
  3. “Haier and Higher.” The Economist. The Economist Newspaper, 11 Oct. 2013. Web. 08 May 2017.
  4. Mahajan, Neelima. “How CEO Zhang Ruimin Reinvented Haier – Three Times Over.” CKGSB Knowledge. 28 Sept. 2015. Web. 08 May 2017.
  5. “Haier CEO Zhang Ruimin: Challenge Yourself, Overcome Yourself.” Founding Fuel. 18 Oct. 2015. Web. 08 May 2017.
  6. Fischer, Bill, Umberto Lago, and Fang Liu. “The Haier Road to Growth.” Strategy Business. 27 Apr. 2015. Web. 08 May 2017.
  7. “Zhang Ruimin: Driving Haier’s Innovation.” Zhang Ruimin: Driving Haier’s Innovation | CEIBS. Web. 08 May 2017.

Jeff Bezos – an Amazonian chief

With my last blog “Warren Buffett – Not your average billionaire”, I kicked off a series of posts we are dedicating to some of the most successful leaders of our time.

There has been a lot of media coverage lately regarding the imminent launch of an Australian branch of Amazon.com – the world’s biggest online retailer. Not surprisingly, the talk of them setting up shop here has sent local retailers into a spin.

Given its power to disrupt markets and change the way the world shops, I thought it would be timely to take a look at the founder, Chairman and CEO of this tech giant – Jeff Bezos.

Worth an estimated $72.7 billion, Bezos is painted by biographers as part dreamer, part quantitative analyst. As a teenager he imagined himself becoming an astronaut but instead went on to major in computer science at Princeton, before putting his skills to use on Wall Street. In 1994, despite having a successful career and a six-figure salary, he left Wall Street behind to create Amazon.com, a start-up retail business in the emerging and largely uncharted world wide web.

Jeff Bezos quickly proved himself a ‘wunderkind’ with great instincts. He survived the dot.com bust of the late 1990’s and continued building Amazon on the back of his own ingenuity, self confidence, and propensity to think big.

Jeff Bezos

Think like the Chief

As he transitioned from a start-up boss into a leader of tens of thousands of people working across multiple businesses, Bezos became renowned for demanding nothing short of excellence from everyone around him. His expectations are captured in Amazon’s 14 Leadership Principles, and it is said that those who do best at Amazon are those who have internalised these principles and think like Jeff. And when they don’t meet his exacting standards, Bezos doesn’t mince words. For your horror (or amusement) I have included some examples of brutal one-liners that have been attributed to him

  1. “Are you lazy or just incompetent?”
  2. “I’m sorry, did I take my stupid pills today?”
  3. “Do I need to go down and get the certificate that says I’m CEO of the company to get you to stop challenging me on this?”
  4. [After reviewing the annual plan from the supply chain team] “I guess supply chain isn’t doing anything interesting next year.”
  5. [After an engineer’s presentation] “Why are you wasting my life?”

Survival of the fittest

Under Bezos’s direction, Amazon is reported to ‘manage out’ a certain percentage of its work force annually, with leaders required to rank staff and dismiss the least effective performers. [1]

Bezos has been accused by critics of lacking empathy and treating workers as expendable resources, but he has also never hidden the fact his priority is and always has been to create value for the customer.

Cohesion – the enemy of innovation?

A questioning and analytical atmosphere is characteristic of Amazon’s culture. Bezos expects his leaders to openly disagree and argue their perspectives, regardless of how uncomfortable it may make them may feel. [1] To this end, Amazon were early adaptors of an agile feedback system they call the “Anytime Feedback Tool” that enables staff to receive real time input from colleagues who have something to say about their work.

At Cognology we know from our own research that team sizes are expanding and companies are striving to find ways to facilitate greater connection, collaboration and sharing of ideas. In this respect, Amazon seems like a bit of an anomaly. Bezos is famous for his two pizza rule: no team should be larger than can be fed with two large pizzas. Bezos believes that smaller teams guard against groupthink and promote innovation. He has also suggested that cross-team communication can be disastrous for innovation as agreement between teams can limit the creative tension required for new ideas. [2]

Keeping his fingers on the pulse

Sharing his time across various ventures, Bezos cannot physically be present for every key decision Amazon makes. Being a number cruncher at heart, he puts his faith in the company’s enormous data resources and analytics, and expects leaders to use metrics to make almost every important decision.

But Bezos doesn’t just rely on cold hard data. The entrepreneur is also said to regularly scan random customer emails for feedback and complaints. And when an email is forwarded to a leader accompanied by a simple “?” from Jeff, the recipient knows to act. [3]

The heart of a Warrior

Adventure and discovery appear to be in Jeff Bezos’s very DNA. However, his passion for progress goes far beyond selfish interests or the financial benefit of shareholders. Bezos seems driven by a self-imposed higher calling to advance the welfare and development of the whole human race. His vision for the future has compelled him to commit hundreds of millions of dollars to a number of ambitious yet noble ventures like carbonless energy, advancements in neuroscience, and Blue Origin – an enterprise aimed at making space travel accessible to millions of people so that they may one day live and work in space.

Leadership involves choices. Jeff Bezos understands that to be truly great, you must be prepared to make choices that are neither popular nor easy. Without apology Jeff challenges his people to use their gifts, follow their convictions, and walk the path less travelled.

It is perhaps unfortunate that we get many of our insights into business leaders through the media, who (let’s face it) have a tendency to emphasise the sensational aspects of a story. Bezos has certainly received his share of bad press in recent years and if you believe the anecdotes of former staff who claim bad experiences, Amazon is a tough place to work. But given Bezos’s accomplishments and endeavours I can’t help but wonder how balanced the narrative has been.

I watch with interest for if and when Amazon.com comes to our shores.

References

  1. B. Stone, 10 10 2013. [Online]. Available to subscribers: https://www.bloomberg.com/news/articles/2013-10-10/jeff-bezos-and-the-age-of-amazon-excerpt-from-the-everything-store-by-brad-stone
  2. D. Baer, 18 03 2014. [Online]. Available: https://www.businessinsider.com.au/the-strategies-jeff-bezos-used-to-build-the-amazon-empire-2014-3.
  3. R. Sanghani, 15 10 2013. [Online]. Available: http://www.telegraph.co.uk/technology/amazon/10379912/How-Jeff-Bezos-rules-his-Amazonian-empire.html
  4. Jeff Bezos image by Yolo0906 (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

How do you know you are ready to be a leader?

Jon Windust

There are two elements to this answer.

One is the desire to be a leader.  The other is possessing some of the skills needed to be a leader.

The motivation to be a leader can come from a number of places.  The desire to collaborate with a group of people is a good starting point, but not enough on its own. Couple with a drive to help people, pass on your knowledge/experience and influence people to be able to achieve more and you have a good starting point.  Later as you encounter tough problems, you’ll know whether you want to stay a leader.

Next are the technical skills needed to be a leader.  A survey of over 300K people identified 7 key skills needed:

  1. Inspires and motivates others
  2. Displays high integrity and honesty
  3. Solves problems and analyzes issues
  4. Drives for results
  5. Communicates powerfully and prolifically
  6. Collaborates and promotes teamwork
  7. Builds relationships

You need a number of these skills and be on the way to developing the others.

A friend wanted to be a school teacher.  Luckily, early on in her training she experienced a classroom environment and her first real introduction to teaching.  This experience provided her with the insight to know that teaching wasn’t for her.  Getting early experience in leadership can be equally valuable in helping you answer the question.

Warren Buffett – Not your average billionaire

This blog will be the first in a series of posts profiling some of today’s most successful business leaders. Each leader is recognised as a trailblazer in their own right; entrepreneurs and visionaries who have dared to challenge the status quo and write their own rules.

This series will explore their different leadership styles and approaches and look at how this has shaped their success.

I decided to kick off with a name you might recognise as being one of the wealthiest and most business savvy people on the planet.

Warren Buffett

Warren Buffett is the creator and CEO of Berkshire Hathaway, a holding company with interests in the likes of Apple, Costco and Coca Cola. [1]

Buffett has been a regular on the Forbes 400 Richest People in America list since 1982, and in 2008 was officially crowned the richest person in the world with a fortune of $62 billion.

Warren Buffett is the stuff of legends and has a cult-like following of investors that hang on his every word. But for me, it is not so much his financial prowess that I’m interested in, but rather how his distinctive leadership style has contributed to his celebrated status in the world of business.

Laissez Faire Management Style

Numerous books and articles written about Warren Buffett refer to his laissez-faire approach to management. A French term, laissez-faire loosely translates to “let them do” -basically let people do as they choose. This label seems fair given what I have come to learn about Buffett’s hands-off approach.

When Buffett buys a business, he leaves the managers alone to run the company the way they would have had he not bought them. Unlike other CEO’s, he doesn’t seek to exert control through traditional corporate plans or strategic meetings, and generally only communicates through his annual letter to the board. [2]

So how has Warren Buffett managed to successfully build an empire with assets worth $621 billion [3] whilst all the time remaining at arms length?

Adapting the Situation to Suit the Leader

Perhaps the secret lies in the corporate culture and operating environment he has carefully cultivated over the last four decades.

Engaging Top Talent
Warren Buffett has been quoted as telling his children “If you want to soar like an eagle in life, you can’t be flocking with the turkeys”. His personal philosophy is to surround yourself with good people whose behaviour is better than yours so that they inspire and challenge you. When hiring managers, Buffett looks for integrity, intelligence, and energy. [4]

Autonomy and Accountability
It stands to reason then that by choosing highly motivated and capable leadership, Buffett has been able to entrust his businesses to the stewardship of others. Handing over full autonomy is fundamental to the way Buffett operates. [2] (For more on the benefits and challenges of autonomy see A Sensible Discussion about Autonomy)

Meaningful Communication
Though Buffett’s communication with his people may be infrequent, his words have impact. He showers praise on the people who work for him in his annual letters but is also generous with advice. He breaks down complex financial concepts in a way that anybody can understand him.

Values-Driven Culture
In Part II of my blog Aligning People I discussed how a group united by values will achieve far more than one that’s driven by other agendas. Interestingly, Buffett only acquires well-led, profitable companies that share his values. He believes that a values-driven culture translates to strong business performance and credits a strong culture with the ability to attract and retain outstanding employees. [5]

If you want to soar like an eagle in life, you can’t be flocking with the turkeys

Authentic Leadership – Living the Values, Walking the Talk.

An ‘aha’ moment for me in my research into Warren Buffett was when I realised that the values he pursues in business he practises in all aspects of his life.

Thriftiness

Berkshire Hathaway only acquires firms with low debt and strict cost control. This reflects Buffett himself who is renowned for his frugal nature. He still lives in the same house he purchased in 1958 for $32,500 and drives himself to work everyday. [6]

Hard Work and Discipline

Lawrence A Cunningham in his book Berkshire Beyond Buffett wrote that,
“Buffett’s own success has been built through hard work, discipline, a no-nonsense acquisition strategy and unwavering adherence to core values”. [2]

Buffett demands the same level of discipline and commitment from his leaders. He asks only that they stay true to their core business and values. In other words, he expects them to keep doing what they know how to do and to do it well. No more, no less. [2]

Integrity and Humility

Cognology has found extensive evidence to suggest that integrity is a key attribute of exceptional leaders. Buffett is passionate about maintaining a reputation for doing the right thing and instructs his leaders to “zealously guard Berkshire’s reputation.” [7]

Buffett is admired for the humble manner in which he openly admits his failures and his willingness to share the lessons he has learnt. In turn he encourages his business leaders to “face up immediately to bad news” and not let problems fester. [7]

But Warren Buffett is not as warm and cuddly as he might seem. He has shown that he is also a man prepared to deal with any leader that has breached what he holds sacred. A Buffett biographer once noted that “when a leader violates corporate values or generates reputational damage, the axe falls swiftly.” [2]

Letting Go

At 87, Warren Buffett has no plans to retire. People will remember Buffett for his extraordinary ability to pick good investments. But in truth, a lot of his success has been due to his ability to identify talent and retain top performers for the long term.

His leadership style has been shaped by his own personality: his honesty, his integrity, his humility, and his other deeply ingrained values. He has succeeded in demonstrating that you don’t have to maintain tight control over your people to do well in business. Success can in fact come from letting go – so long as you have laid the right groundwork to begin with.

References

  1. CNBC, [Online]. Available: http://www.cnbc.com/berkshire-hathaway-portfolio/.
  2. L. A. Cunningham, Berkshire Beyond Buffett : The Enduring Value of Values, Columbia University Press, 2014.
  3. Market Watch, “marketwatch.com,” [Online]. Available: http://www.marketwatch.com/investing/stock/brk.a/financials. [Accessed 09 03 2017].
  4. Vintage Value Investing, [Online]. Available: http://vintagevalueinvesting.com/wp-content/uploads/2017/01/Warren-Buffett-University-of-Florida-Lecture-Vintage-Value-Investing.pdf.
  5. L. A. Cunningham, “The Philosophy of Warren E. Buffett,” The New York Times, 05 02 2015.
  6. A. Mohr, “www.investopedia.com,” 22 07 2016. [Online]. Available: http://www.investopedia.com/financial-edge/0412/the-everyday-lives-of-frugal-billionaires.aspx.
  7. W. Buffett, “berkshirehathaway.com,” 31 12 2014. [Online]. Available: http://www.berkshirehathaway.com/letters/2014ltr.pdf.

Disrupting Human Resources

Warmest thoughts and best wishes for a wonderful holiday and a very happy new year.

Happy holidays from CognologyKaren, Brad, Jon and Louise of Cognology

Disrupting Human Resources

This isn’t a new topic. Everyone from world famous entrepreneurs to the guy on the street has an opinion on Human Resources – and they’re rarely flattering.

We’ve all read articles arguing that the industry needs to change and, with 2017 dawning, I think now is the time to put words into action. As a HR professional – and the CEO of a HR Technology company that itself needs HR management – I thought I’d share my somewhat unique perspective on the subject.

Disrupting HR

Why does HR need to change?

Before we get down and dirty with what needs to change, let’s take a moment to consider why we need change.

Less than a year ago, The Australian reported that the average time it took to fill a vacant position had topped a record-breaking 68 days, and they estimated that those vacancies were costing AU$558 million per ASX100 company¹. The authors championed a shake up, citing a problem with recruitment as a clear indication that HR needs to change.

I agree that these numbers indicate a problem worth fixing but, to my mind, they hint at a bigger issue; HR is still widely viewed as a compliance and admin department.

Yes, Human Resources didn’t walk into the workplace fully grown – it started life as the Personnel Department, an administrative team that managed everything concerning the workforce at a human level – but it’s grown beyond that.

We know good Human Resource management practices address skills gaps, increase engagement, reduce churn, and improve job satisfaction². This fact was acknowledged by Ram Charan (the bestselling author and advisor) back in 2014, when he argued that we needed a complete overhaul and a new structure. That particular article may have caused quite a stir, but the message wasn’t a new one. Industry leaders including John Boudreau, Mark Herbert, and Carol Anderson have been calling for a change for years.

And the reason we need a shake up, the problem that’s plaguing our industry? HR departments often lack skilled team members and the wider respect of the organisation (Edward Lawler once shared an anecdote about a manager who not-so-fondly referred to his colleagues in HR as the ‘Business Prevention Unit’). So, unless we disrupt Human Resources and turn it on its head, we’re going to struggle to effect real change and improve organisational efficiency.

Strategic Human Resource Management

That’s not to say that we haven’t made strides in the right direction. The last few years have seen Strategic Human Resource Management (SHRM) take a step closer to the top table, aligning HR practices with organisational strategy and growth initiatives.

But the fact that only 5% of HR professionals feel their department is seen as a strategic partner within their organisation⁴ proves that there’s more than a few problems with SHRM. Which is where I come in.

Disrupting Human Resources

I have a plan to disrupt Human Resources, and it involves a two-pronged attack:

  1. Move administration and legal responsibilities away from HR.
  2. Replace HR with a Business Performance Group.

I’m not the first to argue for removing the administrative, compliance, or legal aspects of HR to other organisational groups. In 2015, Edward Lawler suggested splitting the department in two: administrators on one side, highly skilled analysts with a keen strategic understanding of the business on the other. I would go even further though, and say surely it’s more efficient to remove administrative responsibilities altogether?


Disrupting HR infographic

Lean Methodology

Because efficiency is key and, when it comes to streamlining HR and repurposing it to drive organisational growth, there’s a lot to be learned from the manufacturing world.

Many of you will be familiar with Toyota’s ‘Lean Methodology’³, a process that focuses on optimising the customer experience while minimising waste. ‘Lean’ organisations work at peak efficiency, creating more value with fewer resources. They understand what the customer values and continually innovate and refine their processes to enhance customer experience. The end goal? To deliver maximum value with no waste.

This is the function HR should perform within an organisation. We should be data driven and strategically focused, responsible for identifying the most efficient processes to deliver on organisational goals.

The Business Performance Group (BPG)

The real disruption in my idea stems from the Business Performance Group (BPG). This completely new organisational unit will replace the HR department in much the same way that Human Resources replaced Personnel.

The idea for this group came from thinking about the HR function and what I want from it as a business owner. Those of you who caught my blog post on work and happiness won’t be surprised to discover that, for me and my business, performance and happiness are at the top of my list.

I want a business that performs because I’m committed to creating the best talent management technology for my customers. I need performance to achieve that.

I also want the people who work with me to be happy. As I see it, we nailed survival a long time ago (for most of the world at least). Today, working is more a group effort to progress, innovate, and improve each other’s lives. So work should really make us happy.

The Aim of BPG

So, with an objective to optimise efficiency and deliver on organisational goals, the BPG has three key responsibilities:

  1. Identify ways to improve performance and happiness.
  2. Implement improvements and manage change.
  3. Advise the organisation on people management.

The BPG will not be a department of ill-equipped administrators. It will be a highly productive, results driven team made up of experts from specialist fields.

The first specialty is leadership, which is critical to performance and something most organisations are failing miserably at. In fact, 70% of leaders say they carry out regular performance conversations, but only 56% of their employees agree⁴.

BPG leadership experts will address this disconnect, spearheading individual development, coaching, and mentoring programs. An apprenticeship approach to management training will provide a strong leadership succession strategy, something only 14% of businesses feel they currently have⁴.

Analysts and productivity experts will also feature highly in the BPG. Supported by data scientists, they will be responsible for assessing current processes, uncovering improvements, and managing change. This team will enhance efficiency and identify future trends – a critical performance metric we undervalue as a nation. Don’t believe me? Employers in Italy, Japan, and China all cite a ‘global mindset’ as one of the most important skills a new hire can possess, while Australian employers view the same trait as the least important to long-term business success⁴. Who do you think is right?

Learning and Development specialists will form the third pillar of the BPG, and their work will support the initiatives of the rest of the team. Data driven, these guys will provide learning opportunities to the workforce, efficiently addressing skills gaps before they hinder organisational growth, and ensuring all learning is relevant to the workplace. That may sound extraneous to a highly efficient, lean organisation but, by 2020, one third of the skills we see as core today will have changed⁴. Businesses that intend to keep pace will need to prioritise education.

R&D

Of course, the BPG isn’t going to walk in and solve every problem overnight. This is a team of analysts, and they’ll require data to assess value.

I propose borrowing a stalwart of the Silicon Valley design process (after all, their performance management techniques were worth stealing); split testing. It’s the same approach the folks in marketing call A/B testing, and it simply involves testing two competing strategies alongside each other to see which performs best.

Companies like Google have gained real value from split testing at a product level, and I firmly believe the approach could work well at an organisational level as well. The BPG could split test everything from training methods to customer enquiry responses, creating in the process a business that performs at optimum efficiency and a HR alternative that delivers quantifiable results and adds real value to your organisation.

To Sum Up…

Until we as business owners and managers recognise that the value of Human Resources goes far beyond recruitment and administration, we’ll never unlock the full potential of our employees, our businesses, and our markets. HR doesn’t need a revamp, it needs disruption.

References

¹Haywood, 2016. Companies wasting millions on hiring. The Australian (Business Review).

²Kehoe and Wright, 2010. The impact of high performance human resource practices on employees’ attitudes and behaviors. Journal of Management. 39 (2). pp. 366-391.

³Teich et al., 2013. Lean management – the journey from Toyota to healthcare. Rambam Maimonides Medical Journal. 4 (2).

⁴Mercer, 2016. Futureproofing HR: Bridging the gap between employees and employers. Mercer.

⁵WorkplaceInfo, 2016. Got a bad reputation? It’s going to cost you. WorkplaceInfo.