The Weird CEO

by Charles Towers-Clark

In his excellent book Reinventing Organisations, Frederic Laloux sets out a number of organisations where the CEO has found a working compromise between typically corporate organisations (he described these as red organisations with strict command structures) and those that could be perceived as green organisations (with egalitarian management). Laloux describes these as ‘Teal’ organisations, the key attribute of which is that the CEO allows employees to take responsibility for their own (and therefore the company’s) destiny. We have taken some of the practices used by companies cited in his book and adjusted them to our own environment.

  A number of the practices that we have undertaken to help push WEIRD attitudes are discussed within the next few sections.

  C)

  IN AND OUT

  “Recently, I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. No, I replied, I just spent $600,000 training him.”

  Thomas John Watson Sr – Ex Chairman & CEO IBM

  i. Recruitment

  I’m always baffled why companies recruit on the basis of a one-hour interview process. You wouldn’t propose to marry somebody after knowing them for one hour. Granted, you are unlikely to spend the rest of your life with a new employee, but you are certainly going to spend a lot of time with them – every working day – very possibly for some years.

  When I mentioned at a meeting that candidates who wish to work in our Spanish office have upwards of ten interviews, I was asked: “How can you expect people to find the time to do that?” “That’s ridiculous – who would want to do that?” “It’s selfish to ask!”

  Although it fell on deaf ears, I tried to explain that there are three reasons for such an extensive process:

  1) We try to get as many existing employees as possible to meet with the candidate. That way our employees get a say in who joins – and therefore some ownership of the recruitment decision. If an existing employee feels that they were part of the decision, they are more likely to help ensure the success of the appointment.

  2) We are keen that the candidate gets an opportunity to meet the people with whom they will be working. Frankly, if somebody doesn’t want to take the time to do that, it implies either that they don’t care about what they do in their working day or they have doubts about how long they will be working with us.

  3) At the end of the recruitment process, I will have a conversation with the candidate for more than two hours. It is difficult for somebody to keep a façade for that long, after meeting many people, so we have a high degree of confidence that the person we are interviewing is indeed the person with whom we wish to work in the future.

  With the benefit of hindsight, when we have made bad recruitment decisions, it has been a result of not spending enough time interviewing the candidate.

  ii. Conflict

  The enemy of conflict resolution is silence.

  People should be encouraged to deal with conflict by taking it head on and talking to the person with whom they are in conflict. However, this requires a level of trust and self-confidence that is not always present. As a result, it is worth having a stepped approach to deal with conflict:

  1) Sort it out privately. Initiator has to make a clear request (not a judgement or demand). The other person has to respond to request with ‘yes’, ‘no’ or a counterproposal. If there is still a conflict, then…

  2) Nominate a colleague as mediator. That colleague provides support aimed at finding an agreement but does not impose a judgement or resolution. If there is still a conflict, then…

  3) Select a panel of relevant colleagues, agreed upon by both parties. If the parties cannot agree on the panel, then the mediator brought in at stage 2 will decide on the panel. This panel listens, and helps shape an agreement. It cannot force a decision. If there is still a conflict, then…

  4) The CEO might be added to panel. Again, the CEO is not expected to provide a decision but rather to help find a resolution to the conflict.

  Any conflict should, in the first instance, stay between the two parties. Neither party should enlist the support of others unilaterally. If help is needed, it should be sought via the conflict process.

  Each person should take the responsibility to talk directly to any colleague who they believe is not acting or working appropriately (appropriately is obviously the opinion of each person). Almost always, the ‘problem’ will be sorted by a simple conversation because, often, people are not aware that they are causing an issue, annoying other people, causing costs that they had not considered, creating more work etc. This should include the most junior person being able to speak directly to the CEO if they think the CEO is doing something wrong. True success of this system can only be demonstrated when a junior person feels comfortable taking up a conflict directly with a CEO.

  This happened at Pod Group, when I was too hasty in trying to hire an employee for a new project we are launching. I walked into the office and felt that I had been set upon by four of my colleagues – and became defensive as a result. After we had all calmed down, we discussed the conflict. I was (unjustifiably) angry at the time, which resulted in a feeling in others that they couldn’t express their opinion honestly. Transparency is great, but Emotional Intelligence should be used as well – if somebody feels attacked it will not lead to a useful conversation. The situation was handled much more effectively after I had calmed down and suggested that one of my colleagues spoke for the others in a separate discussion (not in the middle of the office). As a result, I understood that the real frustration was a problem on another project – so I undertook to move heaven and earth to get that problem resolved.

  iii. Dismissal

  Generally, I am of the belief that there are no wrong people but rather wrong jobs. Before starting down the dismissal route, it is often worth asking what tasks the employee would prefer to do and think that they would be good at. This exercise requires both the employee and the manager or Head of HR to throw all caution to the wind and not to limit the answers to what jobs are available, what tasks need to be done, what the employee thinks they could do within the organisation or even what the company does.

  By removing any pre-judgements, sometimes a very exciting business opportunity can arise with a very motivated promoter.

  When employees are performing badly, there is a tendency to tighten the control around their work, with the intention of getting them to perform better. This will almost certainly lead to a downward spiral of disillusionment and poorer performance. Most employees perform badly because they are not happy with their specific role.

  The quickest and most successful performance turnaround in my experience happened when we gave full responsibility for a project to a colleague who was on their final warning and due to be fired within days. Previously we had tried to control their work and taken more and more responsibility away from them. Not long after, I had the pleasure of hearing their previous boss state that he needed that person for a new project.

  However, there are times that an employee has lost all motivation and is probably causing a distraction to the rest of the team. A final option is to ask the employee to set a plan as to how they are going to change. This plan needs to be set by the employee not by their manager or HR Director, so that they are responsible for its implementation. At this point there is probably a 50/50 chance that the employee will rise to the challenge. If they do not, they should be dismissed from the company as soon as it is clear that they are failing, so as not to demotivate other employees further.

  D)

  PERFORMANCE AND REWARDS

  “Our praises are our wages”

  William Shakespeare – English playwright

  i. Transparency of salaries

  Part and parcel of the freedom of financial information is transparency of salaries.

  However, knowing what your neighbour earns is an incredibly sensitive subject. This is strange considering that, in most countries, public servants are paid according to fairly narrow pay band
s which are public knowledge.

  When it comes to salaries within the private sector, obfuscation seems obligatory. From a purely financial point of view, this is advantageous to companies as they can pay what an employee will accept, not necessarily their true value. So, people can be paid different amounts for the same job.

  Study after study indicates that transparent salaries create a better environment as employees realise that they are paid fairly.[c],[ci]

  The reverse is that non-transparent salaries lead to inaccurate assumptions. When salaries are not transparent, roughly 75% of employees will assume that they are not being paid fairly, regardless of whether their salary is above, at or below the market rate.

  However, most importantly, if employees are to make informed decisions, all information needs to be transparent. The cost of each employee’s salary will be one of the main costs of any new project and not including this in a budget conversation prevents the true cost of a project or business unit being analysed.

  The problems we encountered in introducing transparency of salaries at Pod Group are described later. However, after the decision was made – apparently similar to other companies who have implemented this change – the actual release of salary information was a complete non-event.

  ii. Deciding own salaries

  Employees deciding on their own salary is one of the key tools to generate an ethos of self-responsibility (alongside decisions on holidays, place of work and working hours). However it is a tool and not an end in itself.

  Buffer, who make clever social media tools, are very public with their information. This includes publishing each person’s salary online. Furthermore, Buffer publishes its financial breakdown, equity formulas and pricing breakdown.

  To calculate salaries, Buffer has a formula that again is open. The third version of their pay formula is as follows:

  benchmark X a cost of living multiplier X a role multiplier X an experience factor.

  At Pod Group we decided that we should change the way in which salaries are calculated, resulting in huge discussions as to how a formula should be created. In summary, we couldn’t find a fair equation for each person in the company living in different places, with different goals and at different times in their lives. So, finally, we realised that the only way to ensure fair salaries was to let people choose their own.

  When I tell outsiders that our employees choose their own salary, the first assumption is that employees ask for outrageous salaries. I estimate that our salary bill is probably about 10% above what we would be paying without transparency and self-chosen salaries.

  It is easy to explain why people are so reasonable by returning to the survey summarised in the table in Chapter 1. Around 33% of recipients were motivated to go the extra mile by: camaraderie, peer motivation, encouragement and recognition.

  As salaries are transparent, employees are aware that the level of positive recognition from each of their colleagues will also take into account the salary earned. If colleagues think that you are earning too much money, there is a very real danger that your interaction with them will change. As most people value peer camaraderie, they don’t want to appear greedy in the eyes of their colleagues.

  Apart from peer interaction, we also provide some other tools that can help assess the appropriate salary. This includes a review of comparable salaries in each city that we operate. Each month we review the financial data of the company so that individuals can see, perhaps not individually but certainly as a group, how they are contributing.

  One of the key methods to help people understand how they are viewed by their peers is a 360-degree evaluation tool that we created. However, we do not link the evaluation feedback to salaries. Instead, it is used as a way of measuring improvement and a channel to receive comments from colleagues.

  Other companies have similar tools, but we decided to keep ours simple.

  iii. Evaluation and appraisals

  Ray Dalio implemented a unique evaluation methodology in his company, Bridgewater Associates (one of the biggest hedge funds in the US). Employees are given iPads which they can use for various tasks. One of these is a constant evaluation process so that at any point (for example in a meeting), each employee can give a score to reflect how well a colleague is doing on any one of a hundred attributes or skills. Therefore, a twenty-five-year-old analyst can give Ray Dalio a low score for clarity during a presentation and add a comment alongside.

  This methodology has its detractors, but I agree with Ray Dalio that feedback should be constant and honest. This requires a level of trust and confidence in both the giver and recipient of feedback. I hope to be able to implement constant feedback at Pod Group in the future.

  At present, we have a quarterly evaluation for everybody in the company (including the CEO).

  We ask just three questions:

  1) How much do you know about and work with each person in the company?

  2) In your opinion how much value does this person bring to the company?

  3) What comment do you have about that person’s work?

  Initially, all comments were anonymous. However, we realised that comments can easily be taken out of context and so we now encourage people to include context in their comments and to add their name so that it can lead to further discussion.

  One of our developers devised an application to ensure that the survey can be filled quickly and that the results are calculated automatically without human interaction. Most importantly of all, comments can be viewed only by the recipient and the HR Director.

  In assessing the survey results, we try not to get to hung up on scores. The value is in the comments and the ability to monitor progress of individuals between evaluations.

  Each person reacts to comments in very different ways – which, in itself, can lead to conflict and hurt. As a result, the HR Director talks to the recipient about any comments that might be taken badly. Hopefully, the number of problematic comments will reduce, and/or recipients will become more comfortable with constructive criticism.

  E)

  TEAM WORKING

  “Coming together is a beginning. Keeping together is progress. Working together is success.”

  Henry Ford – Founder of Ford Motor Company

  i. Seating plans

  The tendency in most companies is to seat departments together. There is a lot of sense to this as inter-departmental communication is facilitated.

  Another option is to hot desk. Again, nothing wrong with this as it may cause more interaction between departments. Generally, though people prefer to sit together with those that they know and like.

  I find that most (but not all) people prefer routine. Part of that routine is often to sit in the same place. Thus, trying to get people to change desk can create an extraordinary amount of resistance: “But we need to be with our team mates or we will have to get up and find them every time we have a question.” There is logic and truth in this, but there is also value of physically splitting up a team so that they communicate with other teams.

  One idea is to put the management team in desks next to each other and to put the rest of their department elsewhere. This offers two benefits:

  1) Removing the manager from the team removes the ability for employees to defer even simple questions to the manager rather than thinking them through for themselves.

  2) If employees come to talk to their manager, other managers get an opportunity to learn about the other departments’ interactions and issues.

  Similar to introducing transparent salaries, it may be worth the time and effort to persuade people that changing seats is worthwhile in order to change attitudes (especially in more hierarchical organisations). However, whilst it seems a trivial issue, forcing people to sit next to somebody against their wish can demotivate an employee such that they become disruptive. Either way, an effective seating plan can aid communication in an organisation as much as any other initiative – but finding the right time to push a chang
e in seating is key.

  ii. Avoiding stars and egos

  For WEIRD to work successfully, trust is required and this arises when people are honest with themselves and with others – knowing their strengths and willing to admit their weaknesses.

  There are of course many team-building exercises which can be very valuable in developing trust between colleagues. However, most important is the day-to-day encouragement of trust.

  Teams will always outperform individual stars when each person understands and appreciates that they need their colleagues in order to achieve their own and the company’s goals.

  This requires only two actions:

  1) Refuse to pander to a ‘star’s’ ego. Even though they may be responsible for much of the company’s revenue, in the long term they will destroy the company as other people won’t want to work with them. Furthermore, the longer they stay, the more dependent upon their ‘star’ status the company will become.

  2) Make sure that anybody with an over-inflated ego understands what everybody else in the organisation does. People generally think they are the most important because they don’t understand the value of other people’s work.

  Worse than an over-inflated ego is pride. Some years ago, in another company, I was pulled into a bitter multi-million-dollar dispute by two investors. Each was very proud and refused to back down. The result: both lost all their money and their reputations – but the lawyers did well. Creating an environment where people can admit they are wrong or admit their lack of knowledge without fearing repercussions is extremely healthy. The easiest way to start and encourage this environment is for the CEO to take a lead in publicly accepting what he or she doesn’t know and to apologise publicly when making a mistake.