New venture outsourcing blog

Potter Stewart wrote in hs concurring opinion in the 1964 case of Jacobellis v. Ohio about pornography:

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so.  But I know it when I see it, and the motion picture involved in this case is not that.” (emphasis added)

I believe this statement applies just as well to pinpointing star employees.

Many managers obsess over recuiting and hiring the “best & brightest” employees.  Depending on the industry, the difference can be quite dramatic.  In industries requiring a combination of heavy training and natural ability (e.g. finance, law, and professional sports), the difference between the most productive and the rest of the group can be startling.  Thus, finding methods for evaluating, selecting, and compensating employees based upon these differences can quickly become an important task for any business - but for new businesses in particular.

Google’s Peter Norvig for example, talks about Google’s Lake Wobegon Strategy they employ to maintain their high bar for talented employees.  This strategy allows a company to only hire someone who is expected to be above the mean of their current employees.  Below is a copy of Norvig’s compelling simulations of the difference hiring above the mean can make compared to hiring above the minimum employee talent level.

In any small to medium sized group of people, it seems to me that about 15 minutes are required to size up who most of the real contributors are, and who most of the slackers are.  There are always a few surprises, which is why actually working with someone or watching them work with others and seeing the outcome is the ultimate test.

Unfortunately, this “gut instinct” people evaluator we all come equipped with can get confused under certain circumstances.  Particularly when you’re pressed to hire quickly.  Google’s Norvig notes that Google doesn’t allow project managers to hire into their project - as they tend to lower their standards in order to get some help meanwhile they end up bringing down the average for the company.  This sort of breakdown happens more generally after you’ve already spoken to 100 other applicants, when your “real work” todo list is growing as you scan every new resume, and while your investors are breathing down your neck to increase head count.  The other unsettling aspect of this is the subjectivity of it.  If there’s one thing people can’t stand, it’s being treated unfairly.

Unfortunately, and fortunately, fairness is not absolute when it comes to real life human beings, it’s an issue of perception.  The Society for Industrial and Organizational Psychology Inc. says that there are basiclly three different types of organizational justice percepions:

• Perceptions about fairness of the outcome
• Perceptions about fairness of the process
• Perceptions about fairness of the interactions

For anyone who’s ever tried to evaluate employees in an organized, procedural way, it’s appalling how hard it is to create a “process” for doing this.  I think the problem may be that managers are trying to make the process too objective in an effort to make it more fair, or at least to improve the perception of fairness.  However, this effort is misguided.

Making a process more objective at best only reduces the risk of procedural unfairness.  It doesn’t address outcome or interaction fairness at all, as most of us have learned the hard way.  In practice, any attempts to correct for outcome or interaction fairness tend to reduce objectivity, undermining the procedural fairess as well.  The result: a process that is peceived to be much less fair than a purely subjective one.

Big businesses have a tough road to hoe in this respect, you can’t have the CEO really get to know everyone at a company the size of GE or WalMart.  Fortunately, new businesses have an advantage of being able to be in the same room with most of their people.  My advice?  Take advantage of it while you have it!  Being subjective about your interviewing, your evaluations, and your compensation systems can be more fair, more effective, and a lot less time consuming than implementing a more objective process.

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