The investors metaphor

Hosting talent is developing the organisation’s human capital. One of the roles of the leaders-architects is to build good hosts and hubs of something that they do not own: the individual’s talent. Nobody has put it better than Thomas O. Davenport with his ‘investor metaphor’ of workers (in his book Human Capital). Employees were once treated as ‘cost’, then as ‘most valuable assets’ and now they should be seen – he says- as investors, that is, investors of their own human capital. It is a very interesting concept from the leadership perspective.

What do you do when you invest? You go and find a place where your capital is going to grow! At the end of the year, or whatever other period, you are going to compare what you put in and what you got out! It follows that people should go and work at places where their human capital is going to grow, and where, in the process, it’s being used by the organisation. In this model, leaders are more like investment fund managers, creating the conditions for the growth. As such, they should be measured by their ability to show the growth. And this is a tricky one because whilst we are good at managing tangible assets, we’re not necessarily that good at managing intangible ones. If your people are not sure about what ‘intangible’ means, use this:

A rich American lady visits the most famous hat maker in Paris. She sees a beautiful, exquisite, long ribbon and immediately falls in love. The hat maker takes the ribbon in his hands, does a few twists with it and creates a stunning hat. Brilliant! The lady grabs it immediately. “How much is it?” she asks. “Five thousand Euros”, the hat maker says. “Five thousand Euros!” the lady exclaims, “But, it’s just a ribbon!” “Madam”, the hat maker says, “the ribbon is free.”

Leadership and ‘home effects’

In a previous post, I mentioned to you that leaders are architects and that there are 3 dimensions to their architecture. I’ve already focused on how they need to protect time and create space in my previous posts. Now, let’s look at how leaders build homes: the second dimension.

Leaders build ‘homes’. Leaders build organisational I.Q. which is a combination of three things:

1. Human Capital: the combination of individual talents, assets that the company does not possess but hosts. The organisation is like an investment bank using other people’s talent
2. Social capital: the quantity and quality of relationships between people internally and externally and between the organisation and other organisations.
3. Architectural capital: the assets developed and grown from (a) a particular ‘way of doing things’ and (b) a particular way of being organised.

The no-war on talent
In 1997, McKinsey-consultants coined the term ‘war on talent’ to describe the fight between corporations over the attraction of good human capital. Talent is a key asset, not a commodity, so there must be a war to win it for the company. There were articles and more articles and a book… It took a few years for somebody to shine a different light on the problem and it was Prof Jeffrey Pfeffer of Stanford University who did it. I learnt of this through an intriguing article in the Financial Times in 2001 with the title The futile war on talent. After all the noise made about the war, to have the FT saying there wasn’t one, or that it was futile, deserved a bit of attention.

The thesis was very simple. All this business about a war on talent distracts people from focusing on the talent inside their organisations. By making so much noise about a talent that seems to be ‘out there’ and for which organisations are murdering each other, we lose sight of our own internal talent pool. The issue, the article put forward, was how to host talent (whether home-grown or attracted) not how to grab it from some sort of extra-terrestrial place.

Intrapreneurs at the gates

I bring this topic here as an example of leader’s architecture designed to create space and place for people. And this is far from altruistic. It is an example most applicable to medium or large organisations but the principles would be more universally valid. I am talking here about self-contained, entrepreneurial ‘business units’ within a large organisation that can be designed to take advantage of the large company context, but without its bureaucratic liability, and with the attraction of the small ‘independent’ organisation. They live a symbiotic life with the company, and somewhere else I have called them ‘SymBUnits’, that is symbiotic business units. They are inside the firm. Individuals don’t have to open the gates and go… but they are different from the rest. And here are the differences:

1. Protected boundaries. The borders of the unit, the group of individuals or the ‘special team’, must be protected (by management) but those borders may be permeable. Actually, they may even look more like Monaco borders than Heathrow borders. When in Monte Carlo, you have to look hard to see any visible difference from France other than the police hats. But they have their own police, banking system, laws and government. Some of these groups of entrepreneurs-inside-the-gates may be similar, separated more by an osmotic membrane than a rigid organisation chart. But don’t be fooled, accountability and clarity of goals will be there. Yes, some degree of ambiguity may be necessary, and this is not everybody’s cup of tea. These units need to be particularly good at stakeholder management and at nurturing their interfaces with the rest of the organisation. They may need resources in and out, part-time people lent from other parts of the company, and a mixture of secondments and fixed headcount, all in one. Today’s structure may look different tomorrow. They may represent a bit of a moving target for HR departments! But the leadership needs to protect that permeability and those semi-invisible borders to facilitate a sense of identity.

2. Clear, well-defined output intent. These groups must have a clear idea of what they are going to deliver in return for their protected uniqueness. Of course, their delivery must add value. Expectations must be clearly defined and those expectations must be aligned with their special charter, which, incidentally, must be well documented and shared.

3. Operating model freedom. These units must be free to operate in a different way from the rest of the organisation. Within the agreed charter and their permeable boundaries, they must have protected freedom to establish their own processes and sit outside the homogeneity of the rest of the firm. They make their own rules. They should not be forced to follow the same systems and procedures as anybody else. If there is a massive, corporate, overall project management system with defined reporting and control, for example, they must be allowed to opt out if it’s not suitable. There is no point to give them the borders, charters and protection and pretend that they will behave like anybody else. If project teams report monthly to management, these units may want to do it weekly or quarterly. That can be agreed upfront, of course, but the whole point of having them is that they can enjoy a more agile, fast-track, tailored way of doing things. This is particularly worrying to command and control bosses.

4. Resource control. Within the agreed framework, these intrapreneurial groups must fully control their allocated resources, with direct visible accountability of their use. They must be free to outsource if needed. They should be allowed to spend the money in the way they need, not the way the rest of the organisation does. Scary again, but, yet, what’s the point of having them following the same rules? At this point of my presentation, I usually get things such as: “Oh my God, this is crazy, a recipe for chaos.” But it is not, if you trust them enough to allow their set-up.

5. Magnet for talent. These ‘units’ must by design be magnets for talent inside the firm (and outside). They must exhibit an ability to seduce and attract the best hearts and minds. These units must pride themselves to become ‘the place to be’, a prestige, elite space where growing intellectual capital is as easy as growing mushrooms (in places where mushrooms grow!) Inevitably, you are creating some sort of internal competition, but this is healthy. The role of other parts of the organisation is to become ‘the place to be’ themselves as well, not to complain about unfair treatment or differentiation. There is no law that says that you have to run parts of the organisation that must be defined as ‘the places not to be’. If there are lousy processes and boring work, these have been created by man. Man can change that.

6. High Brokerage. Although brokerage is part of normal leadership, these ‘units’ must be exquisite at that capability, They will have to constantly negotiate with other parts of the organisation to protect their boundaries, use ad hoc resources, and make trade-offs. Their leader is their Master Broker. The leader of these units must be unapologetically contagious in his or her energy, determination and passion. Passion is not necessarily jumping in the corridor singing and clapping – business passion is a deep belief in what one is doing (when in doubt, look at your entrepreneur friends who left, passing through those open gates).

7. Identity and destiny. And now it gets even more philosophical (and scarier for standard managers). These units must have a sense of ‘any-size-d’ destiny, as I mentioned in chapter 1. I don’t mind whether you use a big D or small d, but sense of destiny means that they share a good awareness of their potential unique impact on the organisation. They want to be remembered as ‘the ones who did such and such, who developed that product, who created that new idea, who commercialised that opportunity, etc’. People in these intrapreneurial cells have a high sense of belonging. The unit is their reference place. They are aware of their elite status and all the benefits and the liabilities associated with it.

8. Knowledge incubation. These units thrive on knowledge creation, sharing and transfer. They invest heavily on training and development of their people on anything that is necessary even if it’s not part of the training portfolio available in the company. If somebody needs to be trained on something specific that is desperately needed, here you go, here is the ticket and the credit card, go and get it. They take intellectual leadership seriously and pay a lot of attention to their own recycling of skills and capabilities. Incidentally, they control their training budget, the one that usually gets cut around September time when the company needs to make some ‘savings to compensate for the lower than expected sales in Singapore’ and/or the ‘unfavourable currency conversion’.

9. Urgency ethos.They have a culture sense of urgency. Sense of urgency is not synonymous of all-fast-at-any-cost. They have a motto: “Life is short”. They protect their ‘time to think’ but then, it’s all go. They politely answer the concerns about quality by professing quality as a given, as a ‘pass’, as a baseline, not as an aim in itself. Whilst other people produce quality ideas, quality products, quality services and quality goods for the sake of quality, they produce them for the sake of the output itself, their added value, which just happens to have high quality. Quality is a given, slowness is not negotiable. As I mentioned in the previous chapter - referring to ‘the tyranny of the or’- many people around them say that it’s one or the other, quality or speed, one compromises the other, they can’t have it both ways. To which they respond, “Watch me!”

10. Emergent architecture. Over time, the shape of the SymBUnits, intrapreneurial units, in-venture groups or whatever you may choose to call them, may change. The composition of members, nature of their network, size of the operation, etc. may evolve. However, the foundations remain.

You have noticed that I have been calling these groups differently all the time. This is by design because it is not a question of creating a new ‘theory of the organisation’ or ‘a new model’ but applying the principles no matter what form, shape or label. Structural evolution in these groups follows more of a self-organising path than a designed plan. Identity remains high all the time, but the borders of those Monacos may look like a moving target.

The old Arab choice between having enemies inside the tent but pissing out (annoying) or having them outside the tent but pissing in (more annoying), also applies here. Choosing between all those about-to-leave people (going outside the tent and eventually pissing in) and creating an inside-the-tent strategy (definitely far more hygienic) that keeps talent in the organisation… Well, it’s your choice. You will also introduce healthy internal competition. These ‘structures’ are ideal for internal ventures, fast-track development projects, expansions into new fields, special projects, one-stop problem solving ‘teams’, internal product incubators, hosts for different product-development life cycles inside the same organisation, or just intrapreneurial pockets retaining talent.

I am told that on the door of a GE facility in India there is a sign: ‘Trespassers will be recruited’. You as leader should have an equivalent sign for your organisation, perhaps something along the lines of ‘Leavers will be seduced and recruited again.’

100K investment lost

It has always surprised me. Corporations are resigned to let their best entrepreneurs go on the grounds that it is normal for those people to want to exit corporate life. They are not good at dealing with many practices and procedures, hate too much reporting, need an agile ‘entrepreneurial environment’, want to be more free, to make decisions that matter and to feel that they can see the differences they make. So they have to go! Great! So we acknowledge that rigidity, over-reporting, lousy decisions and lack of freedom are an inevitable part of corporate life.

If a £2,000 laptop is missing from the office, we will launch an investigation. If an entrepreneur leaves to create his own show because he can’t stand the constraints of the company, we call it a ‘natural fact of life’. I heard this comment many years ago and it’s still valid today. How interesting! Instead of fixing the internal rigidity problems we prefer to let human capital go in search of a more motivating environment. We will even have a party to say goodbye and celebrate the loss. Accountants will be happier because they have just made a saving on the balance sheet. It’s the surreal world of management: let somebody go and you’ll save money.

It is probably impossible to pretend that the entire culture, systems and processes of a medium-sized or big company changes overnight to accommodate for entrepreneurial groups on the inside, but can we do anything about it? Yes, we can! Provided that the leadership is not too scared to ‘allow’ different operating structures to cohabit within the firm, that there is no obsession with uniformity of systems and that the focus is to make the most of those entrepreneurs at the gates (that is, in this case, entrepreneurs about to get out), there are definitely ways.

And I’ll look into that more in detail in my next post.