This article was originally published on CFO.com.
A high-performing culture like Amazon’s is effective, but it also creates winners and losers. And, in some cases, it can quickly go bad.
Let me start with a confession. I am and always have been a workaholic. I was even profiled once on a TV program about workaholics. I spent sixteen years at one of the (now four, then eight) big professional services firms — one of 2,000 partners among 100,000 employees — where everyone was very smart (our hiring practices were generally effective and there was no lack of talented applicants), but everyone knew that most would never make it to the top. Attrition through competition was a fact of life and surviving by meeting a never-ending stream of stretch goals created a sense of shared experience and trust among the firm’s partners.
Careers in law and investment banking offer similar models: work really hard to solve challenging and interesting problems; get great training and experience; but mostly leave sooner or later — generally for success elsewhere. Smart organizations that use this model look after their people, even those who don’t make it all the way through, because they may one day be customers.
The model depends on a few factors that aren’t all that easy to control. Most critically, there has to be a supply of people who are willing to go along (which has generally been true, although we had some doubts during the dot-com bubble years). You also need managers at all levels that can be fair and objective in evaluating performance, in selecting the candidates for promotion, and in counseling those who aren’t as good a fit as is needed. That often turns out to be tough — those who have been successful within the system don’t always understand what made them successful and how to see the same traits in others. Overall, however, the system had enough checks and balances to work effectively — and enough operational data to balance subjective opinions when needed.
While I am probably not a great example for most people of work/life balance (although I do in fact have a rich and rewarding life outside of work) I have always been interested in how and why some organizations are able to create a singular but effective working environment. Often, this melding of culture and process can be a source of long-term competitive advantage. Understanding what makes these organizations tick teaches you interesting lessons in achieving a sustained level of high performance, even if it doesn’t usually help much in emulating them.
Some examples. Capital One with information-based strategy; GE with multiple aspects of a measured and aligned management culture focused on continuous improvement; Koch Industries with market-based management; Amazon.com with the (now infamous) 14 principles of success and relentless focus on customer satisfaction; and Bridgewater Associates’ Ray Dalio’s principles and commitment to self-improvement.
In each case, there is a lot more than lip service to a few platitudes or even to aspirational ideas going on here. In each case there is close to total alignment around all aspects of the business, strategy, operations, management style, and day-to-day process. People are a necessary part of all this, but they are only a part and employees at all levels are expected to fit in. If they don’t, they won’t be successful and will, one way or another, leave.
Note that this doesn’t imply that the companies that operate this way aren’t innovative, agile, or willing to change to meet new challenges. In general they are all of those things. What they aren’t is easy places for “just anyone” to work. Because the rewards for success are significant there are always more aspirants for success than there are places available, especially at the senior levels. So there is competition, sometimes brutal competition to do well, and that will inevitably create “winners” and “losers.” Even if the “system” that evaluates performance is fair and unbiased (and it isn’t always), it’s not pleasant to be a “loser.”
A big part of what makes these organizations work (and makes them in general very successful in a very competitive world) is a reliance on data in driving decisions. Data about everything, including the actual performance of the people.
Another big part is the recognition that not everyone is equally talented at anything. Peoples’ abilities obey the law of large numbers just like any large collection of things with randomly distributed characteristics. I will never win an Olympic medal at anything — gold medalists start out genetically superior and no amount of training and dedication can substitute for that level of natural ability. Nor will I ever be a major league baseball player or a Formula One racing driver.
The trick is to design a system that reliably finds people who have the talent (or at least the potential) you need and a culture that allows them to develop and apply their talent in productive ways. Forcing people to stretch themselves and their colleagues can, if managed well, create an organization that can do things well beyond the ordinary — even beyond what people might see as possible.
It’s also important to recognize that no system is perfect and that any culture that deliberately operates at a highly competitive level can quickly “go bad” if it’s not both policed and allowed to evolve. It only takes a few people behaving badly to derail the system. Preventing that takes data too.
All the organizations noted above are intensely data driven — and it’s becoming easier for any organization to collect and analyze detailed operational data that can be used to drive decisions. What sometimes seems to get lost, however, is that all that data can obscure as often as it illuminates. As a friend and former colleague of mine likes to point out, “People are not peripherals” and treating them as if they are isn’t a good idea, even if you have an endless supply of replacements waiting to be plugged in.
So it’s reasonable to ask at what point does a supposedly merit-based organization, which has room for some variability within its culture and operations, become a rigid and mechanistic trap? Can any amount of data and analysis prevent this or at least provide a warning that it’s happening? And if the available data can’t prevent it, what can? Does it take an “Ah-hah!” moment triggered by an article in a newspaper or an exposé on TV?
A final thought. Sooner or later a company designed to be highly and continuously competitive runs the risk of running out of people who want to participate. At that point you can’t grow any more; if you can’t grow, you’re likely to fail. Before that happens, make sure that the data that support your decisions and help form your strategy are good enough to help you adapt and find another way to succeed.