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Monday, December 28, 2009

Turn the Cell Phone Industry Upside Down

This a rare, off-topic non-workplace post but I'm on vacation this week and thinking about other things. While shopping for Christmas presents I briefly considered and then dismissed buying an iPhone or Blackberry for my wife. Our daughter has an iPhone and loves it; I have a company-issued Blackberry and find it handy at times. The purchase price of these devices is $450 - $500 unless you renew your cell phone contract, and then they are anywhere from $49 - $99. But that's where they lost me.

I went to my local AT&T store and found out that we don't have a line on our family share plan that is up for renewal until February. I pushed back some with the nice young man behind the counter; after all, I send enough money each month to AT&T for my home phone, Internet access and three cell phones to supply a third world city with food for a year. What's eight weeks if you're making a long-time and very good customer happy. Nothin' doin'! I'm under contract and they don't have any incentive to make me happy. That's when it hit me.

I know I'm slow, but I don't think about technology and the business end of technological companies that much. I have a full-time job, and technology is simply the tool set of our modern age. I don't focus on the latest gadget anymore than my great grandfather sat around his WPA work camp talking hammers with his fellow carpenters. Tomorrow the technology will change we'll be on to something else and I just refuse to get caught up in the hoopla over the latest gadget. What does interest me are people, and part of that interest is in the art and science of customer service and building customer loyalty.

So, thusly unfocused, I missed what the cell phone industry has done to all of us. This business has undoubtedly become a commodity. Although really neat developments like the iPhone make even guys like me sit up and take notice, cell phone stores could just as easily resemble groceries with high competition and low margins. Rather than let that happen, the industry came up with a great gimmick: offer expensive phones for next to nothing, require that the customer sign away their freedom of choice in exchange for the phone, then amortize that cost over the two or three year term of the contract. Without freedom to change companies, the industry resists commoditization. Phone prices from hardware makers and the monthly fees charged by the service providers can stay artificially high.

Here's what I've decided to do about it, and I think you should too. Hang on to your phone, save up your money, and the next time you need a phone buy it at full price without signing a contract extension. When your contract is up, you then have leverage to negotiate terms with the AT&T's and Verizons of the world. How much leverage is unknown right now; it depends upon how many people decide to take this route. What won't happen is your being held captive to a corporation at an expensive price in what should be a cheap commodity market.

Friday, December 04, 2009

Things to Blow Up I: Performance Reviews

In an industrial era where supervisors were "bosses" rather than coaches, where jobs were relatively unskilled manipulating things vs. information, and where the talent needed for these jobs was in ample supply was born the performance appraisal. The purpose was two-fold: force the occasion at least annually for the boss to speak to the worker about their performance and how they could do their jobs better, and provide a documented history of the worker's performance. That history, housed usually in the Personnel department, was primarily used for (1) review of the worker's history for purposes of promotion or reassignment, and in later years after the development of discrimination laws (2) documentation for the company to support its termination decision and defend against lawsuits.

W. Edwards Demming, the most progressive-minded and talented of all management gurus, advised American industry to end this practice in the 1950's. As is well-documented, his ideas were laughed out of the U.S. and promptly adopted in Japan whose industries recovered to outperform American companies for a generation.

The changes in how we supervise, how we work, the talent supply, and how we document have changed dramatically since the first performance reviews.

The mode of supervision has morphed from "boss" to "coach" with frequent and candid on-going communication happening throughout the year. No longer do you need to force an occasion for supervisor and staff member to talk.

The nature of the work performed in most jobs is now information-based. It is trackable and measurable and poor work is evident more quickly than in the industrial era, if not immediately evident. It is also evident to both employee, co-workers and the supervisor. A formal meeting is not required to point out opportunities for improvement.

The talent supply of information workers is not infinite. Yes, we have 15+ million people unemployed right now, but we simultaneously have highly skilled jobs open on all the major job boards like Monster and Career Builder. Thanks in no small part of the demise of public schools and nuclear families, we have lots of people and not so much educated talent. To keep this talent requires a softer, coaching-based supervisory mode that is antithetical to formal top-down performance reviews.

As Christian supervisors, we suck at performance documentation and constructive conflict. Rating inflation occurs in almost every workplace, but its a pandemic in Christian cultures. Most employees feel that they are above average and are insulted by an average rating, and supervisors don't want to insult their people. We find that comments on the appraisals are generally accurate ("Janie should not steal the company van to go line dancing during lunch hour") but are immediately followed by ratings of "Commendable" or "Outstanding". As such, this documented rating not only fails to help HR in defending against wrongful termination actions, it is actually a barrier that must be overcome in litigation preparation.

The review process does not build alignment. Reviews come at different times throughout the year. At different stages in the business cycle we have different needs and points of emphasis. Everything from the supervisor's mood to the department's budget-to-actual performance is different at each employee's review. The context is never the same for each review, and the review itself does not build alignment amongst and between the different jobs in the department and the department's role in the organization's goals and objectives. That's done informally by the coaching supervisor.

Because each employee feels they are above average, and is rated so by their supervisor, there is no meaningful link between rating and salary increases. In a 3% or 4% increase pool, if we rated based upon above average ratings, everyone would get 5-6%. To stay within budget managers typically disregard the ratings and give increases based upon other factors such as budget, position in market range, etc...

The review process is time consuming. It starts in HR where one of our staff members queries the payroll system monthly for a list of reviews due that month, and overview reviews from prior months. Next we send out an email list, and we follow up on supervisors with late reviews from prior months. The supervisors typically read last year's review to see if there's been progress made and then completes the review form, a process that takes all-together about an hour. The review meeting takes 30 - 45 minutes and involves at least two people, the supervisor and employee. The review form may or may not be sent to the second level supervisor for prior approval. It is always sent to HR for filing. All told, every review is the culmination of about 4 man hours. Multiply that by 500 people and you have the equivalent of one full-time employee's work for a year.

In summary, employees dread their annual reviews almost as much as their supervisors dread giving them. The vast majority of people leaving a review haven't learned anything new during the review meeting because they talk to their supervisor regularly throughout the year. The documented record, both in terms of how the employee is doing and the historical rating, are of limited value. The meeting does little to drive alignment between and within departments. The rating has little if anything to do with the eventual salary increase. The energy expended is significant for a process that adds little or not value.

So what should we do instead? We've discussed this with the ELT and will discuss it with all SVPs later in the month. Until then I'll reserve comment on what should replace the current system. Once we have SVP input I'll feel it appropriate to say more.

Question: What's your opinion of performance appraisals and how happy or sorry would you be to see them go?

Wednesday, December 02, 2009

It's a New Year: Let's Blow Some Stuff Up

Okay so we've worked our way through the worst part of the worst recession in our lifetime. We've practiced a relentless focus on our business, watched our expenses, kept the company profitable through a variety of challenges from weak retail to financial backers who think a bible translation means English, Spanish or French. Everybody on the team deserves credit.

While focus is a great thing that keeps us on-task and taking care of immediate business it should not be the enemy of innovation. God gave us two eyes, and I believe that gives us the ability to keep one on the task at hand while the other one looks to the future.

Without taking our "eye" off our immediate needs, we need use the other one to take a fresh look at some worn-out assumptions, blow up some old programs, and continue to simplify our business. This is a well-run profitable company, but I believe there are places where we're expending energy for little return. Since we're all doing the work of more than one person we just don't have the time for that.

Over the next few blog posts I'm going to lay out a case for narratives we should shift, assumptions we should throw out, and programs we should end. I have my list (see below), but I'm really more interested in yours! If you have a "stupid things we should stop doing" list feel free to comment on this blog, send me a private email, or drop off your submission in an anonymous envelope in HR (although if you're that paranoid you might want to use gloves so we can't track your fingerprints). ;-)

My List

1. Performance Reviews - I think its time we "just said no"
2. Marketing/Publicity Job Titles - Its an old system that needs an overhaul
3. Expense Budgets - Hint: zero-based and grounded in an activity plan
4. The Equal Opportunity Narrative - I remember 1964 and this ain't it!

Okay, I've gone first. If you want to add to this series you know what to do. Feel free to join the conversation.