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September 2012

Revenue Per Employee: The Only Performance Goal You'll Ever Need for HR Leaders

How do you measure the effectiveness of an HR Leader?  I'll define HR Leader fairly broadly to keep everyone engaged - let's say that's not only those who lead the HR function for an entire company, but also those with generalist responsibility over a client group of employees.  If you support a line of business or a function and have a flock of employees to hire, train and fire, you're an HR leader.

Talking about the effectiveness and performance of HR is a black hole.  You've got the transactional side, performance, talent acquisition, etc.  All sub-areas of HR have metrics, and HR leaders have been told that measurement is the key to the HR function being viewed as strategic. Revperemployee

But the top 20 metrics you can site are really just white noise when it comes to measuring the effectiveness of an HR leader.

There's only one metric that really matters when measuring HR.  It's called Revenue Per Employee (RPE).  Take the revenue produced by your company or business unit and divide it by your total number of employee (FTEs for the budget geeks in the house).   

Compare Revenue Per Employee year over year for your HR leader.  Did it go up or down?  That's all you need to know. The rest is BS.

The naysayers tell me that's an imperfect measure, citing the need to measure profit and the fact that all revenue isn't good revenue.  My response to both of those issues is pretty simple... An HR pro's contribution to profit is best measured by getting the most out of the people they have, and the demoninator of the formula (per employee) is actually an expense number measured by FTE's.    Lower revenue per employee means that you're likely delivering less potential profit to the company related to what you can control.  So profit is in there based on the revenue/headcout dynamic.

The side that says all revenue isn't good revenue?  Try telling that to a wise CEO that wants to measure you via Revenue Per Employee.  The thought may be true, but it's just noise and a reason to say no to the measurement.  Start focusing on Revenue Per Employee and let someone else figure out what's good and bad revenue.  We're not qualified to determine that, and all that thinking does is cause paralysis by analysis....

YOU MAKE THE CALL: Are You Responsible For Knowing That This Executive Hire Was About to File Bankruptcy?

Let's say you're leading a CEO Search for a company that does $48 Million in Revenue and prints $24 Million in Net Income annually.  Are you responsible for knowing the hire you made was in financial trouble?

Is that your responsibility?  Is that your business?  Would the Board of Directors expect that level of vetting?

A company recently missed along these lines, getting surprised by their CEO filing for bankruptcy just months after he was hired.  Whether you agree with it or not, I'm thinking there's no way the company makes the hire if they knew their candidate was carrying such heavy financial woes.  Here's the details of the CEO's situation, which are public record:

"_____ recently filed for Chapter 7 bankruptcy, and documents filed today in federal court show that he has only some $1.2 million in assets, compared to more than $25 million in liabilities. He's making $850,000 as part of his 10-month contract to _____, so it would appear ______has quite a long-term problem here.

He has just $300 in cash on hand and $500 in his checking account, the bankruptcy documents show.

_____ estimates the only real property he owns as worth $2,000 from a "1/4 interest in deceased parents real estate — 8 acres in Iona, Idaho worth $8,000.00 (total).

The latest court filing shows the extent of those difficulties. The biggest claim against him is $20 million from Terra Springs LLC, in Louisville. Republic Bank and King Southern Bank in Louisville claim $2 million and $902,000 respectively. American Express is claiming $10,810.

Chapter 7 bankruptcy is used to liquidate debts. Among the other assets ____ lists are: $5,000 in home furnishings, $2,500 in memorabilia rings and watches, $900 in books and pictures, $950 in clothing and accessories and $200 in golf clubs and a shotgun."

Hit me in the comments and tell me two things:  1) Was it the lead HR exec's responsibility to know this data about the candidate, and if they knew, should they have made the hire?

PS - the CEO in question is embattled Arkansas football coach John L Smith.  Click here for details.

Will Gen Y Have Professional Regret for Embedding Facebook?

When we think background checks and Facebook, we're usually thinking about beer bong pictures and other sophmoric behavior designed to tell us that the candidate has basic judgment issues, right?

We're certainly not thinking about predictive analytics designed to guess the probability of disease, pregnancy and the presence of things like insomnia and migraines.  But if you think about what's going on with big data these days, why wouldn't that happen?  Read this from Monday Note and ponder:

Tina Porter’s resumé popped up thanks to LinkedIn Expert, the social network’s high-end professional service. LinkedIn, too, developed its own technology to data-mine resumés for specific competences. Tina’s research on trade disputes between Korea and the United States caught everyone’s interest at Wilson, McKenzie. That’s why her “3D Resumé” — a Narrative Data trademark — is on the top of the pile, that is displayed on a large screen in the meeting room.

Narrative’s Marcus Chen does the pitch:

“Tina Porter, 26. She’s what you need for the transpacific trade issues you just mentioned, Alan. Her dissertation speaks for itself, she even learned Korean…”
He pauses.

“But?…” Asks the HR guy.

“She’s afflicted with acute migraine. It occurs at least a couple of times a month. She’s good at concealing it, but our data shows it could be a problem”, Chen said.

“How the hell do you know that?”

“Well, she falls into this particular Health Cluster. In her Facebook babbling, she sometimes refers to a spike in her olfactory sensitivity — a known precursor to a migraine crisis. In addition, each time, for a period of several days, we see a slight drop in the number of words she uses in her posts, her vocabulary shrinks a bit, and her tweets, usually sharp, become less frequent and more nebulous. That’s an obvious pattern for people suffering from serious migraine. In addition, the Zeo Sleeping Manager website and the stress management site HeartMath — both now connected with Facebook –  suggest she suffers from insomnia. In other words, Alan, we think you can’t take Ms Porter in the firm. Our Predictive Workforce Expenditure Model shows that she will cost you at least 15% more in lost productivity. Not to mention the patterns in her Facebook entries suggesting a 75% chance for her to become pregnant in the next 18 months, again according to our models.”

“Not exactly a disease from what I know. But OK, let’s move on”.

I stop here. You might think I’m over the top with this little tale. But the (hopefully) fictitious Narrative Data Inc. could be the offspring of existing large consumer research firms, combined to semantic and data-mining experts such as Recorded Future. This Gothenburg (Sweden)-based company — with a branch in… Cambridge, Mass. –  provides real time analysis of about 150,000 sources (news services, social networks, blogs, government web sites). The firm takes pride in its ability to predict a vast array of events (see this Wired story).

Ugh.  It stands to reason this is where it goes related to the impact of big data and HR.  Is a predictive modeler that shows probability that someone has insomnia and migraines or will get pregnant illegal?

Is it moral?  It's a probability index.  Let's say that probability index was modeled together to give you a productivity and ability to execute score rather than talking about specific things.  Maybe the ability to innovate.  What then?

What if you use a consultant rather than any type of metrics to give you some plausible deniability?  

Going to be an interesting next 5 years, to say the least.  My guess is that high-end firms that can pay the frieght for this type of hypothetical service will be the first to experiment and use these types of predictive analytics, and we'll eventually see it play out in the courtroom.  

How to Triangulate a Senior Leadership Team That Doesn't Think There's a Talent Problem...

Ah yes.  The Sr. Team.  They're talented! They're leading! They're movers and shakers!

And they're also slow to admit that they might have a talent problem.  Doesn't matter what the talent Sr team problem is.  Could be performance management.  Recruiting.  The strength of their people managers.  Whatever - it doesn't matter.  Regardless of the focal point, you've brought up things you think are an issue or a limiting factor for the business as an HR pro, and they've pooh-poohed it, haven't they?

"I don't think I have that problem.  We're good.  Have you talked to the rest of the Sr. team?  My guess is they agree with me."

Ugh.  So in order to get some movement towards acknowledging that your company could do better in the human capital area of your choice, go through the following 2-step survey process:

1.  Ask each of the Sr. Team members if they believe the issue in question (performance management) is a problem in their area.  If you're facing the situation I described in the jump, you're going to get a lot of "no's".

2.  Wait a week.

3.  Come back to them after a week, and tell them you need their help to dig a little deeper.  Say this:  "I know you didn't think you have a performance management problem in your shop, but do you feel like there's any other functional area that's having problems with low performers, good goal setting, etc?"

4.  You won't get all no's this time around.  Human Nature 101.

5.  Use the results of your poll to get past the general Sr. Team consensus that your issue isn't worth spending time on.

It's called leverage.  I know you don't have the problem, but does anyone else?  

Boom.  That's how it's done by the HR leaders who get human nature and aren't afraid to use the leverage it provides.

HELP ME: Stuff Great Leaders Think About In September: What's My Funky Holiday Book for Customers/Friends/Prospects Going To Be?

Here's a picture of the books that I have two copies of that I'm taking to the library at Kinetix on Wednesday.  Dont' judge, but join me after the jump because I need your help.


That stack begs the question - what's the Kinetix Holiday Book going to be this year?

Background - every year since I joined Kinetix as a partner - we do a holiday book.  But not just any holiday book... Our holiday book tends to be something that we hope stands out in a long line of corporate Christmas gifts, something that makes you think about things on the professional or the personal side - and hopefully a mixture of both.

Two years ago, we gave away Fahrenheit 451.  Last year it was The Alchemist.  Because let's face it - nothing says Christmas like a book about firemen of the future who START fires, not put them out.


Of course, F451 was about more than fires and who gets to start them.  I would have sent a coffe table book about Fire Marshall Bill (video clip!!!) if that's all we wanted to do.

Which brings me to the question I need your help on.  What book would you recommend we give to our select list of customers, friends and prospects this holiday season?  What's made you say "hmmm" this year in a professional and personal way?  What thought provoking book can you give me that seems like it fits our brand at Kinetix?

Help KD out - hit me in the comments with your suggestions, or if you're shy, just email me.

The audience always has the best ideas.  Help me lock in on the perfect Christmas book for our company based on the description of what we're looking for above.

I'll owe you one...

WORTH REPEATING: "Have Some Pride"...

Up at 4am today to get on a plane to another suburban office park in America that looks like all the other ones.  City?  That’s not really important, right?  Good times.  First thing I see on my iPhone is a note from Don MacPherson (of a cool company called Modern Survey) hitting me with a link to his latest blog post, entitled “Have Some Pride” 

“The score of the pickup basketball game was 18-4 (play to 21).  We missed another shot, they got the rebound, beat us down the court and scored another easy layup.  “Have some pride,” yelled one of my teammates.  Honestly, he was the one in five of us who was giving maximum effort.  The rest of us were beaten.  Going through the motions.  It’s no surprise we lost. 

I have played thousands of pickup games as an adult.  This is one of the few that I remember.  “Have some pride” still rings in my ears today.  It was a great reminder that every person has a choice in how they react to their challenging circumstances.”

Words to live by for a guy like me, with 3 or 4 emails in my inbox that I don’t want to deal with because they represent impossibly complex situations or relationships that appear DOA for a multitude of reasons.

Words to live by for a guy like me, who like everyone else in the world finds himself in a professional rut from time to time when it feels like it’s simply “time to make the donuts” again at 4am on a Monday.

Get busy living or get busy dying.  Insert sailor language of your choice at the appropriate place in the phrase “Have Some Pride”.  I’d go with “Have Some _____ Pride”.  But that’s just me.

We all get to choose.  It’s ironic that the only thing that can make tough circumstances (which seem totally external) bearable is our personal response to them.

Have some pride.   (Thanks Don)

The 5 Managerial Responses to Sabotage At Work…

Human behavior is so... well... human.

How many times have you seen it?  The pressure's on at work, and maybe even layoffs look like they
might be around corner - or another round of layoffs, depending on your company's situation.  And when the pressure's on, you can bet that questionable human behavior is right around the corner.

Self-Preservation 101.  I'm good, he's bad.  Pick me, pick me!... Beastie-boys-sabotage-352116

What type of human behavior?  How about the type who will cheat to ensure an edge is gained against a co-worker you are directly or indirectly competing against?  The type of behavior you see when someone's trying to keep his job and will apparently DO WHAT IT TAKES TO CLOSE THE DEAL vs. his competitor, who also happens to be a teammate. 

How do you deal with that when it involves actions that are labeled as "sabotage"?  You know the type of internal cheating I'm talking about - email tips, gossip about someone's performance, misinformation and yes, even stealing the ideas of others and presenting them as your own.

For my money, here are the 5 most common managerial responses to sabotage/cheating at work:

1.  You ignore it because you created the system.  You tell your folks to take every inch they can get.  No such thing as a bad edge to you, right?  You wink at zero sum players of the world, even as their teammates cry.  If he'll cheat now, what will he do when you pressure him to cheat?  Cheat even more - you like that.

2.  You ignore it because you're passive and scared.  I know, I know, Johnny.  You don't condone it, but you won't confront it.  "Where's the proof?" is your mantra that keeps you on the sidelines.  Whether that's your stance because you're scared or you really want your talent to push the edge?  That's subject to public opinion.

3.  You're in support of a FIRM REPRIMAND.  But you won't disqualify the cheater from competing or even penalize him as a result.  If this is your stance, you also like to discuss the merits of committee rules.

4.  You regularly throw a crazy Nolan Ryan fastball at the head of anyone in the margins of cheating to gain a competitive advantage. They can stay the first time you catch them, but with severe prejudice that can only be overcome by lengthy periods of high performance with no artificial advantages.

5. Get a box and pack it with your stuff, because you're gone if you cheat.  This is the one we all think we would respond with, but we don't.  It's uncommon, blocked by rationalizations like:

--"I won't be able to replace them"

--"Can I still hit my budget number?"

--"I don't have enough proof"

--"We could be sued"

Ah yes, the rationalizations when the employees we love cheat.  Which response is yours?  What's your rationalization?

Finance for HR Nerds: GDP and How Big America's Economy Is...

Last time in this series, I talked about the ground view of how a LBO firm works.  Check it out here if you missed that one. GDP

This week on Finance for HR Nerds:  Let's talk about GDP and the size of the American economy.  

First, the definition:  GDP stands for Gross Domestic Product, which Wikipedia defines as is the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.  

Many of you knew in broad terms what GDP was.  But do you know the size of the American economy compared to other industrialized nations when defined by this metric?

I was moved to write on this today when I was reading an BusinessWeek article that talked about some bogus bonds from the 90s that the Russian governement was balking on paying.  The size of the bond that was due was in the range of 750 Billion, which BW cited as being about half of Russia's GDP.  Thus, it was unpayable without collapsing everything else.

Then I thought - wait!  Didn't the USA peel off a bailout in the same range (700-800 Billion) like we were paying off a bar tab?  How much bigger is the American economy than Russia's?

As it turns out, a lot bigger.  America's GDP is kicking in the 15 Trillion range, while Russia is kicking it old school at 1.5 Trillion or so.  No wonder Reagan spent them into the ground.

Wondering how the USA compares in size to China?  2X (think it's up to 7 Trillion now.  France?  5+X.   Get a rough chart from 2010 to the side courtesy of Wikipedia to the right and find your favorite also ran.

USA = 25% of the world's economy.  

DOWNLOAD: The HR Rubik's Cube (How to Revamp Performance Management at Your Company)

I've been doing a lot of work lately related to performance management, specifically how to get away from forms, rating scales and all the other administrivia that drives your clients crazy and makes them think you're more of a paper pusher than you really are as an HR Pro.

I know you're more strategic than people think you are.  That's why I did a whitepaper over at Kinetix called "The HR Rubik's Cube: Plot Your Talent Using the 9-Box Grid".  It's basically a starter's kit to being thinking about performance management with a very strategic end in mind, the type of tool that makes Rubiks Cube people go "hmm... I never thought of it that way" rather than "damn! Do I have to fill out this form again?".   Go get the paper and it will give you a nice intro to the following:

1. The Holy Grail of Performance Management (aka the Performance vs. Potential Grid), which allows you to look at talent in a multi-dimensional way, ignoring rating scales, metrics and other features that get in the way of measuring true performance at your company. 

2. Four Ways the Performance vs. Potential Grid Makes You a More Strategic HR Pro when it comes to re-engineering the Performance Management Process at your organization. 

3. How to Create a Performance Management System that Delivers the Performance vs. Potential Grid, measuring what really matters (performance) and adding items we call potential factors

If you want to read more, go get the whitepaper here (registration required).  Not a sales pitch, just interesting reading and a great way to help yourself out.  I wrote it, so if you like what you get here, you'll like the whitepaper...

If you find registration for content personally appalling, I don't even know who you are anymore.... Just kidding, just email me or hit me in the comments if you're hiding from the authorities and are naturally suspicious, and I'll send you the PDF...