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PEOPLE ECONOMICS: Regression to the Mean

I've got a theory I've written about here before - EVERY MANAGER and INDIVIDUAL CONTRIBUTOR HAS A SHELF LIFE AT A COMPANY.

What's a shelf life?  Shelf life means that you come into a new opportunity with lots of fresh ideas, and you're engaged and ready to kick some ass.  And you do that.  Just as importantly, the people around you - the receptors of all that wisdom - view you as at least somewhat fresh and innovative.

Like the Eagles once said, you're the new kid in town. Average-employee-skills (1)

Until you're not.  I think every manager has a period of about 2-3 years in the company, then they either need to get a different team in the same company, change companies or do what is hardest - reinvent themselves and the personal value proposition they bring to the company and their teams.  

I call it shelf life.  Others might call it regression to the mean, and smart people realize it impacts companies as well indviduals. Here's some notes on how a VC thinks regression to the mean is the biggest threat to Facebook:

"What's the biggest threat to Facebook?  Some things leap to mind: GoogleTwitter, the shift to mobile, government regulators.  But a top Facebook executive says those aren't the real problem.

Instead, it's reversion to the mean, according to Chamath Palihapitiya, who's now a venture capitalist at the Social + Capital Partnership. Reversion to the mean, or regression to the mean, is a concept from statistics. It basically says that exceptional performance can't last forever."

Here's how that works according to CP:

"When companies work, the biggest thing that happens is you revert to the mean. The mean is every crappy company out there. And we all work at crappy companies. We've all done it. We all look at our boss and think, "This guy's an idiot. How does he have this job? This company is so stupid. I hate my job. Is it time to leave yet?"

We've all been in that position.

And so the real question that I was asking myself at Facebook was, "What happens and how do companies end up in this situation?" And my realization was every company gets there eventually. But that last word is the most important.

And the challenge of a senior executive team is to prevent that regression to the mean. And culture is the only thing that does that."

Regression to the mean for companies and shelf life for managers.  It's going to happen eventually.  Your job is to prevent the regression from happening as long as possible.  When you think about it, preventing good talent from that regression is probably the most important thing a HR pro can do, right?



This is so true. Is there a book you can recommend?

Bill Fasttires

A positive view of this phenomena is that managers and others should try to elevate the mean level and statistically push that level higher. This action not only causes the people to have better results but also better outcomes and incomes.
The old mean is now a new mean - at a higher level. Even if one can not prevent "regression" in the statistical sense, the lower bound of the movement can be stopped at a higher level and the new upper bounds can be increased to a higher level. There may be an ebb and flow of ROI caused by periods of costs and profits however the constant cycle of improvement can be achieved with existing business units that are well managed. No manager should think of themselves as having a defined shelf life, they should seek cellular regrowth on a regular basis and look to the target along with the need to execute an existing plan while adding new modules that target higher levels of performance.
The idea that you are either here or there is moot, its not mutually exclusive - you are nowhere and everywhere unbound by physics at the same time - you are the one. Its up to you, not where you are.

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