3.

Getting Great People on Board

I believe the real difference between success and failure in a corporation can be very often traced to the question of how well the organization brings out the great energies and talents of its people.

—Thomas J. Watson Jr.

In chapter 2, we talked about how to translate your team’s vision into a tangible and measurable strategy to address an environment with changing technology, market opportunities, and customer needs. To execute the strategy, however, you need to get the right people on board. After all, a key part of our definition of leadership is that much of your impact is through others. That means building a leadership team and an organization with the best talent and the right skills for executing your strategy, and motivating them to do so to the best of their abilities.

To do this, you need to achieve a fine balance between putting the organization’s needs first while also respecting the needs and desires of your staff as they pursue their professional and personal aspirations. People join organizations voluntarily, with the assumption that their participation is a two-way street. If they give their best efforts to achieve the collective goals that you lay out, they expect to be rewarded, in terms of compensation, growth, job satisfaction, relationships, and more. This is the basic social contract of organizational life, and when it works, your team is more likely to perform at a high level with committed, loyal, and motivated people.

As a leader, you are the creator and steward of this social contract, whether for the whole organization or your part of it; thus you need to honor both sides as you make decisions about staffing, organizational structure, development, and compensation. Good leaders don’t obsessively drive for performance goals in ruthless ways that leave a trail of bodies (or unhappy people) in their wake. But they also aren’t so concerned about making everybody happy that they avoid conflicts and hard decisions and end up not achieving the needed results. Good leaders thread the needle between these extremes so that the organization has the right people on board to execute strategy and get results—and they feel good about being part of the collective endeavor.

But threading this needle can be challenging. Frequently, the individual’s and the organization’s interests can seem misaligned. What happens if, in order to achieve your strategic goals, you need to lay someone off or fire them? What if they want to be paid more than you can give? And developing people by giving them tough feedback can be in the best interest of both the individual and the overall company, but it still isn’t pleasant or easy. Engagement is hard to pin down; not everyone is motivated by the same things. Convincing people to change or grow can be difficult; culture is deeply rooted in organizations. And managing the social contract for your whole department or unit is challenging when most of your interactions are primarily with your direct reports, and it just seems that so many of these things might be easier to hand off to human resources.

To confront these challenges, your particular focus as a leader needs to be on building your direct reports into a strong team of results-producing leaders and managers who also understand and honor the social contract, and can multiply your commitment to it through the rest of your organization. Doing this includes five elements:

• Finding the right mix of leaders and managers to work directly with you to execute the strategy and helping those people work together effectively, across functions and silos
• Ensuring that your direct reports get the feedback they need to either get better at their jobs or make the decision to go elsewhere, and that they do the same with their people
• Creating opportunities for great people to learn, grow, and develop
• Articulating an explicit incentives philosophy that motivates your direct reports and all of your people to do the right things, for both the organization and themselves
• Combining these steps into an organizational or team culture that can enable strategic change

To start, let’s look at a case that illustrates the tension between achieving organizational objectives and honoring individual aspirations.

Managing the social contract through strategic change at the Ford Foundation

When Darren Walker became president of the Ford Foundation in 2013, he identified a new strategy for achieving the organization’s vision of reducing inequality and injustice, strengthening democratic values, promoting international cooperation, and advancing human achievement: the foundation would have to take a more digitally focused approach to its work. Walker explained: “The rise of the digitally connected world presents a threat to social justice that we hadn’t been aware of, such as internet freedom and net neutrality, the creation of open and free access platforms, and the challenge of a single lane internet vs. fast lanes given to the wealthy. In addition, all of the things in an analog world that are discriminatory and unjust, like bullying, wage inequality, and predatory lending, are replicated in the digital world.”

As Walker dug deeper into this issue, he realized that many of the people reporting to him, and others below them, were not well prepared to tackle these issues. It wasn’t a matter of motivation or commitment, but rather one of understanding and skill. There were few digital natives on the foundation’s staff, much less the executive team. Walker thus faced a challenge: despite good will on both sides, there was a gap between the strategic needs of the organization and the capability of its people to carry it out. Walker’s job as leader was to close the gap as quickly as possible.

Walker considered his options. Should he ratchet down his strategic expectations to match what his people could do? He didn’t see this as a viable option, since that would weaken the effectiveness and competitive position of the foundation. Another equally unappealing option was to replace many long-standing, highly committed, and loyal staff with new digitally savvy people who could quickly grasp the new strategic agenda. But that would compromise current programs, create negative publicity, and destroy remaining and future employees’ faith in the social contract that they had signed up for, destroying morale and productivity in the process. Walker was also aware that firing people for no fault of their own would breach the very principles of social justice that the foundation stood for. Walker was firm on this point: “How do you stand before the staff and say to many of them who came to the foundation because they had the skill to work in social justice, that they are missing a critical skill needed to work on social justice in the twenty-first century?”

Walker found a third option, however, that allowed him to meet both the organizational and the people sides of the equation as much as possible. The solution involved a careful combination of the options: some new hires, some staff reductions, and retention of a significant number of current staff, but with changing expectations supported by development and retraining, extensive performance feedback, and new goals and incentives. “Technology fellows” were new hires introduced into each program area. These digital technologists had the task of rapidly familiarizing existing program staff with the digital world. Walker and his team also changed the job descriptions for new program officers to require some experience with coding and a basic knowledge of the digital landscape in addition to their own field. Finally, they changed the actual programs to focus on creating a new field of internet rights, marrying human rights to understanding technology and media, and lots more.

Though this solution proved to be a good one, it was still a wrenching and difficult change for the organization and for Walker, particularly since he knew that not everyone could make the shift successfully. But he was clear and candid in his communications: “I had to deliver a tough-love message, saying to people that while we had a lot to be proud of, if we continued on that path, a lot of them would be irrelevant. I also had to be frank about the fact that some of them wouldn’t make it. It wasn’t easy.”

Assembling your leadership team

Walker’s story demonstrates how difficult it is to get the right skills and capabilities to pursue your strategic goals, while also respecting everyone’s security and well-being. But the reality is that just as strategy development is a continuous process, you will need to be continually making related staffing decisions. That’s true at the scale of the whole organization, and particularly within your own department or team.

Every leader, at every level, needs to have a top-notch team to help develop and then execute strategy, and drive the organization forward. But the direct report team is especially important because its work cascades down to everything else the department or organization does. Sometimes you’ll need to recruit the team or part of it, but most of the time, you’ll inherit a team already in place. As Walker did with his leaders, you’ll need to make sure that all members of the team have the capability to fulfill their particular roles and collaborate with others as needed in order to achieve the organization’s goals.

So what are the most important things to consider when looking for the right people for your leadership team? And how do you assess whether those you already have can make the cut?

Recruit the right leaders

As you consider your team of direct reports, you’ll need to create a list of critical attributes that reflect what you think will be most important for executing your strategy and getting things done. For example, ConAgra’s former CEO Gary Rodkin made a list that included technical excellence, vulnerability, the ability to communicate and develop people, time management, and basic people skills. You also should look for skills that allow your team members themselves to be great leaders of their own teams (see more on this in the section “Build Your Team and Coordinate an Organization of Teams” later in this chapter). We believe that two such skills are particularly important across sectors and industries at all levels: adaptability and emotional intelligence.

Claudio Fernández-Aráoz, a senior fellow at the Harvard Business School and an experienced recruiting professional, provides useful guidance on recruiting adaptable leaders in his HBR article “21st-Century Talent Spotting.” Fernández-Aráoz argues that rather than technical skill or specific knowledge, the most critical characteristic that leaders should look for in selecting people is potential, “the ability to adapt to and grow into increasingly complex roles and environments.” This approach recognizes the pace of change in a global, digital world in which the skills and competencies important in the past might not be relevant for future challenges.

Emotional intelligence is also increasingly seen as critical for leaders across functions, especially as organizations become flatter and managing in a collaborative way becomes more crucial. Daniel Goleman and his colleagues’ pioneering research has shown that leaders who are aware of their and others’ emotions and who are able to moderate their own emotional responses also have more ability to create great organizations and teams. (Goleman and his coauthors describe the hallmarks of emotional leadership in their classic HBR articles “What Makes a Leader?” and “Primal Leadership: The Hidden Driver of Great Performance.”)

Finding people who meet your criteria doesn’t mean that all your direct reports need to look alike, act alike, or think alike. Recruiting people with complementary and diverse skills is equally important. As a leader, you must mix and match talents, backgrounds, and tendencies (including your own) in a way that will allow your team to succeed collectively. So as you build your team, assess current strengths and backgrounds. Are there any that are missing? Who in your organization might have those qualities? Also look at personality types to make sure you have a mix of people who are different enough to spark creative thought, but still able to collaborate.

Venture investor Bob Proctor compares this process to constructing a dynamic jigsaw puzzle. He spends much of his time making sure that the startup companies in his portfolio have leadership teams with the right mix of skills and thought processes, and that the companies’ leadership recognizes who’s good at what and builds roles around them and what they excel in. You can do this formally as you build or develop your team by using one of the personality-style assessment tools available in the market. Although none of them is perfect, they provide interesting insights into different ways that people approach problems, communicate, and think. You also can get the measure of current and potential team members by giving them problems to solve, asking them to make a presentation, conducting role-plays, or finding ways to have them interact with other members of your team. All these methods will give you more insight than just checking résumés and conducting one-on-one interviews.

As you focus on other members of your team, also pay particular attention to your own gaps. Anne Mulcahy, the former turnaround CEO of Xerox whom we met in chapters 1 and 2, for example, did not consider herself to be a very strong strategist. Most of her career had been in sales and operations, so her strengths were in people and communications. When she became CEO, she realized that strategic capability would be critical, so she made sure that at least two other senior executives had those skills when putting together her leadership team.

Make the tough decisions

Identifying the right people for your leadership team also goes hand in hand with identifying those team members who should no longer remain. Jack Welch, the legendary former CEO of GE, used to say that leaders need to be “hard-headed and soft-hearted.” As a leader, you need to be totally dispassionate about getting the right people in place in order to implement your strategy and get results, but still be personally compassionate about how those choices affect the individuals involved.

This means that if one of your direct reports isn’t working out—they’re not the right fit, or they’re not performing despite whatever guidance and support you’ve given them—you need to take them off the team. That may not necessarily mean letting them go; you may be able to find a role that is a better fit for their skills elsewhere in the organization. Finding the right place for them is a compassionate way of removing them from the team, but so is being candid about exactly where they didn’t perform so that they can improve, either at another position in your firm or elsewhere. Letting them stay and continue to fail or feel uncomfortable, however, is not compassionate, is not upholding your end of the social contract, and is actually doing a disservice to that person and to the rest of your team. (For more on how the social contract can play out on a team level, see the box “How solid is the social contract on your team?”)

What does the combination of dispassion and compassion look like? Years ago, Welch asked one of his top leaders to come to his office during the week between Christmas and New Year’s Day. The leader, who ran a multibillion-dollar business and had met his revenue and profitability targets for the year, thought that the meeting was going to be about his bonus or possibly even a promotion to run one of GE’s larger units. Instead, Welch told him that he was being let go because his leadership style was autocratic and based on fear, completely contrary to GE’s values. Welch had told him this numerous times in the past year, but he hadn’t taken it seriously. After some tough discussion, the business leader accepted the rationale for his departure and saw it as a wake-up call. He went on to become the CEO of another company where he paid a great deal of attention to more effectively balancing his top-down, results-producing style with the growth and well-being of his team. In retrospect, he later said that this experience, despite the pain, was one of the best learning moments of his career.

Building, fine-tuning, and maintaining your leadership team is a continuous challenge. Strategies change. Customer needs evolve. Markets shift and new technologies emerge. And often people—at all levels of the organization—cannot adapt to the changes in their environment. Adjusting for this starts with the people who report to you.

Build your team and coordinate an organization of teams

Once you have the right people on your staff, you still have to put them together to form a team. Building a high-performing leadership team doesn’t usually happen by itself, however. You can’t just put a collection of talented people in a room, lock the door, and wait for a cohesive group to emerge. As a leader, you have to actively help your direct reports come together.

This is vital because your people are likely to have greater impact by working together and because teamwork is a critical part of the social contract. Most research shows that people’s satisfaction at work is determined not only by what they do, but also by whom they do it with—both their immediate supervisor and their coworkers, whether they belong to lower-level teams or more senior leadership teams. So having productive, supportive, and collaborative relationships between your direct reports is a key factor in ensuring that your people are motivated, engaged, and committed to your vision and strategy. Building this kind of teamwork also multiplies your impact. For example, the shift to a digital mindset at the Ford Foundation ultimately was not driven by Walker alone, but by his senior leaders as well.

Coalescing strong and capable individuals into a high-performance team takes work. As a leader, you must do so deliberately. Based on years of research into team performance, Martine Haas and Mark Mortensen suggest four key steps in their HBR article “The Secrets of Great Teamwork”:

1.Ensure that your team has one or more common and compelling goals that require everyone to contribute in some way. At the Ford Foundation, the senior team was collectively responsible for driving a digital mindset into every program and aspect of the foundation’s work. To make that happen, all of the senior leaders had to not only take action within their own areas, but also look at the implications across programs and functions, and act as an overall steering group for the transition to digital.

2.Create an agreed-on structure for how the team will work together, including norms of behavior, sharing information, when and how to hold meetings, communication patterns, and clarity of assignments. This doesn’t mean that you dictate to everyone how the team will work, but rather that you discuss these issues with your team explicitly so that the structure becomes solidified.

3.Provide the support needed for the team to succeed, such as education, access to resources, budgets, coaching, and the like. At the Ford Foundation, the provision of digital fellows to senior team members is a good example. Support, however, also means psychological support so that your team members feel that they can get help and constructive feedback from each other rather than attacks and put-downs.

4.Foster a shared mindset and sense of identity with the team. Particularly in organizations where team members may be dispersed, traveling frequently, and connecting virtually, you need to encourage people to develop personal relationships and get to know each other beyond just the immediate tasks and roles. Find time for off-site sessions, unstructured discussions, dinners, and occasional fun activities, sometimes including spouses and significant others—all of which can help bring your team together.

Your team of direct reports, however, is not likely to constitute the only team in your scope of responsibility. Your direct reports may also have teams reporting to them and so forth down the line. So the way your direct team operates can create a model for the others.

Furthermore, your organization probably also has many cross-functional teams for product development, customer service, systems introductions, and the like. In addition, your firm might have occasional or standing teams that include people from outside organizations, such as open innovation forums or corporate social responsibility initiatives, and you may run or participate in some of these. As a leader, you need to ensure that the multiple teams that constitute your organizational ecosystem are functioning together as well as possible. (See the box “The importance of thinking horizontally.”)

New patterns of flexible and agile interactions between these kinds of networks of teams have recently been reinforced by General Stanley McChrystal, former commander of US Special Forces in Afghanistan (see his book, Team of Teams). McChrystal emphasizes that traditional top-down leadership is no longer effective in warfare when the enemy is a decentralized network that changes strategies and tactics almost instantaneously. Instead, troops on the ground have to understand the overriding mission that they are to accomplish, have all the information and training possible, and then have the freedom to make their own decisions in the context of the mission. Moreover, these troops have to operate not only as effective teams on their own, but also as teams of teams that can coordinate their efforts with other units rapidly and flexibly.

These lessons apply to all types of organizations that operate in fast-changing, unpredictable environments, which is almost every organization. As a team or department leader, you should:

• Encourage your team of direct reports to interact, share information, collaborate, and support other teams beyond those that report to them directly. Don’t assume that teams in different silos will naturally collaborate with each other, no matter how much they are committed to the goals and have the right information.

• Reinforce to your team members, and have them reinforce to their teams, that all their individual decisions need to actively and directly help move the organization toward the strategic goals you have identified. Your vision and strategy practices come into play here as well, especially the efforts you make through those practices to ensure that everyone understands your unifying direction and strategic objectives.
• In addition to communicating your vision and strategy, push as much information as possible down to all your teams in order for them to make the best possible decisions. The more they know, the better they will be able to find the right ways to collaborate with other teams in the service of achieving the strategic goals.

For example, to help his teams communicate with each other, Welch challenged GE to become a “boundaryless organization” in which information and resources could move quickly up and down the hierarchy, across functions and business units, and between the company and its customers and suppliers. To make this happen, Welch required all his senior leaders to sponsor and participate in two-day “Work-Out” sessions where people from different parts of the organization, regardless of title or pay grade, came together to quickly solve business problems. Sessions also were held between GE and its customers and suppliers. The Work-Outs—which GE and many other companies still hold—not only produced untold millions of dollars in business benefits, but also taught previously siloed teams how to work together without waiting for the boss to bring them together.

Creating your team and coordinating a network of teams are key steps for navigating the balancing act between organizational success and individual satisfaction. Talented people thrive in an environment where they can effectively and easily work with others either day to day or as needed and feel that they are making a difference. And the more these people thrive and leverage their skills, the more successful your organization will be.

Harnessing performance feedback

Another key element in bringing people on board to execute your strategy is making sure that everyone knows how they are doing, so that they can continually improve and grow. We saw this at the Ford Foundation: Walker used performance feedback to help develop the digital capabilities of existing staff as the organization’s strategy evolved. Without feedback, individuals and teams won’t get signals that tell them whether their day-to-day efforts are working or not, or how to change. This is a key way of fulfilling the social contract by ensuring that people understand what it takes to succeed or whether another organization might be a better fit.

Giving constructive, candid, and timely feedback to subordinates is taught in just about every management curriculum. But even experienced leaders struggle with it, particularly because of the anxiety that it triggers. Looking another person in the eye and telling them how they are doing (whether good or bad) is difficult, and even more so when it might affect the person’s livelihood or career. So we tend to avoid doing it, do it awkwardly, or slough it off to human resources. However, giving feedback is an even more critical skill for leaders than managers, because leaders are not only responsible for providing feedback to their own direct reports, but also for setting the tone for feedback and learning for the organization. It’s a key part of having broader impact; as Mark Benjamin, when he was president of NCR Corporation, told us: “If I don’t set the tone properly about giving candid feedback, the problem multiplies itself exponentially. There are 33,000 people at seven levels below me, and if I don’t do it well, it could mean that there is someone on my team, who might have 4,000 people reporting to him, that doesn’t do it well. So then the bar is lowered for all of those people.”

Of course, you might not have thousands of people in your organization. But even if you and your direct reports are responsible for only a few dozen, each one needs to knows how they are doing. Just as the vision and strategy you set cascade down through your direct reports to others in your area, the way you give performance feedback also creates patterns beyond your immediate team. So not only must you give feedback to your direct reports effectively, but they must also do the same with their people.

Get through with tough feedback

For feedback to be effective, you need to think through the process and message beforehand and prepare yourself psychologically. Feedback can’t be done well on the fly or in a hurried and frenzied conversation, no matter how busy you are. Sure, there will be times when it’s appropriate to give feedback in the moment in response to a particular incident, but even then you should take a deep breath to think before you speak. As a leader, your words carry extra weight, and if you are overly negative, you can crush a person’s spirit and self-confidence. So keep in mind a few principles:

• The act of giving feedback is first and foremost a business activity that’s important for the health of the organization—to make sure people are doing the right things in the right ways. As Vito Corleone said in The Godfather, “It’s not personal, it’s business.” The goal is not to make the other person feel bad, or to put them down, or to make yourself feel powerful. Rather, it’s about making the other person successful so that you can achieve your organizational goals. And if someone can’t be successful in their current role, then it’s in both of your best interests to help the person find another role where they can succeed, either in your organization or elsewhere.
• Because feedback has a business purpose, frame the discussion as a problem-solving exercise rather than just telling someone what to do differently. Given current performance or personal behaviors, how can the person do better? What can they do? What can you do to help? What other resources could you make available? And what are the specific steps for moving forward, and over what period of time? Structure the dialogue so that it’s a two-way street where you define the problem and invite both parties to suggest solutions.
• Base the feedback discussion on data and not just subjective impressions. Look at the results the person has achieved versus their goals, get views from other people who the person works with, and refer to critical incidents or specific examples to back up your message. Feedback should not be just your opinion.

Just as with any other skill, you need to practice, practice, practice. Giving tough and constructive feedback doesn’t come easily for most leaders, so you have to find your own voice. Try writing out what you want to say or at least how you want to start. Role-play the dialogue with a trusted colleague or human resource person. Be clear about what you want the discussion to accomplish (an improvement plan, a better understanding of what’s expected, a decision to change roles, etc.). Then assess afterward how well you did and what you could have done better.

In addition to individual discussions, one of the most powerful ways to deliver tough feedback so that an individual can hear it is with 360-degree feedback, which provides comments from multiple sources—boss, peers, subordinates, customers, and others. This assessment is particularly powerful because if common themes from a number of others don’t align with a person’s own view, those themes become more difficult to dismiss or ignore. Richard Ober, CEO of the New Hampshire Charitable Foundation, described the effect: “One of our key people was a brilliant problem solver and project manager, but did not have much experience leading people, and the culture in her group was strained. We did a 360 assessment to identify her core capabilities and weaknesses. She was stunned to hear reactions of people about working with her. I took advantage of her openness to listen to start intensively coaching her to evolve from being great at doing to being great at empowering. Now she’s one of the best performers on our senior team and consistently gets very high rankings on annual employee surveys.”

There will be times when people don’t respond to individual feedback, however, and don’t develop the way you need them to. When you’ve exhausted ways of discussing with them what needs to change, you may have to take action, letting them go from your team, as we described earlier in this chapter.

Team feedback

Feedback is not just a tool for improving the performance of an individual; you also should give feedback to your team about how they are performing together, and you should encourage the team members to give feedback to each other. For example, Jim Ziolkowski, the head of a nonprofit called buildOn, brings his leadership team together at the end of every year for a four-day session where they talk about how well each person and department achieved their key performance indicators for the year. Each leader prepares a brief summary of what they did well, where they fell short, and what they need to do differently in the next year, after which all the other team members give their comments and suggestions. They also talk about how their performances affect each other and how they can support each other going forward.

Leaders should give performance feedback to entire organizations at times, particularly about key performance themes or issues. Walker’s challenge to the Ford Foundation about becoming more digitally savvy is a great example of this. Often this is the beginning of significant transformation and improvement for your organization, which we’ll talk about in chapter 5. The point, however, is that feedback is essential not only for individual change, but for collective change as well.

Feedback throughout the organization

Giving feedback effectively to your own people models the behavior for others in your division or unit. But you also must build regular processes into the rhythm of the organization to make sure it happens regularly. Most large organizations already have a performance management system setting defined times throughout the year for employee assessment. These conversations often culminate in decisions about promotions, compensation, and development needs.

As a leader within that system, you need to meet the requirements of this enterprise cadence and also put your own stamp on it. That’s the difference between your team seeing performance management as an onerous corporate process and seeing it as one that drives real business value. For example, the leader of a sales team within a large technology firm set up monthly talent talks with each of her direct reports and a quarterly talent talk with the group as a way of reinforcing the importance of keeping a focus on performance issues, both good and bad, and doing something about them. Then, when it was time to fill out the yearly corporate performance management forms and participate in the associated meetings, she and her team were already well prepared.

Of course, if you are leading a startup or a nonprofit, or taking over an organization, you may need to construct a broader cadence yourself. Just make sure that it fits your needs and encourages constructive feedback, and don’t just delegate the creation of this system to human resources. For example, Dan Springer, CEO of DocuSign, insists that each manager have a performance discussion with their people twice each year, talking about what they are trying to achieve and what they are doing for the customer, the company, and the team. To compel his managers to actually do these well, he asks them to create a brief, one-page summary of the discussion and send it directly to him. He then reads all of them and randomly sends notes back to managers with comments about the reviews, sometimes asking them to do the review again if it didn’t seem to have been truly productive.

Strategy consulting firm Boston Consulting Group (BCG) has another approach. In addition to immediate feedback on projects, BCG has a formal yearly process of written reviews for each of the 1,000-plus partners in the firm. These reviews are discussed in face-to-face meetings of the top twenty-seven senior leaders during partner performance week and are used to make decisions about bonuses, promotions, future assignments, and key development goals, which are then discussed with partners one on one. According to BCG’s president and CEO Richard Lesser, this process gives the top leaders an understanding of talent across the organization and reinforces a “one firm” culture with consistent messaging. It also helps those leaders calibrate their own contributions with the many impressive performances outside their own areas, keeping them grounded and focused on supporting the next generation.

As your department or unit gets larger or you get more responsibility and the pace of work increases, you also should make sure that your performance management system doesn’t become overly bureaucratic and begin to lose its value of driving systematic feedback and improvement. For example, Raghu Krishnamoorthy, senior vice president and chief human resource officer at GE, notes in HBR’s “The Secret Ingredient in GE’s Talent-Review System” that GE’s leaders (up to and including the CEO) routinely spend 30 percent of their time on people issues, including having intensive debates on individual performance evaluations. To get better return from that time, GE is working toward creating digital tools to make this process more streamlined and flexible so that these discussions can happen when they are needed, not just at certain times of the year. Professional services firm Deloitte also is reinventing its performance management process and reducing the time involved by focusing more on quarterly performance snapshots than on yearly evaluations. Marcus Buckingham and Ashley Goodall describe this transformation in more detail in their HBR article “Reinventing Performance Management.”

The result of an intense, candid, and transparent feedback process during the course of the year is that staff throughout the organization, and your team specifically, know where they stand and how they have to improve. It also weeds out weak performers or those that no longer fit with your team, department, or the organization. Equally important, it gives you a solid basis for assigning people to new opportunities or roles.

Fostering learning and development

Giving your direct reports feedback and creating a system for feedback throughout the organization is one way to foster the employee growth you need to meet your strategic goals. More formal learning and development is another way. By giving your direct reports and aspiring leaders resources for personal and career improvement so that they can better meet the organization’s needs, you are also giving your people the ability to adjust, grow, and thrive to meet their own goals—an important part of fulfilling the social contract. For example, look again at the Ford Foundation: Walker was able to help his program managers learn to understand the digital world by hiring technology fellows. Thus, he was able to keep many of these employees on board, while they equipped themselves to perform well in other future roles.

Your human resource function likely focuses on this kind of development specifically, but you have a role as a leader as well. By putting some of your own time into the talent development of your team and creating stretch opportunities for your best performers, you can drive your vision and strategy and give everyone the sense that you take your employees’ career growth seriously, which can be a major selling point in attracting even more good talent.

Put your time into top talent

Jack Welch used to say that he only had two ways of making an impact on GE: one was to allocate financial resources differentially, and the other was to ensure that his various business units had the best possible leaders to take advantage of that financial capital. To make that happen, Welch spent a huge amount of personal time reviewing and sharpening leadership succession plans and decisions, interacting with promising leaders, and conveying messages about leadership themes to various groups inside and outside the company.

How involved you should be in talent development depends on your personality as well as the size, scope, nature, and maturity of your organization or unit. But you do need to be personally involved to some degree; this can’t just be delegated to human resources or consultants. After all, you are in the best position to connect the vision and strategy with the talent development plan. And when you’re directly involved, you send a message to all other managers and employees that development is a serious business endeavor and not just a nice perk to make people happy.

One way to structure your involvement is by participating in the talent and leadership planning review process like Welch. Another way is by personally participating in special events, programs, and training sessions with your team members. Often senior people feel that development sessions are just for lower-level people, and if they participate at all, it’s just a ritual appearance or speech. Joining in more intensively, however, can be a powerful opportunity to get to know your team members and future leaders, share your views about what’s important, and send a signal that learning and development is for everyone.

For example, shortly after Kenneth Frazier became the CEO of biopharmaceutical company Merck, his human resource team organized a series of development sessions for high-potential leaders (fifty at a time) in conjunction with a prominent business school. Frazier met with the designers of the program to ensure that his views about what leaders needed to do to make Merck successful were incorporated. But Frazier didn’t stop there. In addition, he personally attended the two-day programs from beginning to end as a full participant, engaging in small-group and plenary discussions throughout. This gave him direct exposure to dozens of potential leaders whom he hadn’t known before and gave him a platform to share his vision for the company and what it needed to do strategically. His participation also sent a strong signal to the participants, and the thousands of people who reported to them, that Frazier was committed not only to Merck’s long-term success, but to theirs as well, which is the essence of the social contract.

Leaders don’t need to spend all their time sitting through leadership development programs. But you should take a hard look at your calendar and at how much time you are devoting to the review and development of your department’s or team’s talent. For many leaders, business, customer, and competitive pressures often squeeze out the time for direct involvement in the development of their people. If you let this happen, however, you may end up with people who won’t be able to help you reach your goals.

Stretch your high potentials

Another way that you can personally give your team members opportunities to grow is to force people into assignments and projects that will stretch their abilities beyond what they think might be possible.

Most research on talent development shows that leaders learn much more from real situations in which they are forced to get things done than they do from case studies, simulations, and training sessions. Harvard Business School professor Michael Beer and his colleagues have pointed out for years that leadership training on its own—roughly a $350 billion business (as of 2015)—has little impact on real leadership performance (for more, see their HBR article “Why Leadership Training Fails, and What to Do About It”). As a leader, you can create challenges for your direct reports, and if you are a senior leader, you can make sure that these kinds of opportunities are available to high-potential people throughout the organization.

You can create these kinds of experiences for your team members by:

• Giving your direct reports tougher and broader goals. For example, McKinsey Global managing partner Dominic Barton describes what happened when he was tossed into the deep water early in his professional life:

  The key to my career was when I was asked to head up the McKinsey office in Korea. We had eighty people but weren’t considered to be a prominent firm in Korea and didn’t really have a way to grow. The orthodox wisdom, I was told by my predecessor, was to keep a low profile, not be in the media, and not talk to newspapers. But if we were so quiet, how would any Korean companies know about us? So I took a risk and started to write a short newspaper column every week about business and management issues. It was published in Korean, so I knew that nobody at McKinsey outside of Korea would read it and I couldn’t get caught. Eventually, these columns helped me get to know the fifty people who really matter in Korea, build relationships with them, and grow our practice. In essence, I had a small playground to work in and try new stuff.

• Asking your people to work together to achieve something. For example, the president of a large academic medical center asked his top twenty leaders to jointly address the changing health-care landscape and find ways to put the institution on more solid financial footing. These leaders, who ran various clinical departments, research areas, and operational functions, were all experts in their fields, but had little experience leading strategic change, nor had they developed their skills at working across disciplines. They tended to be protective of their own areas and budgets. By taking on this joint assignment, however, the leaders were forced to take an institutional perspective and think about trade-offs between areas. They brought in experts on health-care trends to educate them on the external environment and learned how to do a SWOT-style analysis on their own organization. Over the course of several months, they identified a number of strategic initiatives and financial shifts and took responsibility for getting them organized and carried out. In addition to the institutional results, the effort helped the leaders develop new skills and perspectives. One eventually became the interim president, and another became the chief operating officer—roles that they would never have been able to handle without this experience.
• Moving people into stretch assignments. You and your HR partner can set this up in a number of ways, such as through project-based training or special projects. In project-based training, high-potential leaders from different areas are given a specific project to achieve over a two- to three-month period (while continuing their regular jobs) and learn skills needed to accomplish the project through focused workshops, webinars, or work with a leadership coach. Siemens, for example, used this approach for many years to not only accomplish substantial results (such as introducing products into new countries), but also to develop hundreds of next-generation leaders. And if your organization doesn’t offer training like this, you can take the initiative by giving your people special projects on your own and support their learning with online, university-based, or consulting inputs. For example, the head of a marketing team challenged one of her high potentials to organize a new recruiting process for the team and sent him to a university program on human capital to get some fresh perspectives.
• Creating job rotations. Another approach is to rotate your people through different parts of the company so that they have hands-on experience with a variety of business challenges, cultures, and geographies. International Paper, for example, moves its high-potential leaders across units and geographies to give them a broader perspective on the company and to see how they perform under different conditions. If your company doesn’t do this routinely, you can work with colleagues to trade good people or just champion some of your people for open positions. Some leaders hesitate to do this because they fear losing good people from their team, but if you don’t actively help them find new opportunities, the best people will do it on their own, and you might lose them from the organization completely. The other advantage of actively helping your people move is that you will then have a network of former team members throughout the organization who can collaborate with you and support you in the future.

While all these approaches to development sound straightforward and sensible, many leaders still hesitate to act on them. After all, it takes work, time, and money to develop people, and if you do a really good job, the person might still go to another team or another company anyway where they can get more money or responsibility. Great people will always have other opportunities. So why should we make the investment and watch someone else reap the returns?

Unfortunately, there is no easy answer to this question. Great leaders, however, understand that it is ultimately less expensive and far more effective to develop their own talent than to constantly bring in outsiders who will need to go through a learning curve and who might not work out in the end. Internal people usually have a far greater chance of success and become productive much more quickly. So in the long run, developing talent will pay off many times over, both in productivity and in reinforcing the social contract of your organization.

Sharing your incentives philosophy

Not all people are alike. They have different motivations for coming to work and different long-term career aspirations. At the same time, the actual work that they do is not always comparable. So how do you reward everyone for their performance in a way that they feel is fair and equitable, and that attracts, retains, and develops the kind of talent you need—and doesn’t break the bank? Questions of incentives always get to the heart of the social contract: your compensation framework must address all these competing concerns.

Many leaders simply try to avoid these questions by creating or perpetuating undifferentiated compensation systems (“just give everyone a 5 percent raise”), by staying away from career discussions with their people, or by just turning compensation over to human resources. And while that may ease their discomfort, it rarely creates high-performing organizations, because it means that good people often end up going elsewhere.

Instead, your role as a leader is to articulate a philosophy of incentives clearly so that people know what it takes to be successful—whoever they are and whatever their goals.

Make your incentive philosophy explicit

Your job as a leader is not to get into the business of designing compensation and benefits plans. There are hundreds of expert consultants and firms that can do this work for you, along with your own human resource team, whether you’re a startup or a multibillion-dollar organization. But in order for these experts to put together a plan that will help you achieve business results and make people feel good about being part of your team, you do need to provide some clear direction for how to decide on salaries and bonuses, award promotions, and confer other benefits. That is what we call a “philosophy of incentives.”

Even if you are not in a position to drive an incentives approach for the whole organization, by sketching out a philosophy of incentives for your department or unit (based on the organizational rewards system), you’ll make your people aware of what behaviors and outcomes will be rewarded and recognized, and what it will take to advance in their careers, and, conversely, what behaviors or results will have adverse implications for their careers. Without that clarity, employees and managers will make their own decisions about what’s best to do, and it might not actually be what you want or intend.

Steve Kerr, an expert on reward systems and the first chief learning officer for GE and then Goldman Sachs, in the HBR article “The Best-Laid Incentive Plans,” describes “the folly of rewarding A while hoping for B.” The classic case of this is when a leader rewards and promotes people based on achieving individual goals, while assuming (or hoping) that these people will work together for the greater good of the team. But if their individual goals conflict with each other in some way, it’s likely that they will compete with each other rather than collaborate, not because they are ornery, but because most people will rationally do what’s in their own best interest first.

By making your incentives philosophy explicit, you send a clear message to your people about what you expect of them. For example, Andrew Géczy, the CEO of Terra Firma, a private equity firm in Europe, and a former executive at Lloyds and ANZ banks, explained to us that part of his incentives philosophy is that people’s behaviors (and not just their performance results) are a key factor for compensation and promotion. He uses a two-dimensional grid for performance assessment with behaviors on one axis and results on the other. By making this clear to his organization, he prevents his managers from using tactics to get results in the short term that could harm the organization in the longer run.

Questions to ask

As you articulate your incentives philosophy, here are a few questions that you should address:

• To what extent are you committed to making sure that your team truly functions as a meritocracy, where individual achievement is rewarded versus just tenure, loyalty, or personal relationships? (Some leaders talk about results being paramount, but then reward people differently.)
• Is tenure rewarded at all (and if so, how)?
• What’s the balance between individual achievement and collective achievement? In other words, should your team members be rewarded if they hit their individual goals, but the team misses its targets? Or should there be a portion of individual rewards that is based on the collective results—and that perhaps will differ for senior versus junior people? What about vice versa—what happens if the team or organization does well but individuals miss? Should they share in the rewards anyway? What is the weight on the individual versus organizational success?
• What behaviors are critical for success on your team? How seriously will you assess and compare these with the achievement of goals? What happens if someone does a fantastic job of reaching their business targets, but falls short in the behavioral sphere? Will you follow Jack Welch’s lead and ask that person to leave despite the good results? Will you give them a second chance?
• What kinds of nonmonetary rewards can you provide as recognition for work well done? In addition to personal praise, to what extent can you use your communications channels to recognize people and make them heroes? Are there opportunities for managers and teams to present their achievements to others? Should you reward exceptional contributors through dinners, trips, or outings? What other ways can you make your team and top performers feel truly appreciated?

Obviously, every leader will answer these questions differently, and some will be applicable for the entire organization while others will apply at certain levels. Senior leaders, of course, have more influence over the entire incentives approach. But even if you are a team leader, you need to know how your organization thinks about these questions so that you can communicate them to your people. You also need to think about whether you can have some local control over some of the incentives. For example, there might be some companywide behaviors that are encouraged and rewarded, but you may have some additional behaviors that you want your team to follow. Similarly, there might be nonfinancial incentives that all leaders in the organization use, but there may be others that you develop yourself for your team (e.g., dinners with people who make special contributions).

Once you are clear about the answers to these questions (whether you are making the decisions yourself or more senior leaders are giving them to you), you need to communicate them to your team. Sometimes these are well understood or may be part of an employee handbook and on-boarding orientation. Usually, however, the incentives philosophy is somewhat opaque, with people making assumptions about what it takes to be rewarded or to get ahead. And in the absence of common understanding, people will be surprised, disappointed, or hurt when they receive their compensation decisions or talk with you about their career prospects. On the other hand, if you do make the basis for incentives as clear as possible, your people will have a pretty good idea ahead of time what to expect and will know what they need to do in order to do better.

In short, your job as a leader is to make the principles of rewards and incentives as clear as possible. Talk to your team as a group about the philosophy and what it means. Then talk to each person individually, long before compensation or reward decisions are made or announced, about how the philosophy applies to them. Is there a behavior that they need to work on? Do they need to temper their expectations for a raise because the overall company is not doing so well? Do they need to gain some other kind of experience in order to advance to a higher level?

The key point is that everyone in the organization needs to know the principles and how they apply to them. Even more importantly, once these principles are articulated, they need to be followed. If you and other leaders are seen as talking a good game, but not following through, it will damage your credibility and diminish people’s commitment to your organization.

Shaping a culture for executing your strategy

Culture is one of those words that is used all of the time, but its meaning is not always clear. The dictionary definition is that an organization’s culture is the sum of attitudes, beliefs, customs, and behaviors that distinguish one group from another. That culture develops over time as groups of people work together and create repeated patterns and habits. Eventually these patterns become informal rules or norms that most people in the group adhere to, and to which new members have to adapt. In this way, organizational culture has intense power to promote certain behaviors and actions.

Culture also is a key factor in people’s decisions about whether to be a party to the social contract of your team—that is, whether your unit will be a place where they can meet their personal needs. And if the culture turns out not to be a good fit with their expectations or abilities, people might opt out.

Managing your team’s culture is thus a powerful way to determine how effectively your people execute on your vision and translate your strategy into action. If your new vision or strategy is generally in accord with the culture, then change can happen quickly. But if the current culture is at odds with the kind of strategic change you are proposing, it can be a true roadblock. That’s why many CEOs are fond of saying that “culture trumps strategy,” a truism that Jon Katzenbach and his coauthors explain in their HBR article “Cultural Change That Sticks.”

The main problem with managing culture, however, is that it’s invisible, implicit, and hard to describe. If you ask ten people in your company or team to portray your culture, you’ll probably get ten different answers because everyone sees it from their own perspective. In addition, every organization has subcultures, perhaps in geographies (how things are done in a particular office) or functions (R&D works differently than finance), or in units that were bolted on through acquisitions (but retained their old cultures).

Perhaps you can’t change your team’s or organization’s culture completely or quickly, but you can try to get some key aspects of culture to work for you instead of against you. To do so:

• First, make your cultural goals explicit to your direct reports and their people.
• Then, use the elements already described in this chapter to move people toward those goals.

Define your cultural goals

It’s not up to us to say what your team’s culture should be or how you should try to shape it. That’s a decision that you and your team should make, based on your vision and the strategy that you are trying to execute. Given the increasing pace of competitive and technological innovation, however, many organizations are trying to create cultures that are specifically more agile, open to change, and quick to align themselves with new ideas. If that’s the case for you, then your cultural goals should reflect these shifts and/or others that are important.

To make your cultural goals explicit, work with your direct reports. First, discuss the key cultural characteristics that currently exist in your organization or group. You can use an assessment like the one in figure 3-1, which defines some basic areas of organizational culture, to prompt your discussion. You may want to add some other areas that pertain specifically to the strategy you are pursuing, such as digital savvy (as in the Ford Foundation example) or openness to partnerships.

Next, consider how you might need your team’s culture to be different in order to support and drive your particular strategic goals. Where are the biggest score gaps? As you work, continue to iterate this dialogue with other groups and ask your direct reports to hold similar sessions with their teams. Since culture is the accumulation of behaviors across an organization, you can’t just dictate it from the top down. You also have to engage people at other levels so that they buy into and help shape the cultural shifts and make them come alive.

For example, the head of a small factory within a large corporation became frustrated when he learned that most of the plant’s productivity-improvement projects, all of which his team had ratified, were delayed. As he dug into the situation, he realized that the problem was not lack of skills, know-how, or resources, but an inability of his direct reports to make decisions (at all stages of the projects) without him. Since he was too busy to attend every project meeting, many decisions were simply not made. In talking with his team about this pattern, he realized that this was a cultural issue: his team members were hesitant to take risks, and he had not truly empowered them to do so, which made him the decision-making bottleneck. As this pattern became clear, the plant manager began to pull himself out of each decision, and as issues came up, he repeatedly told his direct reports to use their best judgment and do what they thought best. At first, his people hesitated (or didn’t believe him) and kept going back to ask him what to do. But over the course of several months, as he repeatedly refused to make the decisions for them and kept pushing them to do it themselves, the culture started to change. And as team members made their own decisions and the culture began to shift, delivery times on the projects dramatically improved.

Identifying cultural shifts or priorities is important at all levels of the organization. At GE in the 1990s, Jack Welch saw that the company was highly bureaucratic, slow moving, hierarchical, complex, and overly analytical. He and his leadership team emphasized “speed, simplicity, and self-confidence” as three cultural characteristics that he wanted to encourage, and that they saw as critical for GE’s success in the twenty-first century.

When Ken Frazier became the CEO of Merck, he did something similar. At the time, Merck was in the final stages of integrating its purchase of Schering-Plough Pharmaceuticals, and the combination of the two companies had created a very large but overly complex and slow-to-decide enterprise. To counter this, Frazier set cultural goals focused on the principles of “prioritize” (focus on what’s important), “align” (collaborate with others to get these important things done), and “simplify” (find the most direct and least complex ways of doing them).

Shift the culture

Naturally, it’s not enough to just state some desired cultural shifts. You also have to take action to move your organization toward them. While there are powerful symbolic acts you can perform to model the culture (see the box “Symbolic actions to model cultural behaviors”), the other elements of managing people we describe in this chapter also constitute deeper ways to set a culture shift in motion.

Build your leadership team

If you have some clear cultural shifts in mind, then you can look for people who tend to work in those ways, just as Darren Walker actively recruited new program managers with more digital savvy and who could work more effectively in a digital world. If someone on your team does not exemplify your cultural goals, you may need to let them go, as Welch did with the high-performing business leader who was out of step with Welch’s goals for the culture. This incident sent reverberations throughout GE that cultural behaviors mattered and would be factored into promotions, rewards, and advancement. Years later, many people still feel that that moment was the turning point for changing GE’s culture.

As you manage how all your teams work together, ask them to think a few minutes about their own cultures and how they are working, and what they can do differently going forward to move toward the cultural goals you have set.

Harness performance feedback

Performance feedback is a more obvious way of shifting culture-related behavior. To use it this way, however, you need to be very clear in your feedback about the desired cultural behaviors and the gaps that might exist, and you need to do this without pulling punches. In most organizations that have shifted their cultures, this kind of brutal honesty is critical. You should also include questions about a person’s cultural fit in their 360-degree evaluations.

Foster career development

While you create opportunities for people to grow and develop, and advance in their careers, you can simultaneously help them understand, internalize, and act on the cultural goals that will enable your strategy. For example, in the high-potential leadership development sessions at Merck, Ken Frazier not only talked about his vision and strategy for the company, but also about how having a culture of prioritize, align, and simplify would help make it happen. During the sessions, Frazier and the faculty (including other Merck executives) also facilitated specific discussions about how these leaders could apply the cultural principles to their day-to-day work, and each made specific commitments to do so. You can also make job rotations and stretch assignments with the explicit expectation that these will be opportunities for the leader to learn new behaviors, not just get exposed to a different business or geography.

Offer incentives

Positive reinforcement of cultural behaviors is powerful. When organizational members see that the people who are rewarded, promoted, and recognized are those who exhibit the desired cultural behaviors, it provides a strong incentive to also act in those ways. You also can reinforce the desired behaviors by selecting people for key assignments who already have those behaviors, or who have the potential to do so.

Putting this all together, of course, takes a lot of hard work and isn’t accomplished overnight. Over the long term, however, building a culture that helps you advance your strategic goals, and that people feel good about, can have an enormous impact on your organization and can reinforce the social contract. It also can be incredibly rewarding for you as a leader. When reflecting on his tenure as dean of Haas Business School at the University of California, Berkeley, Richard Lyons told us that aligning the school with a concise set of cultural principles was perhaps the most significant thing he had achieved because it had become such a key factor in attracting students and faculty to the school. Shaping the culture also shaped his legacy: “It has put heart and soul into the institution that will outlive me.”

The practices we’ve described throughout this chapter are not sequential steps, nor one-off activities. Instead, in order to create a high-achievement and high-morale organization, you need to continually practice these elements, determining the right way to approach them as your organization continues to change. Bringing people on board to support your vision and strategy requires constantly assessing and adjusting these different elements over time.

But done well, you can attract talent for years to come. Mastering the steps we’ve described and creating a culture that blends both organizational and personal success is hard work, and many of the associated skills for doing this may not come naturally. Taking some of these actions may also require uncomfortable discussions, such as when you need to be tough about performance feedback or promotions or rewards. Getting the right balance between organizational and personal success may not win you any popularity contests. But in the long run, it will be one of the keys to unlocking your own leadership potential and generating the significant impact that makes a difference for your organization.

But to achieve that impact, you need to enable this motivated team and staff to generate results. In chapter 4, we’ll talk about how to make that happen.