First, Break All the Rules

by Marcus Buckingham

  “You can’t give her that title. She doesn’t have anyone reporting to her.”

  Conventional wisdom is barricaded behind a wall of selection, training, compensation, and performance management systems. The only way to dislodge it completely is to replace these systems. And only the company can replace these systems.

  Using the Four Keys as our guide, here are some of the master keys that the senior management of a company can use to break through conventional wisdom’s barricades.

  A. Keep the focus on outcomes: The role of the company is to identify the desired end. The role of the individual is to find the best means possible to achieve that end. Therefore strong companies become experts in the destination and give the individual the thrill of the journey.

  As much as is possible, define every role using outcome terms.

  Find a way to rate, rank, or count as many of those outcomes as possible. Measurement always improves performance.

  The four most important emotional outcomes for a customer are accuracy, availability, partnership, and advice. Examine each role within the company and identify what actually needs to happen to create these outcomes. In training classes, explain how the standardized steps of the role lead to one or more of these emotional outcomes. Also explain where, how, and why employees are expected to use their discretion to create these outcomes.

  Hold managers accountable for their employees’ responses to the twelve questions presented in chapter 1. These twelve questions are a very important outcome measure. Although we would not advise paying managers on their employees’ responses, managers should use the twelve questions as part of their overall performance scorecard.

  B. Value world-class performance in every role: At strong companies every role, performed at excellence, is respected. If you want to understand the culture of a company, look first to its heroes.

  Within as many roles as possible, set up different levels of achievement. Identify specific criteria for moving up from one level to the next. Reward progress with plaques, certificates, and diplomas. Take every level seriously.

  Within as many roles as possible, set up broadbanded compensation plans. Identify specific criteria for moving up within each band. Explain clearly the reason for the pay cut when shifting from one band to another.

  Celebrate “personal bests.” Many people like to compete with themselves. Design a system so that each person can keep track of his or her performance monthly or quarterly. Use this system to celebrate monthly or quarterly “personal bests,” as and when they occur. A growing number of “personal bests” means a growing company.

  C. Study your best: Strong companies learn from their very best. Internal best practice discovery is one of their most important rituals.

  Start with your most significant roles and study your best practitioners. Build a talent profile for each role. This will help you select more people like your best.

  Revise all training to incorporate what you have learned about excellence in each role.

  Set up an internal “university.” The main function of this “university” should be to provide a forum for showcasing how your best, in every role, do what they do. As far as is possible, every employee should be exposed to the thinking, the actions, and the satisfactions of your best, in every role. Your employees can learn many other things at this “university” — policies, rules, techniques — but the main focus should be a presentation of internal best practices. Remember, this “university” can be as flexible, informal, and brief as the size and complexity of your organization requires — the important thing is to learn from your best in a disciplined way.

  D. Teach the language of great managers: Language affects thinking. Thinking affects behavior. Companies must change how people speak if they are to change how people behave. Strong companies turn the language of great managers into the common language.

  Teach the Four Keys of great managers. In particular emphasize the difference among skills, knowledge, and talents. Make sure people know that all roles, performed at excellence, require talent; that a talent is any recurring pattern of thought, feeling, or behavior; and that talents are extraordinarily difficult to teach.

  Change recruiting practices, job descriptions, and résumé qualifications to reflect the critical importance and the broader definition of talent.

  Revise all training content to reflect the differences among skills, knowledge, and talents. A great company is clear about what can be trained and what cannot.

  Remove the remedial element from training. Send your most talented people to learn new skills and knowledge that can complement their talents. Stop sending less talented people to training classes to be “fixed.”

  Give every employee the benefit of feedback. Know that 360-degree surveys, personality profiles, and performance appraisal systems are all useful as long as they are focused on helping the person understand himself better and build upon his strengths. Stop using them if they are focused on identifying what needs to be fixed.

  Start the great managers’ “performance management” routine.

  These master keys, although not a substitute for great managers, are a valuable companion. Left unturned, they allow conventional wisdom to create a climate hostile to great managers. With every policy, system, and language built around its core assumptions, conventional wisdom drowns out the small voices of dissent and forces each great manager to question even her most fervently held beliefs. In a climate like this, great managers cannot grow. They cannot refine their intuitions with practice. They are too busy trying to stay clearheaded and to survive.

  However, when turned successfully, these master keys alter the whole company climate. The climate becomes supportive to great managers, reinforcing their insights and pushing them to practice and to experiment and to refine. In this climate great managers will thrive. Employees will excel. The company will sustain its growth. And conventional wisdom will be uprooted once and for all.

  Gathering Force

  * * *

  Great managers make it all seem so simple. Just select for talent, define the right outcomes, focus on strengths, and then, as each person grows, encourage him or her to find the right fit. Complete these few steps with every single employee, and your department, division, or company will yield perennial excellence. It sounds almost inevitable.

  We know, just as you do, that it isn’t. It is very hard to manage others well. The essence of the role is the struggle to balance the competing interests of the company, the customers, the employees, and even your own. You attend to one, and you invariably upset the others. If you have just intervened between a rude customer and a stammering employee, it is hard to find the right words to placate the customer and yet save face for the employee. If you have just assumed responsibility for a team of thirty jaded veterans, it is hard to know how to gain their trust while still pushing them to perform. If you have just realized that the new employee, whom you so carefully selected, does not, in fact, have the talent to perform, it is hard to know how to break the news without demoralizing him and alarming his colleagues. No matter which way you spin it, it’s hard being the middleman.

  This book doesn’t offer to make your role easy. It simply offers you a vantage point. It offers you a way to gain a clearer perspective on what you are doing, why you are doing it, and how to do it better. This perspective won’t tell you what to do in every situation. But it will guide you toward sound action. It will help you know how to start laying the foundations for an enduringly strong workplace.

  We cannot promise miracles overnight. And you wouldn’t believe us if we did. You know that at work tomorrow you are going to see a lot of people cast in the wrong roles. You know that you are going to see many managers marching in lockstep with conventional wisdom. And you know the limits of what you can change on your own. You know that you will only be able to change things one emp
loyee at a time, conversation by conversation. Like all great managers, you are at the start of a long journey.

  We can only promise that these Four Keys are an extraordinarily powerful beginning.

  •••

  On your journey, take strength from this: As you chip away at conventional wisdom, you are being aided by the gathering of two powerful forces. The needs of the company and the needs of the employee, misaligned since the birth of the “corporation” 150 years ago, are slowly beginning to converge. Today you, the manager, find yourself at their meeting point. …

  Everywhere employees are demanding more of their work. With the breakdown of other sources of community, employees are looking more and more to their workplace to provide them with a sense of meaning and identity. They want to be recognized as individuals. They want a chance to express themselves and to gain meaningful prestige for that expression. Only you, the manager, can create the kind of environment where each person comes to know his or her strengths and expresses them productively.

  At the same time, companies are searching for undiscovered reserves of value. Human nature is one of those last, vast reserves of value. If they are to increase their value, companies know they must tap these reserves. In the past they have tried to access the power of human nature by containing it and perfecting it, just as mankind has done with the other forces of nature. We now know why this cannot work: the power of human nature is that, unlike other forces of nature, it is not uniform. Instead its power lies in its idiosyncrasy, in the fact that each human’s nature is different. If companies want to use this power, they must find a mechanism to unleash each human’s nature, not contain it. You, the manager, are the best mechanism they have.

  The intersection of these two forces — each company’s search for value and each individual’s search for identity — will change the corporate landscape forever. You will see new organizational models, new titles, new compensation schemes, new careers, and new measurement systems — all designed around the mantra “Don’t try to put in what was left out. Try to draw out what was left in.” Some managers may try to resist these forces of change, but they will fail. A company’s search for value is as unending and as irresistible as an individual’s search for identity. You can slow these gathering forces down. You cannot stop them.

  But you can speed them up. You can be the catalyst. The world’s best managers have shown you how.

  APPENDICES

  * * *

  Appendix A: The Gallup Path to Business Performance

  Appendix B: What the Great Managers Said

  Appendix C: A Selection of Talents

  Appendix D: Finding the Twelve Questions

  Appendix E: The Meta-Analysis

  Appendix A: The Gallup Path to Business Performance

  “What is the path to sustained increase in shareholder value?”

  Through research examining the linkages between key elements of a healthy business, the Gallup Organization has developed a model that describes the path between the individual contribution of every employee and the ultimate business outcome of any company — an increase in overall company value. For publicly traded companies, this is, of course, best measured by increase in stock price and market valuation. Below is a schematic of the path. A brief overview of each step along the path follows.

  REAL PROFIT INCREASE DRIVES STOCK INCREASE

  Many variables influence the market value of a company, including external variables beyond a company’s control. But of the variables a company can control, real profit increase is the most important driver of stock increase. We emphasize “real,” because there are many maneuvers a company can take to drive short-term profitability. Some are solid operational initiatives, such as improving process efficiency or cutting costs. Others are generously described as creative accounting, such as write-downs, aggressive one-time charges, or forcing orders for products at the end-of-period to overstate revenue. However, only sustained profit increase from normal operations can drive a sustained increase in stock value.

  SUSTAINABLE GROWTH DRIVES REAL PROFIT INCREASE

  Real profit increase can only be driven by sustainable growth. Sustainable growth is quite different from “bought growth.” A company can buy growth through a variety of techniques: acquiring another company’s revenue stream, slashing prices, or, a perennial favorite among fast-growing restaurant or retail chains, opening as many new locations as possible as quickly as possible. All of these techniques create a welcome spike in your revenue, but none of them addresses the issue of sustaining that revenue — in fact, some of them actively undermine it. Sustainable growth is not measured by a short-lived revenue spike. Rather, sustainable growth is measured by metrics such as revenue per store, or revenue per product, or number of services used per customer. These metrics reveal whether or not your revenue stream is robust, whether it will last.

  LOYAL CUSTOMERS DRIVE SUSTAINABLE GROWTH

  The most critical driver of sustainable growth is an expanding base of loyal customers. In some industries it is also critical to have a growing base of loyal customers who are willing to pay a premium price. It is even better if these loyal customers become advocates, thereby creating a large, vocal, and unpaid sales force.

  Customers can be persuaded to try a product or service through effective sales and marketing communications, but true customer loyalty can be created only by treating customers to a superior product and superior service. At Gallup we refer to the sales and marketing communications as the “brand promise,” and the quality of the products and services as the “brand experience.” A company will be able to create a growing number of loyal customers only if its brand experience matches or exceeds its brand promise.

  ENGAGED EMPLOYEES DRIVE CUSTOMER LOYALTY

  Jack Welch, the CEO of General Electric, once said, “Any company trying to compete … must figure out a way to engage the mind of every employee.” This is especially true in service industries, where nearly all of the company’s value is delivered to customers by individual employees. But even in pure manufacturing environments, quality products are unlikely to be produced without engaged and committed employees.

  The twelve circles in the path schematic above refer to the twelve questions described in chapter 1. A “fully engaged” employee, by our definition, is one who can answer with a strong affirmative to all twelve of those questions. Remember, the four outcome measures we used in our meta-analysis at the business unit level were employee retention, productivity, customer satisfaction, and profitability. While the schematic above only illustrates the link between engaged employees and customer loyalty, there are often very direct links between an increase in the number of engaged employees and profit, either indirectly through an increase in productivity, or directly through major decreases in employee turnover.

  THE RIGHT PEOPLE IN THE RIGHT ROLES WITH THE RIGHT MANAGERS DRIVE EMPLOYEE ENGAGEMENT

  At the entry point of the path, the first steps must be performed almost perfectly or the remaining linkages to customer satisfaction, revenue growth, and profit will not occur. First, you must identify the employee’s individual strengths. In step two, you must position that individual to perform a role that capitalizes on these strengths. Failure to meet these two requirements cannot be corrected by either the employee’s motivation or by expert coaching. As this book describes in some detail, when we refer to “strengths” we are referring primarily to a person’s recurring patterns of thought, feeling, or behavior — his talents — and less to learned skills and acquired knowledge. We believe that when selecting employees, companies have spent far too much time and money focusing on the skills and knowledge of employees and not nearly enough on their talents. Truth be told, most companies trip themselves up right at the start of this path because they have no accurate way of knowing how much talent they are bringing in, nor how well that talent is positioned.

  H
aving successfully taken these first two steps, you arrive at the path’s most critical juncture. You must find a way to engage these talented employees. Again, there are many ways to do this — pay them more, provide more generous benefits — but these are low-character solutions. The only way to engage talented employees successfully is to select great managers and then provide these managers with a climate friendly to the Four Keys. In this climate great managers can select the best people, set accurate expectations for them, motivate them, and develop them. Every single employee’s talent will be released into customer-focused performance. The company will become strong.

  The company that is unable to take this step will be forced off the path. They will lose more talented people than they keep. They will miscast, overpromote, undervalue, and otherwise misuse those talented employees who do stay. Lacking talented people in the right roles, this company will have to revert to less robust routes to performance — an overreliance on marketing, an unquestioned fondness for acquisition, a frantic push for “bought” growth. Pressed by high-character competition, these routes will serve this company poorly. And, in the end, lacking great managers to keep it on the right path, this company will lose.

  Appendix B: What the Great Managers Said

  “What did great managers say to the three questions quoted in chapter 2?”

  “As a manager, which would you rather have: an independent, aggressive person who produced $1.2 million in sales or a congenial team player who produced about half as much? Please explain your choice.”

  Great managers replied that they would prefer an independent, aggressive person rather than the half-as-productive team player. They reasoned that the independent, aggressive person was probably more talented but harder to manage. The team player was probably less talented for the role but much easier to manage. Great managers are not looking for people who are easy to manage. They are looking for people who have the talent needed to be world-class. Therefore they prefer the challenge of taking a talented person and focusing him or her toward productivity to the challenge of trying to make a less productive person talented.