Wednesday, October 27, 2010

The People Thing (Revisited)

In his recent book - The Lords of Strategy - Walter Kiechel wrote that the “people” element in the developing concept of strategy over the past 4 decades had not developed “a paradigm that can hold its own with strategy”. He goes on: “We’ve seen how successive thinkers [since the 1960s]built on an original construct [of strategy] that integrated calculations of cost, competition, and customers…[but they] failed to come up with a competing paradigm (…) that would have put people at the core of an enterprise’s success”. Essentially, this boils down to the failure of finding any satisfying metrics that demonstrate the contribution people make to an organization’s success.

Why is this the case? I think it lies in the complexity of outputs that is required from (and is the nature of) any human being working in an organization. If you think about it, most things that have a single cost input usually produce a single output (enhanced processor speeds, or quicker deliveries). A person working in an organization also has a single cost, but invariably, the range and complexity of outputs cannot be easily aligned with that cost.

For example, as a sales-person, my cost to the company is measured against the revenues I produce. Pretty simple? But look closer: as I am selling complex solutions rather than just widgets, there are a whole lot of activities, decisions, empathic behaviors, and feedback loops happening sequentially and simultaneously that are necessary for me to be successful.

On the other hand, companies that want to make simple, repeat, commodity sales can make use of a website (like Everybody realizes this, and understands this is why you can’t sell a customized two-year consulting project on a click and pay portal. However, when searching for metrics, both ways of selling (human and non-human) are measured and evaluated in the same way: cost to revenues.

The vast majority of business success is measured in cash flows and profits. Put crudely, we measure the contribution of people to this success in the very same terms. This is why enhancing those complex and multifarious human outputs presents such a problem when evaluating their impact on the business. In developing people and talent, looking for things such as ROI on training always comes up against this ‘mushy’ disconnect between people skills and results. That’s why we call them ‘soft’.

A better word would be ‘complex’.