meritocracy.net

On quarterbacks, passer ratings, and organizational efficiencies...

So I was watching football on Sunday night (Tivo is the single best product I have purchased in the last 5 years) and doing some thinking on recruiting metrics and organizational efficiencies, and it struck me that organizations (companies, sports teams, others) should measure their organizational efficiency with respect to talent in a different way.  Incidentally, if you are reading this, then you might have an interest in football, and also talent acquisition and talent management, in which case you should also read this article but it's a clear digression from this post (so don't stray too far).

Quarterbacks all have a passer efficiency rating.  The algorithm is complex.  Too complex, actually, and in that respect it reminds me of recruiting organizations that measure far too many metrics and create unnecessary complexity and unclear direction for the people who are actually doing the work.  I'm a huge fan of simplicity when it comes to organizational metrics, as any dilution in the line of sight from the metric to true downstream value creation creates wasteful inefficiencies. 

All organizational or company components (like the recruiting department) drive business results in terms of market share, profits, and/or revenue in discrete ways, whether we see or are able to measure the connections or not.  Understanding exactly how and getting everyone on the team rowing together is the key to organizational success.  Hedgehogs unite.

A quarterback's passing efficiency ratio (ER) is calculated as follows (by the way, the metric is different in college, which brings me quickly back to complexity and the ambiguous HR metrics discussion): 

To calculate pass-efficiency ratings points, simply (sic) multiply a passer's yards per attempt by 8.4; add the number obtained by dividing pass completions (PC) by pass attempts (PA), multiplied by 100; add the number obtained by dividing touchdowns by pass attempts, multiplied by 330; and subtract the number obtained by dividing interceptions by pass attempts, multiplied by 200. A passer rating of 100 or better is considered great in the NFL. A rating of 158.3 is perfect in the NFL. However, certain percentages in the NFL are capped, although the same measures are used.

NFL Formula:
Note: Each bracketed value below is capped at 0.0 (min) to 2.375 (max);

Total = [((100 * PC/PA) – 30.0) * .05] + [((TY/PA) – 3.0) * .25] + [20 * TD/PA] + [2.375 – (25 * I/PA)]

ER = Total / 6.0 * 100

So now you get my first point about complexity.  Too many measures and one begins to lose the point. 

All of that said, however, what is unique about a standardized passing efficiency ratio is that football fans all know that 100 or better is considered 'good'.  Which brings me to the following point:  Organizations (companies, sports teams,others) all have a burn rate and and ROI when it comes to people.  People, like dollars, are simply a flow through an organization.  Some organizations flow quickly, others hardly at all.  I met with some folks from Costco last year, and they have nearly a 100% internal promotion rate for filling jobs and low turnover.  Low burn rate for sure.  ROI?  Difficult to measure without more data.  One could simply measure revenue and profit per person though, to get an idea over time with how things are shaping up.

So my second point is:  should organizations be measured on their 'human capital efficiency ratio'?  How fast an organization acquires talent, the quality of the talent, and the acquisition cost, but also how fast the flow is of departing the organization (turnover) but also the quality of the talent that is leaving.  What's the flow rate, and is it efficient?

Most organizations measure turnover, cost per hire, internal promotion rate, but they don't measure the flow of talent through the organization, and the efficiency of that flow.  At least within same industries, it might be an interesting metric.  How does Microsoft, Oracle, and other software development firms stack against each other in terms of efficicent use of human capital?  How does Starbucks rank against other competitors in the retail industry?

Maybe it's overly complex, which would dismantle my whole argument I suppose, but if I were a CEO, I'd want to know how efficiently my organization was acquiring, consuming, and extracting value from its human capital compared to our competition. 

And if anyone knows who developed the passing efficiency ratio and what went into it's development, I'd love to hear from you.  Now where did I put that remote? 

Networking ≠ Net Working

On Monday, I had the good fortune to have dinner and a beer with Bill Taylor, one of the founders of Fast Company magazine and the author of the new book, Mavericks at Work - Why the most original minds in business win.  He was out in Seattle promoting his new book, which, if you haven't noticed, is getting a lot of press (Newsweek, BusinessWeek, US News, etc). 

We talked about a lot of things while I bought him a proper microbrew, which incidentally they don't have on the East Coast where he lives.  Anyone that tries to tell you differently is not to be believed.  It was really interesting to get his take on the themes that he extracted from a multitude of case studies that he and Polly LaBarre used as the basis for the book.  One of the themes, which I'll discuss in a future post, highlights the transparency that is being created in the world (which I discuss a lot in relation to recruiting) and how companies can capitalize on the phenomena to win customers and create competitive advantage. 

During the course of our conversation, Bill asked me about Jobster.  Honestly, I get asked about Jobster, and our experience with the product at Starbucks, on about a weekly basis (there's that transparency thing again).  As we talked about networking effects, management, and the usefulness of technology in building bridges between people, it struck me that Networking ≠ "Net Working". 

So there I was, munching on some garlic fries and sipping a pretty nice amber ale, and I was chatting with Bill Taylor.  He didn't have to meet with me, in fact, he just got off a flight from Boston and it was 7:30 pm, and I'm sure he was bagged.  And it was my son's birthday (1 year old on the 9th), but I chose to meet Bill anyway because our paths aren't likely to cross in the same cities very often.  We both found mutual value in making a live connection since we were in Seattle. 

Over the course of the last few months, he's helped me out with some things; I've helped him out with some things.  I sent him some coffee.  He gave me a copy of his book (signed no less).  I know what sports teams he likes.  He knows I have two kids.  As of Monday, I now know he's a die hard Bruce Springsteen fan, and has been to way too many concerts.  I won't disclose the exact figure, for fear of detracting from future book sales.  I meant to ask him if he likes the Killers and their new album.  We wouldn't have known any of this had we not sat down and had a beer together. 

The most valuble networking (the old fashioned way - between people) comes from authentically giving people value and making a human connection.  It's about forming "1/2 friendships" that have a probability of becoming 3/4 or perhaps someday full friendships.  Networking ≠ "working on the net" to make connections with people.  It's not the same thing, and the level of value creation isn't the same, nor do I think it ever will be. 

That's not to say that Jobster, H3, LinkedIn or other technology extensions can't create value...they can and they serve a purpose:  they are a means to a predefined end.  Filling a job.  Extending a campaign.  Capturing lists of people as a target market.  They are 'reach extension tools' but they don't perpetuate true networking, because high-value, relationship driven networking between people can't be filtered.  Once filtered, it becomes diluted, and I submit that dilution limits value creation.  Old fashioned networking is a means to an undefined end:  the probability that unknown value will be created in the future. 

We can all spend a ton of time "net working":  spending time on the internet with technology to extend our reach.  But the the most valuable connections I've established in my career (indeed my life), which continue to pay dividends and drive the highest return, are from building relationships with people for the sole purpose of giving them value.  Quantity does not beget quality or value creation.

The old form of networking seems to have been eroded in the last 15 years, in much the same way that people now send an email to a colleague who sits 20 feet away instead of walking over to them.  Choosing not to network is an error in life-management.  In fact, I think I can trace all of my notable career and life accomplishments to some sort of networking.  Career opportunities, investment opportunities, entreprenuerial opportunities, you name it... nearly all have started with my efforts to build relationships with people for the pure sake of building relationships with people.

Another example:  I spoke at Georgetown University in the spring; to an MBA class in the Executive Masters of Leadership Program.   In my presentation, I talked a fair bit about the value of networking, and encouraged the students to keep in touch with me.  I also gave the MBA candidates some Pike Place Blend Coffee.  I got to meet a lot of really cool people while I was there. 

One of the students (Chas) who works for a music company, sent me an email afterwards, and told me his wife drank all of his coffee.  So I sent him some more, and remarked that I really liked the band Carbon Leaf and that he might know them, since they are also from Virginia.  I didn't hear from him again, until last week, when he dropped me a line out of the blue and said, "Hey, thanks again for the coffee, I have an band-autographed copy of the new Carbon Leaf CD waiting for you, I just need to know where to send it..."

That is so cool. 

Networking ≠ net working.  Never has, never will.

The Story Behind the Netflix Story...

There's been much ado regarding the recent Netflix announcement to pay $1M to whomever can crack the code to improve their collaborative filtering engine.  While much banter has been tossed around regarding this topic, the PR splash, and other facets, I see two other stories going on behind the scenes. 

Story #1 - Building a talent pool.  (see netflixprize.com):  As of this post, there are currently 8775 contestants on 7170 teams from 97 different countries engaged in The Contest.  As David posts on his GenuineVC blog, the value of solving the code is worth far more than $1M as it drives renters down the long tail of their available titles and away from more expensive, first run titles.  That said, Netflix now has a talent pool of ~9,000 softwre developers that it is building a relationship with, and able to evaluate their problem solving capabilities to boot.  This is a very interesting, captive talent pool of smart, committed, and entrepreneurial people.  What is the value of coalescing that many like-minded people (way more than $1M)?  Never mind the fact that the publicity value alone has surely funded the $1M contest already.  This story becomes far more interesting if Netflix has other plans in the works or needs to scale for some particular business reason.  I wonder if other companies will launch similar problem solving exercises in the future?

Story #2 - It's not about the 1 million dollars.  I was talking with my good friend Greg Boesel over at Swaptree who is one of the smartest guys I know, and he suggested this:  If you read the rules of the contest, you will learn that you don't need to submit the solution algorithm until you've been qualified as the winner.  So if the winning team is able to create a more successful collaborative filtering model, why would they settle for $1M?  I can think of a host of companies that would pay more for the algorithm and thinking behind improving the suggestion engine of their website (um... why isn't Amazon.com better at suggesting things I really want?).  Why wouldn't the noted winner, once confirmed that they have a superior solution, try a different approach to extract the most value out of their notorious solution?

This may be interesting to watch, provided a superior solution can be developed...

Candidate Marketing Impressions are Multiplicative

I had an interesting discussion on this topic, in response to a post Shannon from Exceler8ion made here. 

In summary, I suggest that employment marketing to a segment of top candidates (those with multiple options for employment) differs from general consumer marketing in that candidate marketing impressions are multiplicative in nature, as opposed to additive as is most consumer marketing.  This is important to consider when recruiting top candidates (who are almost always currently employed). 

First we have to bear in mind that the primary motivating factor of humans is fear of loss:

If you present people with an even chance of winning a hundred and fifty dollars or losing a hundred dollars, most refuse the gamble, even though it is to their advantage to accept it: if you multiply the odds of winning—fifty per cent—times a hundred and fifty dollars, minus the odds of losing—also fifty per cent—times a hundred dollars, you end up with a gain of twenty-five dollars. If you accepted this bet ten times in a row, you could expect to gain two hundred and fifty dollars. But, when people are presented with it once, a prospective return of a hundred and fifty dollars isn’t enough to compensate them for a possible loss of a hundred dollars. In fact, most people won’t accept the wager unless the winning stake is raised to two hundred dollars.

So when considering top candidates, one must consider that a primary motivator is fear of making a career mistake and 'buying' the wrong job.  Now consider every marketing impression these candidates receive through the informal and formal process of changing jobs - employment ads, impressions from colleagues who work at the new company, overt marketing such as employment branding, blog posts from people inside the company, candidate experience during the interview process (a personal favorite - call me a zealot) and all the other components that frame up the value proposition of changing companies.

So let's consider that Joe is the passive candidate being wooed by a company.  His buying decision is representated by an imaginary bank account into which he places value (positive employment marketing impressions) and in which value is diminished, through negative impressions or experiences. 

First and foremost, Joe starts with a positive impression of the company, or Joe won't even engage in exploring the opportunity (bank account:  +10 credits).  So during the process, Joe is considering all impressions, in the marketing sense of the word.  Interesting job description (+4 credits).  Appealing location geographically (+2 credits).  Good compensation and benefits (+4 credits).  Positive postings on a variety of blogs (+3 credits).  Excellent corporate reputation (+2 credits).  Positive corporate social responsibilities (+1 credit). We are now up to 26 credits in Joe's bank account. But then let's say the Joe goes through a negative candidate experience that doesn't inspire confidence, or makes him feel unsure about the culture, the culture of the company through a blog post, his new boss or >insert Joe's concern here<  and in one fell swoop, the deal is off (-26 points).  In terms of impressions, one negative impression has the potential to impact the entire deal and turn the whole bank account into a negative balance:  candidate marketing to top candidates is multiplicative. 

Similarly, to recruit and land top candidates, organizations need to use this multiplicative effect to dislodge top talent by 'wowing' them with a consistent series of positive experiences.  I have found that few organizations are good at doing this today.

Contrast this with product marketing which is more additive in nature; and in this I can speak from a personal experience.  I offer this example as it has relatively high value.  Other purchases with less opportunity cost or lower value exchanges follow the same additive model, if not more so because of fear of loss diminishes with value exchange. 

I bought my wife a 2000 Volkswagen Jetta in 1999.  Our general impression of VW automobiles was slightly favorable, but pretty close to neutral as we had long-owned Japanese automobiles.  Following the example above, let's say our bank account was +10 credits.  So we visited the dealership, had a favorable experience (+5 credits), we liked the features on the car (+3 credits), we really liked the price (+5 credits), and we talked with others who owned VWs (+3 credits) and then we read the reviews of the automobile...um...not so good (-10 credits).  The reliability predictions for the car were not comparable to other cars.  But we still ended up purchasing the car, because we still had 16 credits in the bank, and although we REALLY did not want to make a bad purchase decision (fear of loss), the overall impressions related to the buying decision of this consumer product were additive, not multiplicative; even though this transaction was of considerably high value ($24k or so).  This is true of most consumer marketing efforts. 

As we consider a talent market driven by candidates, any detrimental components of employment brand, employment experience, interview impressions, and other facets of the candidate engagement cycle will have the potential to impact outcomes like never before.  As such, talent will continue to develop as a source of competitive advantage for organizations that recruit well.

And as it turns out, I was never really happy with the Jetta.  Lots of problems.  Would I buy another Volkswagen if they offered a model that I liked (they don't today)? 

Yes, I probably would.