The Manager's Oath

The Manager’s Oath
I read an article in HBR last year about some professors at Harvard Business School who believe that the reputation of business practitioners has been tainted by the likes of Madoff, Enron and the masterminds of the Credit Crisis. In order to recover Brand Equity (reputation) they want MBA candidates to take management practitioners Oath; much like the Hippocratic Oath medical practitioners take.

The Oath (http://www.mbaoath.org) is a series of points that basically represents the some important ideals and the spirit that I’d like to think managers share- that is, honesty and integrity. Most managers I know realize the responsibilities they have go beyond just the shareholder returns. They understand the impact their practice has on the environment, on the legal system, their reputation, the social good and finally on the moral of their team.

The Dilemma
The client needed a feature rich extranet upgrade. They wanted to put a database online.
The project was scoped into 2 parts. Part 1 was working with the current database to extract it. Part 2 was the custom development and install on their servers.

The client lead the BA to a particular conclusion about the current database the company had to work with, which was the basis for the specs, which the Project Manager used to base the Project Estimate (and budget) on (the budget was based on man hour estimates).

The database was by no means as straight forward and simple as the client lead the BA to believe. As a result- Part 1 took a great deal longer than originally estimated. It was the PM and BA's suspicion that it was more than just a simple mistake - in order to get a lower cost for the development.

My friend was the PM. Once the client signed off on the contract, and the developers dug into the database, they quickly found out the size of the project was greatly misleading, and the database was deceptively complex. The hours for Part 1 estimates were quickly burned without the forward movement in the project that was expected. She felt obligated to make a Change Order to the client to re-estimate the amount of time was involved in Part 2, in order to cover the loss for Part 1.

Her developers found out about the Change order and project momentum was affected.

To be fair, once she sat her team down and explained the larger picture on why the obligation existed- that the client was being unfair with them, and as a result the project would be a loss, and that they’re not looking to gouge the client, just looking to make things up and be fair about things in the end, and just get what’s coming to them, the team was ultimately understanding and on board.

So- was that ultimately a violation of the oath? When considering that we have to look at which specific points it potentially violates.
1 Was it a violation of Integrity?
2 Was it a violation of Good faith?
3 Was it a violation of representing the performance of the enterprise?

Integrity
On one hand- it was not because the client drew first blood so to speak. While it could be inferred as two wrongs make a right, that’s a simplistic answer that doesn’t represent the complexity of the situation. The client did in fact mislead the company and that’s why the company was at a loss, and they weren’t looking to make any level of profitability beyond what they would extract if everyone was honest from the beginning.
On the other hand, my friend willfully lied to her client.

Good Faith
On one hand - I’m not certain it was a violation of the Good Faith. As I mentioned, the intent was for a level of profitability that would be derived from the outset of the project if everything was above board, and no more than that. She could have lied and gotten a higher level of profitability, but she chose not to.
On the other, she lied. She knew she was doing it. She sat down with the intention to lie to them.

Performance of the Enterprise
On one hand, Yes.
On the other, well- ok- there is no other.

In conclusion- Ethics and morality should be in someone’s everyday practice, in their personal and professional life. I’m not certain if having an oath will make a huge difference, but it certainly can’t hurt, and management professionals should start taking lengths to repair the brand equity in the eyes of the rest of society.

Thanks to John Murray who is awfully fond of oathing.

Determining Salary: Tips for Fair Value Compensation

Salary
Salary represents something more visceral than simply the paycheck. To an employee it represents their imagined worth to the company. It’s a reflection of their perceived importance and seniority.

When calculating the salary you want to offer a potential candidate there are some things you can keep in mind.

Current Salary Comparison
Taking the current salary of the candidate and offering either a set amount (10 K) or percent (20%), is useful when trying to seduce a superstar away from their current gig. One potential hazard is that they could be exaggerating their current salary to get a sweeter deal. To quote Ronal Reagan: “Trust, but verify.” When speaking to their current or most recent employer as a referral, include verifying the salary they cited among the things you discuss with their old boss. If there’s a discrepancy- don’t take it personally (can’t blame a guy or gal for trying, right?), but set the offer compared to the true salary, not the quoted one.

Industry Standard
There are some extremely useful sites out there. www.payscale.com is one of my favorite resources for this. You put in a bunch of information including role, region, years of experience, education, qualifications, and what the job entails, and you get like for like comparison to other professionals.

Do your research. The offer should be around the 50th percentile of the scale. If the person’s expectations falls significantly above or below the average, you have to wonder if their duties were truly related to the job you’re considering them for.

If it’s a step up- there’s nothing to say they are not capable for the step up. Promotion by job movement is common, but you have to keep in mind they may be on a steeper learning curve.

It it’s a step down- you pose the risk that they may not stick around and will they take the next job that comes around which is more with on their career track. Of course- some people are willing to trade down a position and be demoted for more free time, or the right work environment, so ask the person about it in a non-confrontational way.

Ask
Ask for the salary of what the person wants, and then meet it. If they give a ballpark or range (which is what I usually do), offer the average of the low and high.

Performance Based Incentives
Bonuses based on performance go beyond commission for sales and revenues earned. More progressive models of compensation incorporate profit sharing and gain sharing (gain sharing refers to using company or business unit performance to determine bonuses beyond simple profit metrics. For example, it can be attached to increase in profit, cost management, QA etc…).

The interesting thing about performance based compensation is that it can be tied to business unit performance, or directly to the employee’s performance, or a mixture of the two. The important thing is to attach the metrics to things they directly have control over. In the case of where it’s based on a Likert scale style performance review, that the reviewer is going to be honest and fair in the numbers they’re selecting, and are not bumping up because they’re fond of the employee, or down because they’re not fond of them employee, and the numbers reflect personal feelings instead of performance of the employee.

You get what you pay for. If you compensate below what people are used to or feel they’re worth you risk two things: 1) Losing your best people to new jobs, or 2) having them lose their fire and motivation.

In summary, while it’s in the interest of business unit profitability to keep things lean, it’s antithetical to productivity of the employee. The highest quality candidates are always going to be more expensive, but worth every cent.


Thank-to-Editor: John Murray.

The Perils of Management Theory

This weekend I am helping out at my Business School. The MBA World Tour is coming to my city and I am manning a booth set up by my program to recruit potential quality candidates.
It got me thinking of my MBA experience and how it related to my experience after graduation. Granted, I think my experience was exceptional because my school stressed practicum instead theory and always tied it into real world practice through discussion and case study analysis.

In theory, the models work perfectly. The buy in is unanimous, the transition smooth and the hiccups nonexistent. Reality, however, has proven that function should dictate structure and process and not the other way around. It’s important when applying models to keep them flexible enough to adapt when reality strikes.

Don’t get me wrong, I think that the MBA is a great experience and offers a fantastic experience for those seeking a wide (and not deep) review of the management body of knowledge. More importantly, it gives you exposure to best practice for management and depending on the format, exposure to other people’s views that you wouldn’t normally get (I was in a group with a Music historian, a manager of Non profits, an engineer, a banker, a geologist and a lawyer– talk about diverse points of view!).

Some take the approach of theory as the answer. This is a mistake. Theory as a method is a better approach. Instead of using pure theory as the tool for accomplishment, use it as a road map for milestones or for best practice. Things are different when you’re talking about adherence to law. When you let the model dictate the practice entirely, you not only open yourself to the risk of failing, but you also open yourself up being thought of as trapped in theorems and dazzled by the abstract, unable to bridge the gap between the text and the application.

In closing, remember that the reason you’re doing business is for the sake of the practice, not the sake of the theory. Make sure you read the theory, and let the models influence your practice, but don’t be afraid to bend or break the rules.

Special thanks, as always to my patient editor John Murray.

Fear and Loathing in the Boardroom

Dealing with uncertainty in a Services Environment

Uncertainty can be a team killer. Economic contractions, while normal and to be assumed within expected events of the business cycle, can stifle the productivity of any team. In cases where the product or offering is specifically human based (i.e. services), the business unit can find itself suddenly running on no cylinders.

I’ve found employees crave security. The reason they are working for you instead of for themselves or going freelance is because of the security you can offer. The fact is they invest more than just their skills for the 40 hours/week they work. They invest their trust that the company will be able to afford to keep them on staff. This trust is shaken during economic downturns, or when rumors start hitting the cubicles of mergers, acquisitions or layoffs. Uncertainty basically equates to fear of the possible, increasing as that encounters the realm of the probable.

Ignorance is Bliss
I’ve been in companies that have been acquired. I was the first employee to know about it when it was still just a remote possibility, before any documents were even drawn up. We were in the middle of a couple of major projects, but I couldn’t let my team drop the ball as far as meeting deadlines go.

We compartmentalized the information so rumors wouldn’t start flying until the contract was signed. It was the right choice too. As soon as the team realized the company was being acquired, even if we had projects and work to do, the motivation just seeped out.
In these cases you keep as tight a lid on it as possible. If your team is scared, the business unit productivity is doomed.

Deal with the Gossip Girl
If the rumor mill starts going, it’s better to nip it in the bud and call a meeting. An open dialogue with the team that presents the actual facts may be in order. If their fears are warranted, and the rumors are true, but you need to keep them motivated, a gut reaction may be to lie, or at least put a fair amount of spin on the truth.
Here’s the potential problems with lying:

1. There are very few people who actually excel at lying. Most people have tells. You probably have a tell without knowing. If you lie to your team there’s a chance they won’t believe you.
2. If can pull off a good lie you will likely face significant fallout when the project ends and your team discovers the truth. Your credibility will be damaged and your ability to attract top talent in the future compromised.

A better approach may be to have the open dialogue where you address the facts and focus on keeping them motivated. Not all possibilities become probabilities. Applying some context to fears and placing uncertainty in its proper perspective will go a long way.

Motivation with loss of an Account
Tell them about other clients you’re working with and what work you see coming down the pipe from other clients.

Motivation with a slowdown of Work
Keep them from being idle with things that help the company that aren’t necessarily billable. Internal Projects, R&D, and skill upgrades are only possible when a client isn’t throwing a fit in the corner because they need a project completed tomorrow, so look at this as an opportunity to do necessary housekeeping and sell it to the team members that same way.

Motivation with an Economic Downturn
They are probably inundated with doom and gloom from news sources during a bear market. Don’t just tell them they have no reason to worry without qualification. Use examples, such as clients who are economic stalwarts (aren’t affected much by downturns or upturns), hedges (who are experiencing a boom in bad times, such as tech in this economy) and bellwethers (the first reactors to economic activity- to show that the tough spot may soon be over). This will show that the company is not in jeopardy, and they are not at risk of losing their job.
And in the end- if you have no choice but to lay them off…

Motivation before an Exit
Tap your network trying to find them a new job, and do what you can to make sure they still have an income after things end with you. If you’ve done everything you can then do promise outplacement help and glowing recommendations.

In conclusion- Management in good times is hard enough. Management when facing challenges is downright tricky. Remember that despite the stress it’s not good for anyone if you take out that stress on your team. Try to remember to smile and always speak positively to your team, management and clients.

Special Thanks to John Murray.