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|In: Industry Commentary|Last Updated:

Should executives receive incentive pay? Should anyone?

Last week’s KJR explored the logic behind incentive pay, and concluded it doesn’t hold up to scrutiny (I nearly said “close scrutiny,” which contrasts with the distant scrutiny that’s so popular these days).

Incentive pay shares a characteristic with at least four other well-established business practices — recruiting, performance appraisals, outsourcing, and software development — namely, the widespread certainty that when they don’t work, the problem is with the details of execution, not the fundamental concept:

Recruiting: As my friend Nick Corcodilos of Ask The Headhunter fame has been pointing out for years, the industry-standard recruiting practice of posting a position description, screening resumes based on skill-to-task matching, and so on fills fewer than one out of every ten open positions. And yet, most companies continue to pretend it works, even though, based on the numbers, it’s obviously broken.

Performance appraisals: Okay, I don’t have any documented numbers to back this opinion. Based on what I’ve seen, over the past few decades the performance appraisal process (really, practice) has become increasingly bulky and time-consuming for both managers and those they manage.

The payoff for the additional time and energy diverted to this activity? So far as I can tell, managers hate it, few employees find it valuable, and there’s no evidence that better employee performance correlates with more extensive and intensive performance appraisals.

Outsourcing: As documented in Outsourcing debunked (me, 2011), the only constant in the outsourcing industry is its failure rate. Commonly, three years into most outsourcing deals the contracting company finds itself either renegotiating their contract or terminating it altogether. Overall the numbers seem to show that between 30% and 70% of all outsources fail, depending on whose numbers you’re reading and the type of outsource they’re writing about.

But the numbers you read almost certainly underestimate the failure rate. Here in the Minneapolis/St. Paul metro, for example, it’s widely known that Best Buy is quietly unwinding its high-profile outsource to Accenture, but nobody in either Best Buy or Accenture publicly admits the whole venture was a failure.

Software development: For at least two decades, waterfall development wasn’t a way to develop software. It was the way, even though the way that preceded it (or at least one of the ways) — frequent informal conversations between business managers and programmers, with programmers showing business managers their results as soon as there was something to show and the business managers providing feedback that led to quick course-corrections — demonstrably worked.

I say demonstrably because the near-universal pre-waterfall outcome was stable, tailored-to-the-business, feature-rich applications, unlike waterfall, with its notorious 70% across-the-board failure rate.

Isn’t it interesting that when you read the Agile Manifesto, it sounds a whole lot like nostalgia for the pre-waterfall days?

At least with software development, as an industry we finally acknowledged that waterfall doesn’t work, although we needed a couple of decades dominated by dismal failure to accept this.

Too bad the Agile Manifesto hasn’t kept up with the times. It’s about software delivery to customers at a time when (1) there are no internal customers, and (2) the point isn’t software delivery, it’s successful, designed, planned business change.

Incentive pay, recruiting, performance appraisals, outsourcing, and software development. Five very different concepts. In all five cases, the business community has spent decades assuming the problem was with execution, not in fundamentally flawed concepts.

Here’s the irony: If an assumption was to be made, flawed execution was the right one. It’s the Edison Ratio in action.

Edison, you’ll recall, explained genius as being one percent inspiration and ninety-nine percent perspiration. Given this 99:1 ratio, logic dictates that when something goes wrong, it’s 99 times more likely to have been with the sweat than with the idea … with the execution, not the concept.

So the issue isn’t that business leaders, faced with failures, focused their attention on execution. Quite the opposite, this was admirable. It means they recognized that there’s no substitute for sweating the details.

No, the issue is how long it should take to figure out that the problem is the core concept after all.

In this, business leaders would do well to accept the advice of the source of so much wisdom, W.C. Fields: “If at first you don’t succeed, try, try again. Then give up. There’s no use in being a damn fool about it.”

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|In: Business Ethics|Last Updated:

According to Mike Daisey in his The Agony and the Ecstasy of Steve Jobs, he saw first-hand the appalling conditions in which employees work at Foxconn, Apple’s Chinese manufacturing partner.

Also according to Mike Daisey, making stuff up and presenting it as fact is just fine when you’re presenting a “larger truth.” Or so he said when The American Life, which had broadcast The Agony in the first place on the understanding that it was factually accurate, revealed that, after further investigation, it wasn’t.

I’m not certain of much, but I’m certain of this: If you have to make stuff up to support your “truth,” you’re telling neither the truth nor a truth. Truth be told, none of us has access to the truth. The best any of us can achieve is some confidence that the evidence on which we base our opinions is reliable, the logic we’ve used is sound, and we’re honest in how we explain it.

And so, KJR hereby announces a moratorium on the word “truth” and its derivatives, because whoever lays claim to it is either deceiving themselves or lying to someone else.

Meanwhile, back in not-yet-offshored America, the latest trend in recruiting is requiring job applicants to provide their Facebook password. Or so the story goes.

Unlike Michael Daisey, the AP’s Manuel Valdes and Shannon McFarland reported actual events as they happened — a few factually accurate (or, at least, undisputed) anecdotes. But as someone once said, the plural of anecdote is not data. A few instances is hardly the same thing as a trend.

Which isn’t to say there’s no such trend. It’s to say that we have no more knowledge of whether this is a trend after reading the AP story than we did before reading it, just as was the case with Daisey.

Different reasons, same result.

In the case of Apple and Foxconn, thanks to an investigation by the Fair Labor Association (which despite the name is an industry-funded, not union-funded organization) it appears that Daisey notwithstanding, working conditions at Foxconn, while far from horrific, often violated even China’s lax standards.

Which brings us to a question that’s of personal interest to you.

You don’t have to be the CEO of a Fortune 500 corporation to be responsible for an offshore outsourcing contract. It’s easy to be self-righteous about Apple either (pick one) failing to properly audit its manufacturing partner or knowingly involving itself with a company that treats employees poorly.

It’s a lot harder to avoid being guilty of the exact same thing when the subject is your offshore outsourcer.

There’s a school of thought that says this isn’t your problem anyway. Your job is to contract for the best possible service at the best possible price. The company you’re contracting with is located in another country. It has different laws, different enforcement of the law, a different culture, and different expectations of what a work environment should be.

That makes it all Someone Else’s Problem, doesn’t it?

Legally, it probably does. Ethically? Probably not.

The reductio ad absurdum argument is all you need: Were you to learn that an offshore outsourcer used slaves rather than employees, chaining them to their desks and whipping them if they didn’t write your code while starving them to death because the supply of slave programmers is ample but food is expensive … legally, because that’s how it is in their country … were you to learn this, I sure hope you’d choose a different offshoring partner, even if it cost you more to do so.

If you agree, you agree you have some ethical responsibilities for setting minimum standards for workplace conditions. Now that this is settled, the question that remains is what they should be.

That’s a question that’s easier to ask than to answer. Applying U.S. standards to countries with lower standards of living and different expectations of the workplace truly doesn’t make sense. On the other hand, accepting whatever level of misery is the norm there as your standard is probably the wrong answer, too.

What’s probably the right answer is to spend some time there, talking with the people who do your work, to gain some sense of what they would find comfortable … not luxurious, not barely tolerable, but comfortable. You’re looking for, not physical equivalence to U.S. working conditions, but emotional equivalence.

That’s a complicated proposition. I’d love to offer a simple, clear solution instead, but as usual the world is too complicated for a simple solution to work.

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