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A new HR paradigm

Okay, we need a bit of a background.  You need to change to survive.  If you are going to change, it helps to understand the path of how we got to where were are today.  From there, you can define where we want to go, and then chart the course.  If I lost you at why you need to change, this article is not for you.  Face it, the internet is not for you.  For all others, please let me explain.

There are two paradigms in the corporate world regarding creative processes.  The first is to take everything in a business workflow, reduce the work to a set of procedures and policies, then hire the cheapest person you can for the process steps.  The more you simplify your processes, the easier it is to replace a worker with something or someone cheaper, and therefore, the cheaper a process becomes.  A worker becomes the cog in the machine of industry.  This is the concrete thinking process at its finest.  Cheap processes increase profit and provide a necessary hedge against competition.  Nothing new here right?

This model has been a main-stay of industry since Henry Ford realized you could produce consistent quality products at a lower price by standardizing the work.  With the advent of computers, and the ability of computers to simplify/replace portions of the process, competing companies are in a race to lower costs and increase quality.  This drive to extremes translates into companies maximizing profit.  Because of these extremes quality has never been greater.  One time asset investments in machines (digital and otherwise) produces huge dividends by eliminating a high cost of production, the worker.

For years in the USA, manufacturing has been driven by these goals.  The first real challenge faced by US manufacturing was Japanese refinements to our processes and their subsequent improvements in quality.  The second wave of hits in the US is a willingness of overseas workers to take a lower wage than their US counterparts to perform the same basic tasks.  ISO 2000 is the final nail, making the quality and consistency of foreign workers similar to the US workers given the same materials and process.  Then again, this is old news.

The one thing corporations have left out of the equation is a concept of creativity.  So far, there is no way  to make an assembly line out of a creative process.  Creativity by its nature is not a definable process.  Without creativity, corporations do not create the next latest-greatest widget.  Once the new widget is created, a world of manufacturing knows how to break it down and create the widget consistently and reliably cheap.  The lack of defined creative process has not prevented corporations from seeking this holy grail of production, to standardize their creative process, but largely, it is not a linear path nor are the most talented creatives prone to fit into the world of manufacturing standardization.  These companies face a real problem of talent retention and try all sorts of legal tricks to capture an essence of the creative long after the creative is not compensated by the corporation.

We will call this first type of company, a process driven company (PDC).  Recent examples of PDC companies would be Microsoft, GM and 3M.

The second paradigm is to make a corporation overly full of very creative people.  These companies outsource all the manufacturing and become just a design shop.  The more creative your staff is, the better your design.  The better the design, the more unique your product is, and the easier the marketing for the product becomes.  This is a world which Seth Godin is trying to define.

This paradigm is very old.  It is a paradigm of the great architects and artisans.  Creativity was classically found in a wheelwright, tentmaker, carpenter, blacksmith, or tinker of old.  Today, some carpenters are artists, some are cogs in the PDC, so don’t mistake the two.  It used to be, you could go to the blacksmith shop, explain a problem and have a smithy strike up an iron something or other to fill your need.  Not every artisan made consistent items, and asking them to reproduce an object would give you an interpretation of the original idea in every unit.  No consistency, therefore quality issues and production limitations.  Also, you can only go as fast as the artist.

There has ALWAYS been a need for these artisans, but because PDC companies needed the next widget, they created a cog type role for an artisan and lulled them with false promises of security, decent-pay and constant pay, even if they didn’t always product the next greatest thing.  This is called employment or a J-O-B.  Most artists call this jail.

The second paradigm is to make something unique and fills a need.   We will call the second type of company a creativity inspired company (CIC).  Recent examples of CIC type companies are Apple, Zazzle, Google, 3M and Lady Gaga.  I throw 3M in here because they do have a CIC branch even though they are mostly a PDC.

Problems exist for a PDC because they still need creativity.  Another problem with a PDC is their attempt to fit a creative artisan into the same mold as a cog.  A bigger problem for a PDC is an artist now has equal marketing power as a large corporation via the internet.  The ability to generate revenue is no longer in a PDC, but in an artists hands.  This makes an artist just as likely to score a new product without your company as with it.

A cog needs consistency.  Therefore for a cog, the best schedule of payment is an attendance based compensation.  If you show up, you perform your tasks by the procedure, you get paid.  Artists do not handle an attendance model well and many of the best artists get fired for attendance problems.

Artisans should really get paid on an as-needed-basis based on an idea.  This doesn’t always work well for a PDC because a PDC is about controlling costs.  Therefore, they try to hire an artisan and get them to detail out their work process.  This never works, so a company gets less creative.  This leads to a false belief within a PDC that all artisans are a cost center.  They see them as a drain on revenue, and based on how they retain an artisan, they are correct.  Artists do not produce their work on a schedule.  They produce it based on events.  By forcing an artist to justify their existence everyday, the event does not occur.

An artisan who is treated like a cog will develop creative ways to justify their position.  Attendance Based Compensation does not reward them for being creative, it rewards them for showing up, being consistent and showing they are producing cogs.  This is exactly opposite of what the company needs.  A company does not need an artist to be creative in how to take a companies money, a company needs an idea to fill the assembly line.

If you are a PDC, you need to recognize this is not a way to success.  You are going to have understand you need a TRUE artisan, not a cog in an artisan role.  You may need an artisan to create a new product, or another to take an existing product and creatively break down a work-load.  These true artists are now termed free agents.  A classical term is consultants, but consulting companies tried to apply a PDC model to CIC type work and destroyed the name.  Free Agents are artists who work for more than one PDC.  By staying connected to their art, they are more effective and better value than existing employee cogs with a title of artist.

If you are a CIC, you need to focus your company on the creative side of things and farm out production.  CIC companies are usually fail because they don’t have an ability to separate the two branches.  I would wager that any true CIC company needs to complexly separate for scalability and cost effectiveness as the adoption curve starts to rise or if you are in a long-tail marketplace.  A problem a CIC faces is they really cannot retain the consistency of ideas needed to keep a business at peak operation without rotating your artists.  Artists get a bit stale and something fresh is always needed.

Free Agents can fill this role, because while they are not needed by your company, they are renewing their art at someone else’s expense.

Being a PDC or CIC type company does not make you better or worst.  There are very bad CIC companies and very bad PDC companies, and understanding your paradigm is important to maximizing your position in this venue.  There are also very good companies in both roles but understanding the players and how artists work is far better return on investment (ROI) than existing business models of hiring and firing.

Because PDC companies are shedding so many positions in a bid to be the lowest cost, most of this shedding is occurring with people who may be artists.  Even if they are artists, PDC and CIC companies need a method to understand intrinsic value an artist brings to a new project.  Failure to understand this value, is a failure to be accountable to your corporation.  My point behind this article IS you need to shed these people.

You’re existing paradigm of holding all the cards is going to cost your company in the long run.  You need to destroy the concept of a captive artist.  They are not as effective as you may think and are going to increase your project costs.

HR, in the future is going to need to embrace this new reality.  HR is not prepared for this kind of interchange, nor are companies as a whole.  Contractual obligations enforced by HR make it necessary to treat these artists as a consultant or vendor, but the role is more of a contract employee.

A better way to deal with this new paradigm of these free agents is honesty.  I do believe there is a non-disclosure agreement, a time limit and an agreement to pay based on the idea must all be a part of an agreement on BOTH sides.  Making sure the company retains value while investing in artistic solutions for the company’s customers is still paramount.

Companies leading this next generation of PDC’s will embrace CIC companies.  The ones who don’t are going to be in an endless cycle of lower, and lower prices until… you are producing it for free.  Both companies by embracing a Free Agent paradigm will compete better in this new market.

So if your company can survive on free, you win.  Most companies cannot survive.  Where are you?

A larger question become how to integrate these artists into your work teams.

2010/11/27 0 Comments Business , , , , ,

Every business is a small business

Dave Ramsey is coming out with a new book soon about Leadership.  In this book, he has announced his concept that all business is small business.  At first, the realist in me sees that statement as false.  However, there is a sliver of truth to the statement even if it is not a “real” statement.

For me, a “real” statement is one that is born out of what we like to call reality.  While I would love to get philosophical about what is real and what isn’t , we will use a working definition of “real” to mean in this case, the current attitudes and actions of business dealing with one another.

The problem is, that while ALL business SHOULD BE small business, the larger corporations don’t like playing that way.  Once you get to be real big, a fear is created by believing the business may shrink.  If it shrinks, it may not be large and the advantage to a large corporation is that the number of competitors is less in their space.  However, being a realist, I realize that the pie is not limited, and this fear of becoming small is the very reason that most of these companies will be small again some day.  For example, consider Novell who was once larger than Microsoft.

The reality of business is it being about people.  While there are large people and small people, people are people and business is about that person to person relationship.  It is true that larger people, such as my father, were always good sales people because when he stated something with conviction, you listened.  You don’t argue with the big guy.  As least to this once small son of my father it was that way.

But the fundamentals of business are people.  One-on-one interactions with people are the game.  You cannot get smaller that one person and the decision is never far from just one person.  Every company has that one person with whom the final buck stops.

Large companies try to change that dynamic as much as they like, but sale by sale, unit by unit, brick by brick, all business is still conducted at the small level of the person eventually.  I might need to go through a committee to get the one person to sign the PO, but it still comes down to one person.

So in part, yes, all business is small business, but I am sure that Microsoft or Apple will never fully appreciate that nuance, because they are fundamentally afraid of being small again.  Maybe not the company directly, but the shareholders and the board defiantly have that fear.  If they didn’t we wouldn’t have them making decisions based on the short term, like locking people out of their products.

So for now, the small business of Microsoft or Apple will keep trying to insulate themselves by doing what a puffer fish does when it is afraid…make itself look big.  Someday, these companies will be small again and have to learn all over again that the question is not the next greatest product, but how you treat each person.

PS There is another facet of the large/small business based on transaction volume.  However, I know companies that deal in billions of dollars with a fairly small staff.

2010/08/29 0 Comments Business