Monday, January 20, 2014

Importance of free will for employee engagement

Like many other companies, at Sefaira we realize that empowering and engaging our entire team with the company's mission is critical for our success. This implies those closest to the front lines, i.e. our customers and our code, should feel complete engagement with the goal of the company & motivated to make decisions and act in the interest of Sefaira's success.

The business value of employee engagement isn't suspect, and can be proven by empirical data. Anecdotally, we feel this helps with improve employee happiness as well. However, I recently read a study by Mihaly Csikszentmihalyi‎ which provides empirical data in favor of this.

Using his novel Experience Sampling Method, Csikszentmihalyi‎ studied a population of workers across a wide spectrum to understand when people enjoyed themselves. He learnt the following -

  • While at work, 54% of the population said they experience enjoyment. During this state of enjoyment they felt challenged & they felt their skills were being used well
  • While at home or during leisure, only 18% of the population said they experience enjoyment. Interestingly, a majority of workers felt apathy & boredom during leisure hours
This clearly showed that people enjoy themselves more at work than they do during leisure hours. However, a 2nd question showed an interesting paradox. A majority of workers who said they were enjoying themselves at work said they'd rather be indulging in a leisure activity. Also, a majority of workers who were bored during leisure stated that they'd rather not be doing something else. 

This means that a majority of workers would rather be bored & apathetic, than engaged in enjoyable work. This was a paradoxical finding. The author states that this can likely be attributed to the social perception that the nature of work is not determined by employees (even though work itself is challenging & enjoyable), and is not under the employee's free will. This lack of free will leads employees to choose to spend their time being apathetic, away from work they truly enjoy.

For us as managers, the lesson is clear. The more employees feel like they are acting under free will, the happier they will be, as they will seek the enjoyment that comes from work. Of course, the business benefits from this if it is organized to allow employees to decide & act in the interest of business.

Tuesday, January 14, 2014

Two ways in which quotas can debilitate startups

Quotas(1) play a very important role in businesses. They are the chief instrument for translating business objectives into measurable milestones. Further, they translate measurable business goals into objectives for revenue generating functions in the business. Ultimately, they connect all other functions ranging from product development to marketing with overarching business objectives.

However, they suffer from two major weaknesses especially for startups who tie themselves to quotas like established businesses would.

Quotas are not actionable metrics

I was first introduced to the idea of actionable metrics while reading "Out of the Crisis" by Edwards Deming who used accident statistics as an example of an outcome-based metric that measures the result. However, it fails to provide any insight into what actions can be taken to improve the metric. Similarly, quotas are an outcome-based metric, which can't translate into actions as highlighted by Jason in this HBR article. Naturally, as Tom Tunguz points out in his follow up, they lead to anxiety in absence of actionable metrics (which are often process indicators) as they leave sales people powerless (2). Actionable metrics are important for sales as they result in constancy of purpose, and break business objectives down into fundamental metrics that can be acted on. In essence, actionable metrics translate sales into a machine that looks for continuous improvement as opposed to attainment.

Quotas can obfuscate reflection

Established businesses have a business model that works, they have a sense of market size and their customers, and therefore - business goals well informed. Startups are unlike established businesses. Business goals aren't informed by an objective market size, as very often startups are creating new markets based on their offerings, or fulfilling needs that the market didn't realize it had. This implies that unlike established businesses, startups are going through constant learning. A natural extension here is that startups  need to reflect about their sales processes independent of attaining quotas - way more than established businesses do. The challenge here is that quota attainment (or meeting budget) can sometimes result in inadequate reflection, and delay in actions which can debilitate a startup.

A question for more informed folks, especially those that sit on startup boards - Does measurement of leading indicators lead to better "retrospectives" by executive teams than meeting budget?

1 - I use quotas interchangeable with budgets here. I find that the difference between the two is essentially their probability weights. Budgets have 90% likelihood of being met, where as quotas might have 50%.

2 - In the face of goals, being powerless causes anxiety - a thesis proven by Mihaly Csikszentmihalyi in Flow