Google is clearly the youngest firm among the leaders; it
has surprisingly been less than a decade since Google’s IPO.
Most companies on the top 20 market cap list could be
accurately described as “old school,” because most can attribute their success
to being nearly half a century old, having a long established product brand, or
through great acquisitions. Google’s market success can instead be attributed
to what can only be labeled as extraordinary people management practices that
result from its use of “people analytics.”
A new
kind of people management
The extraordinary marketplace success of Google (and Apple, which is No. 1 on the list) is beginning to force many
business leaders to take notice and to come to the realization that there is
now a new path to corporate greatness.
“New path” firms dominate by producing continuous innovation.
And executives are beginning to learn that continuous innovation cannot occur
until a firm makes a strategic shift toward a focus on great people management.
A strategic focus on people management is necessary
because innovations come from people, and you simply can’t maximize innovations
unless you are capable of recruiting and retaininginnovators. And even then, you must
provide them with great managers and an environment that supports innovation.
Unfortunately, making that transition to an innovative
firm is problematic because almost every current HR function operates under 20th century
principles of past practices, efficiency, risk avoidance, legal compliance, and
hunch-based people management decisions. If you want serial innovation, you
will need to reinvent traditional HR and the processes that drive innovation.
Shifting
to data-based people management
The basic premise of the “people analytics” approach is that
accurate people management decisions are the most important and impactful
decisions that a firm can make. You simply can’t produce superior business
results unless your managers are making accurate people management decisions.
Many do argue that product R&D, marketing, or resource
allocation decisions are instead the most impactful decisions. However, each
one of those business decisions is made by an employee. If you hire and retain
mostly mediocre people and you provide them with little data, you can only
assume that they will make mediocre decisions in each of these important
business areas, as well as in people management decisions.
No one in finance, supply chain, marketing, etc. would ever
propose a solution in their area without a plethora of charts, graphs, and data
to support it, but HR is known to all too frequently rely instead on trust and
relationships. People costs often approach 60 percent of corporate variable
costs, so it makes sense to manage such a large cost item analytically.
Another major problem in HR is its traditional reliance on
relationships. Relationships are the antithesis of analytical decision-making.
The decision-making “currency” for most business decisions has long been data,
but up until now, HR has relied on a different currency: that of building
relationships.
In direct contrast, Google’s success has to be attributed
in large part to the fact that it is the world’s only data-driven HR function.
Google’s business success should convince executives at any firm that wants to
grow dramatically that they must at least consider adopting the data and
analytically based model used by Google. Its approach has resulted in Google
producing amazing workforce productivity results that few can match (on
average, each employee generates nearly $1 million in revenue and $200,000 in
profit each year).
How
does the Google approach reinvent HR?
HR at Google is dramatically different from the hundreds of
other HR functions that I have researched and worked with. To start with, at
Google it’s not called human resources; instead, the function is called “people
operations.” The VP and HR leader Laszlo Bock has justifiably learned to demand
data-based decisions everywhere.
People management decisions at Google are guided by the powerful
“people analytics team.” Two key quotes from the team highlight their goals:
- “All people decisions at
Google are based on data and analytics.”
- The goal is to … “bring the same level of
rigor to people-decisions that we do to engineering decisions.”
Google is replacing the 20th century subjective decision-making
approach in HR. Although it calls its approach “people analytics,” it can
alternatively be called “data-based decision-making,” “algorithm based
decision-making,” or “fact or evidence-based decision-making.”
Top 10
reasons for Google’s people analytics approach
The people analytics team reports directly to the VP and it has
a representative in each major HR function. It produces many products,
including employee surveys that are not anonymous, and dashboards. It also
attempts to identify insightful correlations and to provide recommended
actions. The goal is to substitute data and metrics for the use of opinions.
Almost everyone has by now heard about Google’s free food, 20%
time, and wide range of fun activities but realize that each of these was
implemented and are maintained based on data. Many of Google’s people analytics
approaches are so unusual and powerful, I can only describe them as
“breathtaking.”
Below I have listed my “Top 10” of Google’s past and current
people management practices to highlight its data-driven approach:
- Leadership characteristics and the role of managers –ts “project oxygen” research analyzed reams
of internal data and determined that great managers are essential for top
performance and retention. It further identified the eight characteristics
of great leaders. The data proved that rather than superior technical
knowledge, periodic one-on-one coaching which included expressing interest
in the employee and frequent personalized feedback ranked as the No. 1 key
to being a successful leader. Managers are rated twice a year by their
employees on their performance on the eight factors.
- The PiLab — Google’s PiLab is a
unique subgroup that no other firm has. It conducts applied experiments
within Google to determine the most effective approaches for managing
people and maintaining a productive environment (including the type of
reward that makes employees the happiest). The lab even improved employee
health by reducing the calorie intake of its employees at their eating
facilities by relying on scientific data and experiments (by simply
reducing the size of the plates).
- A retention algorithm — Google developed a mathematical algorithm to proactively and
successfully predict which employees are most likely to become a retention
problem. This approach allows management to act before it’s too late and
it further allows retention solutions to be personalized.
- Predictive modeling – People management is forward looking at
Google. As a result, it develops predictive models and use “what if”
analysis to continually improve their forecasts of upcoming people
management problems and opportunities. It also uses analytics to produce
more effective workforce planning, which is essential in a rapidly growing
and changing firm.
- Improving diversity – Unlike most firms, analytics are used at
Google to solve diversity problems. As a result, the people analytics team
conducted analysis to identify the root causes of weak diversity
recruiting, retention, and promotions (especially among women engineers).
The results that it produced in hiring, retention, and promotion were
dramatic and measurable.
- An effective hiring algorithm – One of the few firms to approach recruiting
scientifically, Google developed an algorithm for predicting which
candidates had the highest probability of succeeding after they are hired.
Its research also determined that little value was added beyond four
interviews, dramatically shortening time to hire. Google is also unique in
its strategic approach to hiring because its hiring decisions are made by
a group in order to prevent individual hiring managers from hiring people
for their own short-term needs. Under “Project Janus,” it developed an
algorithm for each large job family that analyzed rejected resumes to
identify any top candidates who they might have missed. They found that
they had only a 1.5% miss rate, and as a result they hired some of the
revisited candidates.
- Calculating the value of top performers – Google executives have calculated the
performance differential between an exceptional technologist and an
average one (as much as 300 times higher). Proving the value of top
performers convinces executives to provide the resources necessary to
hire, retain, and develop extraordinary talent. Google’s best-kept secret
is that people operations professionals make the best “business case” of
any firm in any industry, which is the primary reason why they receive
such extraordinary executive support.
- Workplace design drives collaboration – Google has an extraordinary focus on
increasing collaboration between employees from different functions. It
has found that increased innovation comes from a combination of three
factors: discovery (i.e. learning), collaboration, and fun. It consciously
designs its workplaces to maximize learning, fun, and collaboration (it
even tracks the time spent by employees in the café lines to maximize
collaboration). Managing “fun” may seem superfluous to some, but the data
indicates that it is a major factor in attraction, retention, and
collaboration.
- Increasing discovery and learning – Rather than
focusing on traditional classroom learning, the emphasis is on hands-on
learning (the vast majority of people learn through on the job learning).
Google has increased discovery and learning through project rotations,
learning from failures, and even through inviting people like Al Gore and
Lady Gaga to speak to their employees. Clearly self-directed continuous
learning and the ability to adapt are key employee competencies at Google.
- It doesn’t dictate; it convinces with data — The final key to Google’s people analytics team’s success occurs
not during the analysis phase, but instead when it present its final
proposals to executives and managers. Rather than demanding or forcing
managers to accept its approach, it instead acts as internal consultants
and influences people to change based on the powerful data and the action
recommendations that they present. Because its audiences are highly
analytical (as most executives are), it uses data to change preset
opinions and to influence.
Dr. John Sullivan is a well-known teacher, author, and HR
thought leader. He is a frequent speaker and advisor to Fortune 500 and Silicon
Valley firms. Formerly the chief talent officer for Agilent Technologies (the
43,000-employee HP spin-off), he is now a professor of management at San
Francisco State University. An expert on recruiting and staffing, he was dubbed
the "Michael Jordan of Hiring" by Fast Company magazine. Contact him
at johns@sfsu.edu.