Turnover ... a potential indicator of longevity?

I think there's a lot of lottery-playing going on right now. Companies staffing up, raising a bunch of money, hiring a bunch of people, and burning them out in the hopes that they'll hit the lottery. ...all you have to do is read TechCrunch. Look at what the top stories are, and they're all about raising money, how many employees they have, and these are metrics that don't matter. What matters is: Are you profitable? Are you building something great? Are you taking care of your people? Are you treating your customers well? In the coverage of our industry as a whole, you'll rarely see stories about treating customers well, about people building a sustainable business. ...I don't know what percentage of tech companies have been around 30 years.

In this article from Fast Company, co-founder of 37 Signals Jason Fried, talks about building a sustainable business, in it for the long haul. He decries the tech start-up culture of burning out and churning though employees.

After reading it I was left wondering: could rates of employee turnover be an indicator of long term viability and success?

Letting people go: quick versus slow. Lessons from the Media Industry

Helen Kapalos was sacked by Channel Ten a fortnight ago.

When Eddie McGuire was forced to axe 100 staff from Channel Nine – barely a few months into his new role as CEO – he decided to give it to them straight.Unfortunately, his HR department had other plans.Instead of letting him sit down and talk with each unlucky worker, they made him read a scripted statement to them. He was also advised not to answer their questions. ... "It was a disaster . . . the worst thing I did," McGuire confessed to his Triple M listeners last week. "These HR people come in, they have their set plays – and they never work."

Letting people go is an unfortunately reality of work life. But how to do it? Clean break? Slow release? This article about the Australian media industry provides some examples of sackings and reactions by audiences and colleagues. Needless to say common decency and truth is encouraged over cold HR strategies.

Read all the gory details at smh.com.au

Personnel Economics: The Economist's View of Human Resources

Monetary incentives are the petri dish where motivation grows in work environments, particularly in sales. Whether the culture that forms is a healthy one or not depends on context. Customers' expectations of service providers are changing. People expect service not just sales. So how do you design an incentive scheme that supports customer service and results in sales?

I don't pretend to know the answers. All I know from my experience as a service designer is that incentives (and remuneration) are factors that someone needs to be thinking about when change is being rolled out.

The paper "Personnel Economics: The Economist's View of Human Resources" provides an overview of HR from an economic perspective. I hope to share enough of it so that you might read the whole piece. Here's the teaser:

Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Many questions are asked. Why should pay vary across workers within firms--and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms use teams and how are teams used most effectively? How should all these human resource management practices, from incentive pay to teamwork, be combined within firms? Personnel economics offers new tools and new answers to these questions.

The paper theorises on how pay determines culture in its discussion of piece rate pay versus performance pay. It talks about pay conditions that foster team work and cooperation and the trade-offs that they involve. It’s not all about money though, so the paper also considers “hedonic” factors like prestige, recognition, and working conditions. 

It’s easy to measure the output of sales people, but how “service” is measured needs to be considered if the behaviour of staff needs to change to meet new objectives. 

The article is by Edward P. Lazear and Kathryn L. Shaw can be downloaded via nber.org. It is available for free for those with access to academic databases. If you don't have access the paper is $5, and worth every cent.