CIPD Podcast 16 - An interview with Tom Stewart

Date: 05/02/08 Duration: 00:23:07

In this podcast Tom Stewart, editor of the Harvard Business Review, talks to us about the art and science of teambuilding and HR on both sides of the pond.


In this podcast I’ll be talking exclusively to Tom Stewart, editor of the renowned Harvard Business Review. I caught up with him during his recent visit to London to talk about the art and science of team building. But first, I asked him about the differences that he has observed between people management and performance here in the UK and across the pond in America. 

Philippa Lamb: Tom, I think it’s fair to say that regardless of what sort of organisation HR people are working in, they’re all interested in creating sustainable, high performance. Now, it seem to me one of the big challenges with this is that nowadays they are all doing this in an atmosphere where change is constant. Here in the UK, we’re always being told that productivity is higher in the US, that you’re better at achieving high performing organisations. What’s the secret? 

Tom Stewart: It strikes me that there are three characteristics on the macro level – and they tie in in interesting ways to HR issues – that help to create that productivity. One is a high degree of flexibility in the labour market, which is to say it’s very easy to hire somebody, it’s very easy to fire somebody. So there are few restrictions around that, which means it’s very easy to allocate human resources to those places where you think they might get the most return. 
The second thing is a similar flexibility in the capital market – so both in human capital and in financial capital you have a lot of flexibility – and there the issue that strikes me as being most relevant to productivity is that it’s very easy to start a company and very easy to kill a company. So you see a lot of business formation in the United States – more than in Western Europe generally – and it’s very easy to shut one down without serious consequences. 

Those two things combined with, I think a third element, which is a very powerful consumer segment. The consumer never met a product she didn’t want faster and cheaper. That is a very high and constant pressure on productivity. So you start with that demand pressure – give it to me faster, give it to me cheaper, give it to me better – and then you have the two conditions in human capital and financial capital that allow you to allocate resources to do that. 
Having said that about the US, what I think you’re seeing, my sense is that we’re seeing increasing amounts of all three of those elements in Europe. 

PL: So bringing this down to a corporate level, would you say that in the States, leaders and managers are getting more out of their people on the ground; are they making them more productive? 

TS: I wouldn’t generalise about that. You can generalise about economies, but I wouldn’t say “American companies do it”, I would say companies that are in America in general do it. I think when you get to the corporate level, you see extraordinary examples everywhere. Tesco is every bit as extraordinary a retailer in terms of productivity, in terms of labour productivity, in terms of anything else as any retailer in the world. We published a few years ago a very interesting study by Nitin Nohria, William Joyce and Bruce Roberson, two academics and one former consultant, who did a long study of 160 companies and their performance over 10 years t try to look at what really works, what were the high level management and leadership practices that were associated with long-term performance. They found four must haves. One of them is strategy – you have to have a clearly focused strategy, it has to be a well-communicated strategy and you don’t want to have a strategy of the month. So you have to have a sensible strategy, well-communicated and stuck to.

The second piece was an execution piece, that you needed a culture and an organisation that could develop and maintain what they call “flawless operational execution”. The third was a fast, flexible and flat organisation, so it was a structure that is fast, flexible and flat. And the fourth was a performance-oriented, or I should say here orientated, culture. And these last two, I think are the ones that are the most directly connected to HR practices. If you started looking at them from an HR point of view, it would be very interesting, for example – and not many HR leaders have done this – to think about corporate strategy and HR’s relationship to it. Too often HR people, I think, say “all right, I’ve got a workforce, let me develop it, let me get the best people, let me give them leadership development training, let me give them the skills they need, let me sign up with the outside educators, let me get the best possible benefits passage...” But they don’t spend a lot of time thinking about “what’s my strategy and what’s my culture?” 

I remember once – this is a long answer, but it’s a good question – sitting on an airplane with my wife and looking forward about 10 seats where there was a man standing in the aisle talking to another man. Just looking at their body language and his gestures, I said “those two people work for General Electric”. My wife said: “nonsense”. So I walked past them to the loo and back and said “yep” – I overheard their conversation. 

PL: How did you know? 

TS: I don’t know how I knew, but there is something in a rather confrontational, direct style – they don’t mince words, they’re forceful, they’re direct, they’re productivity oriented and they’re fact based. And there was a “just the facts” man kind of quality in the conversation that I recognised. 
Now, people who have worked at Hewlett Packard – at the old Hewlett Packard – say the same thing, that they can smell each other in a room, that alumni can find each other. It’s a very different kind of culture, much more collaborative, much less aggressive, much less forceful, much more West Coast than East Coast in its style. But these things are associated with the way they deal with customers and one of the interesting things to think about from an HR perspective is if this is our strategy, who should our people be? 

PL: Well, I’m very interested in this and indeed how you bring those thoughts to bare on practical issues like teambuilding. I know you have some strong views about this, and certainly talking to HR people, I think a lot of them are finding, particularly in large organisations, their project teams are getting bigger, they’re getting more complex, they’re getting more unwieldy to manage, but what they’re not necessarily doing is achieving their objectives any better. What are your thoughts on this? 

TS: We just published some very interesting work by Lynda Gratton at the London Business School and Tamara Erickson of the Concourse Institute, who are looking at exactly the team question. One of the things that Lynda and Tammy found out is that teams are getting bigger and more diverse. The average sized project team in the companies they studied used to be about 20 people. It’s now about 100 people. 

PL: It’s so many, isn’t it? 

TS: It’s too many in a certain way. They’re very diverse, they’re working on very complex projects. I remember a few years ago, talking to a fellow, a Silicon Valley man, who was talking about the first microchip that he designed and he said “I did it”. He designed this first chip. The company’s most recent generation of chips was designed by 200 people. 

So it’s partly the very complexity, certainly, of technology work that has done it. It’s the cross-border nature of things, and it is also the fact that more and more companies are providing solutions rather than simple products or services. So when you’re providing a solution, you’re often coordinating the work of more than one group so that we’ve got three different profit centres, three different PNLs, trying to provide one solution to you so the coordination becomes complicated there.
So team sizes are growing – and they’re becoming more diverse so that you don’t just have, you know, Englishmen in marketing, you have a global team of men and women in marketing, finance, engineering and customer service all trying to deliver something in a team of 100 people. And a number of things happen. First of all, they don’t like each other. The marketing people speak marketing, the customer service people speak customer service – and if you just leave them alone, they will have a hard time. Diversity is a good, diversity gives you more different approaches, more points of view, but if you don’t manage it, it can lead to something like a dance that 11- or 12-year-olds go to where the boys are on one side and the girls are on the other and the twain almost never meet and they sort of sit there and glower. 

PL: So how do you make all these talented people collaborate? 

TS: The first thing is you give them something to do. One of the things that Lynda and Tammy discovered is that because of these inherent tensions, it’s not a good idea to sort of give them a lot of stuff to bond about, like let’s get together and bake a cake or tell our life stories. A lot of this soft, fuzzy stuff will actually simply allow them to discover their differences rather than commonalities. 

PL: That’s really interesting. 

TS: There was an old American cournal who served in the Vietnam war at a time when one of the slogans of the American government was to win the hearts and minds of the Vietnamese people and this counral, in a sentence that was extremely controversial at the time and politically incorrect, said “you know, my philosophy is that if you get them by the balls, their hearts and minds will follow”. There’s some truth to that. 

PL: Harsh! 

TS: You give people something to do and they will get to work. 

PL: So they don’t need to love each other.

TS: They don’t need to love each other, they need to have a common task. I think one of the reasons a lot of couples divorce when they have an empty nest, you know at 45 or when their children have grown, is that suddenly they don’t have anything to do, they don’t have a common task. So start with that common task, get them working. And then there are a number of factors that will really help.
One is to invest in signature relationship practices. At Royal Bank of Scotland, every day the top executives get together, wherever they are in the world, for an hour or an hour and a half, on the phone. They have that meeting every day. If you’re a senior executive of RBS, you do that. It’s a sign that you’re there. So signature practices like that help a team get together – we’re always going to be together doing that. 
The top leadership has to model collaborative behaviour. If you get the leadership team going off to the off site and everybody says well, take off your corporate hat or your department hat and put on your corporate hat, and then they come back and put their department hat back on – you know, if they model uncollaborative behaviour, the organisation is going to pick it up. 

PL: So they need to lead by example? 

TS: They need to lead by example, really mean it and, by the way, just as a dog can smell fear on a man, an organisation can smell hypocrisy on a leader so they have to lead by an actual example. You have to provide the right skills. I mean, there is an element of skills and here is where HR can really play an important role. Human Resource departments that teach employees how to build relationships, how to communicate well and how to resolve conflicts and how to do that in a creative way can make a major contribution. These teams will have conflict and too often people think conflict is bad and must be repressed or papered over. No, you need to resolve conflict rather than bury conflict and there’s a lot of skill building in the conflict resolution space where HR can contribute. Supporting a strong sense of community. I said earlier that you don’t necessarily want to go in and – you know, it’s not all sitting around and singing Kumbaya, but once you’ve got that work going, you want to celebrate your wins, you want to celebrate your conflicts, you want to go around and sing Kumbaya from time to time. 

PL: So a degree of socialising together, if you can do it. 

TS: Absolutely. 

PL: It’s interesting you say that because a lot of HR people have said to me that they have felt, in building these enormous teams, that they almost become an end in themselves. The team has become the objective. And I think that’s kind of what you’re talking about, isn’t it? They become detached from the organisation. 

TS: You want both because you want that sense of here we are, we’re a team, we’re special, we’re the red team, we’re the green team, we’re the...whatever it is...project team. So you do want that hot group morale, but you want that hot group to be linked into the strategy and culture of the organisation. You want them to bear the organisational vision and strategy in mind. 

PL: Same brand. 

TS: Yes, exactly. 

You’re listening to the CIP podcast series. 

PL: What can HR people bring to the table here because managing these sprawling teams – I must say I do have some question in my mind about whether there is a sense of corporate safety netting here that the teams are getting so huge I wonder whether that is something that HR people should be putting forward as an idea. Do the teams need to be that big? 

TS: That’s a good question. I think that HR’s role should be thought of in multiple dimensions here. One, as I said, is in giving people the skills they need, helping people to get the skills they need to be good team players, to understand how teams work, to understand how conflict works. 

Another I think is to help in the architecture of teams. One of the things that Lynda Gratton and Tamara Erickson describe in this article in HBR that we published in November and in the research that they have done, they describe something that they call role clarity and task ambiguity and what they mean by that is that if we are on a team together you should know what your role is. I should know what my role is. But we don’t necessarily know what we’re going to be doing in our roles because the world is changing. Part of the reason you’re forming teams is the work is not routine so it’s rather like American football where you know you’re position, but you don’t know the play. I think HR can help in constructing teams with that kind of understanding. I think a skill and a discipline that HR should be developing is the skill of team design, because, frankly, general managers don’t have it. General managers shouldn’t have to have it. This is exactly the kind of thing where a smart team leader ought to be able to call a smart in HR and say I need to put together a team to do this – help me design a team. 

PL: At a very practical level, I was interested that Lynda took the view that when you’re putting a team together, at least 20 to 40 per cent of those people need to know each other already for that team to be effective. 

TS: That’s right. 

PL: You talked earlier about the difficulties of actually measuring performance. Assuming you’ve got your great team together, they’re collaborating beautifully, what you really want is for them to achieve their objectives. How do you measure those objectives effectively? How do you measure team performance? 

TS: It’s a very good question and I don’t have a very good answer to it. One place to start is to decide whether this is a project team and, if so, whether project management techniques and skills should be brought in. In classic project management, part of the project manager’s job, and indeed maybe his or her most important job, is to guard against the dreaded scope creep, which is when you start out with saying let’s have a cup of coffee and you end up buying Brazil. 

PL: I think we call this mission creep over here. 

TS: Mission creep, yes! So some teams, I think, are project teams and some teams should be measured with that sort of project management skill and intensity that this is what we’re trying to do, we’re not trying to do more, we’re trying to do X by Y date for Z money.

PL: And that’s that. 

TS: And that’s that. I think it becomes much more complicated when the teams are how you’re running the company and much more complicated when, for example, you’re providing solutions to a customer and if you are an IBM or working across five or six different PNLs and trying to pull together consulting, software, multiple kinds of hardware along with computer operating services, each of which has a PNL and you’re trying to provide this for a large client in a multibillion dollar deal, how do you make the trade-offs between PNLs? That’s a problem. 

How do you keep knowledge going when a team’s work may extend over a long period of time? So you may not even know what your best practices are or you might not even know what your mistakes are because the time between cause and effect may be very long. And how do you end up saying it was good? It’s not all together clear and I think one of the things that companies need to do, and I think HR can play a major role here – this is where somebody creative from HR and somebody creative from finance ought to find ways to talk together. That’s the kind of opportunity that needs to really develop, I think, better ideas of performance, measurement and management in large, complex teams. 

PL: Just expanding on the idea of what HR as a profession can do better. You spend a lot of time looking at people management practice and HR, how it’s done in the States, how it’s done here – what can they do better? Where is HR missing trick, would you say? 

TS: Well, you know, the ability to sort of denounce HR – there is a long tradition of that. I did it in a rather notorious column when I was at Fortune Magazine, Peter Drucker did it once. 

PL: I think everyone has thrown a few bricks at HR. 

TS: Oh yes, exactly. Enough bricks for HR to build a magnificent building out of. But it seems to me that the fundamental opportunity for HR is to understand that the word equity has two different meanings. A lot of what HR needs to do - and this is important – is to create equity in the sense of fairness around an organisation; equal pay for equal works, reasonable working practices, reasonable benefits and a general sense that people are treated fairly. That is, if you will, the HR hygiene factor. It’s got to be done. But it’s necessary, but by no means sufficient. 
What HR really needs to do is to build on equity in the other sense, which is wealth, which is capital, and to start thinking of itself truly not just in changers in nomenclature but truly as being the steward and builder of human capital and responsible for making that human capital productive, putting it to work.
That mindset is talked about among some top HR professionals – it’s given lip service to all over the place, but too often... I remember once going to a gathering of corporate librarians, just by way of analogy, and it was a large gathering of 1,000 people in Indianapolis, Indiana. I was asked to give a talk and various other people like Stan Davies were giving talks about knowledge being the currency of the twenty-first century and so on and so forth and that’s what the theme of the whole conference was. That was the keynotes, but it you looked at 99 per cent of the rest of the conference it was about do we want to use this decimal system or that decimal system. I mean, that was down there at the lower case e equity level or lower case k knowledge level in the librarians’ case. 
So I think that there needs to be a really systematic effort to figure out what we’re trying to do. How do we toe our training to strategy? We are increasingly seeing, and I think this is a global phenomena, that more and more companies don’t just want to train you in generic leadership skill or generic marketing skills. Their issue is trying to get to open a market in eastern Europe, so how do we train you in marketing skills applicable to that? That’s the kind of work that ties HR leadership to real business problems and that’s the kind of work that builds capital E equity rather than just lower case e equity. 

PL: Tom Stewart, thank you very much indeed. 

TS: Thank you. 

PL: Fascinating stuff, but on that note I allowed Tom to return to his day job back in the States.
Go to to find the show notes that accompany this programme. And join us next month when I’ll be looking at some of the latest developments in the world of reward and benefits. Until then, goodbye. 


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