Buy them here
Just Adding a Chief Data Officer Isn’t Enough
The proliferation of C-suite roles is an indication of the increasing strategic and operational complexity organizations face. Heightened expectations of expertise are also part of the picture — for instance, GE’s recent transition from asking executives to focus on breadth to focus on depth.
One of the newest additions to the C-Suite is the Chief Data Officer. Thomas Redman wrote in October about the increasing value of a CDO and how to know whether such a role might be good for your organization. If you’ve decided to move ahead, then the next step is to effectively build that role into the rest of the top management team. To do so, you need clarity around how the CDO will work with the rest of the top management team as well as incentives that support collaboration across the top executives and senior managers — something that goes beyond equity compensation.
Research shows that you can’t just add a new member to a team without renegotiating the roles and relationships. Members need to know who already knows what, who should know what, and how to coordinate — and that all varies by the particular people in the team, not just their role. For instance, the person who was once the best at analytics may no longer hold that position if a Chief Data Officer is brought in. Brown, Court, and Willmott provide an excellent starter list for the issues to address: Establishing new mind-sets around the value of data; defining a data-analytics strategy; determining what to build, purchase, borrow, or rent; securing analytics expertise; mobilizing resources; and building frontline capabilities.
Brad Peters, CEO of Birst, a business intelligence company, raised the issue of incentives and structure with me in an interview at Saleforce.com’s Dreamforce conference. He said that without changes in incentives, as well as a change in the structure of the C-suite, broad-based roles like Chief Information Officers, Chief Marketing Officers, and Chief Data Officers are hampered in their effectiveness. Alignment with specific business goals is important to all senior executives, of course, but it’s especially true for those who may be in service roles to the business units of the organization.
David Aaker’s helps explain why in his book, Spanning Silos: The New CMO Imperative. Though he was writing about Chief Marketing Officers, his advice is equally valuable here. When incentives are focused on rewarding silo behavior and performance — as so many incentives are — it is a struggle to take advantage of a boundary-spanning executive position. Instead, organizations need cross-silo incentives and initiatives to support behaviors that leverage the skills of the new executive. (Chief Operating and Finance Officers side-step this issue given the broader power-base of their positions.)
The top management team should approach the role clarification and incentive alignment as a negotiation. While it is likely that the entire executive suite would be involved in a decision to bring in a Chief Data Officer, it is important that the process goes beyond involvement. Negotiation, with its norms of agreement to an explicit deal, means that the new role, its responsibilities, and its rewards, are fully integrated into those of the rest of the top management team.
Have this negotiation as part of the new Chief Data Officer on-boarding. Lay out major roles and responsibilities to highlight places where data and other roles intersect given the expertise of the particular people on the top management team. Use Brown, Court, and Willmott’s six tasks of data-focused activities to start developing the issues to have the on the table. Add incentives to the mix by setting goals around the collaborative activities. Morten Hansen argues that you don’t need to overhaul an entire incentive structure — you can focus on special incentives for silo-spanning collaborations.
The whole top management team must collaborate both in fact and incentives. There must be something that rewards cross-silo efforts. To effectively make use of data’s insights, executive teams need more than goodwill and a new hire.
Learn How to Spot Portable Talent
My wife, children and I have a farm in beautiful and peaceful Patagonia, where we fatten cattle. Each fall we buy a few hundred calves, recently separated from their mothers, and then keep them for 11 months, letting them feed on our natural grass. Once they’ve gained enough weight, we sell them and restart the cycle. The first year we did this, results were spectacular: The animals doubled their weight and prices were sky-high. In the years that followed, we started buying calves from better farms but, for some reason, our average annual weight gain kept dropping, along with our revenues. And last year’s selling season was our worst ever.
Puzzled, I asked a good friend, whose family has a three-generation history of breeding and fattening cattle in Patagonia, for advice. “Claudio, that first year when your animals gained so much weight, where did you buy them?” he asked me. I told him they came from a dry-land farm with very poor soil and low quality grass. “See,” he said. “That’s what you want. If you find calves that can survive in a poor and hostile environment, the minute they get to your farm they will blossom.”
Last month I bought half of my cattle from a seller with low quality grass, and a year from now I’ll be able to tell you whether my friend’s theory is right or not. But his insight makes a lot of sense — and it applies to human talent as well.
The best employees and executives are what talent management experts call “portable”. They are able to effectively transition from one role, company, industry or country to the next, not only bringing their unique strengths to each but also growing stronger in the process. My great colleague and hero, Harvard Business School professor Boris Groysberg, is the father of this field of research (indeed, his wife Lilyia tells me that their youngest daughter’s first word was “portability”). He wrote an excellent book on the topic, and each year, when I visit HBS as a guest lecturer, I never miss a chance to watch him teach the subject to his students.
Most people assume that the best hiring strategy is to find the best performers in a given field and get them on your team. But Boris has found that most people aren’t so portable: some who are shining stars in one context can fall out of the sky in another. One of the best ways in which he demonstrates this is with a study on equity research analysts moving between Wall Street investment banks. You would expect high portability in these situations. As Boris puts it, when a star analyst at investment bank A accepts an offer to join investment bank B, he gets a box, puts his laptop and a few other things in it, goes down the elevator, looks left and right before crossing Wall Street, goes up the elevator, and exactly 56 seconds later he is working at his new job. He operates in a similar environment, analyzes the same companies in the same sector, and has the same clients. He doesn’t have to sell his house, move to another state, buy a new house, look for new schools for the children, or help his spouse cope and adjust to a move. What could be easier? Yet, Boris has found that, while star equity research analysts that stay at one firm continue to shine, the performance of those who move declines quite dramatically in the following year and remains below previous heights even after five years.
Talent is much less portable than what we think because performance isn’t just one P; it stems from five — processes, platforms, products, people, and politics – and most of those you can’t take with you.
Am I, a 28-year veteran search consultant, confessing my sins and telling you that executives can’t successfully move from one organization to another and so you shouldn’t ever hire from the outside? Of course not. Sometimes it’s the only alternative, or the best one. But you should help yourself make better decisions on outside hires, as well as internal moves, by learning the key lessons on talent portability. While falling stars are the average outcome, there are several caveats.
First, origin and destination matter. While cattle from fertile farms didn’t gain as much weight at ours, the survivors of poor environments flourished. Likewise, when an executive moves to a weaker firm, performance is likely to decrease; if the person moves to a stronger firm, he or she will keep shining. Think about it in more practical terms: Should you only embrace candidates from outstanding firms like McKinsey or Goldman Sachs, as many companies do? Or would you be better off following a more counterintuitive strategy and finding the true stars who have managed to thrive at weaker firms?
Team-specific human capital is important too: when people move together, they tend to do better than when they do it alone. Boris has also found that starting something new in a new company (what he calls “exploration”) is much harder than taking over an existing project, team or unit (“exploitation”). In addition, some types of roles are more portable than others: COOs are much less so because their job requires lots of internal knowledge and many relationships; CFOs and other functional experts are usually better positioned to move.
Finally, you must check for how well an incoming star will fit into your industry given its dynamics; your organization given its culture and strategy; and your team given the personalities on it. Consider the performance of GE executives hired to lead other companies. We all know that the company has long been a factory for talent, so much so that its alumni account for the second largest group of CEOs within the Fortune 500, after Harvard MBAs. Whenever an executive leaves GE to become the CEO of another firm, the market value of the latter typically spikes — by at least a billion dollars for large entities, and in some cases by up to $10 billion. Yet when Boris, along with HBS’s Andrew N. McLean and Nitin Nohria, analyzed the performance of those stocks over the following three years, the results, presented in this article, were mixed. While many of the newly appointed CEOs created great value, others presided over huge value destruction. What made the difference? Fit, and especially the strategic kind: some people are great for startups, others for turnarounds, others for managing cyclical businesses.
If you want to keep your stars bright, reject the myth of the executive who shines at all times and in all places. Instead, assess for your candidates’ portability, including a careful check for fit.
This post is adapted from my forthcoming book, It’s Not the How or the What but the Who: Succeed by Surrounding Yourself with the Best (Harvard Business Review Press, 2014).
Best Business Books 2013: Strategy
- This year's best business books on strategy drive home the lesson that managing your company with an eye toward innovation in your market offerings, business portfolio, and business models is the only sustainable competitive advantage for most companies. The strategic imperative for their leaders is the continuous and deliberate navigation of change.