Unlimited vacation perks and game theory

There have been a few news articles going after perks like “unlimited vacation.” The trouble with these articles is that they typically go after these perks quoting folks who run workplaces without these policies and thus tell you that these perks are dangerous. There’s an inherent skin-in-the-game problem there.

A better approach might be to examine such perks from the lens of game theory. The challenge with unlimited vacations is that one’s natural behavior is to want to take a little less vacation than their neighbor – i.e., not enough to be the slacker on the team. This means the natural equilibrium point is to reduce the number of vacation days to zero.

This problem can be easily solved by shifting the equilibrium. For example, companies like Hubspot and LinkedIn (where I work) either mandate 2 weeks of vacation or shut down entirely for 2 weeks in the year. Another way to do this would be to have negative incentives below a certain threshold – e.g. maybe you get some benefit deducted if you don’t take 3 weeks off.

Company culture goes a long way in creating equilibrium points as well. Smart employers understand that breaks result in more productivity. And, cultures can create norms that make it unacceptable to not take these breaks.

Perks aren’t culture – their use is dictated by culture. They are rarely good or bad by themselves. Ping Pong tables, for example, can actually be pretty great if you use them every once in a while to blow off some steam with a teammate.

So, if perks aren’t being used as intended, it is better to evaluate the equilibrium created by the culture and incentives in place. And, game theory is our friend.

(Inspired by the game theory chapter on “Algorithms to Live By” – a very good book :-))

Policies and principles

As we learn to manage ourselves, we often start by setting policies. Policies are iron clad rules that help us achieve certain objectives. Examples of policies are –

1. I will always go to the gym first thing in the morning
2. I will never check email on Saturdays
3. I only eat sweets on Sundays

Of course, these policies are just ways to live by certain principles. For example, the principles behind these 3 rules might be –

1. I care a lot about exercise and would like to make sure I get it done
2. I need to feel relaxed during the weekend
3. I care about the sugar levels in my blood and would like to make sure I keep them low

Now, these principles provide us degrees of freedom. For example, you might be okay checking your email on a Saturday as long as you are feeling relaxed. And, those degrees of freedom enable us to be more effective by applying these principles based on the context.

Managing by policy is an amateur’s game. This is just as applicable whether we’re managing ourselves or an organization.

This, in turn, is exactly why culture matters – both in organizations and individuals. Google’s employees are not held back from discussing confidential information from their company’s weekly all hands because of a policy. Rather, it is their commitment to the culture. Great cultures are important because they enable leaders to focus on principles rather than policy.

For short term wins, policies can work great. However, if you are in it for the long term, principles are the way to go.

Beavers and rabbits

In 1946, members of the Argentinian navy released 10 beavers to enrich the ecosystem and perhaps kick start the fur trade. Now, beavers have wrecked havoc in Argentina for decades. Unlike trees in North America, trees in South America die when beavers sink their teeth into them. Without a natural predator, they are now a hundred thousand strong. And, Argentina has declared a war on beavers

Australia faced a similar problem when 6 rabbits were introduced for hunting. Rabbits turned out to be an invasive species in Australia.

The obvious lesson here is to beware messing with the delicate balance in nature. There are two other less obvious ones.

First, small things have the ability to mess with the balance in an ecosystem. Nice organizational cultures have been destroyed by a few bad hires. Introduce one person who enjoys politicking more than doing the work and you might not notice much change. However, bring a few and it’ll soon affect the ecosystem.

On the flip side, you might also find yourself in environments where you are the invasive species. In an environment that thrives on the fact nobody asks questions, asking questions might result in the environment rejecting you.

Pay attention to the environment. Some adapt, others don’t. And, while some will work well for you, others won’t. Make sure you choose. And, once you make your choice, pay attention to the changes it undergoes. A change in your environment is sure to have an impact on your life and happiness.

Purpose and appreciation

Building a culture is hard. This is so because of two reasons. First, there seem to be so many other things that need to get done. And, second, it isn’t clear what you should focus on. There seem to be way too many factors that go into building a culture anyway. While both are true, we all know that there are ways to simplify seemingly complex problems. And, my attempt at simplifying culture building is to simply focus on purpose and appreciation.

Dan Pink’s excellent book, Drive, beautifully synthesized human motivation to 3 ideas – autonomy, mastery and purpose. I’ve begun to believe that it is missing a fourth – appreciation. We care about being appreciated. A lot. There’s a saying that people don’t leave companies, they leave managers. And, I’d hazard a guess that the managers who people want to leave are often managers who don’t appreciate what their people do.

So, why leave out autonomy and mastery in culture building? As an organization grows, I think it is hard to emphasize autonomy and mastery. Autonomy can get in the way of process. And, process becomes critical as we grow to ensure a consistent experience to customers. Balancing between autonomy and process isn’t easy and is a constant struggle for mature organizations. So, I think it is something that needs to be solved for by managers and leaders at an individual team level.

As far as mastery goes, I think it makes sense in some contexts and doesn’t in others. For example, companies work hard to allow for internal movement so people don’t feel stuck in certain careers. Certain career paths may be viewed as stepping stones to others. Again, I think of mastery as something we work on a manager and team level. In some teams, mastering the craft should be the key focus. And, in others, it should all be about gaining relevant skills and moving onto do other things.

My gut says that if we can focus on purpose and appreciation in our organizations and homes, we’ll be able to solve for most of the problems that culture helps solve. And, while more organizations are attempting to do better with appreciation, most are a long way away from improving the sense of purpose.

Foundations of culture – The 200 words project

When he visited Jeff Bezos’ investment office, venture capitalist Bryce Roberts noticed a piece of furniture that seemed out of place – a table with a wooden door atop some legs jerry rigged together. The “door desk,” he was told, was a symbol of the early frugality Amazon embraced early on which, in turn, was a key part of Amazon’s culture.

Image Source

On reading the story behind the compliance crisis HR services company Zenefits faced a few months back, Bryce shared an anecdote that caught his attention. Zenefits founder Conrad Parker made a small decision early on – he created a macro to bypass the systems created to certify that someone had completed the required training to sell insurance in the state of California. He believed that 52 hours was too long to spend in training.

This act resulted in serious compliance issues that threatened to wreck the company. Each article about the Zenefits crisis showed glimpses of the tone the macro set within the company. Ever since, a lot of work has gone in to tear out the old foundation in hopes of saving the company.

Like cement, the cultural foundation for new projects/companies/teams sets early. Mindful, we must be…

These small, seemingly insignificant, early decisions to save money by building ramshackled desks or building tools to cheat the system set the foundation for company culture that everything after gets built upon. – Bryce Roberts


Source and thanks to: Bryce’s blog post – “When Culture Sets

A few thoughts on culture

As part of my annual review process at the end of every year, I ask myself – “Who/what were my biggest sources of inspiration this year?” It is a useful question as I think about all those people who’ve had a repeated positive impact on me. Inevitably, Seth Godin takes the top spot. I have been reading Seth’s blog for five years or more now, sharing his posts and thoughts here and, most importantly, revisiting his posts from time to time. Often, when I think of the topics he tends to write about, I realize that my definition of a particular idea came from one of his posts.

One such seminal post and idea is “change the culture, change the world.” This post boils culture down to one line – “This is what people like me do.” The first time I read this, I asked myself and all my friends (I think they got tired of hearing about this post within a week) – “What is it that people like us do?” And, we ended up attempting to coordinate a “Mastermind Group” across three continents to discuss various topics that mattered most to us. We decided our culture was one around having conversations that matter. The project didn’t work because of timezone issues but it is one that demonstrated to us how much we cared about having conversations that matter. I have continued to implement that idea ever since – at graduate school, I have time set aside every week for a conversation that matters with a group of friends.

I realize now that my answer to the question about my biggest source of inspiration was actually incomplete. There is one other person who has influenced me in a way similar to Seth – Clayton Christensen. While he doesn’t have a daily blog that I know of, his book “How Will You Measure Your Life?” got me started on a path that has gone on to help me define how I live. I listened to Clay’s TEDx talk and read his excellent article (which, unfortunately has been put behind a paywall by the folks at HBR) and I was again left thinking about culture. Clay’s insight was – “Ultimately, people don’t even think about whether their way of doing things yields success. They embrace priorities and follow procedures by instinct and assumption rather than by explicit decision—which means that they’ve created a culture.” Or, “this is what people like me do.”

I’ve written before about how you build culture in a team. Building culture and sharing the culture are two different things, though. While you might imagine any great culture would be automatically shared, it doesn’t work that way. As I have repeatedly learnt, “build it and they will come” is fundamentally flawed. Our culture is built around “best selling” or, in the case of the internet, “best sharing?”

I think the way culture is shared is by sharing stories. It is like the famous collection of Macy stories which talk about Macy’s employees who go to incredible lengths to please a customer. It is the Zappos person who was on the phone with a customer for many hours. Stories are powerful.

As I reflect on their power, I see the effect they have had on my life. In two days, I’ll be leading and participating an initiative called “The Good Life Sessions” in my final quarter in graduate school. The Good Life Sessions is a three part series of workshops that gets to the questions – “How will you measure your life?” through a series of other questions that help break that large question down. As you might imagine, there is a lot of Clay Christensen in the Good Life Sessions.

I also start these sessions and pretty much any initiative I lead by saying – “This might not work.” While I say this to myself every time before I take a leap, I say it in public generally to shocked reactions – “What do you mean? It should work. Do you lack confidence?” Those close to me understand it. Those who are getting to know me give me feedback about it and tell me I must stop saying it. And, folks listening either love it or hate it. This is one of those things where I choose to ignore all that is said and say – “This is the cost of me doing things. This is how I approach things and this is part of me being me.” “This might not work” is a Seth idea that embraces the fact that anything worth doing begins with an acceptance that it might not work.

As this example illustrates, Clay and Seth have shared their cultures with me and their cultures are an important part of my culture and how I operate. And, they’ve shared this without us ever meeting in person. Clay doesn’t even know I exist.

That is how I’ve come to learn that cultural change is incredibly powerful. It is a big part of what I have spent my time learning about and pushing for during my time in graduate school over the past year and a half – to encourage more reflection, more conversation, and more understanding. And, as you might imagine, a big part of this is just attempting to be all of this myself – because that’s what Clay and Seth have taught me. You have to be the change you wish to see.

And, most importantly, no one is going to pick you to make cultural change. You have to pick yourself.

culture

Rules vs. Guidelines – MBA Learnings

One of the more powerful ideas I’ve learnt in my ‘Values Based Leadership’ class is understanding the power of using rules vs. guidelines in setting culture.

Culture is by far the most powerful change tool that exists. If you really want to change behavior, it is the culture you should turn to. The culture is the mixture of norms and rituals that act as the default behavior in every group or organization. There are rule-based cultures and guideline-based cultures. There are advantages and disadvantages to both. And, to analyze the difference, I thought I’d examine how I’ve approached designing my own culture.

There are many ways to think about designing culture. I think of culture as a set of habits that we incentivize, one way or another. The basic habits I’ve been working to develop have been as simple as – sleep 8 hours, eat healthy, exercise 5 times a week, and meditate. This journey alone has taken the best part of the last 4 years and I am still not done. The first habit I sought to fix was sleeping 8 hours. And, my first instinct was to design a rule based system. When the 8 hour rule didn’t work, I mandated a 530am compulsory wake up as a way to encourage myself to sleep at 930pm. This didn’t work well either as I ended up sleeping late and going into work sleep deprived. I had a few similar experiences with attempting to exercise and meditate. These experiences taught me a couple of valuable lessons about rule-based systems. There is no doubt they are great when you just get started as they make you feel like you accomplished something. But, they work on the carrot-and-stick idea of motivation. And, as modern research has demonstrated, ideas of autonomy, mastery, and purpose motivate us a lot more than the carrot-and-stick model.

So, my next series of attempts were using guidelines. No punishments involved here. The first guideline was to attempt to sleep 8 hours every day. 1 year into that, I did that most of the time. Eating healthy was much easier and I didn’t have to try hard. Exercise was a real beast and I started in earnest in January 2013. Since then, I have averaged exercising ~5 times a week (typically a mix of 3-4 times in the gym and football in good weather). Meditation was much harder. After a rules based attempt in mid 2013, I gave meditation up. However, when I worked on my “tracking my purpose” last year, meditation was an important part of what I considered my ideal personal culture. But, as I swear by guidelines these days, I didn’t attempt to force it. As I tracked my progress every week, I just resigned myself to putting in a 0 as my meditation count for the week. And, after 6 straight months of putting in zeros, I abruptly decided to start meditating as soon as I woke up on Monday last week. I logged into my Headspace app and got started again. I’ve been meditating every weekday since.

What changed? I think the fact that I expected meditation to be a part of my personal culture meant I had an subconscious reminder every week. Next, the fact that I didn’t force it meant that it happened out of intrinsic motivation. And, now that it is there, I have no intention of letting it slip. And, even if it does, that’s okay. I’m sleeping, eating, exercising and meditating because I want to. That’s just how I like leading my life. (“This is how we do things here” – is the all powerful statement of culture)

It is that realization that makes a guideline-based culture incredibly powerful. In some ways, the guiding principle of a guideline-based culture is – “I trust you to do the right thing in the long term. And, if you don’t, be kind to yourself and come back and fix it tomorrow”

It is as empowering as it gets.

PS: The MBA Learnings series is an example of a guideline. It is 1 per week. I aim to do it on Wednesdays. But, the one per week guideline is much more important than the Wednesday rule idea.