“The Way to Win is to Adopt the Mutual Investment Mindset,” Says Reid Hoffman

Exclusive interview with Reid Hoffman, Chairman of LinkedIn and Author of The Alliance: Managing Talent in the Networked Age, by Josh Bersin, Principal and Founder, Bersin by Deloitte.

The Alliance: Managing Talent in the Networked Age is a best-selling new book written by Reid Hoffman (Chairman and Co-Founder of LinkedIn), Ben Casnocha, and Chris Yeh. As co-founder of LinkedIn and a board member of several fast growing Silicon Valley companies, Hoffman has recruited and managed people in one of the most demanding and competitive talent markets in the world.

In August, I sat down and interviewed Reid, and I wanted to share some of his insights from the book in his own personal words..

Josh Bersin: Reid why did you felt compelled to write this book, given your active role at LinkedIn and the venture community? Why do you feel this is such an imperative today?

Reid Hoffman: I was struck by the fact that very few employees feel like they can have an honest career conversation with their managers. They simply don’t have the right language and framework for building a high trust relationship. The book is our attempt to crystallize our own experiences into a practical framework for managers. When honesty and trust prevail at a company, employees will be able to do their best, entrepreneurial work. And we believe the way you get to this point where everyone can work at their highest level is if you define a mutually beneficial, explicit “alliance” with your employees.

Bersin: You talk about the change in employment contract to that of an “alliance” relationship, similar to a sports team. My experience is that people still do want stable employment and a job they feel they can call “home” – what about the people who want that kind of long term career and feel very committed to their companies?

Hoffman: The Alliance is all about building an honest relationship based on mutual trust, mutual investment, and mutual benefit. These principles apply whether the employee expects to stay at a particular company for a couple of years (likely on a Transformational tour of duty), or a couple of decades (what we call a Foundational tour of duty). In the world of sports, some players switch organizations all the time, but others stay with the same club their entire career. Yet even those franchise players don’t sign a single “lifetime” contract when they join the team; they serve multiple tours of duty that span their career on the team, so that both sides consciously re-commit to each other after incremental objectives are met.

The principles behind the Alliance started here in Silicon Valley, but they are spreading into jobs and industries all over the world, wherever employees and companies want to be entrepreneurial and adaptable. The more critical adaptability is in your industry, the more of your employees you will want on defined tours of duty.

Bersin: Your discussion about “tours of duty” is very analogous to what we often call “facilitated talent mobility” in companies. How can a global company implement this kind of model when there are so many options and places someone could go? Who should orchestrate these moves – the manager? HR? And does everyone get to take these tours or only high potentials and high performers?

Hoffman: The key to orchestrating successful tours of duty is the individual manager—that’s where the burden of talent management lies on a day to day basis. Our notion of a “Transformational” tour of duty is that upon completing a mission objective over a realistic period of time (usually 3-5 years), the employee will transform both his career and the company’s growth trajectory. This requires a deep knowledge of the employee’s goals and aspirations, which only his direct manager is likely to possess.

Of course, it is extremely helpful for the manager if HR supports programs to promote the Alliance framework throughout the organization. The Alliance doesn’t replace traditional HR processes, and things like regular check-ins between manager and employee work best when integrated into the existing infrastructure and performance management process. Nonetheless, individual managers can use the Alliance with her employees even if the organization hasn’t yet officially adopted the model.

Historically, most organizations have reserved personalized management like the Alliance for high potentials and entrepreneurial employees. Certainly, that’s the main focus of personalized tour of duty conversations. But we believe the ideal is to roll out a version of this model to employees at all levels.

Bersin: In an organization that implements the “tours of duty” model there will always be internal candidates competing against external candidates. How do we deal with the need for companies to hire outside experts for critical jobs vs. moving internal candidates who may not be as qualified? What is the criteria for external vs. internal or should internal candidates always get the job?

Hoffman: The goal should always be to choose the best candidate for the job. However, most companies and managers underestimate the value of internal candidates and are thus too quick to jump to an external hire. An internal candidate generally brings many subtle strengths to the table that an external candidate simply can’t. Not only does an internal candidate know and thrive in the company’s existing corporate culture, he is likely to have strong connectivity within the organization. Continuity matters—people who have been in a foxhole have the kind of trust and shared experiences that enable rapid decision-making and execution.

Bersin: At LinkedIn you had the opportunity to hire the “best of the best” because the company was growing so fast and the stock was growing. Most companies have a much less consistent level of performance and their employment brand may be weak in many areas, so they often have to hire second or third tier candidates. How does the “Alliance” work when the employer couldn’t get the “very best person?”

Hoffman: Because of all the attention we’ve received recently, people often forget that for much of its existence, LinkedIn wasn’t considered a sexy company. We had to find things other than sex appeal and hype to bring in the best employees.

Studies consistently show that the most important factor in employee happiness is the relationship the employee has with his immediate manager. It doesn’t matter how many perks a company throws at employees or how much the press writes about the business, if your boss treats you badly, you won’t be happy. This gives every company, even those with weak “brands,” a chance to attract great people, as long as you offer the promise of career transformation.

A little-known company with a realistic framework that appeals to entrepreneurial employees is going to be more attractive than a famous company that treats its people like disposable assets.

Conversely, the Alliance is all about bringing in the best person to accomplish a specific mission. It’s not about stockpiling people with attractive resumes. The ex-McKinsey consultant or Harvard Business School graduate isn’t necessarily the best person to accomplish the mission. Managers should focus on finding a person that fits the mission rather than winning a misguided “war” for generic “talent.”

Bersin: Your discussion of the Alumni and Employee Intelligence network is very compelling – but so many companies don’t do this well. What is holding them back and why don’t they do this in a more consistent way?

Hoffman: In a word, fear.

Far too many companies focus on what might go wrong when employees are encouraged to build their external networks, rather than on the value of what will go right. This compliance mentality tries to eliminate downside rather than creating upside. Knowing people who work at other companies—including competitors– is enormously valuable, and are only becoming more so as the world gets more connected.

The irony is that Alumni and Network Intelligence Networking is one of the lowest-cost, highest-return activities a company can undertake! Most of the necessary tools are free.

Bersin: If you could talk with the CEO of IBM, GM, GE, or another very large global company – one which may have hundreds of years of experience and a very complex model for careers and engagement, what would you advise these CEOs? How should they think differently to thrive in the network age?

Hoffman: In the networked age, people—and their networks—are truly your most important asset. The way to win is to adopt the “mutual investment mindset.” Invest in your employees so that they’ll view you as an ally and invest in you. As Jeff Immelt (CEO, GE) told us, “The key to sustained performance is developing competitive leaders in every era. The Alliance captures the essence of modern talent development: trust and mutual value creation helps both employer and employee compete in the marketplace.”

Many of today’s Silicon Valley companies use the Alliance to get the most out of their talent; established companies must do the same to compete in the global marketplace.

Thank you Reid, these are important ideas and tips for organizations everywhere.

This article was written by Josh Bersin from Forbes and was legally licensed through the NewsCred publisher network. Learn more about SmartRecruiters, your workspace to find and hire great people. Photo Credit Wired.