Speaker A In the course of our conversation, I stayed overnight at a friend's house and we went out to dinner and talked again the next day and we began to strike up conversations and correspondence. And then he came down to stay with us in our house for a weekend and we got into a lot of talk because at that point he had just written The Social Power of the CEO. And he was very adamant about the power that people lived and worked in companies most of their lives. That's where you made your living. That's where you had as a CEO huge impact on people's quality of life. He was also way down on what people were being taught in business schools. He thought that they had been taught a culture of hooray for me, hooray for the company, that they were not taught trust inducing behaviors, that they were actually dangerous to the health of the American corporations and that there was a definite lack in curriculum, that they weren't really being taught the principles of management. And when we talked and he also came up with the idea of that was a real sticking point with me is how do you assess somebody's performance and then how do you pay them and what's the basis and what's fair and how do you do it systematically? And like Deming, who when we basically bought into his philosophy, we had all kinds of incentive systems and trust me, I've tried every financial incentive system known in the literature and we've thrown them all out. Because if you have people would like to share, we have profit share. In other words, if the company's doing well, we will share that with them. What Elliot said was, here's a simple way to assess somebody. Remember, there is no system. It all comes down to personal judgment as to the performance of the person and the conditions under which they had to work. And you can never get away from that. So ask this question, and this was what if you ask, well if of all the people that you could get to do this job, are they in the top or bottom half of the group? And I said well they're in the top half and well they're in the top third. Middle third or bottom third? Well, middle third. And he said See how easy that was? He said now you ask the person that you're talking about the same question, 1.9 correlation, they'll give you the same answer. I said really? Yeah, people know. People know. They sell success. They know how good they are. And if, let's say somebody is in the bottom half and the lower third, they know that they're not doing the job and they're wondering when they're going to be found out and therefore they're wondering when the axe is going to fall because they know. They're wondering why you don't know. And the fact is you do know. But you don't have a framework for taking action. So we did this exercise and we listed all the supervisor people and staff people, and my top management team. We went down, took us 40 minutes, and we rated everybody in that list, all 60 of them, and we said, okay, let's get that verified by some supervision and personnel and to see what their direct supervisors, how they would rate with that question, and came back, well, sure enough, there were some anomalies, but generally it was pretty much agreement. So then we looked down the list. We had twelve people that were in the bottom half and the bottom third and middle third. And my question was, why are they here? And everybody looked and said, well, that's a difficult question to answer. That was answered within six months, because within six months, ten of the twelve were gone. Not because they were fired, it's because the supervisors were forced to recognize that they weren't doing the job. And the fact that you told them, the person themselves knows it, it's not a secret to the person. They will be secret relieved. And you said, you know, you're not doing the job, you might be happy you're doing something else. And some of them were removed out of those jobs into other jobs, and then we're a lot happier. But those are the kind of simple insights. And even if you took the system in fragments, you can disregard what I said about using the whole system. The fact is you will find that different ideas within a system have a tremendous effect, so that now you can do more detailed assessments. But under the Jake system, you've had very detailed task assignments and so you now can have a much better way of judging. If you've done the task assignment properly, then you have a much better ability to assess somebody's performance because of being exposed to the idea of levels of management in terms of time frame, the 12345, and the type of thinking that had to go on and assessing people. In that vein, you began to look at people differently, and you began to look at hiring people differently. And over the years we had always seen our way was we had hired three or four young engineers straight out of school and gave them their first work experience, and then maybe two or three, four years, they would go off, which they should do, they need to have more exposure. And we would try to keep and hold on to the ones that we liked and also the ones that were here went on somewhere else. We try to keep in touch with them because at some point you'd like to have them back. And it gave us a good sound way of measuring, of knowing who we wanted. And there are a lot of companies, and this isn't new news, a lot of people say, well, we already know that. You try to look at their track record and academic record and there are different parts and yes, that's all true, but the Jakes puts it into a system that you can understand it and that you can use the framework to make much better judgments about human performance. And the other thing is, when you look at his pay matrix, we then took our chart and how we had people graded, and then we put that against his chart, which I can put it on a spreadsheet. And then we could see who was not paid enough and who was paid too much. And it gave us an idea, well, if it's a disparity, why was it? And sure enough, when we asked that question, the person was either underpaid, we moved them up, and the ones who were overpaid, we began to freeze a little bit. But it helped gave us a framework for putting everything into what we considered this felt fair pay framework. It was a godsend because there was really nothing else out there except local surveys or the job usually pays this or the market pays that. And as it turns out, people know what they're worth. People are recruiting in where they have an idea. So we say, well, what do you think you ought to be paid? Well, okay, well, if it's within the framework, if their number comes way out of the framework, well, then we need to discuss like, oh, you're not worth $160,000 a year, or like maybe 100. What's in your thinking? So it gives you a framework and a reference. And if it's within that range, there should not be very little discussion because if you don't pay people what they think they're worth, then they're going to leave and cuts it's.
