Technology is allowing a degree of sharing so large that new mediums of communication are creating a cascade of new engagements. As a result, we are entering a new era where solutions to market problems can be optimized by tapping into spare capacity held by individuals distributed in the community. Several monikers and catch phrases are used to help describe this new era: Shared Economy, Web 2.0, Crowdsourcing, Cognitive Surplus, Collaborative Consumption, App Economy, or Gamification. Welcome to the rise of the platformed business model to solve market problems!
In human services, adopting a platformed business model to place ability at best-fit can reinforce the career development paradigms of vocational guidance, career education, and life design. However, leaders in this space must accept that a fourth closely aligned paradigm is needed to subsidize development. I call it placement liquidity. I believe that best-fit is achieved by utilizing these four paradigms:
- Placement liquidity that views talent seekers and candidates as principals (i.e. buyers and sellers) in a transaction who may be characterized by willingness and compromise and who may be helped by participating in efficient marketplaces to eliminate pain points quickly.
- Vocational guidance that views principals as actors who may be characterized by individual differences, styles, and scores on personality traits and who may be helped by matching for resemblance to identify occupational fit.
- Career education that views principals as agents who may be characterized by individual development and readiness to make decisions appropriate to stages and who may be helped by implementing new attitudes, beliefs, and competencies to foster individual development.
- Life design that views principals as authors who may be characterized by autobiographical stories and who may be helped by reflecting on themes to construct a satisfying and productive life.
Depending on talent seeker and candidate constraints however, assistance may apply interventions that reflect any one of the different paradigms.
Most importantly, solution providers (professionals and academics included) must be aware that the market will not benefit from any solution unless it is built on a viable and sustainable business model to deliver the value proposition. As such, we shouldn’t forget the adage: “Businesses don’t fail, business models fail”.
What do you think needs to happen to see the improvements we are looking for?
My previous posts titled Evaluating Placement Information (Parts 1 – 3) prompted a request for me to read an article by Don Fornes, CEO of Software Advice which sponsors The New Talent Times blog. I was asked by Software Advice to opine on the article.
The article, titled “The Psychological Profiles of the Dream Team”, was published on BusinessInsider and refers to a commissioned project by Mr. Fornes to analyze the high-performers at his company, to see what drives and motivates them. The research concluded with four distinct personality profiles which describes what makes their top players tick, the management style they respond best to, and how to identify and hire more people like them.
The following is my opinion about the problem the article addresses but in a more expansive view.
First, let’s define the problem. The problem is that an increasing number of people in the world are miserable, hopeless, suffering, and unhappy because they don’t have a good job—one that is a best-fit. The United States is no exception and, in fact, may be the poster child for workplace unhappiness.
Second, in almost all the content relating to ability placement there always seems to be an embedded assumption that we need to rely on the enterprise to make improvements. What if that assumption is wrong? What if the future of work is more about coordinating distributed work activity versus aggregated? Then, as solution providers, I think we need to design for the individual as a work network node, rather than designing for the enterprise as the work center, to realize the improvements we are looking for.
Third, we can look at the financial services industry for an analog to better understand how psychological profiles are used to help place capital at best-fit. After all ability is human capital. My experience tells me that psychological profiling of investors to facilitate the placement of financial capital at best-fit is more art than science. This is because the ongoing decision-making environment is extremely dynamic with very many variables. More specifically, in this space, best-fit knowledge may depend on tacit information held by individuals, distributed in a community network. If you accept this as a constraint and embrace it as such then you’ll be able to see the futility of trying to optimize the art of placing capital at best-fit.
So, in my opinion, psychological profiles can not be relied upon with a high degree of confidence to complete the job-to-be-done successfully. This is not to say that they are not an improvement but rather should be viewed as a sustaining innovation. It is my belief that to make the improvements we are looking for we need disruptive innovation.
Skillfully evaluating information to place ability at best-fit will tend to have three parts: analysis, psychology, and constraints. Accommodating any one of these in a placement process isn’t easy. Being good at all three is rare. Let’s look at the constraints part below and tie up this series of posts.
The third part of a skillful evaluation addresses constraints. The most important job for principals (i.e. the talent seekers and candidates) here is to manage recruitment risks, or the risks that arise because agent-actors (i.e. placement facilitators) may have interests that differ from those of principals. For example, placement facilitators who are fully paid or credited as of a candidate’s hire date may unwittingly employ conservative strategies associated with top-down recruiting initiatives versus understanding the true growth opportunities represented by the relevant edges of recruiting. More to the point, they might, aggressively market candidates who behave similar to a stereotyped benchmark.
I make this point by distinguishing between the profession and business of agency. The profession is about recruiting talent so as to maximize long-term returns, while the business of recruiting or agency is about earning rewards in the short-term. Naturally, current viability is essential to support the profession. But when a placement facilitator emphasizes the business at the expense of the profession, principals are not best served. Rather, facilitators should concentrate on helping principals find matches that provide sensible balance, relevant diversity, and are under priced. This requires going against the consensus and being willing to appear very different from the pack.
John Maynard Keynes, the renowned economist and investor, wrote about this in The General Theory of Employment, Interest, and Money, published in 1936. He discusses the conduct of a long-term investor: “For it is in the essence of his behavior that he should be eccentric, unconventional and rash in the eyes of the average opinion. If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy. Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
As Keynes suggests, the risk of losing credibility as a placement facilitator for straying too far from convention is important. As a result, facilitators will often strive to be different enough to succeed but not so different as to be considered unconventional. The reason is that they are often inappropriately judged by short-term performance. Likewise, a principal who makes a conventional decision that turns out to be wrong can fall back on the argument that the decision process was usual, even if uninspired, and hence the outcome was based on something unavoidable. A principal who makes a correct but unconventional decision that ends badly is exposed to criticism and the risk of losing credibility.
In hiring, the trend toward conformity is clear. It seems to me that workforces today look more like their stereotyped benchmarks than they did thirty years ago. Just as we see in investment portfolios the measure of how different a mutual fund portfolio is compared to its benchmark, has fallen from 75 percent in 1980 to about 60 percent in 2010 in the United States. Too many leaders in ability placement markets as well as in business fear straying too far from convention, even in cases where the convention isn’t all that great.
Because all three parts to skillfully evaluate placement information are difficult, they stand in the way of great long-term performance. Some can succeed in one or two of those areas, but very few can master all three. This fits with the conclusion of an analysis of skill and luck in hiring: only a handful can surmount the analytical, psychological, and constraint obstacles. The same is true in financial investing which provides an excellent analog to learn from.
Skillfully evaluating information relating to the best-fit placement of ability will tend to have three parts: analysis, psychology, and constraints exerted by principals (i.e. talent seekers and candidates). Accommodating any one of these in a placement process isn’t easy. Being good at all three is rare. Let’s look at the psychology part below.
The second part of a skillful evaluation is psychological. This part deals with talent seeker and candidate biases. These include over confidence, anchoring, confirmation, and relying on what is most recent. These biases arise automatically and are therefore very difficult to overcome by primary placement participants or secondary participants known as influential others. For example, when making a prediction, people tend to give disproportionate weight to whatever they have experienced most recently. In hiring, there is a strong tendency to choose talent seekers or candidates which have done well recently, those that seem to have a hot hand.
Also, how people make decisions when they are uncertain about gains and losses is at odds with classical economic theory. Because good placement process decisions can have bad outcomes, not everyone has a temperament that is well suited to making decisions about activities that involve luck. This emphasizes the importance of being willing to go against the crowd. Most agent-actors (i.e. placement facilitators) know that it is more comfortable to be part of the crowd than to be alone. But it’s also hard to distinguish yourself if you’re doing the same thing as everyone else. Skillful investors, for example, heed Benjamin Graham’s advice: “Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it—even though others may hesitate or differ.” However, it is insufficient to be a contrarian because sometimes the consensus is right. The goal is to be a contrarian when it allows you to gain an edge, and the calculator helps you ensure a margin of safety.
We’ll get into the constraints (Part 3 of 3) in the next post.
Do you think there are similarities between evaluating a person’s ability and evaluating a stock?
Skillfully evaluating information relating to the best-fit placement of ability will tend to have three parts: analysis, psychology, and constraints exerted by principals (i.e. talent seekers and candidates). Accommodating any one of these in a placement process isn’t easy. Being good at all three is rare. Let’s look at each part below.
Before we begin however, let’s review the placement process in total which is as follows:
- Aggregation of intents
- Filtration of preferences
- Introduction of principals
- Prediction via evaluation
- Commitment execution
Although we view process sequentially, in reality our experience is palindromic in that a principal or agent-actor (i.e. placement facilitator) can enter the process at any point and proceed any way. This post deals with #4 of the placement process.
Let’s get to it!
To begin the analysis, the real causes of best-fit need to be identified. Success factors include supply and demand and outcomes. For this purpose, data can provide insight to how markets and their participants actually look. So if there’s a discrepancy between what a person’s ability ought to be valued at and what they are currently valued at, placement facilitators need to develop a theory about why value and pay have diverged. What’s going on that’s causing the gap? The analytical edge is embodied in the theory of what determines the fundamentals and why the ability is misvalued or misplaced.
The edge should also include what Benjamin Graham, the father of security analysis, called a margin of safety. You have a margin of safety when you buy a stock at a price that is substantially less than its value. As Graham noted, the margin of safety “is available for absorbing the effect of miscalculations or worse than average luck.” The size of the gap between value and pay tells you how big your margin of safety is. As Graham says, the margin of safety goes down as the price goes up. In other words, make your margin of safety as large as possible without losing attractiveness.
We’ll get into the Psychology (Part 2 of 3) in the next post.
Do you think it’s possible to value ability similar to how a stock is valued?
Recently, I read Amit Mrig’s (President of Academic Impressions) white paper titled “The Other Higher-Ed Bubble” in which he describes a “denial bubble” in academic leadership. Specifically, he outlines and describes four assumptions that are “rooted in past practices and experiences, that no longer hold true and that often hold leaders back from taking a new and different approach” to meet current challenges facing the industry. He makes the point that these are “false-assumptions” now, in today’s environment, in addition to a popular understanding of a financial bubble for the middle tier of educational institutions. This is really a good white paper as a call to action for higher ed leadership but it doesn’t go far enough in opening up eyes to the industry’s most harmful embedded assumption relating to why the market (i.e. the consumer) is interested in paying money to attend higher ed institutions in the first place.
Also, I read an article at Forbes by John Tamny in which he writes that there is not a higher ed financial bubble because parents and students have always and will always pay up for the experience (e.g. career networking) that college provides. In fact, he writes that employers don’t really care about the knowledge learned by the student, at say Yale or Stanford, but rather use attendance at prestigious schools as a signal that the student “is smart, probably hard working for having been accepted, and in possession of [attributes], that the individual can likely learn the skills necessary to achieve on the job”. After reading this article the reader is left thinking about the motivations, quality of education, and price sensitivity of higher ed market participants affiliated with non-prestigious schools.
Is it not obvious that a student’s greatest pain point relates to placing his/her ability at best-fit and at best-price of process? Is it not obvious that education, career guidance, and life-design are merely key activities in support of placement at best-fit? And reducing friction* is critical to best-price of placement process?
As a Global Career Development Facilitator and startup entrepreneur in this space what is particularly interesting to me is that both authors can relate to the challenges facing higher ed today but each misses the deeper critical problem in the industry. Amit sheds light on baked-in assumptions that he feels need to be questioned and John sheds light on bottom-line motivation from the market’s perspective, albeit at the top-end of the market. However, each author seems to miss the critical baked-in assumption and bottom-line motivation that applies to the mass market, the long-tail of the market.
Any business model that is interested in viability and sustainability needs to get as close to the solution provider (or be the solution provider) who is reducing or eliminating the market’s greatest pain point more efficiently and effectively than competing alternatives. The sin of higher education business models is a failure to design for or very closely around placement of ability at best-fit and at best-price of process. I can not identify one business model in higher education that even attempts, none-the-less succeeds, to design for such.
As a result, the disruption we are witnessing today in higher ed is just the beginning. The disruption will destroy every higher ed business model including online education models that do not focus on placement at best-fit at best-price for the mass market. The reason the prestigious school’s business model will eventually be destroyed as well is because the solution provider successfully serving the mass market will eventually have access to cheaper capital to create solutions to satisfy the top-end of the market at a lower cost. I think that ALL (save for niche ability development) higher ed business models that do not reconstruct their value proposition to deliver placement at best-fit are going to fail because that is the greatest pain point in the mass market.
Frustratingly, most leaders don’t care enough to reconstruct the higher ed business model today. I believe it is because they are towards the end of their careers and they know how slow change occurs in higher ed. So, the vast majority of leaders are less inclined to support risks associated with reconstructing the value proposition. However, the disruption being leveled from the “outside” will continue in the interim and the harm to younger higher ed stakeholders will be greater as a result of the lack of current leadership to reconstruct today.
Personally, I think that the higher ed industry will be viewed twenty years from now as the greatest mechanism ever to aggregate ability but failed at designing a viable and sustainable business model because it thought its core sustainable deliverable was academic credential rather than placement at best-fit.
For further reading on how leadership in higher ed may be screwing up a great business opportunity similar to how the music industry leadership screwed up in the face of innovation read Clay Shirky’s prior blog post titled, “Napster, Udacity, and the Academy“.
What do you think?
* Friction is everything that slows down making better placement decisions quicker. Examples of “hard” friction include voice mail, phone tag, text tag and travel. And then there’s email which is the worst collaboration tool ever used on a wide scale! Examples of “soft” friction include the lack of transparency, relevant content, knowledge, and intelligence. All friction inhibits getting through a placement process efficiently (speed/cost) and effectively (accuracy).