In this podcast Shane Hastie, Lead Editor for Culture & Methods, spoke to Ken Charman of uFlexReward on Fixing Pay Equity, Collaborative Cultures, Devolving Decision Authority to Those Closest to the Work and Disrupting the Enterprise Software Purchasing Process.
Key Takeaways
- Pay equity, inequality and fairness is a vitally important topic for organisations today
- The pay and bonus systems in most organisations mitigate against cross-functionality and collaboration
- In complex environments it’s essentially impossible to measure individual contribution, everyone is dependent on others to be effective
- Establishing and maintaining a collaborative culture is crucial to organisational success
- Decision authority should be in the hands of the people doing the work, with common goals and clear boundaries
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Transcript
Shane Hastie: Hello folks. Before we get into today's podcast, I wanted to share with you the details of our upcoming QCon Plus virtual event taking place this May, 17 to 28. QCon Plus focuses on emerging software trends and practices from the world's most innovative software professionals. All 16 tracks are curated by domain experts to help you focus on the topics that matter right now in software development. Tracks include leading full cycle engineering teams, modern data pipeline, and continuous delivery, workflows, and platforms. You'll learn new ideas and insights from over 80 software practitioners at innovator and early adopter companies. Spaced over two weeks at a few hours per day, experienced technical talks, real time interactive sessions, asynchronous learning, and optional workshops to help you validate your software roadmap. If you're a senior software engineer, architect, or team lead and want to take your technical learning and personal development to a whole new level this year, join us at QCon Plus this May, 17 to 28. Visit qcon.plus for more information.
Shane Hastie: Good day folks. This is Shane Hastie for the InfoQ Engineering Culture podcast. I'm sitting down across the miles with Ken Charman. Ken, you are based in the UK, I'm in New Zealand, so we're at the opposite ends of the day today, and you're with uFlexReward. Welcome. Thanks for taking the time to talk to us.
Ken Charman: Thanks, it's a pleasure. Thanks for inviting me.
Shane Hastie: So who's Ken?
Introduction [01:56]
Ken Charman: Right, first thing's first, then. So I'm Ken Charman. I'm 63 years old, even though I only sounded like I'm in my mid 20s, and I'm an enterprise IT veteran. Been in the trade for 35 years, mainly working in enterprise financial reporting and forecasting systems, so big consolidation systems that sit on top of ERPs. Worked for five startups, had five liquidity events, an IPO, and four trade sales, so on the way, on the journey, sold out to the likes of IBM, Oracle, SunGard, Deloitte. So had a good ride in that and done most of the jobs within an IT business. So done some coding, been a systems manager, development manager, done sales marketing, been a country manager, been a board director. So got a good overview of what we do in our industry.
Ken Charman: I now work at uFlexReward, which is a subsidiary of Unilever, which would be global multinational, and I, for the last year, have been the CEO of a spin-out company, a startup, which is based around an internal enterprise app that Unilever developed. We brought in external professionals to develop it, but we funded it, and now Unilever has gone to market with it. So we set it up as a separate business, it's Unilever owned. I report up to the CFO and the CHRO, they're my project sponsors, CEO backed project. I'm living the dream. We got a new product, it's a new class of system, and behind me, I've got one of the world's most respected global multinationals. Life's pretty good.
Shane Hastie: So this concept of the enterprise startup, why spin off a separate company? Why not just stay inside the big enterprise?
Ken Charman: Pay equity, inequality and fairness is a major issue today
That's a good question. There's so many answers to it. Unilever sets itself out to be at the forefront of ideas and wants to lead by example. And we have Unilever senior C-level people talking at Davos every year, trying to drag the business world into areas where Unilever thinks that's good. It's good for the world, it's good for the public, good for the customers. It was that kind of thinking behind it, which is we've done something really good here, it's helped transform the business, it's really changed the way we look at reward, the way people are paid, the most fundamental part of your contract with your employer. It has made that so much more efficient and Unilever's view is this is big topic. The whole topic of pay equity, inequality, fairness is huge, business is under pressure for it. So Unilever's view on that was we need to share the technology with others, and also these businesses seem to be worth a lot of money if you make a success out of them, so our shareholders will be happy if we create a new business and it creates new value for the company.
Shane Hastie: If we explore their HR pay domain, this has been bread and butter for organizations for many decades. It also, in the knowledge worker space, has been an area of contention. If we take agile approaches as being the most common way of building software today and we're in that software space, one of the things that all of the agile methods and approaches talk about is cross-functional teams and collaboration, supporting each other, and so forth. But then, in most organizations, once a year we stack ranked people against each other and we pay them a bonus based around you were better than you, and then we say, "Go away and collaborate some more." This is fundamentally disconnected and broken.
Ken Charman: Yes, I agree with you.
Shane Hastie: What did you do differently?
Taking a different approach [05:29]
Ken Charman: Well, I'm not having that kind of way of working in uFlexReward, let me tell you that. Even though we're part of Unilever, we spun out so that we can be different, and we've been spun out as a experimental test case. So we're a 10 man, 10 woman, mixture of people, mixture of different backgrounds team, and our job is to manage the product, manage the asset, take it to market, manage suppliers. We got probably a team of about 90 working in software development from our partner, Endava, who are a near source software development shop. Then we manage partners, we manage clients, but that's all done from that 10 person team. Nobody has a job description. We got three levels of pay and it's not performance related. We don't set people targets which are any more than the horizon they can see. We multitask, we multi-hat, we do the things that you would expect within agile culture, and we deliver. We deliver much faster than your average regular project in a big multinational like Unilever.
Ken Charman: And the fact the project was around for about eight years before the spin-out company was developed gave Unilever a chance to see how it was operating internally and see that it was different, and then take the jump to say, "Right, now go and run it like that as a business outside of the framework." In pay terms, we don't have management by objectives, we don't do performance management. You get your money. We all sink or swim according to how happy our client and our shareholders are with the group performance of the team. That's not normal, even in a company as progressive as Unilever. Unilever's trying to become more agile, but we are on the super strength end of it. We do a lot of things differently, and I really agree with you about pay and reward. But let me just say a few things about what reward is, which you're all familiar with. Everybody who's listening knows about reward because they're all consumers. We all get paid.
Components of reward systems [07:16]
Ken Charman: If you look at your paycheck, you will see that it's not one thing. It's your salary. Well, we all know that's run by payroll systems, so that's fairly transactional, easy to define IT. But then there's pensions, which is different for every country that you operate in and varies across the whole spectrum of employees, and grades, and pay. Pensions is a world of complexity on its own. Then you have benefits. So you've got your flexible benefits system. You can get your kindergarten vouchers, you can trade benefits, you can get your car or whatever. So, you've got a suite of benefits that you can adopt. That's a separate system, specialist suppliers and administrators supply those systems. Then you have your performance management, you have your complex incentive schemes. They tend to be run locally, so that's something which will be different in each country, usually following the culture of the country and the local market norms. Then you got your share scheme, share purchase, or longterm incentive share options. And all of that comprises reward.
Measuring individual contribution is a myth [08:18]
Ken Charman: In a company like Unilever, it's the biggest item of expense, six and a half billion euros a year spent on 130,000 employees in 120 countries, and in each country you've got separate systems administrating those separate types of reward. It's so complex. And for you, the employee, or for somebody working in HR or reward to understand how much that person gets versus how much that person gets, and then relate it to what they actually did and what they actually contributed, that's a myth. You can't do it. We have to believe in the myth because performance management and pay by results is something we all want to believe in. I don't believe in it and I think big businesses moving away from it, and certainly Unilever has made some big steps in the last two years to do that. Your bonus is much more on group performance than on individual performance.
Consolidating data from many sources [09:15]
Ken Charman: We're an individualized culture so people want to think if I do something excellent, I get more. And if that person over there isn't as good as me, they should get less. This philosophical subject of how we divide up the cake is growing in importance. It's really becoming a very big blob on the corporate radar, but it's really difficult to manage because of the fragmentation of the data. You can see where I'm going here. Unilever just said, "I'm not happy with extraction of data from different systems consolidated in spreadsheets so I can analyze it," so it decided to build its own consolidation system. There wasn't one on the market. It built a consolidator for all that. And believe me, bringing that to one place in real time, which is what we do, was a mountain to climb in terms of an it project.
IT is ahead of the curve in team-based rewards [09:59]
Ken Charman: It's really, really important to people who work in IT. I think on the development side, we, as a culture in IT, are probably ahead of the herd because I think we do have a slightly more standardized egalitarian view of how we pay people. And that might even mean that we pay people according to their skills and their skills as they are in the spot market for labor. So if you're double delta guru in C#, you're going to earn big money. If you've got something which is less fashionable on your CV, you'll earn less. So we're permanently upgrading our skills in this sector so that we remain marketable and we maintain our income based on what the expectation is that we will deliver as part of teams who work in those areas. That's the long version of how we justify of the subjects of pay, and incentives, and variation, and reward.
Shane Hastie: Another point that you touched on earlier is culture. What does a collaborative culture look like?
Aspects of a collaborative culture [11:01]
Ken Charman: There's two ways of looking at it, there's an internal view of that and there's an external view. Internally, within our organization, it looks like a bunch of people sitting around trying to get something done with no visible divisions between the group and with a capacity within the group for people to hand off work to each other. We have a rule that if you've got a question, if you're stuck, you're allowed to ask anybody in the organization for help, and they must stop what they're doing and help you. It's never abused because we trust in each other and we know that the question won't be asked and it was really important. So there's that openness, there's that willing to share, there's a giving element to it, there's a common knowledge of what the group purpose, the group endeavor of the enterprise is.
Ken Charman: So that, to me, is an enterprise startup style culture of highly motivated people who have a big vision of where they're going to go or working towards a strategic target with a plan in the back of their mind, but willing to be tactical and willing to combine their resources to make the best progress they can in any given unit of time, the day, the week, the year. The measure is how far are we progressing, proceeding towards the target? I was a research fellow in strategy in the Department of War Studies at King's College in London. And of course, everybody has to read their von Moltke, and von Moltke's great phrase is, "No plan survives contact with the enemy”, but that doesn't mean there's no plan.
Ken Charman: So really what Moltke was saying is you have a great big plan, you have a strategic plan, and then behind it, you devolve responsibility down as far in the organization as you can possibly go, and you let people take decisions at that frontline level, but in collaboration with each other in the knowledge that we have a strategic plan. Always refer back to the strategic plan, the strategic direction, but you at your lowest level know the right thing to do in order to move your units, your things towards that common target. I think that's what we try to do with our culture. And we try to do something really huge but with a small number of intelligent, energetic people who've got a passion and a belief in what they do. They love their jobs. I could probably pay them less and they'd still turn up. I must experiment one day.
Shane Hastie: That's inside. What's it look like from outside?
Collaboration across organisations [13:19]
Ken Charman: I would go back to a long while ago, my first job out of university was working at Ford Motor Company at Dagenham, big car plant, as a buyer. And we turned suppliers over, and we fought with them, and we set them against each other. It was a war. You're a buyer, they're a supplier. They're scum, they're low life. Let's get the maximum we can out of every deal. And then a guy called Bill Hayden came back from Japan, who was the manufacturing director of Ford, and he came back from Japan because they were making cars for half the price that Ford were, and Ford needed to find out how to shape up. And he came back from Japan having bought Mazda to learn how to do it the Japanese way. And Hayden introduced the AJ program at Ford in which we went from a 180 on how we work with suppliers. It became a collaboration system. So we shared information, we treated them with respect, we passed on our learning, they passed on their learning. It was amazing. And in a year, really the culture changed.
Ken Charman: And with the whole of the rest of the quality movement, we made huge progress in getting down the unit cost of production on a car. So we collaborate with our suppliers, I would like to think. And so here I am, if you've ever been to London, my office is right next to Bank Station. I look out the window on the Bank of England. It's the heart of the center of London. We're based in a WeWork at Bank. I can walk 20 minutes in one direction, and I can be at Unilever's head office on the Thames embankment, I can walk five minutes in the other direction and I can be at Endava's head office, which is our software developer, they're on Broad Street in London. And I've got an employee pass for all three of those locations, and reception knows me by name in all three of those locations, and when I'm inside all three, I seem like I'm one of them, and it's the same with the rest of my team.
Ken Charman: We identify with the mission and we work with our colleagues. And our colleagues might get paid from a different source and they might be full-time employees of a different organization, but actually we're one. So collaboration for us means there's no division. We have contracts. I prefer to run by the spirit of contract rather than by the letter of contract. Through that, I believe we're much more productive. We work much faster, we work much more efficiently and much more economically than a traditional company, which would be looking to exploit every last feature of a contract in their favor. So actually it's external, everybody would say it's external, but it doesn't feel like it. And the same would apply to our clients. This is something else we're bringing an agile approach to the market.
The dysfunctions inherent in the tender/bid process [15:58]
Ken Charman: If you have CTOs in large companies, multinational companies listening, they'll know that in selection of enterprise software, it's a very conflicted and complicated process where clients issue an [ITT 00:16:12], suppliers trying to pretend that they can do everything in the ITT, both sides withholding information. The bid is really intended to put pressure on price, so quite often clients low ball, and then they exaggerate how quickly the system will go in, and then lo and behold, you make your choice, and a year later, when you thought your product would be up and running, it's not, and you're overspent, and we got all that pistols at dawn on the contract. That's the norm. I work for a consumer goods company which is getting into IT, so the question that I get asked by CTOs is, "Why should I buy enterprise IT from an ice cream company when the real enterprise IT companies don't have a great track record of delivering on time and on budget?"
Why an ice-cream company can supply enterprise software - collaboration [16:56]
Ken Charman: We deal with that upfront by saying, "We're super quick to implement. We use the agile methodology. Our process is that you start the project, and we will implement and get you to an MVP point so that you've got a full working version of the system. You saw what effort was required to build the system. You can measure benefits on the MVP that you've got." Fortunately, the way we work is that the system is installed country by country in global multinationals, so I can say, "Give me your most complex country. We'll build the system. Then you say how long it took, you see what the benefits are. And then if you want to go ahead, you can. We'll fund that whole MVP and you get to see everything. You see how we work, you see what the product's like, you see its performance, its reliability, and your business case is then based on evidence. So if you don't want it, don't do it. In fact, if we think there's no benefit for you, we don't want you to do it."
Ken Charman: That completely open way of dealing with a client is also a form of collaboration. It turns the whole social process of contracting with a supplier on its head. If you've got all the information you need, then you're secure in the decision you're about to take. I can't think of any other software company that's doing that. You could say well, you've been forced into it because nobody would buy it from an ice cream company otherwise, but I also think we're doing it because we believe in the movement. We really do believe that there are multiplier effects on benefits by both sides feeling secure and open in their cooperation and collaboration with each other. Project goes better because the pressure's off, and then that develops an energy and we get better result.
Shane Hastie: This to me makes logical sense, but you're saying, quite honestly, that nobody else is doing it. Why not? What is preventing us as an industry from taking on these ways of working? Because these ideas are not fundamentally new.
Challenges to collaboration in software sourcing – everybody’s lying [18:51]
Ken Charman: So I've knocked around industry for a long while, and I've worked in startups where in startups, you're a bit more like that because you've got to get your first client, you got to get your first five, you've got to get your reference sites. So you're much more amenable to flexible way of working with clients in a startup, but once you're established and once you've got the professional investors in, even more the case, once you've sold out to one of the big tech stack companies, then the pressure is on you to deliver one thing for a software company, it's deliver revenue. Software companies are valued on a multiple of revenue and valued on growth. The way the industry is set up is to shorten the sales cycle and maximize the sales conversion rate. So good people who look after their children and pets become evil in that environment, so they are prone to thinking well, if everybody else is exaggerating, I'm going to exaggerate, or if every other supplier out there is low balling with me, then I'm going to build an even bigger contracts with penalties for failure to protect my risk.
Ken Charman: I think the actual system is set up to fail, but what's happened is we've all grown used to it. Behind me on a bookshelf, there's a shelf there which is about lying. Sissela Bok, the famous Harvard philosopher, wrote the definitive book on lying. It tells you every different type of lie. You think oh well, we shouldn't lie, should we? We tell children not to lie, but we all lie. It's part of human social interaction, lying. So what is the big lie in the software sector? And we'll get onto internal lies on projects, I hope, because I think there are ways we can grow out of it, grow up and grow out of it. But the big lie in the software sector is based on the same theory that you get when you're buying a second car or when you're lying in diplomacy, which is everyone's lying. So the background to it is if everybody's lying, then buyers and suppliers, you will take it into account.
Ken Charman: So if you use heuristics to think well I know they don't really mean it, so I've got the price, I know what the timetable is going to be, without telling them, I'm going to add 50% onto my budget and I'm going to tell the powers that be above this is probably going to come in six months later, but we got the tiger target, maybe it'll be earlier. So you compensate for it rather than all get together and think well, perhaps we should all tell the truth. Well, what would happen if we all told the truth? Well, then the best product would always win, wouldn't it? So there'd only be one supplier in the marketplace. That's rubbish, because the best product is different in different markets. Here's something that I like to tell CTOs in big companies, which is don't spend 18 months trying to find what the best ERP or HR information system is. Don't waste 18 months thinking you can tell the difference between Workday, Oracle, SAP, whoever it is out there, because they all work. You can't choose one that doesn't work. They're all going to work.
Ken Charman: They're all going to be trouble to put in, but they're all going to work, so you can't fail. Stick a pin in, you'll choose something that's going to work. And whoever's ahead in technology now, they might not be in three years time or five years time, so judging on what they've got today doesn't tell you about the future. They will all more or less keep up. There's so few of them now, they're all going to more or less be more or less the same. So choose one, but choose one where the supplier relationship is something you're confident in. So choose one where you feel your team can work with their team and where culturally you've got this open, mutual support thing going. That to me is a bigger factor in selection these days than the technical evaluation. It's how are you lot going to behave when we're working on a project? And of course, everybody's going to say, "Oh, well, we use agile now," but here's another one for you, Shane. Unilever had to completely redevelop this system that we've got now.
Ken Charman: In 2018, the early version of the product had been working really well, and then Unilever came along, CHRO came along and said, "Want to do the Future of Work." What's the Future of Work then? Well, Future of Work is we don't have grading hierarchies, we don't have rigid job definitions. Everything is based on skills, all contracts are based on negotiations and personal agreements with individuals. So that's the Future of Work. Look it up. That's the Future of Work. All HR, CHROs, they all want to do this now, not across the whole organization, but they want this as well. And you look at it and say well, that's not how the database is designed. We need grades. We need hierarchy. We're going to have to redesign it. So the product took five years to build. We couldn't see anything on the market. We had to come up with a new plan. We needed it in a year. We long-listed 60 suppliers, we shortlisted to 10, we got the 10 to come and make a pitch to Unilever.
A different approach to contract software development [23:44]
Ken Charman: We had senior people from BP and Saint-Gobain in our selection panel when they were making their pitch of how they were going to do it. We shortlisted to three and then we funded all three to get as far as they could through three sprints. But it was how far are you going to get through three sprints? But we allowed them to do four weeks instead of two. And then we had a chance to work with them every day. They couldn't pull the sales veil over us, we saw how they worked and how they operated. And we had a chance to see who was really agile, and who was just using the terms and going through the motions. And the winner was the one who got the furthest ahead. And the one who got the furthest head was the one that really was ... Endava was the one which really had the deepest, most effective agile culture. But that was new. So in terms of our selection, we paid people to sell to us. And two of them went away with some money, unhappy.
Ken Charman: But at least it was a sales process where their effort was part funded. And one got a really good deal and didn't let us down. Sure enough, within a year we had the first version of the product released to HR, and five months later we released globally. So we were confident by then that they could deliver. They were hitting their markers. They were good. So concerns of enterprise, IT, enterprise culture, big companies can do it but they struggle with the cultural side of it. And in terms of the IT relationship, collaboration with suppliers, we can solve the problem of repeated project failure if we take a different approach, if we become more collaborative, we do more research before we make a decision, and we base our targets, we base our plans on evidence, and we don't set rigid delivery dates or rigid budgets, we set spreads. Work to spreads, don't work to that I'm going to stand up on a stage and cut the ribbon on this date mentality, which big people in big organizations like to do, and then try and force the organization to live up to their rhetoric.
Shane Hastie: Ken, thank you very much. Some really interesting concepts and ideas here. If people in the audience want to continue the conversation, where do they find you?
Ken Charman: Well, uflexreward.com. And I don't know if you publish material which goes alongside the podcast. I sent you some slides on how to avoid IT disaster. These are internal working slides from Unilever which date back to 2012. Now, I know you've got a much longer background and history in agile than I have, Shane, but we were pretty early with it in Unilever. In 2012, if you're not doing prints, you're not coming in. It was still in that phase. But the slides, I think anyone in IT would be interested to cast their eyes over. It's the internal presentation that I had to make to the C levels at Unilever on why this project was different. So you can have a look at that, lot of the ideas are in there, but anybody who wants to contact us or me, hit the website, leave a message. We will definitely be back to you.
Shane Hastie: Ken, thank you very much, indeed.
Ken Charman: Well, thank you, Shane. It's been great fun.
