Companies, globally, claim with pride that they are meritocracies, places where progression is based on performance and not wealth or connections. However, the more I have worked with companies, the more I find that the reasons of advancement in a company extend beyond terms like meritocracy. And this may not be a bad thing.
At the top, when a new chief executive officer (CEO) is appointed, the other internal candidates for CEO leave or are fired. When Jack Welch selected Jeff Immelt to succeed him, Bob Nardelli and Jim McNerney left GE. Other CEOs, who come from outside, often bring in people whom they know, with whom they have chemistry, and who are loyal to them. Outsiders often ask senior people, who must have been strong performers until then, to leave. The ecosystem that the CEO operates under also may create requirements. The CEO may be expected to balance the leadership team across departments, regions, functions, gender, race, age, and length of tenure of individuals. In addition, the CEO may also have personal compulsions and preferences, rewarding and selecting some managers over others who may be more capable, due to their long association and loyalty with the CEO in earlier roles. While there is a lot of talk of pure performance, the fact is that, beyond a point, it is not true.
But it is just not chemistry and loyalty that take precedence over merit in appointments. Companies in different jurisdictions need to respect laws in terms of inclusion and diversity in recruitment and advancement based on considerations of race, gender, colour, caste, religion and nationality. So, leaders in companies can, at best, do constrained optimisation even to comply with the rule of the land they operate in. It is true some table stakes performance is always required of managers. But for real success, other factors often become important. The companies themselves, through their boards, give guidance on the need in their personnel policies to create balance. They may want to balance the preferences, and even biases, of a CEO’s personality and beliefs. This is not always a bad thing and may even be a time horizon thing. It often helps prepare a company for the long run even if it comes with some short-term cost. It’s important, therefore, to break away from simplistic notions of meritocracy. In fact, a growing body of research in psychology and neuroscience suggests that believing in meritocracy makes people more selfish, less self-critical and even more prone to acting in discriminatory ways. This makes “meritocracy” not only wrong, but bad.
{{/usCountry}}But it is just not chemistry and loyalty that take precedence over merit in appointments. Companies in different jurisdictions need to respect laws in terms of inclusion and diversity in recruitment and advancement based on considerations of race, gender, colour, caste, religion and nationality. So, leaders in companies can, at best, do constrained optimisation even to comply with the rule of the land they operate in. It is true some table stakes performance is always required of managers. But for real success, other factors often become important. The companies themselves, through their boards, give guidance on the need in their personnel policies to create balance. They may want to balance the preferences, and even biases, of a CEO’s personality and beliefs. This is not always a bad thing and may even be a time horizon thing. It often helps prepare a company for the long run even if it comes with some short-term cost. It’s important, therefore, to break away from simplistic notions of meritocracy. In fact, a growing body of research in psychology and neuroscience suggests that believing in meritocracy makes people more selfish, less self-critical and even more prone to acting in discriminatory ways. This makes “meritocracy” not only wrong, but bad.
{{/usCountry}}Let me, therefore, identify good and bad reasons for not being meritocratic in a company. Humans have many hidden biases. They often prefer people like themselves and find it easy to work with them. In certain contexts, and up to a certain size and geographic spread, this enhances efficiency. These companies know how to identify people who will succeed, and these people are a good fit for the company. They may be of limited ability in an objective sense, but are contextually suited. Being aware and getting a grip around the constraints will allow managers the ability to make better career choices in these companies. This is the good case for why meritocracies are not really meritocracies.
One group of companies can be exempted from this need, and they are family-owned and managed businesses. The family may have created the business for its family members, and, if they are transparent about this, it is perfectly fair for family members to run these companies.
The bad case for meritocracies not being meritocracies is to do with CEO insecurity — where the CEO prevents the building of a second line, where loyalty is rewarded over performance, where targets are poorly set and board inertia is used to preserve the status quo. Units far from the centre can get away with toxic organisational pathologies for longer. In such situations, people can succeed due to plain luck or being in the right place at the right time when the opportunity came about. In these situations, modern techniques of anonymous 360 degrees feedback, understanding the market context by the board, and being sharp in getting to know the next level and having succession discussions are helpful. It is also helpful to create internal expectations that CEOs don’t stay in position for more than eight to ten years. There should also be rotation in levels below the CEO.
Business managers should, thus, all be alert to their context and take control of their own destiny and not leave it with the human resources departments of their company. Managers need to evaluate their true prospects, evaluate their chemistry with their manager, and be alert to the corridor gossip about senior people’s movement because things can change very fast, and with it, the entire context. Essentially, individual naivety is not a strength and lamenting about being a victim is not a success strategy. Individuals need to always assess their situation and context and then decide whether they have a good chance of advancement. Senior managers need to go beyond the company hype about being a meritocracy and find the firm where they are the right person, at the right time, with the right profile. That is when they fly.
Janmejaya Sinha is chairman, BCG India
The views expressed are personal