1. I will be talking about poker today as part of a larger discussion on water level. Just skip the next paragraph if you have no interest in poker or its jargon. I am a lousy poker player. 1
I like to chase flushes and outside straight draws even when I don’t have the pot odds to justify either, and I like to raise out of position with junk cards (think 3/8 off suit) on the off chance that I get a few callers and make a great hand on the flop. I often convince myself that the fold equity on raising with these hands is great enough to offset the overwhelming likelihood that they can’t win a showdown, but having looked at my outcomes playing these hands over the long term (reviewing hand histories is a must if you want to make any money playing poker) they are losing money propositions.
With that said, for much of my life I have been a winning money poker player. I covered the cost of much of my 1st semester in grad school playing the game, 2. Spending 30+ hours a week playing poker my first semester in business school came with some cost academically. I was ultimately faced with the choice of committing to school full time or committing to poker full time. I actually (seriously) considered dropping out of school to play poker. In hindsight I’m glad I didn’t… the ROIC over the long term wouldn’t have been there. …This is a fun story for another day.and would like to think I could have made even more if I hadn’t had to quit. 2
Again though… as I said I am not very good player. I wasn’t even very good when I was making money playing. Instead, I benefited from being in the small minority of online players at the time who understood basic probability, had the patience to play (mostly) the right way over thousands of hands, and had the discipline to consistently analyze hand histories to get better.
This brings me to water level – which is a topic I’ve been meaning to tackle for a while (I very briefly talked about it a while back).
3. Perhaps most of all in his book “The Signal and the Noise: Why So Many Predictions Fail-but Some Don’t.”Nate Silver talks about water level a lot 3, but the basic principle is that if you’re good at something that adds value in a space that most people haven’t identified yet then there is a huge opportunity to make money by carving out a market niche.
Put another way: A mathematician/statistician might do very well for himself in Finance/Trading/Data Science, but he/she will do even better by identifying a space where his/her skills 4. To this point, when HR figures out the value of the data they have at their fingertips (and how to analyze it) the level of value the function provides to the business is going to increase dramatically.add tremendous value but aren’t widely utilized. 4
This brings me to HR – and specifically who we should be recruiting into it.
Marissa Mayer piqued my interest a few months back when she selected her CHRO from the ranks of a private equity firm. I thought this was a good move since it brought someone with a strong business background into a function that historically hasn’t had much of it. The water level was low.
To be fair, bringing a non-HR person into HR isn’t an exceptionally novel idea. Companies often select their CHRO/SVP of HR from within a business unit/more quant heavy space (as opposed to hiring a lifelong HR person) and surround that person with HR subject matter experts to compensate for the CHRO’s lack of HR background.
Larger point: HR has long been a no man’s land in many respects. The people that join the function either fall into it, or else they enter the function by choice and have very “HR” skills (i.e. they’re good with people/are extroverts, and are competent at developing work/process flows to complete critical transactional/administrative tasks).
I’m of the thinking that the function would benefit from an infusion of talent from quantitative heavy support functions (finance/accounting/risk etc.) or the commercial/operations sides of their respective businesses.
The challenge comes in developing a comp structure that attracts that talent into HR. If an organization only pays an employee based on the role that they’re in (as opposed to the potential value they bring to the table) then it’s tough to attract cross-functional talent into the HR space (HR often isn’t as well compensated as other support functions – let alone commercial and operations groups).
…It’s also worth noting that to say “Non-HR people should lead HR” is to trivialize the depth of subject matter expertise that lifelong HR professionals bring to the table. A better option might be to cross train a certain percentage of the HR population in key business roles over time, making them more valuable contributors as they continue to climb the ranks internally.
Of course, I don’t have all the answers here.
What do you think?
Please share your thoughts below.
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