The Science of Fit

Using Psychology to Replicate High Performance

Josh Bersin,
Principal Analyst

June 2011

BERSIN & A SSOCIATES RESEA RCH REPORT | v. 1. 0

The Science of Fit

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The Science of Fit

TABLE OF CONTENTS
Introduction The Biggest Challenge in Management: Replicating High Performance Implementing the Science and Strategy of Fit Focus on Fit Drives Market Share Growth at Vodafone Focus on Fit Drives Dramatic Improvement in Sales at Bon-Ton Stores Focus on Fit Drives Growth at Regeneron How to Apply the Science and Strategy of Fit Conclusion Appendix I: Case in Point Appendix II: Case in Point Appendix III: Case in Point Appendix IV: Case in Point Appendix V: Table of Figures 4 6 8 11 13 15 17 18 19 22 24 26 28

About Us About This Research

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The Science of Fit

Introduction
The business world is undergoing rapid change. Globalization, shortened product cycles, new technologies, and the recovering economy have created new business challenges. What is the key to creating an enduring, globalized, high-performing business? The answer lies in people. While executives know that innovation, product leadership, and customer service are keys to success, they also know that without the right people, none of these strategies can succeed. Our research on leadership and talent management proves this. During the last three years, organizations which rate among the 10 percent in talent management significantly outperformed their peers. These people-focused businesses generated 26 percent more revenue per employee, had 40 percent lower turnover rates, and were 24 percent less likely to have had layoffs during the last recession1. We also know that these high-performing companies are filled with people who are passionate, productive and highly engaged2. Kenexa, a global provider of business solutions for human resources, found that organizations that rank in the top 25 percent in employee engagement achieve earnings per share almost 2.5 times higher than average3. There is a magic element to business success and it revolves around how we manage people. What are the keys to this people-driven success? Traditionally managers have been taught that people performance is driven by the performance management process: create a vision, develop goals, align people toward these goals, and hold them accountable. Fortune 100 companies, like bellwethers GE, IBM and others, have promoted this process for years, and innumerable authors and consultants have written books and articles about the need for strong performance management, the need to differentiate people, and the need to provide coaching and development to employees. Those activities are indeed important. But our research shows that peak-performing companies go much further. They do not only practice great management; they have learned how to make great hiring decisions for the business and for each individual role.
1 For more information, Talent Management Factbook 2010: Best Practices and Benchmarks in U.S. Talent Management,

Bersin & Associates / Karen OLeonard and Stacey Harris, September 2010. Available to research members at www.bersin.com/ library or for purchase at www.bersin.com/tmfactbook. 2 Employee engagement refers to an employees job satisfaction, loyalty and inclination to expend discretionary effort toward organizational goals. Companies typically measure engagement through an annual employee survey. Kenexa, a leading provider of engagement research and services, has developed a global database of engagement factors and helps companies to implement rigorous engagement measurement programs to identify weaknesses in management, leadership, business processes and culture. Many other consulting firms also offer various types of engagement surveys, and many companies do this themselves. 3 Kenexa WorkTrends Annual Report, 2008.

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The Science of Fit

These peak-performing companies, such as Google, Apple, Zappos, and Amazon.com, outdistance their competition by understanding how to select and promote the right people. They have identified the personality types and traits that reinforce their business proposition and culture, largely by studying the characteristics of high performers. They focus on who they hire, not just what people do and build tools and systems to help managers and leaders assess and attract the right type of people into each particular job. The implement something we explore in this research: the science and strategy of fit.

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The Science of Fit

The Biggest Challenge in Management: Replicating High Performance

Successful business leaders know that a small percentage of people typically drive a large percentage of company value. Bill Gates, founder of Microsoft, once stated that if he had lost the top five performers in the company, Microsoft would never have become the company it is today. In sales organizations it is common for the top 10 percent of performers to generate 30-50 percent or more of the revenue. In software engineering, the top programmers often write 10 times the code as average performers. In customer service there are individuals who are loved by clients, while others struggle with the job. We all recognize these top performers when we see them. The challenge is how we replicate this success. How do we bring the rest of the team up to this level of peak performance?

Figure 1: The Distribution of High Performers in an Organization

Distribution of High-Performers
Peak Performers Top 10% who Generate 80% of Value
Individual Job Performance

How do we create more of these top 10%? Low Performers Those who must be developed, moved, or asked to leave Mid-Level Performers Keeping the Business Running

Number of People

Source: Bersin & Associates, 2011.

Our research shows that most managers are not trained or equipped to meet this critical challenge4. They understand the principles of performance management and are armed with tools to help them set goals and evaluate people, but they do not understand how to build world-class teams.

TalentWatch Q1 2011, organizations rate first line and mid-level management readiness as the weakest part of their

organizational readiness. Only 30% of organizations rated their first-line or mid-level leadership as fully ready or excellent. (insert link)

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The Science of Fit

The science and strategy of fit can help. By applying the principles that we will explain in this report, any organization can replicate high performance, driving tremendous increases in customer loyalty, revenue, market share and profitability.

The Main Idea: Hundreds of books have been written on the importance of traditional performance management creating a top-level strategy, setting goals, measuring progress against those goals, identifying high performers and weeding out low performers. Those activities are important. But many top companies are discovering a lesser known and yet highly effective means of creating a high-performing organization: applying the science and strategy of fit. e

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Implementing the Science and Strategy of Fit

Our research shows that implementing the science and strategy of fit has four steps: 1. Clearly identify the top performers in a role or business function. In any major business area (e.g. sales, IT, customer service, operations), identify the top 10 percent in performance. These are the employees who far outperform their peers. You can do this by looking at business-outcome data measured at an individual level (e.g. sales performance, quality metrics, output volume and other measures available on an individual basis). 2. Figure out what makes the top performers different. Using science5 (this is really the magic part of the process), compare these top performers to the rest of the team. Identify what makes this group different. Look at all elements, including experience, personality, education, job history, skills and personal nature. Through this process you will identify fit characteristics, the traits, skills and behaviors that determine success. During the process, you will find that some of your pre-existing beliefs about high performers hold true: they work hard, they have experience in the role, they have deep skills, and they focus on quality. But you will also find other characteristics (the secret sauce) which may not have been obvious (the Bon-Ton Stores example in this research explains some of these nonobvious characteristics). 3. Incorporate the fit characteristics into all management practices, making it easy for managers to find and develop high performers. Next organizations build tools and systems to help managers select and hire people based on fit. These tools whill help managers assess candidates for fit, train for fit, coach for fit, and promote based on fit. Tools should include pre-hire assessments, interview guides and coaching and selfdevelopment aids. Build a management culture based on how people succeed, not just what they are supposed to do. 4. Clearly communicate your definitions of fit throughout the organization: Finally, publicize the winning traits and behaviors you have identified throughout the organization. Discuss why and how people succeed. Celebrate not only results, but also how individuals deliver results.

The science of fit is part of Industrial and Organizational Psychology (called IO Psychology), which is a discipline of skills

and tools to assess individual capabilities.

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The Science of Fit

You will find that many of the characteristics of high performers are common across the company they make up your culture and employment brand. Other fit characteristics are very role and discipline specific. Together these characteristics tie your company together and make up your organizational culture. This focus on fit creates a flywheel of high performance. Managers now have the tools they need to help hire the right people into their open positions. Employees now have a model for success which they can use for their own development plans. Executives understand how to heighten overall job satisfaction and engagement. Employees also feel more comfortable in their jobs because they succeed. And the organization becomes more collaborative and productive, driving greater revenues and profit. Kenexa, a company which focuses heavily on recruitment and employee engagement, uses a formula to explain this process: i X e =s, where i represents individual, e represents environment, s represents success, and X represents the fit characteristics. When you multiply the right individual by the right environment, success is inevitable. Using the science and strategy of fit, an organization can identify the right i, create the right e and guarantee the s.

Case in Point: AMC Theaters Uses Fit to Drive Profitable Growth

In the 1990s, AMC Entertainments business performance was suffering because of lackluster concession sales and high employee turnover. The companys market share was diminishing. After studying high-performing theaters, AMC realized that guest experience was one of the biggest drivers of concessions sales (popcorn and candy), whch contribute greatly to the bottom line. To address this challenge, AMC trained all managers and theater employees to understand how to deliver great customer service. While this had some positive effect, the cost was high, and the overall results were inconsistent. Even after training, some theaters continued to outperform others. Rethinking the problem, AMC embarked on a project to study fit. The company looked at the characteristics of employees in its top theaters, and found that a certain type of individual was much more likely to provide top-quality guest service and drive the resulting concessions sales. Once fit characteristics were clearly identified, AMC reduced its formal training and refocused its efforts on assessing and selecting the right job candidates. The result was an increase in concessions sales and a significant reduction in turnover. Overall profits rose to the highest in the industry. Theaters that implemented the fit strategy increased their profit per customer by 1.2 percent, which translated into millions of dollars in net income. Concessions sales and employee

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Case in Point: AMC Theaters Uses Fit to Drive Profitable Growth (contd) engagement scores rose. Turnover rates fell by 11 percent. These results, multiplied across more than 320 theaters around the world, had a major impact on AMCs bottom line. Overall profits rose to the highest in the industry. e

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Focus on Fit Drives Market Share Growth at Vodafone

People who fit are more engaged. They enjoy their work (because they are good at it), and they take on more responsibility to help their organization change and grow. Kenexas research in 20096 showed that companies with higher levels of employee engagement outperform their peers in a variety of financial measures. This takes place because people in these companies take on more responsibility and react to change more openly and assertively.

Case in Point: Vodafone Qatar Leverages Fit to Build Market Share

Qatar is a small, fast-growing country on the Persian Gulf that is largely populated by immigrant workers from the Philippines, India, Egypt and other Middle Eastern countries. Workers in Qatar come to the country as contractors, earn high wages and often work six or seven days a week to send money home to their families. As in other fast-growing countries in the region, mobile telecommunications is a vital part of Qatars lifestyle and economy. Vodafone Qatars CEO, Graham Maher, knew that in order to rapidly penetrate this market, the company needed a bold and clear mission. He and his management team studied the market and realized that quality of life was a significant problem in this country. So they defined their mission as one of improving the lives of all in Qatar through telecommunication services. They set an internal goal of becoming the most admired employer in Qatar. Many executives fail to see the value in such high-minded missions. But Maher, who had previously turned around Vodaphones Australia operation leading it over the past five years to become one of Vodaphones most profitable businesses knew what he was doing. He understood that to succeed in Qatar, he had to attract and engage a workforce that could speak more than five languages, deliver excellent service, and remain loyal despite the ability to quit at any time. He also needed employees who were willing and able to help Vodaphone out-innovate companies that had been in the region longer. In short, he needed a workforce that believed in the companys mission and could translate it into market share growth. Working with his internal team, Maher crafted a clear talent strategy identifying the precise skills, qualities and behaviors that would lead to organizational success. The company then developed a series of assessment and management tools that specified the personal values, characteristics and behaviors of an ideal Vodafone Qatar employee.

Kenexa workforce trends report 2009

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Case in Point: Vodafone Qatar Leverages Fit to Build Market Share (contd) Vodaphones fit-focused talent strategy worked amazingly well. In less than two years, Vodafone Qatar became the most highly engaged workforce in Vodafone and the most profitable new business in the company. Today, Vodafone holds more than 30 percent market share in Qatar, and the percentage is rising. The companys net-promoter score (the percentage of customers who would actively recommend Vodafone to their friends) was more than 81 percent, among the highest in Vodafone around the world. This fit model also helps the company to out-innovate its competition. By thinking about how to improve the lives of people in Qatar, the company found that many workers struggle each week to find time to go to Western Union and wire money home. To address this need, Vodafone partnered with a local bank to launch a service that enables electronic fund transfers directly from the cell phone. This service greatly boosted Vodafone Qatars business and caught the competition off guard. e

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Focus on Fit Drives Dramatic Improvement in Sales at Bon-Ton Stores

Think about the problem of sales management in most organizations. Sales leaders are taught to set clear goals for people, coach individuals for success, measure performance against their goals, and weed out those who cannot compete. If this process is handled well, the organization becomes executionfocused people are aligned and held accountable, high performers are rewarded, and low performers are let go or moved to other positions.7 This sounds reasonable, except for the fact that most organizations face tremendous gaps in sales management skills. According to our TalentWatch research, over 70 percent of all organizations believe their first- and second-line leaders lack the basic managerial skills needed to succeed, and 45 percent believe the same of their director-level leaders8. Companies know that the supply of great leaders is thin, so relying on each manager to figure out how to drive high performance will often bring uneven results. When we focus on fit and apply science to the process, management becomes far easier and employees and managers succeed. Lets look at another example, Bon-Ton Stores.

Case in Point: The Science of Fit Helps Sell Cosmetics

Bon-Ton Stores makes much of its profit from the sale of cosmetics a high-margin business that differentiates Bon-Ton from competitors, such as JCPenney and Target (who have smaller cosmetic businesses). When Bon-Ton looked at its cosmetics sales by store, the company found year after year that some stores far outperformed others yet management did not understand why. To try to replicate high-performing stores success, Bon-Tons leaders implemented a traditional salesmanagement approach that included more goal-setting, competitive scorecards and a variety of training tools to help cosmetics salespeople succeed. Despite these efforts, the vast differences in performance remained.

The theory behind this traditional approach to performance management, developed in the 1950s and promoted by such

companies as GE over the years, is what we call the competitive assessment model. It assumes that an organization, like any ecosystem, has a ready supply of talented people, and that through the process of setting clear goals, competition and a culture of accountability, high performers will advance and low performers will either improve or leave. It focuses heavily on accountability and training and assumes that any rugged individual can rise to the top. It often leaves out the need to clearly identify the characteristics of success and build strong science to screen and assess who the right people are. 8 Bersin & Associates TalentWatch Summer 2010. Among 350 senior HR and business leaders, 72 percent of organizations rate the readiness of first-line and mid-level managers to lead as weak or well behind what is needed. This trend has remained consistent over the last three years.

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Case in Point: The Science of Fit Helps Sell Cosmetics (contd) Bon-Ton worked with Kenexa to study the characteristics of the top 10 percent of cosmetics sales representatives. After carefully reviewing the data from hundreds of stores, Bon-Ton realized that it had the wrong people in many of these jobs. The traditional thinking had been that good looks were the most important driver of success in a cosmetics salesperson. But the research indicated that the typical high performer rated only average in personal appearance. Other characteristics, such as high intelligence and analytical abilities, correlated much more strongly with sales success. Armed with a fresh and clear view of what success required, Bon-Ton developed new tools to help supervisors screen applicants and hire the right people. Managers received scientifically designed pre-hire assessment and interview guides, and training to look for specific experiences in each candidates background. The results have been astonishing. In the initial pilot group, sales grew by more than 35 percent in one year, encouraging the company to implement the new approach nationwide. Now, after rolling out the tools and process across the entire company, Bon-Ton estimates an overall 12 percent increase in cosmetics sales per employee. This work has been so successful that cosmetics manufacturers who sell their products in Bon-Ton stores are rethinking their entire model for identifying and assessing sales representatives in all their retail outlets. e

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Focus on Fit Drives Growth at Regeneron

As the AMC and Bon-Ton examples show, hiring the right people and putting them into the right jobs drives individual performance, which in turn helps employees to feel valuable and fulfilled. Fulfilled employees are engaged and passionate about the companys products and services, resulting in higher productivity and lower turnover. But the process also drives growth in recruiting and staffing. Today many companies are trying to hire critical staff to fuel their global growth. Regeneron used the science of fit to drive tremendous growth in staff and resulting revenues.

Case in Point: Regeneron Fuels its Growth by Focusing on Fit

Regeneron, a mid-sized, fast-growing pharmaceuticals research firm, recently won a major contract to build a new line of drug products. This required the company to quickly hire 350 scientists. Because great scientists can be hard to find and hard to recruit, Regeneron needed a bold approach. Regeneron knew its existing recruitment process was ill-suited for the task at hand, so it partnered with Kenexa. Kenexa conducted a study of overall employee fit, and found through interviews that Regeneron had a unique and powerful culture. Unlike traditional pharmaceutical companies that focus on research, manufacturing, marketing and sales, Regeneron is a company of scientists passionate about science. The study informed the development of five statements about Regeneron people that captured the essence of Regenerons employment brand: 1. Science drives our business, and passion drives our science. 2. We are a select team. 3. People here are challenged every day. 4. Thats the way weve always done it is the wrong answer. 5. We refuse to let bureaucracy drive away good ideas. These five statements, now called The Regeneron Five, became the companys mantra for hiring, promotion and development. Regeneron re-engineered its recruiting programs to focus on these principles. The company helped its leaders and supervisors understand its culture and the sort of people who would be a good fit for it.

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Case in Point: Regeneron Fuels its Growth by Focusing on Fit (contd) With the new employment brand clearly defined, Regenerons candidate pipeline grew dramatically. The percentage of candidates who accepted jobs with Regeneron more than doubled. The companys culture got stronger every day, and as the company grew, the senior vice president of human resources cited the focus on fit as one of the most important reasons for success. This program also helped the bottom line. The contract, worth approximately $1 billion, was fulfilled ahead of schedule, enabling Regeneron to beat its revenue and profitability targets. In the highly competitive market for pharmaceuticals research contracts, Regeneron continues to increase its market share. e

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How to Apply the Science and Strategy of Fit

Any organization can apply the science and strategy of fit. Whether you are the CEO, HR manager, or business leader, ask yourself these questions: 1. Do leaders understand the core of our companys (or my business areas) value proposition and what drives success? 2. Can leaders identify the roles that contribute most to revenue growth, customer satisfaction, innovation and savings? 3. Do we have an employment brand or outward-facing communications program to find and attract people with the background and nature we need? 4. Do my managers have the tools to easily select the right people even if these managers are not seasoned in their jobs? 5. Do we communicate and reinforce our core values through stories about employees who embody what we want to encourage? 6. Do we have a strong culture? Can all managers describe it, talk about it and help reinforce it? 7. Do we apply the principles of fit to all levels of management, from supervisor to top executives? Do we understand what makes leaders succeed in our organization? 8. Do we understand how engaged our employees are in each business area, and do we have programs in place to regularly measure and monitor fit and engagement? 9. Do our executive team members understand and believe in the power of having the right people in the company, and do they themselves understand how to assess the fit characteristics of top performers? If you cannot answer yes to these questions, you have an opportunity to dramatically improve your companys performance through the science and strategy of fit.

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Conclusion
Fit is a simple but profound concept that managers at all levels should understand. Unlike the traditional performance management process (which focuses on goal-setting and appraisal), the science of fit forces the organization to understand success drivers at an individual level. Organizations can identify these drivers by studying the characteristics of high-performers and then use this information to help managers better hire, develop, and coach to fit. When applied across an organization, the science of fit helps leaders create a strong and enduring company culture one which attracts the right people and encourages people to find the best roles where they can add the most value. Engagement levels go up, and the organization becomes more agile and customer focused. The examples in this research-- AMC, Bon-Ton, Regeneron, and Vodafone each demonstrate how a focus on fit can improve sales, customer service, business growth, and overall employee satisfaction. We hope this research helps you rethink your management approach and gives you new tools to drive performance in your own organization.

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Appendix I: Case in Point

Case in Point: Bon-Ton Stores Use Fit to Boost Cosmetics Sales
One of the most critical business functions in any organization is sales. Whether the company sells high-value, complex products, such as telecommunications services, or retail products, such as cosmetics, the performance of the sales team can make or break its success. Not only do salespeople contribute directly to revenue and growth, they form an important feedback loop regarding what customers need and want. Sales leaders know that in every selling environment, there are high performers and others who are only average. If companies had more superstars, revenue would go up year after year. But the skills and attributes that make a salesperson highly successful are often hard to discern. Using the strategy and science of fit, a company can identify super-performers and find ways to replicate their success. This is precisely what Bon-Ton Stores did, with Kenexas help, in its retail cosmetics business. Bon-Ton, a full-line department store chain, generates nearly 17 percent of its revenue from cosmetics, one of the companys most profitable product areas. So naturally, Bon-Ton searches for ways to increase sales. Several years ago, Bon-Ton sought to address a high turnover rate among cosmetics salespeople. Through an array of surveys, the company found a variety of problems in that segment of its workforce, mostly centered on a lack of experience and differing levels of success. Cosmetics salespeople are often young and may not even know whether sales is their ultimate career goal. Bon-Ton initially focused on improving accountability. The company formalized a goal-setting process, made use of performance appraisals, and ranked sales performance among peer employees. Still, overall sales performance remained very uneven, and turnover remained high. The company focused next on fit. Working with Kenexa, Bon-Ton studied the characteristics of the top-performing salespeople. Commonly accepted wisdom held that the best cosmetics salespeople were those who were most attractive. The cosmetics manufacturers that pay a portion of sales salaries always focused on appearance in filling cosmetics sales jobs. The theory was that a good-looking salesperson would attract customers because the customers would assume that salesperson could help to improve their appearance. Bon-Ton and Kenexa tested this assumption. A pool of 600 cosmetics salespeople were selected at random and divided into three groups: top performers, middle performers, and low performers.

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The Science of Fit

Case in Point: Bon-Ton Stores Use Fit to Boost Cosmetics Sales (contd) This group drew from each of Bon-Tons 270 sites, representing urban and rural locations, and large and small stores. The team then carefully assessed this pool of 600 to identify the range of characteristics that might be causing good sales performance. The team looked at demographics, physical attractiveness, cognitive skills, experience and a wide range of psychological attributes. It also looked at performance-appraisal ratings to gauge whether the existing management process was working. This process is part of implementing what we call the science and strategy of fit identifying the characteristics, skills, attributes and personalities of top performers. Bon-Ton learned that the highest-performing cosmetics salespeople were not the most attractive; many were only average in looks. Rather, they were the strongest in terms of cognitive ability. These people were quick thinkers, able to deal with lots of information, and excellent analytic decision-makers. The discovery defied conventional wisdom, but made perfect sense. Selling cosmetics is a complex business. Salespeople are expected to understand more than 700 products. They must deal with customers who stand only a few feet away and rapidly ask questions. They have to build rapport and demonstrate value quickly. If a salesperson cannot think quickly, answer questions confidently and recommend appropriate products, the prospect simply walks away. Raw intelligence plays a major role in success. Bon-Ton now knows precisely what type of person is most likely to succeed in cosmetics sales. The next step for Kenexa was to help Bon-Ton to build a set of tools, including new-hire assessments and interview guides, that helped all managers quickly and easily identify the right people. Bon-Ton previously had a set of interview assessments, but it had focused on traditional screening criteria, such as age, educational background, GPA and sales experience. Armed with its newly established, proven fit characteristics, the company developed a new interview guide a tool that helps line managers to ask specific questions carefully designed to assess a candidates cognitive ability, initiative, situational judgment and maturity. Rather than ask about grades and prior experience, managers now ask about extracurricular activities and past leadership roles. While intuition still comes into play, managers no longer make hiring decisions based primarily on gut feelings or an applicants attractiveness. They have a defined process for assessing fit. And Bon-Tons new tools and focus resulted in an immediate increase in sales per employee by 12 percent and a dramatic reduction in turnover. Today, the cosmetics department outpaces the rest of the company in employee engagement and retention. The focus on fit in cosmetics was so successful that Bon-Ton is now replicating the process for fine jewelry sales and other specialty products business areas where small increases in performance result in tremendous increases in profitability.

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Case in Point: Bon-Ton Stores Use Fit to Boost Cosmetics Sales (contd) Bottom line: In this case, as in almost all high-performing sales organizations, Bon-Ton discovered what we call a secret sauce of success. By using the science of fit, the company took the guesswork out of hiring processes and helped managers to improve their own performance and build stronger, more engaged teams. e

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Appendix II: Case in Point

Case in Point: Creating Movie Theaters That Pop How AMC Used Fit to Become Number One in Customer Satisfaction
The movie-theater business presents many management challenges. AMC Entertainment, the second-largest theater company in the U.S., relies on more than 385 general managers to operate 320 theaters with a total of more than 4,500 screens in the U.S., Hong Kong, Canada, France and the U.K. Each general manager is responsible for a wide variety of business measures that include total revenue, concessions revenue, profitability, guest-satisfaction ratings, employee engagement and turnover. These managers must hire the right staff, work with corporate teams to negotiate for the best films, decide how to promote key movies in their region and manage daily theater operations. Their roles are key to AMCs success. In the theater industry, most profits come from concessions. The core business of selling tickets, running the theaters and paying royalties on the movies is typically break-even, leaving the theaters in the business of selling popcorn. To make a chain profitable and grow, each theater must drive per-person concessions sales. Many factors contribute to this measure, including such things as the price and quality of popcorn, promotional materials and layout, cleanliness of the theater, the length of lines, the type and brand of concessions offered, and the entire guest experience. AMC always knew that the quality of the guest experience had a direct impact on sales. If the theater is clean, if employees are smiling and happy, if movies are new, if seats are comfortable, if concessions are fresh and appetizing, and if the experience is fun and enjoyable, people open their wallets and indulge in lots of food and candy. If the theater is dirty, employees are grumpy or unavailable, and the food is unappetizing or of low quality, the customers dont buy. The challenge was to figure out how to continuously improve the guest experience. Could AMC do this through training? Better management? Process improvements? Where were the levers for success? After reading research on the relationship between employee engagement and customer satisfaction, AMC embarked on a major study of employee engagement. The company believed that if it could increase employee engagement, positive guest experiences would follow. It found, as one might expect in a service operation, that employee engagement had a direct relationship to profit. Theaters with the most highly engaged employees had higher per-capita concessions revenues and in these theaters, revenues grew more rapidly. Therefore, the formula worked: Positive guest experiences translated into increased concessions sales, and the quality of the guest experience correlated closely to the happiness, satisfaction and engagement of the theater employees.

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The Science of Fit

Case in Point: Creating Movie Theaters That Pop (contd) AMC also found a link between low engagement and high employee turnover. Many theater chains have annual employee turnover rates as high as 150 percent (which is not nearly as high as fast food and some other retail industries). AMC found that theaters with low engagement levels had turnover rates of 84 percent or higher, while theaters with high engagement levels had turnover rates of 77 percent or less. This difference translated to millions of dollars in savings on new-employee training. But what drove high levels of engagement? Did managers of high-performing theaters hire better people? Were these managers better trained? If so, what skills, traits and activities did they have? How could general managers improve turnover and engagement numbers, and what specific characteristics were needed for someone to be a good general manager? AMC decided to develop a major new training program to teach employees how to deliver great customer service. The company spent millions on this program and found that it seemed to have some small, positive effect. But after studying the ROI , AMCs leaders found that some theaters continued to perform well while others did not indicating that the training was not necessarily a big key to success. About 18 months into the training cycle, Keith Wiedenkeller, the senior vice president of human resources, woke up one day and realized AMC had missed something. Just as Curly in the movie City Slickers talked about the one big thing, Wiedenkeller realized that the single most important key to ensuring a good guest experience was for the employees to simply be friendly. And it is very difficult to train people to be friendly. In fact, friendliness is an innate personality trait. Friendly people are naturally outgoing, they smile, and they enjoy being in a service role. Unfriendly people do not. In recognizing this, AMC began to shift its focus to using fit not performance or management to drive business success. After AMC realized that having friendly salespeople was a key to success, the company partnered with Kenexa to build assessments and revamp interview guides to help managers assess the friendliness of job applicants. In the past, AMC had looked at educational background, grade point average and a variety of achievement metrics to assess candidates. For example, AMC had looked at applicants overall GPAs. By studying fit, AMC discovered a better predictor of success in its theaters: candidates GPA and achievement level in their favorite classes. This more focused metric helps to identify candidates who have the passion and confidence to identify what they like. That ability tends to make people happy which makes them enjoyable to be around. AMCs focus on fit has driven customer satisfaction to the highest in the industry, and the company recently acquired another chain to fuel its growth. e

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Appendix III: Case in Point

Case in Point: Biotech Company Regeneron Harnesses the Science of Fit
Regeneron is one of the most successful biotechnology companies in the world. With approximately $450 million in revenues, the company is so successful in research and development (R&D) that even competitors contract with Regeneron to help them develop products. Much of Regenerons market value comes from its ability to collaborate with other pharmaceutical manufacturers a process the company calls collaborative R&D. In 2007, Regeneron signed one of its largest-ever contracts, a $1.2 billion agreement with SanofiAventis. To implement the contract, the company needed to nearly double its entire staff to add more than 300 scientists to the payroll. Hiring Ph.D.-level scientists in biology and pharmaceutical sciences is difficult. Not only are these people hard to find, they are often happy with their current employers. While Regeneron had an excellent reputation and had been able to recruit successfully, the companys existing recruiting process could not scale up to meet the demands of the Sanofi-Aventis contract. In early 2008, the vice president of human resources met with the CEO and discussed the issue. The company had been successful in hiring technical professionals, but found that many were not staying with the company, and the hiring rate was too low. Leaders realized that in order to meet growth plans and deliver on the contract, the company had to rethink the recruiting process. Regeneron at that time did not fully understand the role of fit. What type of scientist really fit into the Regeneron culture and business model? Where were these people, and how could the company find more of them? And most importantly, what could the organization do to attract them? Regeneron partnered with Kenexa to harness the power of fit. First, Kenexa interviewed executives, lead managers and scientists to get a strong sense of the values, behaviors and passions of Regeneron employees. Second, Kenexa took this information and developed a simple, compelling set of messages that described Regeneron people. These messages, the essence of the Regeneron employment brand, were developed to help the company transform its recruiting process. Kenexa found that this was a company run by scientists with a passion for science. It characterized Regenerons culture as that of a sage full of people who want to push the envelope, discover

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Case in Point: Biotech Company Regeneron Harnesses the Science of Fit (contd) new things and continuously innovate. This culture was distilled into five statements about people at Regeneron: 1. Science drives our business, and passion drives our science. 2. We are a select team. 3. You will be challenged every day. 4. Thats the way weve always done it is the wrong answer. 5. We wont let bureaucracy drive away good ideas. These statements became known as the Regeneron Five. They were posted on walls throughout the company. Stories were published about employees who embodied each of the principles, which became the core of Regenerons new employment brand. An employment brand is the image a company projects to job candidates. By carefully creating a new series of recruiting programs centered on the ideas set forth in the Regeneron Five, the company could change its recruiting process from a funnel to a tunnel carefully finding just the right candidates who fit at Regeneron. One of the campaigns Regeneron used, for example, was titled Five Reasons You Do Not Want to Work for Us. Another was Five Things to Know Before You Say Yes. These campaigns challenged candidates to think about the Regeneron Five, and to decide for themselves whether they were innovative, passionate and focused enough to join the company. The campaign was a huge success. The recruitment process accelerated so quickly that Regeneron made its recruitment targets almost a year earlier than expected. The company set out to embrace the Regeneron Five internally. Regenerons onboarding program, performance management program, leadership development program and future succession program are now all built on these key identity statements. The senior vice president of human resources and CEO have seen a transformation. Recruitment has been easier, and the quality of new employees has risen dramatically. More job applicants approach Regeneron, instead of always waiting for the company to approach them. And Regeneron has attracted some of the most passionate scientists in the industry. This passion enables Regeneron to pursue innovation, an area where many big pharmaceutical companies today no longer excel, giving Regeneron a strong competitive advantage. Without its keen focus on fit, however, Regeneron might have stalled, failing to become the thriving company it is today. e

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Appendix IV: Case in Point

Case in Point: Vodafone Qatar Leverages Fit to Build Market Share
Qatar is a small, fast-growing country on the Persian Gulf that is largely populated by immigrant workers from the Philippines, India, Egypt and other Middle Eastern countries. Workers in Qatar come to the country as contractors, earn high wages and often work six or seven days a week to send money home to their families. As in other fast-growing countries in the region, mobile telecommunications is a vital part of Qatars lifestyle and economy. Vodafone Qatars CEO, Graham Maher, understood the importance of mission, culture and fit to drive growth. His management team started its business with a strong focus on its mission in this case, improving the lives of all in the country with a long-term strategy of becoming the most admired employer in Qatar. Many executives fail to see the value in such high-minded missions. But Maher, who had previously turned around Vodaphones Australia operation leading it over the past five years to become one of Vodaphones most profitable businesses knew what he was doing. He understood that to succeed in Qatar, he had to attract and engage a workforce that could speak more than five languages, deliver excellent service, and remain loyal despite the ability to quit at any time. He also needed employees who were willing and able to help Vodaphone out-innovate companies that had been in the region longer. In short, he needed a workforce that believed in the companys mission and could translate it into market share growth. Working with Kenexa and his internal team, Maher crafted a clear talent strategy identifying the precise skills, qualities and behaviors that would lead to organizational success. The company then developed a series of assessment and management tools that specified the personal values, characteristics and behaviors of an ideal Vodafone Qatar employee. In keeping with its mission, Vodafone Qatar hires only people who understand and demonstrate emotional maturity and a passion to improve the lives of others. The company identifies and coaches leaders by evaluating their ability to communicate and live by the mission. Top leaders visit sales offices and call centers weekly to reinforce and monitor the culture. And the companys recruitment, coaching, compensation and evaluation processes continually remind employees of the aim to improve lives in Qatar. We are here beyond making money, said the vice president of human resources. We ask our people to help us achieve our vision becoming the most admired company in Qatar.

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Case in Point: Vodafone Qatar Leverages Fit to Build Market Share (contd) Vodaphone Qatars fit-focused talent strategy worked amazingly well. In less than two years, Vodafone Qatar became the most highly engaged workforce in Vodafone and the most profitable new business in the company. Today, Vodafone holds a market share of more than 30 percent, and the percentage is rising. The companys net-promoter score (the percentage of customers who would actively recommend Vodafone to their friends) was more than 81 percent, among the highest in Vodafone around the world. This fit model also helps the company to out-innovate its competition. By thinking about how to improve the lives of people in Qatar, the company found that many workers struggle each week to find time to go to Western Union and wire money home. To address this need, Vodaphone partnered with a local bank to launch a service that enables electronic fund transfers directly from the cell phone. This service greatly boosted Vodaphone Quatars business and caught the competition off-guard. Does Vodafone still use traditional practices of rating and ranking? Yes, of course. But each employee conversation is built around the concepts of mission, culture and fit. As Graham Maher puts it, By continuously reinforcing our mission in every single way, we can build an organization of passionate, high-performing people who fuel our growth, deliver for our customers and drive our team ever faster toward success. e

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Appendix V: Table of Figures

Figure 1: The Distribution of High Performers in an Organization 6

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About Us
Bersin & Associates is the only research and advisory consulting firm focused solely on WhatWorks research in enterprise learning and talent management. With more than 25 years of experience in enterprise learning, technology and HR business processes, Bersin & Associates provides actionable, research-based services to help learning and HR managers and executives improve operational effectiveness and business impact. Bersin & Associates research members gain access to a comprehensive library of best practices, case studies, benchmarks and in-depth market analyses designed to help executives and practitioners make fast, effective decisions. Member benefits include: in-depth advisory services, access to proprietary webcasts and industry user groups, strategic workshops, and strategic consulting to improve operational effectiveness and business alignment. More than 3,500 organizations in a wide range of industries benefit from Bersin & Associates research and services. Bersin & Associates can be reached at http://www.bersin.com or at (510) 347-4300.

About This Research

Copyright 2011 Bersin & Associates. All rights reserved. WhatWorks and related names such as Rapid e-Learning: WhatWorks and The High-Impact Learning Organization are registered trademarks of Bersin & Associates. No materials from this study can be duplicated, copied, republished, or reused without written permission from Bersin & Associates. The information and forecasts contained in this report reflect the research and studied opinions of Bersin & Associates analysts.

Bersin & Associates June 2011 This material is licensed to Kenexa for distribution only.