An Interview With FreeMarkets Co-Founder and McKinsey alum Sam Kinney: On Talent

Author's Note: Sam K. , FreeMarket's co-founder, was known as the "Kinney Cannon" back in the day (ready, aim, fire!) Equal parts finance, strategy, IT and HR guru (and always 100% about execution), Sam has always been the ultimate start-up renaissance man (and was the best mentor I've ever had). Besides FreeMarkets (Ariba / SAP), Sam has had some other amazing exits, including Kiva (Amazon) and Happy Returns (UPS). I hope you get as much out of this interview as I did!

Jason: Sam, you saw my recent LinkedIn post where I proposed that FreeMarkets alumni were among the most sought-after staff in the procurement tech space. Certainly, the FreeMarkets network has gone on to accomplish many great things. Even in my time there, we all knew we were onto something special, and the group was very talented. But how did this all start?

Sam:? Well, first, the growth and accomplishments of the FreeMarkets alumni have been a great source of pride.? It’s hard to believe that all these years later people still reflect back on their FreeMarkets experience with such fond memories and gratitude.? But to your question about how this started, part of it stems from the experience that our principal founder, Glen Meakem , and I had at 麦肯锡 , which itself has a superb track record of hiring and developing staff.?

We actually met there, although our only work together was during an intense training program.? But on top of emulating some of what McKinsey does well, I had the good fortune to have done some HR best practices engagements for McKinsey clients.? At the time, I thought this was awful because I considered myself more of a quant and believed HR to be squishy.? Through the best practices work, I found that good HR can be consistent with good quant thinking.

Jason:? What were some of those best practices, and how did you pursue them?

Sam:? It all starts with being able to articulate with some granularity the profile of staff skills, traits, and company culture you want to create.? Mechanically, pen hits paper in the form of what we called “skill grids” that defined the list of things we were seeking in the staff. ?Those skills or traits formed rows of a matrix.? You’d recognize the column headings as the familiar performance evaluation continuum from “Does Not Meet Expectations” to “Meets” then “Exceeds” then “Outstanding.”? Every evaluation format uses some set of columns like this.?

But the magic was the language of each cell intersection, which contained a little snippet of text describing behavior or demonstrating mastery of the skill.? An evaluation system using a 1-4 scale is meaningless if my 2 is your 4.? The elegance of the behavioral snippet language was that two managers could largely agree what behavior they were observing, so a group of people could form a real consensus where an individual fit on each skill or trait.?

With this inherent calibration, even new managers could select and evaluate consistently with more tenured managers.? This is incredibly important during times of high growth.? More important, each employee could literally read how their behaviors were being assessed and what the next higher performance bar on each trait looked like.? The skill grid thus allowed employees to self-manage to higher levels of performance even absent specific coaching interventions.

Jason:? Yes, I remember the grids (channeling the late econ nobel prize winner Daniel Kahneman!) But how did they come about at FreeMarkets?

Sam:? Well, that was one technique we remembered from McKinsey.? But of course, the skills and traits we sought weren’t all straight crossovers.? It wasn’t until years later that I heard Jocko Willink describing the US Marine Corps fitness report and the Corps’ definition of the “Eminently Qualified Marine.”? The basic rubric is the same—listing skills and traits and then using behavioral snippets to illustrate the continuum of performance across each such skill.

As an aside, you also have to remember that everyone in a leadership position in HR at FreeMarkets came first from a line function, not from HR. They had to understand the applicability of skills and talent to the business (which is in large part how we were able to map skills and traits to capability/maturity/performance and behaviors and propagate this through an HR function).

Just as every marine is a rifleman, every leader in HR should come from the business.

Jason:? But as I recall, they weren’t all hard skills.

Sam:? Well, each role had some hard skills against which staff were evaluated.? So, the skills required for software development might differ from technical operations or client service to procurement organizations.? But there was a standard matrix we called something like “Character Traits and Core Values” against which everybody was evaluated.? And some of these were soft.? I credit Glen with this focus on the type of organization we wanted to be.?

He used to stress that we all needed to exhibit core character traits of Honesty, Courage, and Graciousness, then went on to describe how it might, for example, require courage to deliver a difficult but honest message, up or down, but also that when delivering such a message, we wanted to do so with empathy and decorum.? Back to the HR best practices, enforcing a rubric like this helps make these squishy things into something you can quantify.

Jason:? How do you create these??

Sam:? Well, it’s a lot of up-front, hard thinking.? It’s not easy.? But the payoff makes it worth it because all that intellectual capital scales up quickly.? When you’re starting a new business from scratch, it’s more intuition and aspiration.? Of course, this is what entrepreneurs often need—the ability to mold a company around a vision, sometimes uniquely different from others.? I’d say the Core Values piece really speaks to entrepreneurial aspiration.? If you’re in a more established company, you can develop some of this stuff empirically.?

Suppose your company has a hundred account service staff and you already have a reasonable sense of your high performers. In that case, you can create a long list of traits, write the behavioral continuum snippets, evaluate everybody, and then see which traits seem to correlate with higher performance.? It’s like building a big model and backtesting it.?

When you can test your skill grids empirically, you also go a long way to making the squishy stuff more quantifiable.? First, you build an evidence base upon which skills and traits are important.? But a second benefit is that it’s often obvious which skills and traits can be trained, like product knowledge, versus which skills and traits need to be identified at the point of hiring.

Jason:? What was the impact of focusing on these softer elements?

Sam:? I’d say this was one of the most powerful ways to influence the culture but you have to back it all up with actions.? If you say you value honesty, then the whole organization needs to see the consequences somebody faces when they aren’t honest.? You need to actually walk the talk as they used to say.? It helps that if you’ve constructed the behavior matrix correctly, the bad behaviors stick out.? But back to the self-calibration and scalability of these tools, even new staff can be called on to interview, and with the matrix, they have a reasonable roadmap how a candidate might fit in, or not.

Jason:? How do these factor into interviewing?

Sam:? Well, it’s not perfect, but it’s clearly a help to have a strong set of presumptions written out in a way everybody can understand.? We typically had a handful or more of interviewers for each candidate, and everybody participated in an interview debrief.? In one very powerful and culture-defining early episode, a couple of new female staff reported in an interview debrief that they were getting a strange vibe from a candidate.? That became a fast and resounding candidate turndown.? When these new staff members saw their contribution taken seriously, a powerful loyalty formed.? I like to say that we developed a strong mechanism for cultural self-replication.

Jason:? It sounds like it’s all integrated.

Sam:? In the ideal world, yes.? Start with the right skills, empirically tested to elicit actual high performance.? Figure out which of these skills needs to be the subject of training and which must be selected for hiring.? Then, you have to really focus the organization on performance evaluation.

Jason: We spent a lot of time on performance evaluation. In fact, I recall an interesting anecdote that by the time Ariba bought FreeMarkets in 2004, FreeMarkets staff had more than a dozen performance evaluations behind them, while the Ariba staff had none.

Sam:? Back to the HR best practices, credit Jack Welch and General Electric with the twice-yearly, top-to-bottom evaluation of the organization.? At GE, these reviews were called “Session C” of their business planning process.? With 13 business units at the time, Jack Welch was famous for spending 26 days per year sitting through performance reviews of staff.

Jason:? How did that work at FreeMarkets?

Sam:? Well, the biggest organizational mistake is to have no evaluations, but close behind that mistake is to have weak evaluations like a 1-4 scale.? And it’s really a cop-out to give employees evaluations on the anniversary of their start date in a rolling fashion.? The key, and it’s a huge investment of C-suite time, is to evaluate the whole organization every six months.?

The benefits are many, though.?

First, in the performance review process, a manager presents his or her staff performance reviews to a panel of managers at a higher level up to a panel of C-level execs.? The reviewing manager is thus accountable to the next level up to defend their review.?

Second, you get an organization-wide look because everybody is evaluated on the same schedule.? You’re not simply evaluating the people but finding the holes and planning for the team’s evolution.? We didn’t have a forced curve with a mandatory screen, but if a staffer wasn’t fitting in, the accountability usually led to redeploying or terminating the underperformer.

Jason:? That sounds fairly draconian.

Sam:? I think you’ve seen me post some of this on LinkedIn before.? When I hear people talk about making employees feel safe, I think the most important factor is that the employee clearly understands what’s expected, and that set of expectations is shared by management.? Another way to feel safe is to see very clear evidence that underperformance leads to dismissal.? It’s clearly not fair to actual achievers to watch a watered-down evaluation process tolerate underachieving performance.? By forcing reviews to be presented to higher-level managers, you’re also hoping to keep the reviewer honest and fact-based.? It wasn’t perfect, but the idea was to weed out managers whose evaluations were political or capricious.

Jason:? We experienced some rapid growth.? How do you think that happened??

Sam: First, the performance evaluation rubric self-calibrated and was self-replicating.? New staff could quickly adopt and apply the system to interviewing and evaluation.? But also because people could find their own behaviors represented somewhere on the grid, they could quickly tell how to improve without needing direct coaching interventions.?

Think of this like compound interest.? If made consistently over time, even incremental improvements lead to tremendous competency.? I recall hearing about how immensely valuable the FreeMarkets team was when acquired by Accenture (Ariba eventually sold the non-software business unit to Accenture).? I attribute some of this to the simple compound growth of having years of development under their belt.?

We also were lucky.? The core service offering of a sourcing project was something like ten weeks.? A new staffer would join a couple of projects and very quickly see the full life cycle of the project and could iterate their contributions on a fairly rapid growth trajectory.? I’m quite proud of the three-year run of three hundred percent annual staff growth, at the end of which our clients were happy.

Jason:? What surprised you about all this??

Sam:? Well, we had a strong conviction that investing in all this process was the right thing to do, and I think history bears out that to be correct.? But early on, I was honestly somewhat worried that the core procurement project service delivery would become tedious for staff.? On that, I couldn’t have been more wrong.?

It turned out that the learning curve of tackling new categories, solving different tactical problems like supplier consolidation, or finding near-term savings, was quite stimulating.?That was a huge relief, but it also explains some of why the FreeMarkets alumni remained in high demand.? I like to think that when technology made negotiating easier, it forced teams to focus more creativity on the strategy and tactics of their end objective.?I also think we’ve seen this up-skilling of procurement continue as the technology carries more of the execution workload.

Awesome insights. Thanks, Sam!

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