Skin in the game for corporations

One of the biggest pretensions for corporations from Nassim Taleb is that no one is responsible for their actions. This concept is called skin in the game: a person who makes decisions should be fully accountable for their consequences. This is obvious for interpreters, tiny ones: for instance, you’re a small fruit shop owner, and you’ve decided to buy old but cheap fruit. If you can sell it fast and with no intoxication for your customers, it’s a fantastic decision. You’ve grown your profit and decreased costs. But also you know that you have to sell it fast otherwise the fruit will be spoiled and no one will buy it.

In big corporations, all these decisions are complicated. Imagine the same situation with fruit but in a big retail company. One department is responsible for various fruits, another one for prices you’ve paid but the first department may choose from some producers only, the ones who won a tender, but the logistics department is responsible for transportation and a shop director for sales. But who actually sells the fruit? A shop assistant who doesn’t choose the quality or price for the fruit but has to listen to all the customers’ complaints about rotten fruit. A big boss will ultimately get his annual bonus, and the poor shop assistant will return home in an awful mood.

According to Nassim Taleb’s concept, “Skin in the game” refers to having a personal stake or investment in a business or economic outcome. When individuals or organizations have skin in the game, they are more likely to make informed and responsible decisions because they have a direct stake in the success or failure of their choices.

And how can a corporation use this “Skin in the game” concept?

I’ve been working in a vast corporation with more than 300 000 employees. But they still managed to make me responsible for my success and failure. I’ve been hired as a Product Manager with no team, product or budget. The only thing I have is a promise from my boss that my position is safe for three months. After that, I have to sell my product with its annual budget to top management or leave. Believe it or not, I’ve been highly motivated to move fast.

Some Agile rituals like demo works for full transparency. Once in two weeks, I had to face all the stakeholders at the general meeting. It pushes to deliver some results every two weeks (or sprint, in my case). Also, it helps to get feedback from real people. And if a manager has personal meetings with different stakeholders, he or she may explain any feature, fault or bug by dependency from another department. But at the general meeting, it is not possible. Demo also works as a personal responsibility — product managers must answer face to face. No one wants to look foolish. Every demo meeting is a game with your own skin. That’s why it is essential to have them regularly.

Oh yeah, you’ve heard about it a hundred times. But still, it works. It is essential to make your own managers micro CEOs of their products, departments, etc. Help teams unite to deliver the final result (preferably profit). It is not so obvious how some internal services can bring profit. Well, they can decrease costs: like HR — one of a company’s useless (according to Taleb) departments. Well, all companies need people. HR helps to hire them at different costs. Make them responsible for the hiring costs. Oh, it will push the recruitment leader to think twice: does he need a +1 recruiter, or, let’s say, can AI do it better? Does this department need an assistant? Sure, if it helps to reduce costs.

This is the simplest but yet the trickiest part. All the metrics have to be transparent, easy to check, and lead to the result. I’ve seen a lot of manipulations with metrics. For example, timing is essential for hiring — the shorter the time of an offer, the better the success rate. So some managers made hiring time their metrics. But how did they? Well, they used timing until the offer, not the contract, is signed, and a new employee started to work. Why? Well, it is obvious: the problem was at the final step — many candidates didn’t agree to sign an offer and start a job. So make sure that the metrics you calculate focus on a final result.

These are some small steps to help with skin in a corporation’s game concept and increase its antifragility.

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