The Downfall of Nokia Explained in Two Graphs (That Relate to Hiring)

Fast growth companies often face this question — should we fill a position with someone from inside the company or get someone experienced from outside. The two graphs below will help illustrate when to choose one or the other and where Intel did right, and Nokia went wrong.

Lessons from Intel — In Uncertain Times Hire for Cultural Values

In High Output Management Andy Grove (the then-CEO of Intel) brings out the following point — if complexity, uncertainty, and ambiguity (the CUA factor) are high, then make sure there’s cultural fit.

From “High Output Management” by Andy Grove. CUA — Complexity, Uncertainty, Ambiguity

Hire from the outside only when you are certain that cultural values are an exact match and the person fits within the group really well. E.g., take your time choosing the right candidate — something that’s very hard to do when you are practically forced to double or triple your headcount every year.

Cultural fit is hard to find though — especially when hiring in other countries.

More often than not it’s probably a better idea to promote from within the organization because you know that the culture fit is already there. With promotions, the worst case scenario is that the person doesn’t do a good job. With outside hires, it’s that the person might be working for personal gains and against company goals.

If you make a mistake with some of the more influential positions and the new hire has only self-interest in mind, then all shit might break loose. “Every man for himself” will not produce a good result when the group should be working together for a common goal in highly uncertain and complex situations. It’s going to be panic on the Titanic.

Panic on the Titanic

Lessons from Nokia — What Happens When You Don’t Hire for Cultural Fit When Growing Fast

Nokia’s rise and fall is documented in the fascinating “Nokia Mobile: We Were Connecting People”. I recommended watching this for more background, but the short version goes as follows (spoiler alert!).

As the company found product-market fit with mobile phones (eventually becoming number 1 in the world) and started to grow like crazy, they needed to hire thousands of people. Not only in Finland but also outside Finland.

To illustrate how different some of the cultures that Nokia tried to include were, let’s look at three of them as an example: Finland, UK, and India.

Source: Hofstede Insights

While Finland and the UK have relatively low power distance (and therefore prefer less hierarchical organization structures), India is pretty much the opposite.

Things get even more interested when looking at masculinity.

A high score (Masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner/best in field — a value system that starts in school and continues throughout organisational life.

A low score (Feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A Feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (Masculine) or liking what you do (Feminine).

So, while India and the UK are very competitive and success-oriented, Finland is much more co-operative.

Let me illustrate the differences with a comic:

Source: Finnish Nightmares

It’s very hard to imagine that scene (someone being embarrassed by recognition) taking place in the UK or US .

So, what happened to Nokia? The company started hiring a lot of people who had different values from the rest of the company — either due to different cultural backgrounds or just generally being more motivated by money and success than making something useful. And those people promoted and hired similar people.

At the same time, complexity and ambiguity increased due to growth and changes in the environment. Which lead to more fear and anxiety.

Furthermore, the company IPO-d and the original 200 or so workers became millionaires overnight, possibly clouding their judgment even further. It’s easy to believe you’re invincible when you’re #1 in the world for years in a row and drive a Porsche. Everything you touch seems to turn into gold.

Allegedly, when Nokia started out, they were a mature company with humane values, keeping group (“us”) values close to the heart.

Source: Nokia Mobile: We Were Connecting People

But at some point Nokia leaped back from being a humane working place to being success oriented. Self-interest started ruling over group interests. So, by the time the first iPhone came out, there was no way that the company could recover from it — it would have been challenging even with a group effort but when most people had only their self-interests in mind, it became impossible.

Or to put it in Andy Grove’s terms — when cultural values are weak and uncertainty is high, self-interest takes over, and nothing works anymore.

This is why I prefer seeing people from within the company getting promoted when the company needs to grow fast. They know the company, have proved themselves at least with their team, they keep the group interests in mind, will hopefully do the right thing (from the company’s point of view) and hire people with similar values.

It also explains why some fast-growth companies have some of the critical roles unfilled for months on end — the exec team needs to be sure that the person will fit with the company’s values because the influence that s/he potentially has is enormous.

However, when uncertainty and ambiguity are lower, it’s easier and safer to include people with different background and cultural values. It will just take time doing it.

Head of Growth @ Ex-Pipedrive and ex-Amazon. Will occasionally comment on growth, product, marketing, and tech. @teemast on Twitter.

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