Mike Zani, CEO of The Predictive Index, sat down with Jeppe Hedaa, CEO of 7N, to find out this leader’s one-of-a-kind formula for team efficiency—more specifically, IT development and the areas that make a real difference in performance.
Press play to listen to the podcast or read the transcript below.
Mike: I’m Mike Zani. I’m the CEO of The Predictive Index. Welcome to Candid Conversations with Z. I am lucky to be here with Jeppe Hedaa. Jeppe is the CEO of 7N and the author of a new book called “Nucleon.” Jeppe sent me an advanced copy of the book and the book has cruised around our offices and it was really hard to pull away from my head of R&D and my CTO.
Jeppe is not your typical armchair CEO author. It’s not a situation where he did it once successfully in his company and now considers himself an expert. This is a very thoughtfully researched book. Very insightful and attacks something that pains many companies.
“Nucleon” addresses the really black box nature of IT departments and how there’s such a spectrum of performance. So Jeppe, welcome to our podcast, and can you give us a quick introduction to yourself and to 7N?
Jeppe: Yeah, thank you. It’s good to be here. So 7N is an agent. So like actors have agents and sports stars have agents. Some, believe it or not, IT experts have their own agent. And the agent makes sure that the next job is available when this one’s done or if you want a long summer vacation with the family, that that’s taken into consideration and the next job is ready after August or whatever.
So that’s basically my job. I’m an agent. This company we serve a little over 1,100 supernerds, project managers, architects, lead developers, test managers, analytics, business intelligence specialists. And all these kinds of people that go into what we call complex systems development. And we have 70 agents that serve these people—I think almost 80 now—and we have around 180 very large corporations in nine countries that we serve. So that’s basically my company in a very short version.
Mike: Now these 110 supernerds, is supernerd a technical term you use in Denmark?
Jeppe: Well, it’s, I don’t know how American that is, but they are quite geeky. I mean, none of them have less than 10 years experience. They’re very geeky. They can go into a bank, we have 1,100 of them, you know, so that we represent and that is working for us right now full-time.
Yeah, they are very, they’re very nerdy. They are.
Mike: That’s great. So it’s clear that you know the brightest of the bright in terms of technologists, creative architects. In reading your book “Nucleon,” it’s a very formulaic approach to perfecting something—perfecting the IT department. What compels you to write this book?
Jeppe: Well you know, it was really difficult for me to … I’ve been in the IT business for 30 years. Obviously, sometimes you run into people that you get to like. They become your friends. I have a lot of CIO friends that I’ve grown over the years and they suffer. They suffer from business people not really understanding what they’re doing.
And they have this huge area of competence that they can’t really articulate to a CEO or a CFO because obviously these guys are not into this complex systems development world. So many, so many areas of expertise that you need to be able to cover to really be successful in IT and it’s just a mess to really communicate.
Mike: So I really like that term you’ve been using. Complex systems development. I’m gonna try to put it into my vocabulary. So when you built the formula, which is sort of the basis or sort of the common thread that runs through “Nucleon,” how long did it take you to build this formula and how many years or hundreds of thousands of hours did you put into making this thing click?
Jeppe: Yeah, we got, I got the ambition to try and articulate something when causal thinking occurred to me. So I ran into this causal thinking concept, that we shouldn’t just discuss the result, we should discuss what makes the results. And then we can together look at something that can really make a difference. The results will come if you do things right.
And then I started to look, I mean because I’m so old now, I’ve seen so much. I’m 53 years old. In the IT business, that’s one foot in the grave, right? And I looked at all these hundreds of areas of competence that you have to master to do good IT and I tried to find the ones who really make a difference in performance.
And I found nine areas that are really, really, really affecting performance a lot. And then things starting moving faster. And I think since then, I’ve spent, me and my team have spent, I don’t know, thousands of hours looking into academia. What do they say about these nine areas? Practical, empirical studies made by huge professional companies? What do our own Top of the Pop specialists say about it?
And we actually found performance indicators and numbers that we could expect from each of the nine areas. It was really, really exciting. I’m really, I feel like a young kid when I’m working with this form of formula. It’s really, really interesting.
Mike: That’s great. That’s great. So of your 70 agents, that work with you at 7N, how many are really bought into the formulaic and causal thinking approach that you’ve been developing?
Jeppe: Well I think … you know, we have this responsibility to find what we call … our company is very niche. So we only take in what we call the top three percent of performers, right? And it’s out of the global pool of people and it was difficult for our agents to promise that to the customers and not be really sure that they got these top three percenters.
I mean, how do you hire people in such a niche area? Is it a gut feeling assessment? I mean many people do that, right? They do a gut feeling assessment. Are people likable, agreeable? Yeah, we can make this happen, right? And then they have this very expensive divorce a short while later. And we just couldn’t live with that.
So my whole agent team and I started working, I don’t know, five, six years ago very structurally on much more than just reference checks and gut feeling. Even though they were very experienced. Many of my agents have more than 3,000 interviews on their track record, so it’s quite experienced people I have. And you get the gut feeling centers. And that’s also right. We looked at what can really predict high performance.
Mike: So what I, can you articulate to our audience the nine factors that flow into the Nucleon formula?
Jeppe: Yeah, in the area of IT complex systems development, so my customers typically have 300 developers and upwards. It’s, my biggest client has 14,000 developers, so that’s a huge house. So there are three overarching areas.
One is people. People is the mother lode in IT. IT is very creative. Good people, and I’m not, these are conservative numbers. I can give you numbers from very large IT houses that are much higher than the ones I’m mentioning now. Four times higher is the most aggressive number that I run into by trustworthy, competent, experienced people.
But we say that the top one percent performers in IT perform 100 times better than the worst individual and 20 times better, that’s probably more interesting, than the average Joe in the IT department. And that’s amongst professionals. So we’re talking professional developers, project managers, people who has this as a living.
There you have this wide performance gap. It’s interesting, right?
Mike: Huge. Huge. It’s amazing.
Jeppe: So it’s very interesting to know if you find the nine or the 10. The nine, of which is top 3 percent, actually only performs 57 percent of the 10. So you really wanna know where you’re at when you hire people. So, that’s the one area.
The two other areas are the way you organize yourself. That’s one area. And how complex your environment is. So if we look at organization, we have four areas. So that could be like, how big is your team? We know that very big teams reduce performance. We wanna know how close you are to the decision-maker so that, because if he’s far or she’s far away, that will create black holes in the development organization and so forth.
So and then within the complexity area, things are much more difficult to change. So that’s something like your culture. Culture is difficult to change but it has a huge effect on your performance. It could be how much legacy systems, how much old, non-strategic systems that you still have to maintain because you still have some data you use or some functions in the systems that you haven’t created in your new strategic systems. Then you need to allocate a lot of people handing those. So how much of that, how can you get out of that?
So you have these three overarching areas. People, how you organize them, and how complex the environment is. And under organization we have four areas, and under complexity we have four areas. So in total, nine areas where we know the performance implication of each area when we can assess them.
Mike Z: Okay, that’s fantastic. So I’ve gotta ask you, if you were stuck on a data-less island, so you could only grab one piece, one metric, in order to pick a star performer, what would that metric be?
Jeppe: That would really be a dilemma because we found out we need to actually assess four, five, six major areas to feel confident we have a top star IT guy. But it would be a, for me, it would, because complex systems development takes a long time to really get under the skin of, I would have to go between experience/reference taking so if I could call someone and say is this really a rock star, that would really be good. But not that, if I don’t have that, I would probably do some cognitive abilities assessment. Cognitive ability is something I’ve compromised, I mean in very demanding jobs, I’ve compromised a couple of times and suffered.
Mike: Right. Yeah, it’s often referred to, as I understand it, the number one predictor of workplace performance is general cognitive ability. And I think that’s true when it’s just a regular job. Now when you’re dealing with what you call complex systems development, I have to imagine it’s massively important in that environment.
So your formula addresses IT performance. Do you think the formula works, or aspects of the formula works, or has implications to other departments in other less technical organizations?
Jeppe: You know, I’m really looking forward to this getting its own life. So, you know, I’m, as I said before, in IT terms, I’m a relatively old man and I’ve had a good life. And I think this Nucleon thing will grow and grow and grow way beyond my saying goodbye to this Earth.
I hope that people will use this way of thinking in sales, in production. I mean, all lines of businesses have their way of predicting performance, but they just haven’t put it together with a clear consequence.
So right now, we like to compare this with horsepowers under the hood of your car. I can actually, with my formula, I can tell you how much IT power JP Morgan Chase has or a Citibank. And wouldn’t you like to know? I mean, I would like to know as an investor because I know how much IT means for a bank. I would like to know if Chase Manhattan Bank or whatever your big US banks, what performance level can they achieve? How much can they develop if they really wanted to put some muscle behind a project? And-
Mike: Right. That would be amazing, especially if you could take the IT horsepower, divided by spends, to find out the efficiency of these IT departments from a return on investment perspective. That’s fantastic.
Jeppe: Oh, yes. So one is the raw power, and of course if they utilize it well, they paying a lot to do it or are they doing it in a low cost way. But just the mere power just to know if they have 10,000 Nucleons or only 1,000 Nucleons. That would be good to know. And you can’t use headcounts or budgets ’cause they can just be dumb at what they’re doing, right?
Mike: That’s right. So when I was reading the book, I was really intrigued by the team size. Can you tell us a little bit about team size and how it plays?
Jeppe: Yeah, it’s interesting. It shocked me a little bit. Obviously, intuitively, I knew when I thought about more mature businesses than IT, for instance war, right? I mean if we look at how our specialist troops, like you have Navy Seals. We have what we call the Hunters here or, you know. Their teams are typically only five people. So they’re very small. Sometimes they can be bigger, but that’s because they have some assignments where they really need some specialized knowledge. And they know that they’re reducing their performance level when they grow the team.
But what really happens and the best we have found, the best way we have found to articulate it is the amount of communication rounds. So when you’re only three people on the team, there are only three communication rounds. But when you’re four people on a team, you have six communication rounds. And that kinda like goes into this exponential graph, right? I mean, so I think if you have 17 people on a team, you have, I don’t know, go 150 something communication rounds.
And what happens is, in a team with that many people, like 17 doesn’t sound like too much I guess but it really is in IT, you suddenly don’t know who’s doing what, what are their weak and strong sides? How can we best help each other? Who has what artifacts? How far are you, should I wait for you? Are you ready to receive what I have done now? It just, it just … and the project manager has a huge problem deep diving into all these 17 workplaces that he manages. It just, it just sands up. It just becomes much less effective.
Mike: Right. Right. I can totally see that. So if someone dives into this and they said I’ve got a complex system. Maybe it’s an IT department. Maybe something other. Where or how should someone start in their journey to improvement? ‘Cause I’m sure it’s pretty daunting to them to, you know, as we, you know, you’re very facile with these theories. You know, causal thinking, and … how should they get started? So that it, they can take it off in some bite-sized pieces?
Jeppe: You know, and I ask myself that question too because I don’t want, I could launch a new business unit that did consulting on this. And people ask me why don’t you do that? And I’m saying, I’m just so happy with my current job. I really love this agent thing, so, you know, and it might be that I’m just a humble man but I don’t need to earn more money.
So I didn’t want to send out this book and just leave it there. So what we actually did, what we did a small, we did a small home page where you can actually do a rough assessment in less than 20 minutes, I think, of your team. So we’re gonna launch that together with the book and, we did one trial with the formula in a bank where we hand-held it. It took us 300 hours with two very seasoned agents of mine. Recruitment agents that I have. And my COO was project managing the entire thing. And I’m just not going to spend that amount of time. So we had to move it into this website that people could use for free.
Mike: Oh, so it’s sort of like an analytic tool where you can get a sort of self-survey?
Jeppe: Yeah, the project manager will go in and then it will ask him to assess every individual he has, how much he pays them, how much potential they have? And we will then show him what science and experience say about their actual performance per dollar for him. It’s quite eye-opening, I can tell you that. It’s very, very eye-opening. You really want to allocate your resources optimally.
Mike: Oh, that’s fantastic. Well, that’s wonderful. Well, Jeppe, this is really interesting stuff. I have a lot of conversations around human capital, and your approach is so unique. You know, this causal thinking, the fact that you’ve written sort of what hopes to be a breakthrough book, but certainly a breakthrough equation on the subject. Thank you so much for your thoughts. We’re just so fortunate to have had this time with you together for you to share some of these ideas.
Jeppe: It was good to meet you and thanks for developing the products that we appreciate so much. So, perhaps we’ll see you at mynucleon.com, which is gonna be the name of that assessment home page that we discussed.
Mike: Well I know my head of R&D and my Chief Technology Officer, who both read the book, they’re certainly gonna be keen to dive in and I know our teams, you know we have a lot of structural elements that are in flux for us, and it’d be great for us to dive in. Hopefully we don’t score poorly from the start, but yeah. But thank you.
Jeppe: You probably will be surprised how poorly you score, but look at it as an opportunity to improve. And we’ll give you a laundry list on what projects they should take on first.
Mike: That’s great. That’s great. Well, we should start soon, then. Well, thank you. Wonderful speaking with you and best of luck with the book launch and with 7N.
Jeppe: Cheers, it was a pleasure.