Poison in the Well

During a college summer I worked for a manufacturing company as a machine operator.  It was boring work.  During the first night, I figured out a more efficient way to configure the work space.  The second night, after some rearranging, I more than doubled the output.  When entering the plant on the third night, the supervisor clapped me on the back and congratulated me.  Barely two minutes later, the union steward told me that if I did it again, I risked bodily harm in the parking lot.

I was designing a sales incentive plan working closely with the vice president of sales for a well-known consumer manufacturer.  During a plan review meeting, a financial person persisted in questioning a provision in the plan.  After a short while the sales VP suggested that maybe the finance person didn’t want his job.

As a senior vice president of a national broadband company, I heard of a small group of cable installers in rural Massachusetts who wanted a union.  I traveled most of a day to get there and sat with the group.  It took a while for them to open up, but when they did, I heard their ideas to better schedule time off.  Unfortunately, their manager didn’t want to listen to them.  It wasn’t about pay, or benefits, or safety – it was about flexibility.

There are many reasons why organizations don’t get the best thinking from their people – it almost never has to do with the ability or motivation of the front line crew.

Why Not Use a Horoscope?

Assessment tools (Myers Briggs, DISC, etc.) are being touted as useful ways to improve teamwork and productivity.  But they’re really nothing more than a way to label people in ways that aren’t even accurate (since they are self-reported.)  You might as well use a horoscope.  These tools actually provide an excuse not to be honest with each other because it’s easier to label people and put them into categories than to really understand each other.

(If you want genuine personality assessments or selection tools, use a qualified professional and valid, reliable instruments, otherwise you’re on thin ice.  And if you need a referral, let me know.)

The real question is:  What is your objective?

• If your purpose is to start a conversation, why not use a Drucker essay, a Maureen Dowd column, or a Harvard case study?
• If you want to identify work styles, why not just discuss who works best in a group work and who prefers solitude?
• And if you want your people to work better as a team and improve business execution, an approach I often use is to help participants give each other relevant business feedback and actually listen to each other.

The real key is to change behavior, not just insights.

Why you don’t want happy employees

Umpteen studies over the decades have proven that a happy employee is not necessarily a productive employee.  So all the talk and articles and blog posts about how to make your employees happy are misleading.  Making employees happy is not what you should be trying to accomplish. 

So what do you want your employees to be? 

First of all, you want them to be productive.  Getting the job done is the sine qua non — without which, there is nothing.  But productivity these days is not enough.  You can, through command, control, manipulation, and consequences get people to be productive.  But as a result, they won’t be committed — to providing the best service, to continuous improvement, to developing their skills, and to your company.

So secondly, you want employees who get satisfaction from their work.  This is not the same as being satisfied – that’s not motivational.  Rather, it is the satisfaction that comes from accomplishment and doing  good work, which is the strongest source of motivation — intrinsic motivation.

When someone derives satisfaction from their work, they treat other employees and customers better, they put in extra effort, they want more of the satisfaction from doing a good job.

Don’t try to make employees happy or satisfied.  Instead, help them to be productive and to get satisfaction from accomplishment.  Only then can you maximize your return on people.

Executive Pay Out of Control

Let me get this straight:

A business unit loses $40.5 billion in one year, causing the company to nearly collapse, and jeopardizing the world economies.  The government provides up to $173 billion in public funds to bailout the company.  And key company employees are getting about $450 million in bonus payments.

The company claims the bonuses are “retention” payments, even though 11 of the employees receiving $1 million or more each are no longer with the company.

• Does this make any sense to anyone?
• What would these employees get in a good year?
• Why retain the very people who caused this mess?
• Did the government do any due diligence before throwing an enormous amount of public funds at the problem?
• Who designed this bonus program?
• Who approved this bonus program?

It gives “pay for performance” a whole new meaning.

Trust – What executives can learn from A-Rod

What bothers me about the Alex Rodriguez (A-Rod) story now in the news is not that he used steroids early in his career.  We know that steroid use in baseball (and football…) is epidemic.  What really bothers me is that a supposedly confidential and anonymous test wasn’t either one.  Never again will any major league baseball player (or minor league, or college…) participate in any “confidential” study.  The trust has been entirely blown.

I have conducted employee surveys for many companies over the years.  And I’ve always been intrigued by employees and managers who are so obsessed with confidentiality.  It is a clear indicator that trust is lacking within the organization.  (Of course we will conduct every survey to be confidential – meaning we will not release any individual information, period.)

I’ve always thought that an open and productive work environment should be one where opinions are shared so that problems and misperceptions can be corrected or at least understood.

The vast majority of executives and managers I have worked with respect confidentiality and welcome other opinions.  They truly want to understand what employees are thinking and to make the workplace better.  However, a small percentage of executives and managers are so insecure in their positions, and zealous in their need for control, that they welcome the thinking of their people only if it agrees with their own thinking.

I once observed a leadership 360-degree process in which an executive shared his thinking that the CEO’s regular profanity-laced diatribes against former executives needed to be toned-down.  I thought that was valuable input to someone who claimed to want to make improvements.  While other participants told the executive privately that they admired his willingness to share thoughts that the CEO might not like, the CEO clearly held it against him and omitted it from the CEO’s report to the board (although he included all other comments.)  The message was clear to all in the executive ranks.

Much of the leadership literature of the past 20 years has addressed how to create an open, engaging, and involved workplace – particularly at the executive level.  An honest and candid approach can be very valuable.  Jack Welch, for example, is not known for being nicey-nice, yet he (apparently) worked hard to create an environment where he would get the best thinking from his people, tapping the diversity of thought to find the best solutions.

Smaller “leaders” do the opposite.  They pretend to be collaborative and participative by saying the nicey-nice things, but regularly demonstrate manipulation and control in their actions.  They are posers, and they’ll never get the best from their people.

A-Rod made a mistake early in his career by using steroids — a fact that he has acknowledged.  But perhaps the bigger mistake was to trust in the “confidential” and “anonymous” study.

Can major league baseball ever gain credibility and confidence of the players again?  If so, what would it take to do it?  And what can other organizations learn from this?

Alternatives to Layoffs — Part III

Strategy #3:  Reducing HR Costs

Many companies still haven’t transformed their HR area to reduce costs and improve support to the business.  Cost reductions of 25% are possible and the change in HR from administrative transaction processor to business partner significantly helps line managers.

• Examine the possibility of self-insuring benefits such as dental or optical coverage.
• Consolidate human resource or training functions in the field where appropriate.
• Streamline HR processes and procedures such as the approval process for hiring, transfers, and performance appraisals.
• Employee performance appraisals are generally more effective and less time-consuming if held on a quarterly or semi-annual basis, rather than annually.
• Reduce duplicate paperwork, data input, and manuals.
• Automate HR functions via internet applications, for example benefit enrollments.
• Push more responsibility onto vendors.
• Renegotiate vendor contracts.
• Outsource selected HR functions such a payroll, benefits administration, training, or recruitment.
• Restructure HR to provide new challenges and improve efficiencies through new HR staff performance goals and accountabilities.

For a copy of the full report click here.

Alternatives to Layoffs — Part II

Strategy #2:  Involve Employees in Cost Reduction

Many good ideas can come from employees because they see waste and inefficiency up close.  Companies such as Allied Chemical, Coca~Cola, General Electric, and General Foods have saved millions of dollars in energy, time and material costs by tapping employee input.

Ideas to Consider

1. Have each department sit down with employees regularly to identify cost saving opportunities.
2. Consider using a facilitator as many times employees don’t want to offend managers or supervisors.  For example, in one company I know, employees were uncomfortable speaking up about a time wasting project management process because the CEO created the process and was notoriously defensive about it.
3. Choose to act on the opportunities that have the best combination of high payoff and low effort needed to implement.

What to focus on

• Energy saving ideas
• Operational inefficiencies
• Duplication and overlap of effort
• Scrap
• Internal reports
• Unnecessary meetings
• Opportunities to share best practices
• Options to eliminate positions when people leave or retire
• Ways to reconfigure jobs to improve outcomes
• Benchmarking to identify opportunities through better practices.

Next:  Strategy #3 — Reducing HR Costs

For a copy of the full report click here.

Alternatives to Layoffs: Part I

If your objective is to reduce people-related costs, layoffs are a fast way to go.  But many companies are looking for ways to reduce costs without losing good talent.  Here is a summary of our report on optional strategies that could be used with, or instead of, layoffs and are proven effective in reducing people-related costs.  For a copy of our full report including more cost reduction tips and techniques click here.

Strategy #1:  Alternatives to Layoffs

Laying off people means losing the investment you’ve made in hiring and training.  It will cost you more to replace the lost people when growth resumes — if you can find similar talent.  Additionally, layoffs can damage trust, respect and loyalty, as well as create high stress levels.  Sometimes they’re unavoidable, but consider these alternatives.

1. Cut overtime.
2. Cut or reduce travel, purchases of office supplies and equipment.
3. Reduced workweek.  Nevada casinos recently instituted four-day workweeks as has Pella Windows, AK Steel, the City of Atlanta, and various hospitals.
4. Eliminate or scale-down annual celebrations.  You can still celebrate achievements, but be consistent with the cost-reduction theme.
5. Hiring freeze.
6. Reduce/eliminate bonuses.
7. Unpaid vacations.  Dell is offering employees up to five days without pay through January.  Honda is also offering voluntary unpaid vacations for U.S. employees.
8. Voluntary or enforced furloughs.  The Seattle Times mandated a week of unpaid furlough for 500 workers amounting to $1 million in savings.
9. Salary or wage freezes.
10. Merit increase freezes.
11. Pension cuts.
12. Suspend 401(k) matches, as Kodak announced recently.
13. Offer flexible work schedules to reduce hours.
14. Cut pay by some percentage across the board.  Motorola recently implemented salary cuts.
15. Schedule a work shutdown.  Cisco planned a four-day end of year shutdown. 
16. Exit incentives to encourage voluntary quits (Watch out — you might lose the wrong people with this one.)
17. Offer additional time off instead of pay increases.

Next:  Strategy #2 — Involve Employees in Cost Reduction

For a copy of the full report, click here.

Merit Pay Satisfies No One – and Upsets Many

First, some truths based on overwhelming research and evidence:

1. Individual pay for performance does not improve organization performance.
2. There is no evidence that performance appraisals improve performance.
3. After three decades of research, there is no evidence that merit pay improves either individual employee performance or organization results.
4. Individual employees do not trust their performance appraisal systems.

Furthermore, merit increases aren’t enough to motivate employees – but they will irritate them.  You’d have difficulty feeding a family of four at McDonald’s once a week on the additional pay a high performer gets over an average performer. 

Example:  Average 2009 merit increases are projected to be 3.6 to 3.8 percent, with the highest performers getting 5.6 to 6.0 percent.  For a $50,000 salary, the difference between the average and highest is 2.0 to 2.2 percent.  2.1% of $50,000 is $1050, or $20.19 per week before taxes.

Even when there is significant pay differentiation between weak and high performers, the cash difference isn’t much.  And many studies have shown that differentiation destroys engagement, breeds distrust, and undermines teamwork.

So, what does improve performance?

High performance companies align all the elements of strategy implementation with compensation.  This includes:

1. A clear strategy effectively communicated through the organization so people understand their roles.
2. An organizational structure and processes that enable information, collaboration and decisions to flow in all directions.
3. Co-workers who are competent, productive and positive.
4. A culture of collaboration and high performance.
5. AND rewards that reinforce the strategy and values.

Treating performance reviews and merit increases as annual administrative exercises puts the focus on administrative deliverables, instead of on strategy, values and business outcomes.

Performance management can be a powerful tool to align effort and improve performance.  But it will never achieve those results the way it is traditionally practiced.

(Bob Legge helps clients improve performance and return on people.  For more about this topic, go to http://www.leggecompany.com/articles.htm)

Five Keys to Improving Employee Engagement

There is an old joke about a CEO who was asked how many people worked in his company.  His answer:  “About half of them.”

It has the ring of truth.  According to studies, only 30% of employees are fully engaged in their jobs.  50% of employees are somewhat engaged.  And 20% are actively disengaged.

I’ve never seen a company with engaged employees and unhappy customers.  Engaged employees drive results, positively affect attitudes, and enable a company to outperform its competitors.  They drive customer satisfaction, product and service quality, and revenue growth.  When Herb Kelleher retired as Chairman of Southwest Airlines last year, he said, “You have to treat your employees like customers.  When you treat them right, then they will treat your outside customers right.  That has been a pwerful competitive weapon for us.”

The five things you need to know about improving employee engagement:

1.  Engaged employees feel valued.  No matter how well a person fits the job, or understands the business, he or she also needs to feel valued to be engaged.

2.  Leadership is required.  Leaders who build commitment also build engagement.  Getting compliance through control is never the same thing as building commitment.

3.  Make sure HR practices reinforce engagement.  For example, if teamwork is important, is it reinforced with compensation plans, or do rewards focus on individual performance?

4.  Engaged employees are involved.  Employees value having input on decisions that affect them.

5.  Only let the right people into your culture.  If you hire the right people to begin with, you’re way ahead.

6.  Take your foot off the brake.  Find out what gets in the way of people getting their work done and do something about fixing it.

For an expanded article, see http://www.leggecompany.com/articles.htm