Ideas in Action - Blog

Case Study

A client firm was working hard to grow revenue. The company had several initiatives in place focused on this goal. Cost controls were tight, wasted effort appeared minimal, and managers were highly focused on doing things right. Still, revenue was stagnant.

After consultation, we collected employee data from several key teams, which triggered a series of revelations. For example, a team of software engineers did not feel their strengths were being utilized. In debriefing them, we came to understand that they were also in the dark regarding their growth opportunities within the firm. The company was losing two engineers to competitors annually. It took six months for new engineers to get fully up to speed; replacing them was time consuming and expensive.

Each person on this team of 17 was responsible for driving about $2 million in annual revenues. That’s $34 million. Their total annual salary expense was about $2.5 million. If you’re a manager you’d like to retain (or improve) that 14:1 ratio. If you’re a software engineer, you’ve got some idea of your value and you want to work in a place where you feel appreciated and where you feel the company is investing in your growth and development.

Opportunity

The math made the solution obvious: foster employee development; this boosts retention. Although it may seem counter-intuitive to prioritize staff development in times of lackluster financial performance, the returns are well worth it.

This Glass Door-based data demonstrates that top performing individuals work at places committed to investing in their development. As the math demonstrates, these places [green line] significantly outperform their peers. Recognizing the opportunity, the firm made human resource development a priority starting with that team of engineers.

Solution

Unlike cutting expenses, employee development does not instantly, visibly impact profitability. Building engagement and improving retention rates takes time. To address the gaps related to utilizing their strengths and growth opportunities the engineers elected to create individual development plans. They would review them with their manager, get guidance, and update them quarterly. The time investment allowed their manager to know each person as an individual, which improved his ability to understand individual strengths and interests, and further improve retention.

Now back to the math… let’s say creating each plan required an hour, as does the initial manager meeting. And each of the three subsequent quarterly update meetings take a half-hour. Assuming a $150k salary and benefits package, the annual investment per engineer is $324 for the 4.5 hours per year it takes to develop and monitor their plans.

A senior executive estimated the cost of losing and replacing just one talented engineer at $400k all told. At roughly 1,200:1, that’s another favorable ratio with a clear bottom line impact. Additional benefits include better relationships among staff, deeper engagement, and increased innovation. Leadership math is simple. Which math will have the greatest impact on your results?

Next Step

If you want a sense of how well you know an individual team member, pick one and give yourself one point for each of the questions you answer with “yes.” If you scored fewer than ten points, the team member’s resume may already be in circulation.

What?

A creative, constructive culture overcomes challenges. It generates positive relationships with employees, customers and typically produces profits. Douglas Conant led a constructive culture turnaround at Campbell’s. Southwest Airlines is an oft quoted example as well. Here’s a list of 24 more.

The news from VW makes the difference between constructive and destructive cultures crystal clear. Organizational culture rolls down hill. When it’s destructive, there can be ugly consequences. Look at some choices that contributed to VW’s current crisis:

1. Former CEO Martin Winterkorn decided to make VW the world’s largest auto manufacturer.
2. Chancellor Angela Merkel overturned an existing EU agreement on pollution controls in 2013.
3. Senior VW leaders nurtured a “deep rooted hostility” toward pollution controls.
4. In 2008 VW engineers installed software to defeat emissions testing and bragged that they had developed a “clean diesel.” The same lie-ware is used in 2.1 million Audis.
5. VW sold 11 million “clean diesels” that weren’t so clean.

So What?

The law of unintended consequences stipulates that the actions of people and governments always have unforeseen impacts. Here is the corresponding list of unforeseen consequences for VW:

1. Winterkorn’s success was short lived. The fraud destroyed billions of dollars of VW’s value.
2. Merkel’s decision sent a message that competitive position was more important than limiting pollution.
3. Rather than acknowledging their engineering challenge, VW leaders now face the company’s worst crisis. Senior leaders have been terminated or placed on leave.
4. The VW reputation has been irreparably stained. Investigations will consume vast human and financial resources. Criminal complaints have been filed and investigations are active. Instead of being focused on cars, many VW employees will spend their time talking to investigators.
5. Millions of customers paid a premium for not-so-clean diesels. They are angry. Some want the company to buy them back.

In terms of the ultimate price tag, the lie-ware decision may be to VW what the Deepwater Horizon was to BP, but worse. Some estimate it could cost $86 billion. This makes the $60 billion BP has paid so far seem like a bargain. And that number does not include internal costs of people and time devoted to repairing the damage instead of building the business.

Now What?

Any business leader will face tough decisions. At times there may be no good choices. The character of a company’s culture will dictate the choices people make.

The results of constructive vs. destructive cultures are clear. It’s up to leaders to make the choice. One key step: get an objective snapshot of the current culture. Then, based on the results, you can look at your choices.

Certainly people want and need to be compensated fairly. Money is important. It’s one of the ways we keep score and demonstrate value.But how important is it, really?

The Mayo Clinic delivers what is arguably the finest medical care in the world. It attracts brilliant physicians but not because the pay is great.Once they’ve been on staff for five years - no matter what - their pay is the same as every other physician in their department.[i]They could leave and be paid more money elsewhere. So why don’t they? Because they know they won’t be able to practice better medicine. The Mayo is patient-centric.Everyone is part of a team. The team has one purpose: deliver outstanding patient care.And they are all aligned around that purpose. They are internally motivated.

More important than money is the question of whether people feel they have the opportunity to do what they do best. That’s what they want. Do they feel the powerful drive that comes with the sense that they have the opportunity to “win” at work? Do they feel they can be effective? Do they sense their opinions count? Do they have the opportunity to grow and develop? ⁱⁱ

Do the same rules apply as individual contributors become managers?How about as managers take on P&L and strategic responsibilities?

The answer is “Yes and….” The “and” in this case is that employees and managers perform better when they engage with one another effectively.When a manager feels connected to his team and feels he can have a positive impact, he is more likely to have that positive impact. That’s good for everyone.

Let’s go back to the survey. This tag cloud tells you something important about getting real engagement.It was generated by the engineers’ key word answers to the “…more of…” question. Word use frequency determined word size.

This team is most definitely focused on wanting to do more of the things that will enable them and their team and the enterprise to be successful.They want to share knowledge, focus on performance and improve communication.They are thinking strategically.If your answer to the question “What percentage of team member will say something like ‘Pay us more?” was (a) 5%, you probably know that if you want to build real engagement you have to create an environment where people can win at work.People want challenge, an opportunity to develop, appreciation of effort and the chance to succeed. That’s what it takes.

Not convinced? You will be after you see behavioral economist Dan Ariely PhD at TedX.

Isn’t work about the money? For some people it certainly is. For many others, purpose and meaning are equally or more important. Certainly all but a fortunate few need money, but there is an inexhaustible source of free human inspiration that improves productivity and results.

When we have the opportunity to put something of ourselves into our work, we care more. It gives us purpose. As a result we become more creative and more effective. My daughter works two jobs because right now she needs to: waiting tables produces income, writing provides purpose and meaning and that spur inspiration.

What’s in the way of that in a typical workplace? One thing might be leaders who they assume they know how everything works, better than the people on the front lines. Sometimes it’s true. But often it isn’t, as demonstrated by a global multi-year management effectiveness study of 10,000 businesses.Based on the study’s criteria, US manufacturing and retail businesses mostly scored ‘C’ or ‘C-‘, around 3 on a 5 point scale.How can leaders earn an ‘A’?

Here are five things you can do if you want to pick some low hanging fruit that might improve motivation, retention and results:

1.Don’t assume you know the answer. Even if you do or think you do - WAIT - let employees demonstrate they do too, or can figure it out and grow. Maybe they will come up with a better answer. The opportunity for employees to improve results creates meaning and purpose.

2.Connect the work and its positive impact. Communicate it often. This is the core of purpose which drives productivity. Make it clear and present for everyone. Know your people because it may not be the same for everyone.

3.Develop the ability to listen. It is increasingly rare and the experience is treasured by those who notice you are actually paying attention. When you ask someone a question, try reframing what they said.Someone says “Our product development cycle sucks” and you say, “So we have the opportunity to improve cycle time?”

4.Ask for help. It might sound like “I’m open to ideas” or “How can we do this better?” and then listen. You will be surprised at the performance improvement opportunities that surround you.

5.Really value your people. Demonstrate trust, connect with purpose, actively listen and involve people in creating solutions. Practice these behaviors and you are much more likely to get everyone’s best effort. Bonus: you’ll probably feel good about it and boost your bottom line.

Imagine your organization at its best. What would it look like if it were truly an ‘A’ business? Start here and oh the places you’ll go.