Originally published Aug. 10, 2008
In my last column I wrote about the family trip to Pigeon Forge. When the hotel staff was unwilling to change a light bulb, it didn't ruin our trip, but it did leave a bad taste in my mouth.
I had a very different experience in Pigeon Forge a few years ago. Within minutes of arriving at Splash Country, I lost my keys.
As an aside, the locker rental they offer is a pretty good deal after all.
I lost my keys in the landing pool at the bottom of one of the water slides. I asked one of the 16 year old life guards if there was any hope of recovering them. He told me they would have to close down the slide and dive for them. If they turned up, he would take them to the lost-and-found office.
To be honest, he sounded as interested in finding my keys as I would have been at 16 - not very. I spent the rest of the day wondering how I would replace each key.
Late in the day I decided to visit lost-and-found, just in case.
When I told them I was looking for lost keys, someone opened a desk drawer with about 20 sets of keys. Much to my amazement, my keys were there.
I really don't know who found the keys, but I was pretty impressed for several reasons. First, I know it was my own fault, but Splash Country had a plan in place for handling customer mistakes. The light bulb incident was frustrating because the hotel did not have a plan for dealing with its own very simple problems.
I was also impressed that the teenagers who run Splash Country actually used the plan. I know it's wrong to stereotype, but I really didn't expect much help from anyone at Splash Country. At the hotel, however, the staff looked grandmotherly. When I asked for a new bulb, I almost expected them to bring some homemade cookies along with the bulb.
In these two simple examples, there's a pretty important message for companies. Research on customer service shows that customers are satisfied when their expectations are met. When their expectations are exceeded, however, customers become loyal devotees of the company. When customer expectations are not met, they become ex-customers.
At the hotel, I felt like my very low expectations were not met. At Splash Country, I also had pretty low expectations, but they were exceeded.
Several companies have become very successful by exceeding customer expectations. Every day, employees at Ritz-Carlton hotels around the world gather before their shifts to hear "Wow" stories. These are stories about hotel staffers who go above and beyond the call of duty to help customers.
But you don't have to be the Ritz-Carlton to make use of this principle. Most people have pretty low expectations when they go into a fast food restaurant. On a visit to the Ritz-Carlton, Chick-fil-A founder Truett Cathy noticed that when he thanked anyone on the hotel staff, they always replied, "My pleasure." That's why you get the same response and outstanding service from Chick-fil-A employees.
In the last year, Chick-fil-A has been recognized by Zagat's and Business Week for their outstanding service that exceeds customer expectations.
It's interesting to think about what might have happened at my hotel if Chick-fil-A employees had been working there. I'm pretty sure the response would have been, "It's my pleasure to change your light bulb."
Thursday, August 7, 2008
Thursday, July 24, 2008
Customer Service Matters
Customer Service Matters
I probably shouldn't admit this, but I spent last week trying to take advantage of the alleged economic recession. The Timmerman family packed up and headed to Pigeon Forge. I assumed that, since the American economy is collapsing, we would be the only ones at Dollywood.
It seemed like half the people in the US were in line ahead of us at the Old Mill Restaurant. Apparently, when the going gets tough, the tough go out to eat $18 fried chicken.
I was especially amazed at the number of out-of-state license plates I saw in the parking lots. Pigeon Forge isn't just a recession destination for Tennesseans. People are coming from all over the United States.
But this trip will be memorable for another reason. It was a small incident, but one that will stick with me.
After spending the day standing in lines, we returned to the hotel about 5:30. When we turned on the light switch, it seemed as though we were in a disco from the 1970s. The fluorescent light bulbs in the room were going bad and flickering like a bad strobe light.
No problem, I thought. I'll just call the front desk and ask them to send someone to fix it. But the person at the front desk simply said, "Sorry, we won't have anyone available to fix it until tomorrow morning."
I wasn't sure what to say. Is this hotel incapable of changing a light bulb at 5:30 on a Monday afternoon? I offered to fix it myself if she could simply find the bulbs. She told me that she would see if she could find them and let me know.
About thirty minutes later, I was walking near the front desk, so I decided to stop in and check on the search. That's actually when the search began. Both the receptionist and someone in an office behind the desk said that they didn't know where the bulbs were stored. That's when she looked at me like I was supposed to go away.
I was still baffled, so I offered to remove bulbs from an unoccupied room. The receptionist told me that they only had two empty rooms and they really weren't supposed to swap bulbs like that.
That's when I went from bewilderment to disappointment. I was the one coming up with possible solutions to the problem. They were making up excuses that really didn't make sense.
Finally, when I didn't go away, she offered to call "Walt" and find out where the bulbs were stored. A little while later, someone who obviously wasn't very happy with me showed up to change the bulbs.
I'm glad that the problem was fixed, but it still left me with a bad taste in my mouth. Obviously, my problem could be fixed. But until I persisted, no one wanted to help.
This incident stands out because customer service is something that can really separate any company from its competitors. There are 10,000 hotel and motel rooms in Pigeon Forge and to me they're all pretty much the same. I've stayed at this hotel many times, but this tiny incident has pushed me to shop around on our next visit.
I wonder if there's a hotel that offers room service from the Old Mill?
I probably shouldn't admit this, but I spent last week trying to take advantage of the alleged economic recession. The Timmerman family packed up and headed to Pigeon Forge. I assumed that, since the American economy is collapsing, we would be the only ones at Dollywood.
It seemed like half the people in the US were in line ahead of us at the Old Mill Restaurant. Apparently, when the going gets tough, the tough go out to eat $18 fried chicken.
I was especially amazed at the number of out-of-state license plates I saw in the parking lots. Pigeon Forge isn't just a recession destination for Tennesseans. People are coming from all over the United States.
But this trip will be memorable for another reason. It was a small incident, but one that will stick with me.
After spending the day standing in lines, we returned to the hotel about 5:30. When we turned on the light switch, it seemed as though we were in a disco from the 1970s. The fluorescent light bulbs in the room were going bad and flickering like a bad strobe light.
No problem, I thought. I'll just call the front desk and ask them to send someone to fix it. But the person at the front desk simply said, "Sorry, we won't have anyone available to fix it until tomorrow morning."
I wasn't sure what to say. Is this hotel incapable of changing a light bulb at 5:30 on a Monday afternoon? I offered to fix it myself if she could simply find the bulbs. She told me that she would see if she could find them and let me know.
About thirty minutes later, I was walking near the front desk, so I decided to stop in and check on the search. That's actually when the search began. Both the receptionist and someone in an office behind the desk said that they didn't know where the bulbs were stored. That's when she looked at me like I was supposed to go away.
I was still baffled, so I offered to remove bulbs from an unoccupied room. The receptionist told me that they only had two empty rooms and they really weren't supposed to swap bulbs like that.
That's when I went from bewilderment to disappointment. I was the one coming up with possible solutions to the problem. They were making up excuses that really didn't make sense.
Finally, when I didn't go away, she offered to call "Walt" and find out where the bulbs were stored. A little while later, someone who obviously wasn't very happy with me showed up to change the bulbs.
I'm glad that the problem was fixed, but it still left me with a bad taste in my mouth. Obviously, my problem could be fixed. But until I persisted, no one wanted to help.
This incident stands out because customer service is something that can really separate any company from its competitors. There are 10,000 hotel and motel rooms in Pigeon Forge and to me they're all pretty much the same. I've stayed at this hotel many times, but this tiny incident has pushed me to shop around on our next visit.
I wonder if there's a hotel that offers room service from the Old Mill?
Tuesday, July 15, 2008
The Value of Freedom
Originally published July 13, 2008
Like most good red-blooded Americans, I spent last weekend celebrating freedom by shooting fireworks made in China. We celebrate freedom because it is one of the foundations upon which our country was founded. Freedom is still one of the pillars that separates good countries from oppressive ones.
Oddly enough, freedom is also one of the things that often separates good organizations from bad ones. For the last two years, Fortune magazine has named Google as America's Best Company to Work For. Aside from their free food, one of the hallmarks of Google's culture is known as 20-percent time.
Google expects all of their engineers to spend 20 percent of their time working on projects of their own choosing. These projects are usually creative ideas that an engineer simply finds interesting. Some of Google's most successful products, like Gmail and AdSense, are the result of this freedom to experiment.
Another company on Fortune's list of Best Companies is the convenience store chain QuikTrip. Convenience stores tend to be quite dangerous places to work. So I don't typically think of them as being great places to work. At QuikTrip, however, employees report that the company provides them with the resources they need to be successful, and then they are left alone and trusted to do their jobs.
The value of freedom can be seen in non-profit organizations as well. In a nationwide survey of public school teachers, researchers from the National Center for Education Statistics searched for the strongest predictors of job satisfaction. They examined background characteristics like demographics, experience, and school size. They also looked at working conditions that might be under the control of school administrators.
The background characteristics had virtually no relationship with job satisfaction. Higher paid teachers were only slightly more satisfied than lower paid teachers. Two of the strongest predictors of job satisfaction were the teacher's influence over school policy and the teacher's control in the classroom.
In other words, teachers (like everyone else) are more satisfied when they are given more freedom to make decisions that influence their work.
So if organizational leaders want to offer more autonomy, where should they begin? Pretty much anywhere. One idea floating around lately is that employers should offer four-day work weeks. Aside from saving on gas, moving to a four-day week can offer a number of advantages.
Back when I worked at the underwear factory in South Carolina, we moved to a four-day work week only after the employees voted on it. Even though they were still working the same number of hours, this one move produced the biggest morale boost I've ever seen.
I'm still convinced that the morale boost came more from the vote than from the outcome. They simply appreciated being asked and having an influence.
You can probably come up with a number of reasons why a four-day work week won't work in your company. Sounds like another great opportunity for employee involvement. Ask your employees to overcome your reservations.
Any leader worth their salt should be able to come up with other opportunities for employee autonomy.
Organizational leaders then face the following choice. They can either provide their employees with some good ol' all-American freedom and reap the benefits. Or they can rule their company with the iron fist of a Communist fireworks manufacturer.
Like most good red-blooded Americans, I spent last weekend celebrating freedom by shooting fireworks made in China. We celebrate freedom because it is one of the foundations upon which our country was founded. Freedom is still one of the pillars that separates good countries from oppressive ones.
Oddly enough, freedom is also one of the things that often separates good organizations from bad ones. For the last two years, Fortune magazine has named Google as America's Best Company to Work For. Aside from their free food, one of the hallmarks of Google's culture is known as 20-percent time.
Google expects all of their engineers to spend 20 percent of their time working on projects of their own choosing. These projects are usually creative ideas that an engineer simply finds interesting. Some of Google's most successful products, like Gmail and AdSense, are the result of this freedom to experiment.
Another company on Fortune's list of Best Companies is the convenience store chain QuikTrip. Convenience stores tend to be quite dangerous places to work. So I don't typically think of them as being great places to work. At QuikTrip, however, employees report that the company provides them with the resources they need to be successful, and then they are left alone and trusted to do their jobs.
The value of freedom can be seen in non-profit organizations as well. In a nationwide survey of public school teachers, researchers from the National Center for Education Statistics searched for the strongest predictors of job satisfaction. They examined background characteristics like demographics, experience, and school size. They also looked at working conditions that might be under the control of school administrators.
The background characteristics had virtually no relationship with job satisfaction. Higher paid teachers were only slightly more satisfied than lower paid teachers. Two of the strongest predictors of job satisfaction were the teacher's influence over school policy and the teacher's control in the classroom.
In other words, teachers (like everyone else) are more satisfied when they are given more freedom to make decisions that influence their work.
So if organizational leaders want to offer more autonomy, where should they begin? Pretty much anywhere. One idea floating around lately is that employers should offer four-day work weeks. Aside from saving on gas, moving to a four-day week can offer a number of advantages.
Back when I worked at the underwear factory in South Carolina, we moved to a four-day work week only after the employees voted on it. Even though they were still working the same number of hours, this one move produced the biggest morale boost I've ever seen.
I'm still convinced that the morale boost came more from the vote than from the outcome. They simply appreciated being asked and having an influence.
You can probably come up with a number of reasons why a four-day work week won't work in your company. Sounds like another great opportunity for employee involvement. Ask your employees to overcome your reservations.
Any leader worth their salt should be able to come up with other opportunities for employee autonomy.
Organizational leaders then face the following choice. They can either provide their employees with some good ol' all-American freedom and reap the benefits. Or they can rule their company with the iron fist of a Communist fireworks manufacturer.
The Joy of Entrepreneurship
Originally published June 22, 2008
Two weeks ago I had more fun than I’ve had in a long time. My son and I packed our van with baseball cards, World Series programs, and autographs and set up a table at a sports card show in Nashville.
I was first bitten by the baseball card bug in high school. I started buying cases of cards, pulling out the cards I wanted, and selling the leftovers to dealers. When I was a sophomore in college, I got my very own table at a card show and was hooked.
That was the point when I changed my major from chemistry to psychology. I became convinced that I could make a career out of buying and selling baseball cards. I changed my major from something hard to something interesting so that I could concentrate on my emerging card business.
Thankfully, the baseball card market took a sharp turn for the worse just before I graduated. That downturn gave me just enough time to come up with a Plan B that turned out to provide a slightly more stable career path.
Over the years, I’ve held on to a few cards and will occasionally set up at a show. Ebay, however, has largely made card shows obsolete. I decided to do the show in Nashville because I wanted to expose my 9-year-old son to the joy of entrepreneurship.
T.J. helped prepare everything leading up to the show. At the show, he decided how to set up his half of the table. He handled his own sales and did his own negotiating.
Just like I preach in my classes, I offered him a profit-sharing deal. At the end of the day, we counted up our revenue, deducted our expenses, and split the profit 50-50. I asked if he wanted to stop at Outback for dinner on the way home. He asked if it would count as an expense. When I told him that it would, he opted for Chick-fil-A instead.
Entrepreneurship is not only fun; it’s also one of the most important things parents need to teach their children. I honestly believe that my children will see completely different employment relationships twenty years from now. I believe more people will be self-employed and entrepreneurial skills will be critical.
FedEx provides a good example of what companies are likely to move toward. Did you know that the FedEx Ground deliveries to your house are made by self-employed independent contractors?
They look like FedEx employees, but they buy their own trucks, pay their own expenses, and don’t get paid overtime. FedEx likes this arrangement because it provides them with endless flexibility. If there’s a downturn in business, they don’t have trucks or employee benefits to pay for.
About 15,000 drivers apparently find this arrangement attractive. They have the freedom to buy multiple routes and hire employees to help them with deliveries. They’re free to take a vacation as long as they find someone to cover their routes.
FedEx, like many other organizations, is asking the question: Do we really need employees?
I’m not sure if this is a great long-term strategy, but companies that are driven by short-term results will certainly ask the same question and make a similar decision.
Even if he doesn’t end up self-employed, T.J. will definitely know how to increase profit for his employer. And he’ll actually do it if he gets to share the profit.
Two weeks ago I had more fun than I’ve had in a long time. My son and I packed our van with baseball cards, World Series programs, and autographs and set up a table at a sports card show in Nashville.
I was first bitten by the baseball card bug in high school. I started buying cases of cards, pulling out the cards I wanted, and selling the leftovers to dealers. When I was a sophomore in college, I got my very own table at a card show and was hooked.
That was the point when I changed my major from chemistry to psychology. I became convinced that I could make a career out of buying and selling baseball cards. I changed my major from something hard to something interesting so that I could concentrate on my emerging card business.
Thankfully, the baseball card market took a sharp turn for the worse just before I graduated. That downturn gave me just enough time to come up with a Plan B that turned out to provide a slightly more stable career path.
Over the years, I’ve held on to a few cards and will occasionally set up at a show. Ebay, however, has largely made card shows obsolete. I decided to do the show in Nashville because I wanted to expose my 9-year-old son to the joy of entrepreneurship.
T.J. helped prepare everything leading up to the show. At the show, he decided how to set up his half of the table. He handled his own sales and did his own negotiating.
Just like I preach in my classes, I offered him a profit-sharing deal. At the end of the day, we counted up our revenue, deducted our expenses, and split the profit 50-50. I asked if he wanted to stop at Outback for dinner on the way home. He asked if it would count as an expense. When I told him that it would, he opted for Chick-fil-A instead.
Entrepreneurship is not only fun; it’s also one of the most important things parents need to teach their children. I honestly believe that my children will see completely different employment relationships twenty years from now. I believe more people will be self-employed and entrepreneurial skills will be critical.
FedEx provides a good example of what companies are likely to move toward. Did you know that the FedEx Ground deliveries to your house are made by self-employed independent contractors?
They look like FedEx employees, but they buy their own trucks, pay their own expenses, and don’t get paid overtime. FedEx likes this arrangement because it provides them with endless flexibility. If there’s a downturn in business, they don’t have trucks or employee benefits to pay for.
About 15,000 drivers apparently find this arrangement attractive. They have the freedom to buy multiple routes and hire employees to help them with deliveries. They’re free to take a vacation as long as they find someone to cover their routes.
FedEx, like many other organizations, is asking the question: Do we really need employees?
I’m not sure if this is a great long-term strategy, but companies that are driven by short-term results will certainly ask the same question and make a similar decision.
Even if he doesn’t end up self-employed, T.J. will definitely know how to increase profit for his employer. And he’ll actually do it if he gets to share the profit.
Old Managers' Tales
Originally published June 1, 2008
Over the last few weeks, Jennie Ivey was courageous enough to discuss old wives’ tales in her column. This takes courage because one person’s old wives’ tale is another person’s parenting wisdom. People don’t really like having their wisdom challenged.
I’ve never really liked the term “old wives’ tale.” It seems to imply that old husbands are immune from false beliefs. But I’m pretty sure husbands have a few of these as well.
One of my favorite tales is that more babies are born during a full moon. One of my children was born during a full moon and I remember the nurse commenting about how busy the maternity ward was that night. My other two children were born during other moon phases. Those were busy nights too, but I guess it was because of something other than the moon.
This tale is pretty easy to test. All we have to do is count the number of babies born during each moon phase and we get the right answer. Most recently, a group of researchers examined the moon phase of every birth in Austria over 30 years. What was their conclusion? There is absolutely no evidence that more babies are born during a full moon (or any other moon phase).
Beyond babies, at least 100 other studies have confirmed that the full moon has no effect on homicides, traffic accidents, suicides, psychiatric admissions, or any other human behavior.
So what does this have to do with business management? Last summer, England’s Sussex Police Department announced that they would increase patrols during full moons. One of their inspectors looked at the data from 2006 and found that more crime occurred around full moons.
Apparently he didn’t notice that, during 2006, five of the twelve full moons just happened to fall on weekends. Full moon or not, more crime occurs on weekends for reasons that have nothing to do with the moon. So the police force in Sussex is being managed by myth.
But the inspector’s study is backed up by his 19 years of experience. And that’s exactly why the full moon myth has implications far beyond police staffing practices.
Among the general population, about half of us believe that human behavior changes during a full moon. Among doctors, it’s over sixty percent and among nurses it’s over eighty percent.
In other words, the people with the most experience in this area are actually more likely to believe something that isn’t true. Experience is supposed to make us more accurate.
But this myth (like most myths) persists because of two things that are more powerful than evidence. First, we tend to notice things that confirm what we already believe. A busy night in the maternity ward during a full moon proves we’re right. Other busy nights are just dumb luck and we ignore the slow nights.
Second, these beliefs are passed down by people we respect like more experienced nurses, police officers, and old wives.
So what’s your managerial myth? Are happy workers really more productive? Is money really the best way to motivate employees? Are layoffs the best way to cut costs? Are women incapable of being good leaders?
The first step in avoiding management-by-myth is being willing to admit that your deeply held beliefs could be wrong.
I should also thank Jennie for an inspiration. I finished this column a full day before my deadline by putting a bar of soap under my keyboard.
Over the last few weeks, Jennie Ivey was courageous enough to discuss old wives’ tales in her column. This takes courage because one person’s old wives’ tale is another person’s parenting wisdom. People don’t really like having their wisdom challenged.
I’ve never really liked the term “old wives’ tale.” It seems to imply that old husbands are immune from false beliefs. But I’m pretty sure husbands have a few of these as well.
One of my favorite tales is that more babies are born during a full moon. One of my children was born during a full moon and I remember the nurse commenting about how busy the maternity ward was that night. My other two children were born during other moon phases. Those were busy nights too, but I guess it was because of something other than the moon.
This tale is pretty easy to test. All we have to do is count the number of babies born during each moon phase and we get the right answer. Most recently, a group of researchers examined the moon phase of every birth in Austria over 30 years. What was their conclusion? There is absolutely no evidence that more babies are born during a full moon (or any other moon phase).
Beyond babies, at least 100 other studies have confirmed that the full moon has no effect on homicides, traffic accidents, suicides, psychiatric admissions, or any other human behavior.
So what does this have to do with business management? Last summer, England’s Sussex Police Department announced that they would increase patrols during full moons. One of their inspectors looked at the data from 2006 and found that more crime occurred around full moons.
Apparently he didn’t notice that, during 2006, five of the twelve full moons just happened to fall on weekends. Full moon or not, more crime occurs on weekends for reasons that have nothing to do with the moon. So the police force in Sussex is being managed by myth.
But the inspector’s study is backed up by his 19 years of experience. And that’s exactly why the full moon myth has implications far beyond police staffing practices.
Among the general population, about half of us believe that human behavior changes during a full moon. Among doctors, it’s over sixty percent and among nurses it’s over eighty percent.
In other words, the people with the most experience in this area are actually more likely to believe something that isn’t true. Experience is supposed to make us more accurate.
But this myth (like most myths) persists because of two things that are more powerful than evidence. First, we tend to notice things that confirm what we already believe. A busy night in the maternity ward during a full moon proves we’re right. Other busy nights are just dumb luck and we ignore the slow nights.
Second, these beliefs are passed down by people we respect like more experienced nurses, police officers, and old wives.
So what’s your managerial myth? Are happy workers really more productive? Is money really the best way to motivate employees? Are layoffs the best way to cut costs? Are women incapable of being good leaders?
The first step in avoiding management-by-myth is being willing to admit that your deeply held beliefs could be wrong.
I should also thank Jennie for an inspiration. I finished this column a full day before my deadline by putting a bar of soap under my keyboard.
Please Buy More Stuff
Originally published May 18, 2008
Please Buy More Stuff
Well it’s looking more and more like my TTU colleagues and I will be receiving pay cuts this year. Our salaries aren’t decreasing, but the cost of living is going up and our salaries are staying the same. The net effect is that we lose buying power and we effectively receive a cut in pay.
So why are we receiving pay cuts? Did we do our jobs poorly last year? I don’t think so. We manufactured more student credit hours than ever before. We produced more degrees than ever before. And we attracted the largest freshman class ever.
We’re receiving pay cuts because the citizens of Tennessee aren’t buying enough stuff.
At TTU, we mainly receive raises when the state’s elected officials find enough extra money in the budget for us. In Tennessee, of course, the state’s revenue comes primarily from the sales tax. So I receive a raise when Tennesseans buy more stuff.
I’m not going to propose a solution to the state’s budget problems, but I think this is a pretty good example of the difficulty organizations have when it comes to compensation. Most organizations are not very good at using compensation to pursue organizational goals.
The problem is not limited to state governments. The news is full of companies where pay is not aligned with organizational performance.
In 2007, for example, Citigroup’s stock lost about half of its value and the company’s losses from the credit mess are approaching $40 billion.
Citigroup’s CEO, Charles Prince, “retired” in November of 2007 when the losses began piling up. He left with a severance package worth $40 million. He will also receive an office, secretary, car and driver for the next five years. Perhaps Prince will hire one of the 30,000 Citigroup employees who are being laid off because of his “leadership.”
Countrywide’s CEO, Angelo Mozilo, cashed out $400 million in stock options when the stock was doing well between 2003 and 2007. Mozilo’s options were awarded based on the company’s earnings. The company’s earnings, of course, were built on selling increasingly risky loans.
Now that the house of cards has collapsed and the stock price has fallen by 90 percent, Mozilo is doing pretty well while stockholders, employees, and customers are suffering.
Oddly enough, Mozilo was on the board of directors at Home Depot when their CEO, Bob Nardelli, was ousted because of the company’s poor performance. Nardelli left with a package worth $210 million.
And therein lies the problem with CEO compensation. CEO pay is determined by the board of directors. The board is supposed to act in the best interest of the shareholders. But most board members are selected in ways that guarantee CEO-friendly boards.
Most boards have adopted some form of performance-based pay for the CEOs, but their performance goals are either too easy to meet or actually counterproductive to the long-term health of the organization.
I’m the last one in the world that wants any sort of government regulation of CEO pay, but presidential candidates are proposing this very idea. The CEOs are bringing it on themselves.
All organizational leaders need to understand the kinds of things that foster the long-term health of the organization. Then they need to pay people for doing those things.
Until we learn that lesson, please buy more stuff.
Please Buy More Stuff
Well it’s looking more and more like my TTU colleagues and I will be receiving pay cuts this year. Our salaries aren’t decreasing, but the cost of living is going up and our salaries are staying the same. The net effect is that we lose buying power and we effectively receive a cut in pay.
So why are we receiving pay cuts? Did we do our jobs poorly last year? I don’t think so. We manufactured more student credit hours than ever before. We produced more degrees than ever before. And we attracted the largest freshman class ever.
We’re receiving pay cuts because the citizens of Tennessee aren’t buying enough stuff.
At TTU, we mainly receive raises when the state’s elected officials find enough extra money in the budget for us. In Tennessee, of course, the state’s revenue comes primarily from the sales tax. So I receive a raise when Tennesseans buy more stuff.
I’m not going to propose a solution to the state’s budget problems, but I think this is a pretty good example of the difficulty organizations have when it comes to compensation. Most organizations are not very good at using compensation to pursue organizational goals.
The problem is not limited to state governments. The news is full of companies where pay is not aligned with organizational performance.
In 2007, for example, Citigroup’s stock lost about half of its value and the company’s losses from the credit mess are approaching $40 billion.
Citigroup’s CEO, Charles Prince, “retired” in November of 2007 when the losses began piling up. He left with a severance package worth $40 million. He will also receive an office, secretary, car and driver for the next five years. Perhaps Prince will hire one of the 30,000 Citigroup employees who are being laid off because of his “leadership.”
Countrywide’s CEO, Angelo Mozilo, cashed out $400 million in stock options when the stock was doing well between 2003 and 2007. Mozilo’s options were awarded based on the company’s earnings. The company’s earnings, of course, were built on selling increasingly risky loans.
Now that the house of cards has collapsed and the stock price has fallen by 90 percent, Mozilo is doing pretty well while stockholders, employees, and customers are suffering.
Oddly enough, Mozilo was on the board of directors at Home Depot when their CEO, Bob Nardelli, was ousted because of the company’s poor performance. Nardelli left with a package worth $210 million.
And therein lies the problem with CEO compensation. CEO pay is determined by the board of directors. The board is supposed to act in the best interest of the shareholders. But most board members are selected in ways that guarantee CEO-friendly boards.
Most boards have adopted some form of performance-based pay for the CEOs, but their performance goals are either too easy to meet or actually counterproductive to the long-term health of the organization.
I’m the last one in the world that wants any sort of government regulation of CEO pay, but presidential candidates are proposing this very idea. The CEOs are bringing it on themselves.
All organizational leaders need to understand the kinds of things that foster the long-term health of the organization. Then they need to pay people for doing those things.
Until we learn that lesson, please buy more stuff.
Advice for Graduates
Originally published May 4, 2008
The week after I graduated from high school, I went to work at the underwear factory where my father worked. On my first day as a member of the labor force, I found a newspaper clipping next to my breakfast plate. I believe the clipping was a Dear Abby column. The column contained advice for graduates and I've always remembered one of the pearls of wisdom: If you don't like your job, quit. Otherwise shut up.
Yesterday, nearly 1200 students graduated from Tennessee Tech. I've attended many graduation ceremonies over the years. To be honest, I can't remember any of the advice given by the commencement speakers. But, for some reason, that newspaper column has stayed with me for over 20 years. Today I'd like to share some bits of wisdom I've picked up over the years. Feel free to share them with your favorite graduate tomorrow at breakfast.
On average, a college graduate will earn about one million dollars more than a high school graduate over the course of their career. Your degree doesn't make you worth a million dollars. It helps you produce value. Your employers will pay you according to your value, not your degree.
In college, you probably had teachers that allowed you to earn optional extra credit, drop your lowest quiz grade, and skip class the day before hunting season began.
In the real world, working extra hard is expected, your worst performance will count more than the others, and you might actually have to work on Saturday.
Your employer is your customer. They are buying labor from you. Keep your customer happy or they will shop elsewhere.
Your employer is not legally required to offer health insurance, a retirement plan, or paid vacation. Some employers offer these benefits to attract and retain great employees. If your employer offers these, they deserve greatness in return.
If you stop on the way to work and spend two dollars a day on coffee (or anything else), that's about five hundred dollars per year. If, instead, you invest five hundred dollars a year in a good mutual fund, you'll end up with over two hundred thousand dollars in forty years. Which would you rather have?
Want an investment with a guaranteed return of eighteen percent? Pay off your credit cards.
Do what you love. But if you love playing video games, don't expect to get paid the same as someone who loves doing brain surgery.
Just because you've finished college doesn't mean you've finished learning. You're just beginning.
Twenty years ago, Google's founders were in high school. Today their company is worth more than Boeing and McDonalds combined. Twenty years from now we'll be just as amazed by some other company. You can start it.
Finally, college graduates should know that Kenneth Lay, Andrew Fastow, and Jeffrey Skilling also graduated from college. Lay, Fastow, and Skilling were the brains behind the rise and fall of Enron. Lay died before he was sentenced, but Fastow and Skilling are in prison serving sentences for conspiracy, securities fraud, and insider trading. Thousands of employees and investors were hurt by the criminal behavior of these men.
Your education will allow you access to some great opportunities. But with opportunity comes great responsibility. So before you make a decision, ask yourself how it will look as a newspaper headline.
The week after I graduated from high school, I went to work at the underwear factory where my father worked. On my first day as a member of the labor force, I found a newspaper clipping next to my breakfast plate. I believe the clipping was a Dear Abby column. The column contained advice for graduates and I've always remembered one of the pearls of wisdom: If you don't like your job, quit. Otherwise shut up.
Yesterday, nearly 1200 students graduated from Tennessee Tech. I've attended many graduation ceremonies over the years. To be honest, I can't remember any of the advice given by the commencement speakers. But, for some reason, that newspaper column has stayed with me for over 20 years. Today I'd like to share some bits of wisdom I've picked up over the years. Feel free to share them with your favorite graduate tomorrow at breakfast.
On average, a college graduate will earn about one million dollars more than a high school graduate over the course of their career. Your degree doesn't make you worth a million dollars. It helps you produce value. Your employers will pay you according to your value, not your degree.
In college, you probably had teachers that allowed you to earn optional extra credit, drop your lowest quiz grade, and skip class the day before hunting season began.
In the real world, working extra hard is expected, your worst performance will count more than the others, and you might actually have to work on Saturday.
Your employer is your customer. They are buying labor from you. Keep your customer happy or they will shop elsewhere.
Your employer is not legally required to offer health insurance, a retirement plan, or paid vacation. Some employers offer these benefits to attract and retain great employees. If your employer offers these, they deserve greatness in return.
If you stop on the way to work and spend two dollars a day on coffee (or anything else), that's about five hundred dollars per year. If, instead, you invest five hundred dollars a year in a good mutual fund, you'll end up with over two hundred thousand dollars in forty years. Which would you rather have?
Want an investment with a guaranteed return of eighteen percent? Pay off your credit cards.
Do what you love. But if you love playing video games, don't expect to get paid the same as someone who loves doing brain surgery.
Just because you've finished college doesn't mean you've finished learning. You're just beginning.
Twenty years ago, Google's founders were in high school. Today their company is worth more than Boeing and McDonalds combined. Twenty years from now we'll be just as amazed by some other company. You can start it.
Finally, college graduates should know that Kenneth Lay, Andrew Fastow, and Jeffrey Skilling also graduated from college. Lay, Fastow, and Skilling were the brains behind the rise and fall of Enron. Lay died before he was sentenced, but Fastow and Skilling are in prison serving sentences for conspiracy, securities fraud, and insider trading. Thousands of employees and investors were hurt by the criminal behavior of these men.
Your education will allow you access to some great opportunities. But with opportunity comes great responsibility. So before you make a decision, ask yourself how it will look as a newspaper headline.
Coping With a Recession
Originally published April 20, 2008
Nationwide, business news has been pretty depressing lately. Gas and oil prices are at all-time highs. The record-breaking foreclosure rate means that people are losing their homes and mortgage lenders are going bankrupt. Food prices are rising faster than they have in twenty years and the stock market’s daily fluctuations make the scariest roller coaster look like a Kansas highway.
It’s looking more and more like the country is in a recession – just in time for the election.
So how should people and organizations cope with turbulent economic times?
This may sound trite, but the answer is to think about the future.
This recession won’t be the first. We’ve had many of them in the last hundred years. The interesting thing about recessions is that we’ve recovered from every single one of them.
The average recession lasts about one year. By the time we realize we’re in one, it’s about halfway over.
So how do people and organizations respond in these situations? Individuals often decide to cash out their investments. Unfortunately, by the time they make this move, the market has reached its low point. So they sell low and buy high when the market recovers.
If the stock market recovers like it has following every other recession, now would seem to be a great time to buy. Since the 2001 recession, over 800 stocks have tripled in value.
Organizational reactions are even more interesting. During recessions, organizations often lay off employees and cut back on “unnecessary” expenses like employee training and other human resource functions. These actions cut costs in the short term. But their long-term effects can be devastating.
Home Depot, for example, recently announced that they were eliminating 1200 store-level human resource management positions. Their plan is to add more sales people to deal with the slowing economy.
Just 10 years ago, however, Home Depot spent $100 million to settle a class action discrimination lawsuit. The judge blamed the discrimination on the lack of competent human resource leadership throughout the organization. So Home Depot is now firing the professionals who were hired to help the organization make better decisions.
Good companies take advantage of these mistakes. During the recession of 2001, companies like Southwest Airlines and SAS went on hiring sprees because they knew that talented people were being laid off by other companies.
These good companies also realize that a recession is a great time to increase training. During slower times, employees are not as busy and have more time to learn new things. They also have more time for brainstorming and coming up with ways for the company to run more efficiently.
When the inevitable economic recovery comes, good companies will have talented well-trained employees ready to respond.
The companies that cut employees and training will be understaffed and behind the curve when demand picks up.
These suggestions probably make sense, but they require something that is hard to find during a recession – money! Companies like Southwest and SAS were able to make the moves they made because they had set aside cash for a rainy day. When the hard times came, they were able to spend (wisely) while their competitors made rash mistakes.
The current recession means that spending will be tight around the Timmerman household this summer. But I’m not planning on laying off the kids to cut costs.
Nationwide, business news has been pretty depressing lately. Gas and oil prices are at all-time highs. The record-breaking foreclosure rate means that people are losing their homes and mortgage lenders are going bankrupt. Food prices are rising faster than they have in twenty years and the stock market’s daily fluctuations make the scariest roller coaster look like a Kansas highway.
It’s looking more and more like the country is in a recession – just in time for the election.
So how should people and organizations cope with turbulent economic times?
This may sound trite, but the answer is to think about the future.
This recession won’t be the first. We’ve had many of them in the last hundred years. The interesting thing about recessions is that we’ve recovered from every single one of them.
The average recession lasts about one year. By the time we realize we’re in one, it’s about halfway over.
So how do people and organizations respond in these situations? Individuals often decide to cash out their investments. Unfortunately, by the time they make this move, the market has reached its low point. So they sell low and buy high when the market recovers.
If the stock market recovers like it has following every other recession, now would seem to be a great time to buy. Since the 2001 recession, over 800 stocks have tripled in value.
Organizational reactions are even more interesting. During recessions, organizations often lay off employees and cut back on “unnecessary” expenses like employee training and other human resource functions. These actions cut costs in the short term. But their long-term effects can be devastating.
Home Depot, for example, recently announced that they were eliminating 1200 store-level human resource management positions. Their plan is to add more sales people to deal with the slowing economy.
Just 10 years ago, however, Home Depot spent $100 million to settle a class action discrimination lawsuit. The judge blamed the discrimination on the lack of competent human resource leadership throughout the organization. So Home Depot is now firing the professionals who were hired to help the organization make better decisions.
Good companies take advantage of these mistakes. During the recession of 2001, companies like Southwest Airlines and SAS went on hiring sprees because they knew that talented people were being laid off by other companies.
These good companies also realize that a recession is a great time to increase training. During slower times, employees are not as busy and have more time to learn new things. They also have more time for brainstorming and coming up with ways for the company to run more efficiently.
When the inevitable economic recovery comes, good companies will have talented well-trained employees ready to respond.
The companies that cut employees and training will be understaffed and behind the curve when demand picks up.
These suggestions probably make sense, but they require something that is hard to find during a recession – money! Companies like Southwest and SAS were able to make the moves they made because they had set aside cash for a rainy day. When the hard times came, they were able to spend (wisely) while their competitors made rash mistakes.
The current recession means that spending will be tight around the Timmerman household this summer. But I’m not planning on laying off the kids to cut costs.
Servant Leadership
Originally published March 30, 2008
Servant Leadership
In a previous column I mentioned a company called TDIndustries. The company is based in Dallas and makes heating, plumbing, and electrical systems for commercial buildings. The company is one of only fourteen that has appeared on Fortune Magazine’s list of Best Companies to Work For every year since 1998.
The company doesn't have the outlandish perks of Google, but it does have some unusual practices. No one's salary, for example, is more than ten times the salary of anyone else's. So the only way the president can receive a raise is if the lowest paid employees receive one.
The company is also owned by its employees. No individual owns more than three percent of the stock and the entire management team owns less than 25%.
It's also interesting that the CEO does not have an open-door policy. The reason he has no open door policy is because he doesn't have a door. The reason he doesn't have a door is because the CEO works in a cubicle that is exactly the same size as everyone else's.
The really interesting thing about these practices is the underlying philosophy in which they are based. Everything the company does revolves around the principles of servant leadership. The company formally adopted this philosophy in the 1970s, but the seeds were sown from the start.
Jack Lowe, Sr. started the company in 1946. Within one year, he had established a profit-sharing plan. He recognized from the very beginning that employees who helped make the profit deserved to share it. Two years later, Lowe offered employees the opportunity to buy stock in the company.
Over the years, the company faced the same struggles as any other company. Like most founders, Lowe found it difficult to give up control. As the company prospered and grew, however, he gradually came to see the company as a tool that could be used to genuinely improve the lives of his growing band of employees.
In the 1970s, Lowe discovered the writings of Robert Greenleaf. After 40 years at AT&T, Greenleaf left the company with the belief that America was suffering a leadership crisis. His 1970 essay "The Servant as Leader" began a movement that a few brave leaders are joining.
Greenleaf's primary argument is that true leaders are servants first. According to Greenleaf, the success of a leader is measured by the growth and well-being of his or her followers.
As Lowe's company continued to grow, Lowe did something that I probably would not have done. Just between you and me, I would have used this success as an opportunity to take it easy and work on my golf game.
Instead, Jack Lowe realized that his corporate success provided him with tremendous influence and opportunities for improving his community.
At the height of the country's school desegregation battles, Lowe led the multi-racial Dallas Alliance Task Force to develop an acceptable plan for integrating the schools in Dallas.
As president of the Dallas Council of Churches, Lowe began a city-wide counseling service and a prison ministry.
Jack Lowe, Sr. died in 1980 and his son picked up where dad left off. Today, the company has over 1600 employees generating $300 million in sales. And every one of those employees has attended servant leadership training.
That sounds like the kind of training they should offer at Jack Lowe, Sr. Elementary School, which opened in 2006.
Servant Leadership
In a previous column I mentioned a company called TDIndustries. The company is based in Dallas and makes heating, plumbing, and electrical systems for commercial buildings. The company is one of only fourteen that has appeared on Fortune Magazine’s list of Best Companies to Work For every year since 1998.
The company doesn't have the outlandish perks of Google, but it does have some unusual practices. No one's salary, for example, is more than ten times the salary of anyone else's. So the only way the president can receive a raise is if the lowest paid employees receive one.
The company is also owned by its employees. No individual owns more than three percent of the stock and the entire management team owns less than 25%.
It's also interesting that the CEO does not have an open-door policy. The reason he has no open door policy is because he doesn't have a door. The reason he doesn't have a door is because the CEO works in a cubicle that is exactly the same size as everyone else's.
The really interesting thing about these practices is the underlying philosophy in which they are based. Everything the company does revolves around the principles of servant leadership. The company formally adopted this philosophy in the 1970s, but the seeds were sown from the start.
Jack Lowe, Sr. started the company in 1946. Within one year, he had established a profit-sharing plan. He recognized from the very beginning that employees who helped make the profit deserved to share it. Two years later, Lowe offered employees the opportunity to buy stock in the company.
Over the years, the company faced the same struggles as any other company. Like most founders, Lowe found it difficult to give up control. As the company prospered and grew, however, he gradually came to see the company as a tool that could be used to genuinely improve the lives of his growing band of employees.
In the 1970s, Lowe discovered the writings of Robert Greenleaf. After 40 years at AT&T, Greenleaf left the company with the belief that America was suffering a leadership crisis. His 1970 essay "The Servant as Leader" began a movement that a few brave leaders are joining.
Greenleaf's primary argument is that true leaders are servants first. According to Greenleaf, the success of a leader is measured by the growth and well-being of his or her followers.
As Lowe's company continued to grow, Lowe did something that I probably would not have done. Just between you and me, I would have used this success as an opportunity to take it easy and work on my golf game.
Instead, Jack Lowe realized that his corporate success provided him with tremendous influence and opportunities for improving his community.
At the height of the country's school desegregation battles, Lowe led the multi-racial Dallas Alliance Task Force to develop an acceptable plan for integrating the schools in Dallas.
As president of the Dallas Council of Churches, Lowe began a city-wide counseling service and a prison ministry.
Jack Lowe, Sr. died in 1980 and his son picked up where dad left off. Today, the company has over 1600 employees generating $300 million in sales. And every one of those employees has attended servant leadership training.
That sounds like the kind of training they should offer at Jack Lowe, Sr. Elementary School, which opened in 2006.
Celebrating Mistakes
Originally published March 16, 2008
Springtime around the Timmerman household gets more exciting each year. My son is now old enough to play in the kids-pitch baseball league. Just like every other kid on the team, he wants to pitch.
So we go outside for a practice session and I squat with my back to the garage door. I have a funny feeling that we're going to need a backstop.
He does pretty well. Eventually, however, he gets a little too excited and tries to throw too hard. The ball sails past me and slams into the garage door with a loud bang.
Here I have a tough situation to handle. My natural inclination is to get angry about the wild pitches and damage to the door. But I also hear the wisdom of Bob Sutton ringing in my head.
Bob Sutton is a professor at Stanford and one of my favorite business gurus. According to Sutton, the best single question for testing an organization's character is: What happens when people make mistakes?
In some organizations, leaders forgive and forget mistakes. This approach makes everyone feel better, but it also means that the same mistakes are likely to occur again and again.
In other organizations, leaders search for someone to blame and humiliate. This approach teaches everyone not to make mistakes. And the best way to avoid mistakes is to try absolutely nothing new or innovative.
This approach also teaches people to cover up their mistakes. Several years ago, Harvard professor Amy Edmondson conducted a study on the relationship between leadership in nursing units and medical errors. She expected to find that teams with better leadership would have fewer errors. Common sense, right?
Instead, she found just the opposite.
Teams with better leadership reported 10 times more errors. When she examined the issue further, she found that teams with poor leadership were more likely to hide errors out of fear. Teams with good leadership, on the other hand, recognized that errors needed to be reported and studied so that they could be prevented in the future.
In rare organizations, leaders forgive and remember mistakes. They recognize that most errors are not committed with the intent to harm the organization. Instead, mistakes represent an opportunity to learn and improve future performance.
Mistakes are especially critical for creativity and innovation to occur. The most innovative companies in the world like 3M and Intuit celebrate mistakes that ultimately lead to better ideas.
One of the most famous mistakes in history was committed by 3M scientist Spencer Silver. He discovered an adhesive that wasn’t very sticky. Instead of hiding this embarrassing mistake, the culture at 3M encouraged him to share his failure with other employees. Another 3M employee wanted a bookmark that wouldn’t fall out of his hymn book and the Post-it Note was born.
There’s an old story that is often attributed to auto maker Henry Ford. One of his vice presidents made an error that cost the company over one million dollars. Assuming that he would be fired, the vice president handed Mr. Ford his resignation letter.
According to the legend, Mr. Ford responded: “I’ve just invested one million dollars in your education. Now get back to work.”
I guess if my son ever thinks he should give up pitching, I’ll tell him: “I’ve invested a garage door in your pitching career. Now grab your glove and let’s play.”
Springtime around the Timmerman household gets more exciting each year. My son is now old enough to play in the kids-pitch baseball league. Just like every other kid on the team, he wants to pitch.
So we go outside for a practice session and I squat with my back to the garage door. I have a funny feeling that we're going to need a backstop.
He does pretty well. Eventually, however, he gets a little too excited and tries to throw too hard. The ball sails past me and slams into the garage door with a loud bang.
Here I have a tough situation to handle. My natural inclination is to get angry about the wild pitches and damage to the door. But I also hear the wisdom of Bob Sutton ringing in my head.
Bob Sutton is a professor at Stanford and one of my favorite business gurus. According to Sutton, the best single question for testing an organization's character is: What happens when people make mistakes?
In some organizations, leaders forgive and forget mistakes. This approach makes everyone feel better, but it also means that the same mistakes are likely to occur again and again.
In other organizations, leaders search for someone to blame and humiliate. This approach teaches everyone not to make mistakes. And the best way to avoid mistakes is to try absolutely nothing new or innovative.
This approach also teaches people to cover up their mistakes. Several years ago, Harvard professor Amy Edmondson conducted a study on the relationship between leadership in nursing units and medical errors. She expected to find that teams with better leadership would have fewer errors. Common sense, right?
Instead, she found just the opposite.
Teams with better leadership reported 10 times more errors. When she examined the issue further, she found that teams with poor leadership were more likely to hide errors out of fear. Teams with good leadership, on the other hand, recognized that errors needed to be reported and studied so that they could be prevented in the future.
In rare organizations, leaders forgive and remember mistakes. They recognize that most errors are not committed with the intent to harm the organization. Instead, mistakes represent an opportunity to learn and improve future performance.
Mistakes are especially critical for creativity and innovation to occur. The most innovative companies in the world like 3M and Intuit celebrate mistakes that ultimately lead to better ideas.
One of the most famous mistakes in history was committed by 3M scientist Spencer Silver. He discovered an adhesive that wasn’t very sticky. Instead of hiding this embarrassing mistake, the culture at 3M encouraged him to share his failure with other employees. Another 3M employee wanted a bookmark that wouldn’t fall out of his hymn book and the Post-it Note was born.
There’s an old story that is often attributed to auto maker Henry Ford. One of his vice presidents made an error that cost the company over one million dollars. Assuming that he would be fired, the vice president handed Mr. Ford his resignation letter.
According to the legend, Mr. Ford responded: “I’ve just invested one million dollars in your education. Now get back to work.”
I guess if my son ever thinks he should give up pitching, I’ll tell him: “I’ve invested a garage door in your pitching career. Now grab your glove and let’s play.”
Great Places to Work
Originally published March 2, 2008
Great Places to Work
Once again, Fortune Magazine has released their annual list of the Best Companies to Work For. And once again, Google leads the list.
Last year the company created over 3,000 new jobs and received almost 800,000 applications. Google has become legendary for their free food and stock options. But they also offer a wide array of other valuable benefits. New mothers, for example, may receive up to 18 weeks of paid maternity leave. New fathers receive up to 7 weeks of paid leave.
My favorite thing about the list is the wide variety of industries represented. The top ten includes a grocery store chain, an online mortgage lender, and Starbucks. Companies from any industry can be great places to work.
The list also includes fourteen companies that have been on the list every year since it began in 1998. The interesting thing about these companies is that they are made great by enduring values instead of by unique perks.
TDIndustries, for example, builds heating, plumbing, and electrical systems for commercial buildings. Based in Texas, the entire company is owned by the employees and no single individual owns more than 3 percent of the stock.
The founder of the company believed very strongly in the concept of servant leadership. Today, every employee is trained in servant leadership so that they can serve others and know what kind of leadership to expect from their leaders.
When Fortune’s list was published last year, I began searching for great companies in the Upper Cumberland. One company kept popping up on my radar: Flexial Corporation.
Coincidentally, I had the pleasure of touring Flexial last week. It was easy to see why the company has been so successful.
Flexial manufactures welded bellows. This doesn’t sound very exciting until you talk with company president, Rick Larsen.
Larsen’s innovative team of engineers and technicians continuously develops new applications. Flexial’s products can be found in US fighter jets, the International Space Station, and the Mars Rover.
Before touring the plant, I received a tour of the company’s management control system. Even though I only received a brief glimpse, two enduring values were obvious.
First, the company strongly believes in making information available to everyone in the company. Every employee has online access to anything they need to perform their job. Beyond this, however, every employee also has access to real-time data regarding the company’s productivity, efficiency, and even sales.
This amazing system has drawn accolades from everyone who interacts with it. But the system itself is the result of an employee’s suggestion several years ago.
Not surprisingly, the system also includes an improvement recommendation process. Larsen describes this as a “suggestion box on steroids.”
Any employee can request an improvement that they think might help the company. The request might be for a new piece of equipment or for access to information. Unlike a traditional suggestion box, every request at Flexial is evaluated by the management team and rated in terms of its costs and benefits. Hundreds of these recommendations have been made over the last few years and the vast majority of them have been implemented by the company.
On my tour of Flexial, I didn’t see any free food, pets at work, or free massages like you find at Google. Instead, I found a culture where employees are truly seen as valuable partners.
Great Places to Work
Once again, Fortune Magazine has released their annual list of the Best Companies to Work For. And once again, Google leads the list.
Last year the company created over 3,000 new jobs and received almost 800,000 applications. Google has become legendary for their free food and stock options. But they also offer a wide array of other valuable benefits. New mothers, for example, may receive up to 18 weeks of paid maternity leave. New fathers receive up to 7 weeks of paid leave.
My favorite thing about the list is the wide variety of industries represented. The top ten includes a grocery store chain, an online mortgage lender, and Starbucks. Companies from any industry can be great places to work.
The list also includes fourteen companies that have been on the list every year since it began in 1998. The interesting thing about these companies is that they are made great by enduring values instead of by unique perks.
TDIndustries, for example, builds heating, plumbing, and electrical systems for commercial buildings. Based in Texas, the entire company is owned by the employees and no single individual owns more than 3 percent of the stock.
The founder of the company believed very strongly in the concept of servant leadership. Today, every employee is trained in servant leadership so that they can serve others and know what kind of leadership to expect from their leaders.
When Fortune’s list was published last year, I began searching for great companies in the Upper Cumberland. One company kept popping up on my radar: Flexial Corporation.
Coincidentally, I had the pleasure of touring Flexial last week. It was easy to see why the company has been so successful.
Flexial manufactures welded bellows. This doesn’t sound very exciting until you talk with company president, Rick Larsen.
Larsen’s innovative team of engineers and technicians continuously develops new applications. Flexial’s products can be found in US fighter jets, the International Space Station, and the Mars Rover.
Before touring the plant, I received a tour of the company’s management control system. Even though I only received a brief glimpse, two enduring values were obvious.
First, the company strongly believes in making information available to everyone in the company. Every employee has online access to anything they need to perform their job. Beyond this, however, every employee also has access to real-time data regarding the company’s productivity, efficiency, and even sales.
This amazing system has drawn accolades from everyone who interacts with it. But the system itself is the result of an employee’s suggestion several years ago.
Not surprisingly, the system also includes an improvement recommendation process. Larsen describes this as a “suggestion box on steroids.”
Any employee can request an improvement that they think might help the company. The request might be for a new piece of equipment or for access to information. Unlike a traditional suggestion box, every request at Flexial is evaluated by the management team and rated in terms of its costs and benefits. Hundreds of these recommendations have been made over the last few years and the vast majority of them have been implemented by the company.
On my tour of Flexial, I didn’t see any free food, pets at work, or free massages like you find at Google. Instead, I found a culture where employees are truly seen as valuable partners.
America's Biggest Threat
My "Running for President" column sparked quite a reaction from local businessman Loren Aschbrenner. You can read it here. I also received two thoughtful responses. One from Flexial President Rick Larsen was posted in the Comments section below. The other was from my TTU colleague Mohamed Abdelrahman. This is my response that was published in the Herald Citizen on February 17.
America’s Biggest Threat
I’ve been asked several times if I was going to respond to Loren Aschbrenner’s letter regarding my last column. I didn’t really think it was necessary. Mr. Aschbrenner believes that defense-related manufacturing needs to remain in the United States.
I agree and never said anything differently. My point was that all manufacturing (regardless of what it is or where it’s done) will gradually require fewer people. America will therefore have fewer manufacturing jobs. That’s what we need to prepare for.
It was a simple misunderstanding and easily clarified.
But one part of his letter nagged me all week. Mr. Aschbrenner wrote: “I guess the old adage is true…Those who can’t do, teach.”
Yes, I find this personally offensive, but I’ve been called much worse on RateMyProfessors.com.
What bothered me the most about his comment was that he didn’t just insult me. He insulted all teachers, so I decided to respond on their behalf.
Besides being insulting, the old adage is just plain wrong. A study published just last August found that companies managed by former business school professors perform better than similar companies without former educators.
Another study found that finance professors did a better job predicting loan defaults than professional loan officers.
There are many other examples, but the old adage is simply a myth.
Besides insulting and wrong, however, I believe the old adage is also dangerous. It’s dangerous because of its underlying message.
If teachers are people who lack the competence to perform what they teach, then the education they provide obviously has very little value.
If I were an enemy of the United States, what would I want American citizens to believe? I would want them to believe that education is not valuable.
A good educational system doesn’t simply train people to operate machines.
Instead, a good educational system equips and inspires people to create, design, and innovate. This type of educational system inspires innovation that leads to economic prosperity (even defense-related).
If I were an enemy of the US, I would want its citizens to believe that the best use of their time and energy is to spend 40 hours a week stamping metal, sewing underwear, assembling bombs, and watching TV. Not only does this activity keep millions of people from innovating, but it also makes them economically dependent on the people who own the metal stamping machines.
Mr. Aschbrenner’s idea that education is not valuable is not shared by the Chinese. Between 1998 and 2004, the number of Chinese enrolled in college jumped by 4300 percent. In the US, the number increased by about 19 percent.
Mr. Aschbrenner’s myth is apparently alive and well in Tennessee. We rank in the bottom 10 with respect to the percentage of our population with a college degree. Is it just a coincidence that the gap between the wealthiest Tennesseans and the poorest Tennesseans is the 6th largest gap in the country?
The warped idea that I teach my students is that they can either spend their lives making the metal stamping machine owner wealthier, or they can spend their lives creating their own opportunities and wealth.
So I can understand why Mr. Aschbrenner would want to perpetuate the myth. But my suggestion that the loss of bad jobs wouldn’t be so bad is far less dangerous than the idea that “Those who can’t do, teach.”
America’s Biggest Threat
I’ve been asked several times if I was going to respond to Loren Aschbrenner’s letter regarding my last column. I didn’t really think it was necessary. Mr. Aschbrenner believes that defense-related manufacturing needs to remain in the United States.
I agree and never said anything differently. My point was that all manufacturing (regardless of what it is or where it’s done) will gradually require fewer people. America will therefore have fewer manufacturing jobs. That’s what we need to prepare for.
It was a simple misunderstanding and easily clarified.
But one part of his letter nagged me all week. Mr. Aschbrenner wrote: “I guess the old adage is true…Those who can’t do, teach.”
Yes, I find this personally offensive, but I’ve been called much worse on RateMyProfessors.com.
What bothered me the most about his comment was that he didn’t just insult me. He insulted all teachers, so I decided to respond on their behalf.
Besides being insulting, the old adage is just plain wrong. A study published just last August found that companies managed by former business school professors perform better than similar companies without former educators.
Another study found that finance professors did a better job predicting loan defaults than professional loan officers.
There are many other examples, but the old adage is simply a myth.
Besides insulting and wrong, however, I believe the old adage is also dangerous. It’s dangerous because of its underlying message.
If teachers are people who lack the competence to perform what they teach, then the education they provide obviously has very little value.
If I were an enemy of the United States, what would I want American citizens to believe? I would want them to believe that education is not valuable.
A good educational system doesn’t simply train people to operate machines.
Instead, a good educational system equips and inspires people to create, design, and innovate. This type of educational system inspires innovation that leads to economic prosperity (even defense-related).
If I were an enemy of the US, I would want its citizens to believe that the best use of their time and energy is to spend 40 hours a week stamping metal, sewing underwear, assembling bombs, and watching TV. Not only does this activity keep millions of people from innovating, but it also makes them economically dependent on the people who own the metal stamping machines.
Mr. Aschbrenner’s idea that education is not valuable is not shared by the Chinese. Between 1998 and 2004, the number of Chinese enrolled in college jumped by 4300 percent. In the US, the number increased by about 19 percent.
Mr. Aschbrenner’s myth is apparently alive and well in Tennessee. We rank in the bottom 10 with respect to the percentage of our population with a college degree. Is it just a coincidence that the gap between the wealthiest Tennesseans and the poorest Tennesseans is the 6th largest gap in the country?
The warped idea that I teach my students is that they can either spend their lives making the metal stamping machine owner wealthier, or they can spend their lives creating their own opportunities and wealth.
So I can understand why Mr. Aschbrenner would want to perpetuate the myth. But my suggestion that the loss of bad jobs wouldn’t be so bad is far less dangerous than the idea that “Those who can’t do, teach.”
Tuesday, February 5, 2008
Running for President
I hope I’m not too late. This week I’d like to announce my candidacy for President of the United States.
I think I have an economic plan that will save the country from its impending doom. As president, my first act will be to outlaw bulldozers. Yes, bulldozers.
I’m not sure why bulldozers have been allowed in the United States for so long. But it’s time to put a stop to their destructive effects.
How do bulldozers hurt America? My guess is that a single bulldozer can do the work of at least one hundred people. So my plan is to replace every bulldozer with a hundred Americans with shovels.
Not only will this plan create thousands of shoveling jobs, it will also stimulate the demand for shovels, work gloves, massage therapy, and Band-Aids. I can’t believe no one else has thought of this.
So where did this brilliant plan come from? I was inspired by the other presidential candidates’ visits to South Carolina. When politicians visit South Carolina, they usually talk about the textile jobs that have moved overseas. They usually have some sort of plan to protect American jobs. Some politicians want to punish companies for moving jobs overseas.
These politicians are misguided, of course, because technological advances (like bulldozers, sewing machines, and computers) have taken many more American jobs than overseas relocation. So if we really want to save American jobs, we should focus on the biggest culprit and do everything we can to stifle innovation.
If you haven’t guessed by now, I don’t really believe that we should outlaw innovation. Instead, I think this argument refutes the idea that the government should protect American jobs by punishing companies who move jobs overseas.
This is a sensitive topic, especially in Cookeville. But we can’t really blame the companies. Companies that don’t increase efficiency will be shut down by companies (in the US or abroad) that do.
Personally, I’ve always thought that the US would be better off without the jobs that can be done by 12 year-old Sri Lankans. For every one of these jobs that America loses, that means that one more American brain becomes available to design, create, and innovate.
When I look back at my family’s history, they were all farmers until the early 1900s. In fact, about forty percent of Americans were farmers around the turn of the century. Now, because of technological innovations, less than two percent of the US working population is employed in farming. Thank God for innovation! Without these advances I would probably be following a team of donkeys with a plow this morning instead of enjoying my coffee and reading the Herald-Citizen.
Manufacturing may be following the same path as farming. Would that really be so bad? It sounds bad because most people (including me) are afraid of change and uncertainty.
But as our reliance on farming decreased, people learned new skills and ultimately increased their standard of living. It’s time once again for Americans to learn new skills. These new skills will likely require greater educational efforts in math, science, creativity, and entrepreneurship.
I’m guessing that neither banning bulldozers nor sending more jobs to Sri Lanka will help me get elected. But I’ve got as much chance of winning as Mike Gravel, so campaign donations will be happily accepted.
I think I have an economic plan that will save the country from its impending doom. As president, my first act will be to outlaw bulldozers. Yes, bulldozers.
I’m not sure why bulldozers have been allowed in the United States for so long. But it’s time to put a stop to their destructive effects.
How do bulldozers hurt America? My guess is that a single bulldozer can do the work of at least one hundred people. So my plan is to replace every bulldozer with a hundred Americans with shovels.
Not only will this plan create thousands of shoveling jobs, it will also stimulate the demand for shovels, work gloves, massage therapy, and Band-Aids. I can’t believe no one else has thought of this.
So where did this brilliant plan come from? I was inspired by the other presidential candidates’ visits to South Carolina. When politicians visit South Carolina, they usually talk about the textile jobs that have moved overseas. They usually have some sort of plan to protect American jobs. Some politicians want to punish companies for moving jobs overseas.
These politicians are misguided, of course, because technological advances (like bulldozers, sewing machines, and computers) have taken many more American jobs than overseas relocation. So if we really want to save American jobs, we should focus on the biggest culprit and do everything we can to stifle innovation.
If you haven’t guessed by now, I don’t really believe that we should outlaw innovation. Instead, I think this argument refutes the idea that the government should protect American jobs by punishing companies who move jobs overseas.
This is a sensitive topic, especially in Cookeville. But we can’t really blame the companies. Companies that don’t increase efficiency will be shut down by companies (in the US or abroad) that do.
Personally, I’ve always thought that the US would be better off without the jobs that can be done by 12 year-old Sri Lankans. For every one of these jobs that America loses, that means that one more American brain becomes available to design, create, and innovate.
When I look back at my family’s history, they were all farmers until the early 1900s. In fact, about forty percent of Americans were farmers around the turn of the century. Now, because of technological innovations, less than two percent of the US working population is employed in farming. Thank God for innovation! Without these advances I would probably be following a team of donkeys with a plow this morning instead of enjoying my coffee and reading the Herald-Citizen.
Manufacturing may be following the same path as farming. Would that really be so bad? It sounds bad because most people (including me) are afraid of change and uncertainty.
But as our reliance on farming decreased, people learned new skills and ultimately increased their standard of living. It’s time once again for Americans to learn new skills. These new skills will likely require greater educational efforts in math, science, creativity, and entrepreneurship.
I’m guessing that neither banning bulldozers nor sending more jobs to Sri Lanka will help me get elected. But I’ve got as much chance of winning as Mike Gravel, so campaign donations will be happily accepted.
Monday, January 21, 2008
Southern Civility
Originally published 1/20/08
Have you ever been the victim of an abusive boss? A recent survey by the Employment Law Alliance found that nearly 45% of us have had (or have seen) a boss that engages in cruel behavior aimed at their subordinates.
The survey defined abusive behavior in a way that captures a wide variety of actions including criticizing an employee in front of co-workers, spreading rumors, and inappropriate physical contact.
It doesn’t take a rocket scientist to realize the negative effects of abusive behavior in the workplace. But, scientists have indeed studied the consequences of abusive supervision.
As you would expect, subordinates working for abusive bosses have lower job satisfaction, lower commitment to the organization, greater intent to leave the company, lower job performance, greater psychological distress, and more work-family conflict.
The most interesting part of the Employment Law Alliance survey, however, was the observation that abusive bosses were less common in the South and more common in the Northeast.
When we talk about cultural diversity in business management, we’re usually not talking about this kind of diversity. But I certainly think there are regional differences in how people interact with their co-workers that are worth understanding.
Having grown up in the South, surveys like this one make me proud; but they also remind me of the “other side” of Southern civility.
Several years ago, social scientists Dov Cohen and Richard Nisbett conducted a number of studies that also confirmed the general courtesy shown by people in the South. In a variety of different ways, however, they also found that Southerners were actually more abusive toward others when they had been insulted or challenged.
Cohen and Nisbett explain this through the “culture of honor.” They argue that Southerners are taught from an early age that violence against others is perfectly acceptable when one’s honor has been challenged.
I decided to conduct my own investigation of this phenomenon in a setting that I use for much of my research: professional baseball.
I wondered if major league pitchers born in the South were more likely to hit batters in situations that might be threatening to their identities.
Sure enough, pitchers from the South were not more likely, overall, to hit batters. But in a few situations, pitchers from the South were more likely to hit batters than were pitchers born in other regions of the US.
Pitchers from the South, for example, were more likely to hit batters after their own teammates had been hit by the opposing pitcher. If you’re from the South, you’re probably thinking that this is an admirable show of loyalty to one’s teammates.
Pitchers from the South were also more likely, however, to hit a batter immediately after giving up a homerun. They were also more likely to hit a homerun hitter the next time he came up to bat. This kind of retaliation isn’t quite as admirable.
So what’s the point? I think our lessons about cultural diversity in the workplace are missing an important aspect of culture. There’s enough evidence to suggest that people in the South (including your co-workers) are more sensitive to insults and challenges than are people in other parts of the country.
This means that abusive bosses are even more dangerous to your company in the South than they are anywhere else.
Have you ever been the victim of an abusive boss? A recent survey by the Employment Law Alliance found that nearly 45% of us have had (or have seen) a boss that engages in cruel behavior aimed at their subordinates.
The survey defined abusive behavior in a way that captures a wide variety of actions including criticizing an employee in front of co-workers, spreading rumors, and inappropriate physical contact.
It doesn’t take a rocket scientist to realize the negative effects of abusive behavior in the workplace. But, scientists have indeed studied the consequences of abusive supervision.
As you would expect, subordinates working for abusive bosses have lower job satisfaction, lower commitment to the organization, greater intent to leave the company, lower job performance, greater psychological distress, and more work-family conflict.
The most interesting part of the Employment Law Alliance survey, however, was the observation that abusive bosses were less common in the South and more common in the Northeast.
When we talk about cultural diversity in business management, we’re usually not talking about this kind of diversity. But I certainly think there are regional differences in how people interact with their co-workers that are worth understanding.
Having grown up in the South, surveys like this one make me proud; but they also remind me of the “other side” of Southern civility.
Several years ago, social scientists Dov Cohen and Richard Nisbett conducted a number of studies that also confirmed the general courtesy shown by people in the South. In a variety of different ways, however, they also found that Southerners were actually more abusive toward others when they had been insulted or challenged.
Cohen and Nisbett explain this through the “culture of honor.” They argue that Southerners are taught from an early age that violence against others is perfectly acceptable when one’s honor has been challenged.
I decided to conduct my own investigation of this phenomenon in a setting that I use for much of my research: professional baseball.
I wondered if major league pitchers born in the South were more likely to hit batters in situations that might be threatening to their identities.
Sure enough, pitchers from the South were not more likely, overall, to hit batters. But in a few situations, pitchers from the South were more likely to hit batters than were pitchers born in other regions of the US.
Pitchers from the South, for example, were more likely to hit batters after their own teammates had been hit by the opposing pitcher. If you’re from the South, you’re probably thinking that this is an admirable show of loyalty to one’s teammates.
Pitchers from the South were also more likely, however, to hit a batter immediately after giving up a homerun. They were also more likely to hit a homerun hitter the next time he came up to bat. This kind of retaliation isn’t quite as admirable.
So what’s the point? I think our lessons about cultural diversity in the workplace are missing an important aspect of culture. There’s enough evidence to suggest that people in the South (including your co-workers) are more sensitive to insults and challenges than are people in other parts of the country.
This means that abusive bosses are even more dangerous to your company in the South than they are anywhere else.
Are happy workers productive workers?
Originally published 1/06/08
I first became interested in human resource management while working at an underwear factory in South Carolina. Throughout my high school years, I spent my summers and vacations loading trucks with boxer shorts headed for Wal-Mart, K-Mart, Sears, Target and other stores around the country.
Most people wouldn’t describe this experience as fascinating, but I was intrigued by the fact that common sense was violated on a daily basis. Common sense, for example, tells us that happy workers are productive workers. Managers who believe this tend to think that they can squeeze more productivity out of people by making them happier.
At the underwear factory, however, the people who were the happiest were happy precisely because they could get away with being unproductive. The people I worked with in the warehouse were often absent and spent much of their time at work talking or sitting around listening to music.
The most productive employees, on the other hand, were usually the least satisfied. We worked harder because it made the time go by faster and we couldn’t wait to get away from that place.
Because of this experience, I’ve always questioned common sense approaches to management. In fourteen years of teaching, I don’t think I’ve ever told students that they could increase productivity by making people happy.
When I got to graduate school, I discovered that many people had studied the connection between job satisfaction and job performance. Most of those studies show a small positive relationship between the two. In other words, on average, satisfied people tend to be slightly more productive.
Most people interpret that to mean that an increase in satisfaction causes a (small) increase in performance.
It could also mean, however, that people who are more productive end up more satisfied. People who are more productive tend to receive more recognition, praise, bonuses, and the other kinds of things that might make someone more satisfied. If this is true, it really wouldn’t make much sense to try and directly increase satisfaction in order to increase productivity.
A recent study by Wright State Professor Nathan Bowling offered another explanation for the small relationship between satisfaction and performance. He found that the reason satisfaction and performance are related is because they are both caused by similar kinds of personality characteristics.
In other words, the personality traits that make someone a productive employee are the same traits that make someone view their job positively.
The most important implication of this finding is that employee productivity and satisfaction begin during the selection process. It’s highly unlikely that any company can take a person with low ability and a poor work ethic and turn them into a productive employee by making them happy.
The second implication of this study is that companies are not likely to make anyone more productive just by making them happy. Each semester I ask my students if they will work harder during the semester if I make them happy by promising them A’s no matter how much they learn. Even they are willing to admit it won’t work.
This doesn’t mean that job satisfaction isn’t important. Satisfied employees are more likely to remain with the organization and do other things that help the organization succeed. But if you’re hoping that a Christmas turkey will make your employees sew underwear faster, you’re barking up the wrong tree.
I first became interested in human resource management while working at an underwear factory in South Carolina. Throughout my high school years, I spent my summers and vacations loading trucks with boxer shorts headed for Wal-Mart, K-Mart, Sears, Target and other stores around the country.
Most people wouldn’t describe this experience as fascinating, but I was intrigued by the fact that common sense was violated on a daily basis. Common sense, for example, tells us that happy workers are productive workers. Managers who believe this tend to think that they can squeeze more productivity out of people by making them happier.
At the underwear factory, however, the people who were the happiest were happy precisely because they could get away with being unproductive. The people I worked with in the warehouse were often absent and spent much of their time at work talking or sitting around listening to music.
The most productive employees, on the other hand, were usually the least satisfied. We worked harder because it made the time go by faster and we couldn’t wait to get away from that place.
Because of this experience, I’ve always questioned common sense approaches to management. In fourteen years of teaching, I don’t think I’ve ever told students that they could increase productivity by making people happy.
When I got to graduate school, I discovered that many people had studied the connection between job satisfaction and job performance. Most of those studies show a small positive relationship between the two. In other words, on average, satisfied people tend to be slightly more productive.
Most people interpret that to mean that an increase in satisfaction causes a (small) increase in performance.
It could also mean, however, that people who are more productive end up more satisfied. People who are more productive tend to receive more recognition, praise, bonuses, and the other kinds of things that might make someone more satisfied. If this is true, it really wouldn’t make much sense to try and directly increase satisfaction in order to increase productivity.
A recent study by Wright State Professor Nathan Bowling offered another explanation for the small relationship between satisfaction and performance. He found that the reason satisfaction and performance are related is because they are both caused by similar kinds of personality characteristics.
In other words, the personality traits that make someone a productive employee are the same traits that make someone view their job positively.
The most important implication of this finding is that employee productivity and satisfaction begin during the selection process. It’s highly unlikely that any company can take a person with low ability and a poor work ethic and turn them into a productive employee by making them happy.
The second implication of this study is that companies are not likely to make anyone more productive just by making them happy. Each semester I ask my students if they will work harder during the semester if I make them happy by promising them A’s no matter how much they learn. Even they are willing to admit it won’t work.
This doesn’t mean that job satisfaction isn’t important. Satisfied employees are more likely to remain with the organization and do other things that help the organization succeed. But if you’re hoping that a Christmas turkey will make your employees sew underwear faster, you’re barking up the wrong tree.
Handling Layoffs
Originally published 12/23/07
The recent closing of Toot’s came as quite a surprise to employees and customers alike. But companies come and go. Toot’s isn’t the first restaurant that has closed down in Cookeville. And it won’t be the last.
The thing that shocked us, however, was the way in which employees found out that they had no jobs less than a month before Christmas.
Apparently, employees showed up to find new locks and a note that read: “We have done our best to provide an atmosphere of integrity and fun.”
The ex-employees who were interviewed by WTVF did not seem impressed.
But the purpose of this column is not to beat up on owners Rob and Tanya Holcomb. Instead the purpose is to show why other organizational leaders should handle things differently when faced with layoff or closure decisions.
When faced with a struggling business, many organizational leaders use layoffs to lower their labor costs hoping that this move will help the business survive.
So how well does this strategy work? Unfortunately, not very well.
In Responsible Restructuring, Professor Wayne Cascio explains that layoffs rarely result in positive financial turnarounds. Instead, the short-term savings are overwhelmed by the direct and indirect long-term costs of the layoffs.
Cascio’s book describes a number of companies that survived tough times because they decided not to use layoffs. One manufacturing company, for example, was ready to close one of its plants. Before going through with the closure, however, they decided to ask the employees for cost-saving ideas. Within six months the plant was one of the most profitable in the entire company.
This is a pretty good example of why companies hire people to start with; because they have brains and can think. Employees are less likely to help you come up with business-saving ideas if they’re locked out and being interviewed on television.
The networking giant Cisco Systems avoided layoffs by paying employees one third of their salary in exchange for working temporarily at a non-profit organization.
The possibilities are endless, but too many organizational leaders buy into the myth that layoffs will save a business.
But sometimes, layoffs are necessary. When layoffs are necessary, organizational leaders often believe another myth. They believe that nothing can be done to minimize people’s negative reactions.
Some amazing research shows that layoff victims, as well as layoff survivors, react much more positively to layoffs when they feel as if they are treated fairly during the process. Companies can drastically minimize negative reactions by carefully explaining the rationale for the layoffs and doing so in a sensitive face-to-face way.
But why should companies care if the layoff victims react positively or negatively to a layoff?
First, if business does improve, the company may want to rehire the ones who were laid off. Second, the layoff survivors, as well as the general public, react to the company according to how they treat the layoff victims. Finally, the layoff victims are much more likely to pursue legal action and favor government intervention if they believe they were treated unfairly during the process (even if they were treated legally).
There is one bright spot in all of this. In a free market, organizations with bad management will fail. The market appears to be working just fine on South Willow.
The recent closing of Toot’s came as quite a surprise to employees and customers alike. But companies come and go. Toot’s isn’t the first restaurant that has closed down in Cookeville. And it won’t be the last.
The thing that shocked us, however, was the way in which employees found out that they had no jobs less than a month before Christmas.
Apparently, employees showed up to find new locks and a note that read: “We have done our best to provide an atmosphere of integrity and fun.”
The ex-employees who were interviewed by WTVF did not seem impressed.
But the purpose of this column is not to beat up on owners Rob and Tanya Holcomb. Instead the purpose is to show why other organizational leaders should handle things differently when faced with layoff or closure decisions.
When faced with a struggling business, many organizational leaders use layoffs to lower their labor costs hoping that this move will help the business survive.
So how well does this strategy work? Unfortunately, not very well.
In Responsible Restructuring, Professor Wayne Cascio explains that layoffs rarely result in positive financial turnarounds. Instead, the short-term savings are overwhelmed by the direct and indirect long-term costs of the layoffs.
Cascio’s book describes a number of companies that survived tough times because they decided not to use layoffs. One manufacturing company, for example, was ready to close one of its plants. Before going through with the closure, however, they decided to ask the employees for cost-saving ideas. Within six months the plant was one of the most profitable in the entire company.
This is a pretty good example of why companies hire people to start with; because they have brains and can think. Employees are less likely to help you come up with business-saving ideas if they’re locked out and being interviewed on television.
The networking giant Cisco Systems avoided layoffs by paying employees one third of their salary in exchange for working temporarily at a non-profit organization.
The possibilities are endless, but too many organizational leaders buy into the myth that layoffs will save a business.
But sometimes, layoffs are necessary. When layoffs are necessary, organizational leaders often believe another myth. They believe that nothing can be done to minimize people’s negative reactions.
Some amazing research shows that layoff victims, as well as layoff survivors, react much more positively to layoffs when they feel as if they are treated fairly during the process. Companies can drastically minimize negative reactions by carefully explaining the rationale for the layoffs and doing so in a sensitive face-to-face way.
But why should companies care if the layoff victims react positively or negatively to a layoff?
First, if business does improve, the company may want to rehire the ones who were laid off. Second, the layoff survivors, as well as the general public, react to the company according to how they treat the layoff victims. Finally, the layoff victims are much more likely to pursue legal action and favor government intervention if they believe they were treated unfairly during the process (even if they were treated legally).
There is one bright spot in all of this. In a free market, organizations with bad management will fail. The market appears to be working just fine on South Willow.
Christmas Wishes
Originally published 12/2/07
The sounds of Christmas are in the air. At every toy commercial, my four-year old says “I want that for Christmas.” She probably won’t be getting everything. I hope she has the attitude of her brother when he was four. When my son opened his football tee, he said, with tears in his eyes, “I would have been happy with just this for Christmas.”
I’ve learned some other good lessons around Christmas as well. One year I received my first ten-speed bike. I went outside to give it a test drive and found that it didn’t change gears exactly like it was supposed to.
I went inside and pitched a fit to my dad, who had stayed up half the night putting it together. After getting very little sleep, dad wasn’t exactly in the mood to hear my complaining. That was the day I deserved a good spanking, but didn’t get one.
After reflecting on that episode for a while, I finally realized that parents aren’t required by law to buy their children anything for Christmas. Any gift I received meant that the family had less money for something else. Therefore, I should be grateful for anything I received.
This lesson of contentment has come in handy throughout life. Some employees think of their employers as their parents at Christmas. Some employees think they are entitled to annual raises, bonuses, health insurance, or other expensive “presents.” There’s no law, however, that requires employers to provide these things. That’s why I’m grateful for every raise I receive and every benefit I have.
In spite of my general contentment, there are still a few things on my wishlist. Here’s what I want the most.
I wish the Upper Cumberland economy depended more on people being creative and innovative and less on people being sick.
I wish there was a store in Cookeville that carried all of the merchandise that is on display, but not in stock, at all of the other stores in Cookeville.
I wish there were more service-oriented businesses in Cookeville that could accomplish something even when “the person that does that” is out to lunch or out of the office.
I wish restaurants would stop selling bacon by the slice. Bacon should come in big baskets, like rolls, with free refills.
I wish I had the money to buy a tract of land now before the county buys it all.
I wish Cookeville had a new movie theater. Sorry, that one’s been on the list for so long that I can’t get it off.
I wish Cookeville had a few more nail salons and payday loan establishments. Just kidding about that one.
I wish I had the 1933 Goudey Lou Gehrig baseball card ending tonight on eBay (just in case my wife actually reads this).
I wish fewer of my students would ask “Do I need to know that for the test?”
I wish more of my students would ask “Where can I find out more about that?”
Finally, I wish a merry and contented Christmas to everyone in the Upper Cumberland.
The sounds of Christmas are in the air. At every toy commercial, my four-year old says “I want that for Christmas.” She probably won’t be getting everything. I hope she has the attitude of her brother when he was four. When my son opened his football tee, he said, with tears in his eyes, “I would have been happy with just this for Christmas.”
I’ve learned some other good lessons around Christmas as well. One year I received my first ten-speed bike. I went outside to give it a test drive and found that it didn’t change gears exactly like it was supposed to.
I went inside and pitched a fit to my dad, who had stayed up half the night putting it together. After getting very little sleep, dad wasn’t exactly in the mood to hear my complaining. That was the day I deserved a good spanking, but didn’t get one.
After reflecting on that episode for a while, I finally realized that parents aren’t required by law to buy their children anything for Christmas. Any gift I received meant that the family had less money for something else. Therefore, I should be grateful for anything I received.
This lesson of contentment has come in handy throughout life. Some employees think of their employers as their parents at Christmas. Some employees think they are entitled to annual raises, bonuses, health insurance, or other expensive “presents.” There’s no law, however, that requires employers to provide these things. That’s why I’m grateful for every raise I receive and every benefit I have.
In spite of my general contentment, there are still a few things on my wishlist. Here’s what I want the most.
I wish the Upper Cumberland economy depended more on people being creative and innovative and less on people being sick.
I wish there was a store in Cookeville that carried all of the merchandise that is on display, but not in stock, at all of the other stores in Cookeville.
I wish there were more service-oriented businesses in Cookeville that could accomplish something even when “the person that does that” is out to lunch or out of the office.
I wish restaurants would stop selling bacon by the slice. Bacon should come in big baskets, like rolls, with free refills.
I wish I had the money to buy a tract of land now before the county buys it all.
I wish Cookeville had a new movie theater. Sorry, that one’s been on the list for so long that I can’t get it off.
I wish Cookeville had a few more nail salons and payday loan establishments. Just kidding about that one.
I wish I had the 1933 Goudey Lou Gehrig baseball card ending tonight on eBay (just in case my wife actually reads this).
I wish fewer of my students would ask “Do I need to know that for the test?”
I wish more of my students would ask “Where can I find out more about that?”
Finally, I wish a merry and contented Christmas to everyone in the Upper Cumberland.
Giving Thanks
Originally published 11/18/07
Are you thankful?
I have this funny feeling that we’re going to hear a lot this week about being thankful. I’m certainly thankful for many things. I’m thankful, of course, for my family and friends.
I’m also thankful that my wife and I both hate to shop. And I’m thankful that my kids have low expectations when it comes to Christmas gifts. I’ve convinced them that overloading Santa’s sleigh requires more fuel, which contributes to global warming.
But I’d like to ask business owners and organizational leaders if you’re thankful for the work done by your employees. If so, do they know it?
In 2004, the J.M. Smucker company was named by Fortune Magazine as the Best Company to Work For. Yes, J.M. Smucker is that glamorous high-tech company that makes jelly in Orrville, Ohio (population 9,000).
Founded in 1897, the company has expanded into a few more products and brands. In 2006, they sold over two billion dollars worth of jelly, peanut butter, and baking mixes.
So what makes J.M. Smucker a great place to work? They don’t offer pet insurance or free massages like Google. They don’t have artists on staff to personally decorate employee offices like SAS. Their employees don’t even get a fifteen percent discount at the TTU bookstore like I get (except for computer software and sale items).
J.M. Smucker wasn’t chosen as a great place to work because of their benefits. Instead, they were chosen because of the culture created by the founder’s great-grandsons and co-CEOs, Tim and Richard Smucker.
Before their father died, he wrote down four principles that he said should be used to lead the company. Thank others for a job well done. Look for the good in others. Listen with your full attention. And keep a sense of humor.
When Fortune surveyed Smucker employees, the feature that stood out the most was how often employees felt appreciated. Employees are thanked with gift cards, meals, holiday turkeys, and other small tokens.
The employees report that it’s not the value of the gift that matters. What matters is that someone noticed they were doing a good job and took time to recognize it.
In other words, being thankful for their employees landed J.M. Smucker at the top of the list of best companies to work for.
My columns are usually aimed at organizational leaders and I could probably stop here. But I also think it’s worth pointing out that employees have much to be thankful for as well.
As much as you may hate to admit it, your employer is your customer. They are buying your labor. There are over six billion people on the planet, but your employer decided to buy your services.
Most businesses are thankful for their customers and will bend over backwards to make them satisfied. Is that the way you think about your employer? Are you willing to go the extra mile to keep your customer happy?
I admit it’s a hard concept to grasp, but look at all of the companies choosing to shop for labor in other countries. I’m in the same boat. I teach courses that could easily be outsourced to professors in India or Mexico. But I’m thankful that my employer has decided to buy from me.
Whether you’re an employee or an employer, this week would be a good time to say “Thanks!”
Are you thankful?
I have this funny feeling that we’re going to hear a lot this week about being thankful. I’m certainly thankful for many things. I’m thankful, of course, for my family and friends.
I’m also thankful that my wife and I both hate to shop. And I’m thankful that my kids have low expectations when it comes to Christmas gifts. I’ve convinced them that overloading Santa’s sleigh requires more fuel, which contributes to global warming.
But I’d like to ask business owners and organizational leaders if you’re thankful for the work done by your employees. If so, do they know it?
In 2004, the J.M. Smucker company was named by Fortune Magazine as the Best Company to Work For. Yes, J.M. Smucker is that glamorous high-tech company that makes jelly in Orrville, Ohio (population 9,000).
Founded in 1897, the company has expanded into a few more products and brands. In 2006, they sold over two billion dollars worth of jelly, peanut butter, and baking mixes.
So what makes J.M. Smucker a great place to work? They don’t offer pet insurance or free massages like Google. They don’t have artists on staff to personally decorate employee offices like SAS. Their employees don’t even get a fifteen percent discount at the TTU bookstore like I get (except for computer software and sale items).
J.M. Smucker wasn’t chosen as a great place to work because of their benefits. Instead, they were chosen because of the culture created by the founder’s great-grandsons and co-CEOs, Tim and Richard Smucker.
Before their father died, he wrote down four principles that he said should be used to lead the company. Thank others for a job well done. Look for the good in others. Listen with your full attention. And keep a sense of humor.
When Fortune surveyed Smucker employees, the feature that stood out the most was how often employees felt appreciated. Employees are thanked with gift cards, meals, holiday turkeys, and other small tokens.
The employees report that it’s not the value of the gift that matters. What matters is that someone noticed they were doing a good job and took time to recognize it.
In other words, being thankful for their employees landed J.M. Smucker at the top of the list of best companies to work for.
My columns are usually aimed at organizational leaders and I could probably stop here. But I also think it’s worth pointing out that employees have much to be thankful for as well.
As much as you may hate to admit it, your employer is your customer. They are buying your labor. There are over six billion people on the planet, but your employer decided to buy your services.
Most businesses are thankful for their customers and will bend over backwards to make them satisfied. Is that the way you think about your employer? Are you willing to go the extra mile to keep your customer happy?
I admit it’s a hard concept to grasp, but look at all of the companies choosing to shop for labor in other countries. I’m in the same boat. I teach courses that could easily be outsourced to professors in India or Mexico. But I’m thankful that my employer has decided to buy from me.
Whether you’re an employee or an employer, this week would be a good time to say “Thanks!”
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