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.
Tuesday, July 15, 2008
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.”
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