Taking Your Eye Off the Ball

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Nothing can get you back to your roots faster than a significant and unexpected drop in profits. As the worst economic year in recent history starts to wind down and companies begin to think about budgets and plans for next year, it is a perfect time to reflect on several items, including how to be ready for growth when the economy rebounds, and how to strengthen the organization to avoid significant damage when the next downturn occurs. The best way to begin assessing these issues is to return to the fundamentals and assess whether or not the organization has strayed from its stated purpose.

Many companies are finding that the success they experienced in the years preceding the recession actually led them to unintentionally deviate from their intended purpose. Some of these organizations are now refocusing on their missions as a way to emerge from the current downturn and return to long-term profitability.

TOYOTA

When people lose - or are afraid of losing - their jobs, one would fully expect a drop in automobile sales. Because of this, it is not surprising to see Toyota's revenues and profits to fall during the current recession. What is surprising, however, is the extent of the losses incurred. For a company recognized as one of the best run over the last 50 years, the large loss Toyota incurred over the last year or so has been staggering.

So what really led to Toyota's decline? How can the company that invented lean, treats its suppliers as partners, and has been so successful for so long go from earning almost $22 billion in operating income to losing more than $5 billion within one year?

I believe that the problems at Toyota resulted from the company's leaders taking their eyes off the ball over the last 1-2 years. Overtaking General Motors as the world's largest automaker seemed to become their main objective. In the race to be number one, they forgot what got them to that point in the first place: making high quality cars that people want to buy (or, as their mission states, to enrich society through car making).

I regularly read about CEO Akio Toyoda and other Toyota executives working to get the company back on track. Back on track means that they were off track - and off track means that they strayed from the path that made them successful.

For years recognized as the producer of the highest quality cars in the industry, Toyota has experienced a fairly large number of quality problems over the last few years, which may be a result of the enormous growth the company has experienced recently. In the past, managers would rise up through the ranks and be well-versed in the Toyota way, which meant they understood the systems and process for assuring (and continually improving) quality and productivity. As they battled GM for the top spot in the auto industry, however, their growth exceeded their ability to develop leaders and their quality suffered.

Recent comments made by the company's senior leaders means that they recognize the need to refocus before things got out of control. It is very common in business for companies to lose their way and not realize that anything is wrong until the organization is in severe trouble - which can take several years. Understanding the need to refocus now means that Toyota can fix things before significant damage occurs.

WHOLE FOODS MARKET

Whole Foods started as a modest grocery store in Austin, Texas and, within 25 years, grew into a major chain with more than 250 stores in the U.S. and U.K. Throughout the last few decades, the company became synonymous with healthy, organic and unaltered whole foods. Customers paid more to shop at Whole Foods, but were usually guaranteed to find a wide variety of healthy items in return.

Just like many businesses offering premium priced products over the last year two years, however, Whole Foods experienced a drop in revenues and profits. Rather than cut costs, close stores, and lay off workers, however, company CEO John Mackey decided to revisit the company's roots to return to profitability. As with Toyota, it appears that Whole Foods got caught up in its own success and strayed from its purpose during a period of high growth.

In an August 5, 2009 article in the Wall Street Journal, Mackey admitted that the company sells, "a bunch of junk." He went on to say, "we've decided if Whole Foods doesn't take a leadership role in educating people about a healthy diet, who the heck is going to do it?"

As Whole Foods grew into more of a mainstream supermarket, it replaced much of its healthier fare with gourmet foods. When the recession hit and people became less willing to pay more for gourmet foods, however, the company suffered. This, along with a few other factors, led Mackey to look closely at the reasons for the company's problems and come to the conclusion that Whole Foods had strayed from its purpose.

By definition, whole foods are foods that are unrefined, unprocessed, and resemble what they were in nature. What Mackey found when he recently walked through one of the company's stores was a large selection of white bread, gourmet desserts, and refined oils - in other words, foods that are not even close to being whole - the company's roots.

I'm betting that Whole Foods will succeed in returning to its purpose - and profitability - because Mackey realized that the company lost its focus before too much damage was done. The company has not strayed for very long and, like Toyota, can fix itself by reminding its team members why the company was created in the first place and what made it successful.

IT'S NOT ROCKET SCIENCE

The point of all this is that companies must regularly take time to reflect on their purpose to keep from taking their eyes off the ball. Consumer tastes change, technology changes, economic conditions change, but a company's fundamental purpose - it's raison d'etre - should not.

Cars will continually change in terms of technology and design, but Toyota's commitment to enriching society through car making cannot change or its employees will become confused and its customers will cease to see a difference between a Toyota and any other brand of automobile. If Whole Foods strays from its purpose of providing healthy, organic, and unrefined foods, it will lose the customers who will begin to question why they are paying more for the same products offered at Kroger or Safeway.

Do you run the risk of straying? If it can happen at companies like Toyota or Whole Foods, it can pretty much happen anywhere.

The Role of Business in the Swine Flu Outbreak

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With concerns over a global swine flu epidemic growing, it will be interesting to see the role that businesses take in dealing with and preventing the spread of the disease. Although there is no doubt that companies can help the situation, I am hoping that business leaders at least cease some of the common practices that encourage the spread of illness among employees.

It is not unusual for organizations to award some type of bonus to people who do not use their sick days over a defined period. the bonus may be in the form of a direct payout for not using sick days or indirectly combined with some other type of reward (e.g., a bonus which, to be eligible, requires perfect attendance during the period). However the payout is packaged, it is basically an incentive to discourage people from using (or abusing) sick days.

This type of incentive makes perfect sense when you do not trust some employees. Offering a bonus to those who do not abuse sick days seems logical because it rewards the reliable workers while punishing irresponsible employees. What I have found, however, that this type of incentive actually results in increasing - rather than decreasing - the number of sick days taken by employees; especially during cold and flu season.

Some companies distinguish between excused and unexcused absences by limiting incentives to only those who present a note from a doctor after calling in sick. Besides creating a patriarchal culture within the company where managers are believed to be more trustworthy than workers, this type of policy forces ill employees to take the time, energy and expense to see a doctor when all they may need is to rest for a day or two to recover sufficiently to return to work.

Rewarded for Spreading Colds & Flu

Rewarding people for perfect attendance encourages employees to come into work when they are sick and need to stay home and rest. This results in spreading the cold or flu to other employees, thereby increasing the number of people who either take sick days or come into work when they, like the person who first came into work when he or she was sick, should stay at home. in a small company, this can be devastating because a large percentage of the workforce can end up sick. In one large company, I witnessed infections spread quickly - even to facilities in other countries - because sick employees were encouraged to come into work instead of staying home to recover.

One can imaging the effect this type of behavior can have on a swine flu epidemic. Whether faced with a worldwide epidemic or the common cold, however, managers need to understand that encouraging sick people to come into work shows a lack of regard for the health of all employees and can result in large costs for the company.

Why We Think It Works

Over the years, this type of incentive program has been very common among American companies for a variety of reasons.

1. Frustration:
   
   It is frustrating when someone calls in sick. We hire people because we need them to do a job and when they miss work without advance notice, it can cause problems with productivity, customer service, and scheduling, in addition to putting pressure on co-workers.
   
   An incentive to reduce absenteeism is an attempt to deal with the frustration that unfortunately can make the situation worse.
   
   
2. School Perfect Attendance Awards:
   
   
   Rewarding perfect attendance is a concept that many of us were first exposed to during our school days. Schools commonly award certificates to students who do not miss any days during the school year. As with companies, though, this type of incentive often results in sick students coming to school and spreading the sickness to other children - thereby increasing the total number of days missed by the student body (and teachers), as a whole.
   
   
3. Focus on Direct/Easy to Measure Costs:
   
   Determining the cost of absenteeism by measuring the number of sick days taken is easy, but unfortunately inaccurate. It is impossible to determine the costs associated with the lower productivity that results from sick employees coming into work. When multiplied by the number of employees who were infected by a person who came into work sick, the total drop in productivity can be staggering.
   
   
4. Hero Worship:
   
   Whether the result of a direct incentive or positive reinforcement, the American business culture tends to make a hero out of the employee who comes into work even when he or she is sick. We tend to look at anyone who is more committed to the company than their own health as a valued employee.
   
   I once worked with a company where the CEO publicly praised managers in the corporate office for coming into work when they were ill. As a result, people became afraid to call in sick and only did so when they were physically unable to come into the office. During flu season, infections spread quickly through the office resulting in a number of problems for the company.
   
   
5. Lack of Trust:
   
   If managers trusted the motives of the workers, they would believe them when they called in sick. This can be a reflection of the company's hiring practices and its process for screening employees. If the organization's values are clear and job candidates are carefully screened before hiring to assure they possess common values, management can trust the motives of those who are hired.
   
   Dealing with employees who appear to be abusing the company's attendance policy should be done immediately and on a case-by-case basis rather than through company-wide policy changes.

What Can Be Done?

There are a number of things that can be done to reduce absenteeism at a company. The most obvious is proactive health planning, which includes nutritional and health counseling to help employees strengthen their immune systems - especially during flu season. In addition to reducing employee sickness within the company, this type of initiative can improve productivity (by having healthier employees) and morale (by demonstrating that management cares about employees).

Another action that has been shown to help reduce absenteeism is to offer unlimited sick days to employees. When a specific number of sick days are offered, people think of them as something they are owed by the company and tend to believe they need to use them or lose them before the end of the year. An unlimited sick leave policy does not give the impression that people will lose days that they do not take.

As an example, a company I once worked with changed its sick leave policy from 10 days per year to unlimited days. Within the first year, the average number of sick days taken per employee was significantly reduced. [As mentioned earlier, care must be taken in any measure used to evaluate results from a change in sick leave policy]

Focus on Health

Basically, the way to reduce absenteeism due to sickness - including a flu epidemic - is to focus on health instead of sickness. Attempting to improve the situation through artificial means like monetary incentives will not help people get sick less often. On the other hand, providing information, counseling, and a healthier work environment can give those who are willing to change the ability to do so, leading to sustained improvement.

Some of the steps businesses can take to help prevent an H1N1 epidemic (and reduce the financial impact if one does occur) are as follows:

• Telecommuting: Encourage and help those employees who can work from home to do so. This obviously involved a certain level of trust that employees will, in fact, work when they are not in the office;
  
  
• Stress Management: Implement stress management and reduction programs for employees. Studies have shown that stress depresses the immune system and anything the company can do to help employees deal with stress can help to prevent (or reduce the effects of) the flu;
  
  
• Nutritional Counseling: Diet can help or hinder the effectiveness of a person's immune system. Counseling people on food choices and eating habits can help them strengthen their immune systems to fight off infections and disease, as well as improve their overall health;
  
  
• Education: Educate people on the ways to prevent the spread of disease. Provide hand cleaners and anti-bacterial wipes in convenient locations throughout the workplace;
  
  
• Stay at Home! Implement a policy that requires people to stay home when they are sick. Send people home when they are ill and come into work. Do not penalize people for using sick days and consider implementing an unlimited sick leave policy at least until the swine flu scare has passed. Also, eliminate the monetary incentives that encourage people to come into work when they are sick.

Executives have the responsibility to take a role in preventing the spread of swine flu - not only for the health of their employees (and themselves), but also to help reduce financial impact that a flu epidemic can have on an organization. Implementing the above actions will not be easy for American companies because they require a fundamental change in the way managers think. The fear of an H1N1 global pandemic, however, may be just the thing that stimulates this type of change in thinking.

The Role of Business in Preventing a Swine Flu Epidemic

Tweet

With concerns over a global swine flu epidemic growing, it will be interesting to see the role that businesses take in dealing with and preventing the spread of the disease. Although there is no doubt that companies can help the situation, I am hoping that business leaders at least cease some of the common practices that encourage the spread of illness among employees.

It is not unusual for organizations to award some type of bonus to people who do not use their sick days over a defined period. The bonus may be in the form of a direct payout for not using sick days or indirectly combined with some other type of reward (e.g., a bonus which, to be eligible, requires perfect attendance during the period). However the payout is packaged, it is basically an incentive to discourage people from using (or abusing) sick days.

This type of incentive makes perfect sense when you do not trust some employees. Offering a bonus to those who do not abuse sick days seems logical because it rewards the reliable workers while punishing the irresponsible employees. What I have found with this type of incentive, however, is that it actually results in increasing – rather than decreasing - the number of sick days taken by employees; especially during cold and flu season.

Some companies distinguish between “excused” and “unexcused” absences by limiting incentives to only those who present a note from a doctor after calling in sick. Besides creating a patriarchal culture within the company where managers are believed to be more trustworthy than workers, this type of policy forces ill employees to take the time, energy and expense to see a doctor when all they may need is to rest for a day or two to recover sufficiently enough to return to work.

Rewarded for Spreading Colds & Flu

Rewarding people for perfect attendance encourages employees to come into work when they are sick and need to stay home and rest. This results in spreading the cold or flu to other employees, thereby increasing the number of people who either take sick days or come into work when they, like the person who first came into work when he or she was sick, should stay at home. In a small company, this can be devastating because a large percentage of the workforce can end up sick. In one large company, I saw infections spread quickly – even to facilities in other countries – because sick employees were encouraged to come into work instead of staying home to recover.

One can imagine the effect this type of behavior can have on a swine flu epidemic. Whether faced with a worldwide epidemic or the common cold, however, managers need to understand that encouraging sick people to come into work shows a lack of regard for the health of all employees and can result in large costs for the company.

Why We Think It Works

Over the years, this type of incentive program has been very common among American companies for a variety of reasons.

1. Frustration It is frustrating when someone calls in sick. We hire people because we need them to do a job and when they miss work without advance notice, it can cause problems with productivity, customer service, and scheduling, in addition to putting pressure on other employees.
   
   An incentive to reduce absenteeism is an attempt to deal with the frustration that unfortunately can make the situation worse.
   

2. School Perfect Attendance Awards Rewarding perfect attendance is a concept that many of us were first exposed to during our school days. It is very common for schools to award certificates to students who do not miss any days during the school year. As is does with companies, though, this type of incentive often results in sick students coming to school and spreading the sickness to other children – thereby increasing the total number of days missed by the student body (and teachers), as a whole.
   

3. Focus on Direct/Easy to Measure Costs Determining the cost of absenteeism by measuring the number of sick days taken is easy, but unfortunately inaccurate. It is impossible to determine the costs associated with the lower productivity that results from employees coming into work sick. When multiplied by the number of employees who were infected by a person who came into work sick, the total drop in productivity can be staggering.
   

4. Hero Worship Whether the result of an direct incentive or positive reinforcement, the American business culture tends to make a hero out of the employee who comes into work even when he or she is sick. We tend to look at anyone who is more committed to the company than their own health as a valued employee.
   I once worked with a company where the CEO publicly praised managers in the corporate office for coming into work when they were ill. As a result, people became afraid to call in sick and only did so when they were physically unable to come into the office. During flu season, infections spread quickly through the office resulting in a number of problems for the company.
   

5. Lack of Trust Offering an incentive that discourages the use of sick days shows a lack of trust in employees because if you trust their motives, you would believe them when they called in sick. This can be a reflection of the company’s hiring practices and its process for screening employees. If the company’s values are clear and job candidates are carefully screened before hiring to assure they possess these values, you should be able to trust the motives of individuals.
   
   Dealing with employees who appear to be abusing the company’s attendance policy should be done immediately and on a case-by-case basis and not through companywide policy changes.
   

What Can Be Done?

There are a number of things that can be done to reduce absenteeism at a company. The most obvious is proactive health planning, which includes nutritional and health counseling to help employees strengthen their immune systems – especially during flu season. In addition to reducing employee sickness within the company, this type of initiative can improve productivity (by having healthier employees) and morale (by demonstrating that management cares about employees).

Another action that has been shown to help reduce absenteeism is to offer unlimited sick days to employees. When a specific number of sick days are offered, people think of them as something they are owed by the company and tend to believe they need to use them or lose them before the end of the year. An unlimited sick leave policy does not give the impression that people will lose days that they do not take.

As an example, a company I once worked with changed its sick leave policy from 10 days per year to unlimited days. Within the first year, the average number of sick days taken per employee was significantly reduced. [As mentioned earlier, though, care must be taken in any measure used to evaluate the results from a change in sick leave policy]

Focus on Health

Basically, the way to reduce absenteeism due to sickness – including a flu epidemic – is to focus on health instead of sickness. Attempting to improve the situation through artificial means like monetary incentives will not help people get sick less often. On the other hand, providing information, counseling, and a healthier work environment can give those who are willing to change the ability to do so, leading to sustained improvement.

Some of the steps businesses can take to help prevent an H1N1 epidemic (and reduce the financial impact if it does occur) are as follows:

• Telecommuting: Encourage those employees who can work from home to do so. This obviously involves a certain level of trust that employees will, in fact, work when they are not in the office;
  

• Stress Management: Implement stress management and reduction programs for employees. Studies have shown that stress depresses the immune system and anything the company can do to help employees deal with stress can help to prevent (or reduce the effects of) the flu;
  

• Nutritional Counseling: Diet can help or hinder the effectiveness of a person’s immune system. Counseling people on food choices and eating habits can help them strengthen their immune systems to fight off infections, as well as improve their overall health;
  

• Education: Educate people on the ways to prevent the spread of disease. Provide hand cleaners and anti-bacterial wipes in convenient locations throughout the workplace;
  

• Stay Home! Implement a policy for people to stay home when they are sick. Send people home when they are sick and come into work. Do not penalize people for using sick days and consider implementing an unlimited sick leave policy at least until the swine flu scare has passed. Also, eliminate monetary incentives that encourage people to come into work when they are sick.
  

Executives have the responsibility to take a role in preventing the spread of swine flu – not only for the health of their employees (and themselves), but also to help reduce the financial impact that a flu epidemic can have on an organization. Implementing the above actions, however, will not be easy for American companies because they require a fundamental change in the way managers think. The fear of an H1N1 global pandemic, however, may be just thing that stimulates this type of change in thinking.