The People Formula

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"All anyone asks for is a chance to work with pride." - W. Edwards Deming

When you get right down to it, the formula for creating an organization that performs at a high level and continually improves is fairly simple.  Although there are obviously factors that make implementing the formula more difficult than it appears, companies often further complicate things by ignoring the people aspects of the business or taking actions that actually detract from it.

The basic formula for organizational development is as follows:

HIRE WELL x CONTINUALLY DEVELOP x KEEP HAPPY

The reason the variables are multiplied is because ignoring any element (i.e., making it a zero) results in a zero for the entire process.  Although one could debate the “how” of each of the formula’s elements, it is difficult to disagree with the elements themselves.

Hire Well

The importance of the hiring well component of the formula is recognizing hiring a process that requires continual improvement to effectively support the organization’s higher-level objectives.

Hiring well means finding people who are competent and a good fit with the culture and direction of the organization.  Too often, businesses focus on the competency component and underplay the cultural fit requirement.  Because the search process often starts late – when the workload has grown beyond the point where current staff can handle it or the person currently holding the position is moving on – there is pressure to hire quickly.  The “easy” stuff like verifying previous employment and validating technical skills takes front and center while cultural fit tends to be assessed through gut feel.

Although not the subject of this post, there are a number of ways to verify the fit of a candidate’s personality and values with the organization.  The point here is to recognize that hiring is a process with target conditions that are aligned with the objectives of the company.  As such, it is just as important to apply the Plan-Do-Study-Act (PDSA) cycle to hiring as it is to any other process within the organization.

The target condition for recruiting and hiring could include things like cycle time, quality of candidates, cost of recruiting, offer acceptance rate, and overall employee turnover.  Once the target conditions are established, the process can be managed and improved through kaizen to continually improve its contribution to the organization, as a whole.

Continually Develop

It should come as no surprise that developing people is a critical element of organizational success.  With that said, though, there are really very few organizations that continually develop the abilities of the people working in them.  This includes coaching people to better understand the processes with which they work, improving problem-solving capabilities, and providing the opportunities to learn.

To do this well often requires that leaders improve their ability to coach, something drastically needed in most companies.  The best environments for developing people tend to be those that stretch thinking and learning is guided by experienced and qualified coaches.  Objectives are set aggressively and people are put in situations that force them to think differently to achieve them.  It is similar to working with a personal trainer.  Although it often hurts, sticking with the regimen and following the trainer’s advice often leads to improved physical condition.  In the workplace, developing problem-solving capabilities can also hurt, but lead to significant achievements if the coach is effective and the person is committed.

It should be noted, however, that missing a stretch objective should never count against a person as long as he or she learned and showed commitment to the process.  Punishing a person for missing a stretch target will only serve to halt learning and stop people from accepting such objectives in the future.

Keep Happy

Keeping people happy is another area where a kaizen mindset can help.  Although employee turnover may not be the best measure of happy employees, it is a start.  The ideal condition for any company should be 0% turnover, but getting there may require setting the target at a level that is better than the current rate.  Once it becomes clear where the organization’s current turnover rate is in relation to the target, steps can be taken to close the gap.

One first step that many organizations can take to quickly improve employee satisfaction is to eliminate the traditional performance review.  Although studies have proven over and over again that grading performance – especially when based on force-fitting results to a normal curve – results in far more dissatisfaction that satisfaction, many organizations refuse to let go of the process (see blog post on performance reviews here).

Hiring well (bring in technically competent people who fit within the culture) and continually developing team members should greatly improve the performance as the organization moves toward the “perfect” workforce.  As you move toward the ideal condition, applying a normal distribution to ratings is illogical and destructive to the organization.  Leaders often do not understand the importance of the system in employee performance, and that the system is the leadership team’s responsibility.  If leaders want a perfect workforce, and team member performance follows a normal distribution year-after-year, the fact that the situation is not improving is more of a reflection on leaders than workers.

Putting it Together

Keeping the formula in the forefront will help improve the organization’s focus on its people.  The traditional management force that is still so prevalent in western business, however, will continually interfere with true improvement of the people-side of the business.  Moving beyond attempts to improve motivation and performance through superficial means will require hiring and developing leaders who respect people and truly understand the connection between people and organizational success.

More Trouble for France Telecom

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It appears that the situation at France Telecom regarding the rash of suicides over the last two years has resulted in more trouble for the communications company.  Late last week, French prosecutors ordered a preliminary investigation into whether the company should be charged with involuntary homicide over its management practices, which have been blamed for 35 suicides over the past two years.  [story]

Besides the obvious sadness surrounding the situation, this action by the French government opens the issue of the accountability of companies over the way its managers treat employees.  In the U.S., there have been numerous trials related to harassment and mental anguish caused by companies and/or individuals in supervisory roles.  To my knowledge, though, there has been none related to something of this magnitude - holding a company accountable for the suicides of its employees.

I'm sure many French companies (as well as French divisions of global companies) will be watching the progress of this investigation to better understand what effect it may have on their own situations.

There has been much written about the positive effects that management practices can have on employee productivity, absenteeism, and company profitability.  We don't spend a lot of time, however, on the stress, depression, and other negative effects that company culture or management style can have on employees.

Whether or not the suicides are found to be the result of company practices (I'm sure the investigation will take years to complete), I hope that this situation highlights the need for all organizations to focus on creating a positive environment for employees and the benefits it can bring to all stakeholders.

France Telecom executives have begun to address some of the cultural issues at the company that are being blamed for the suicides.  Whatever the outcome of the investigation, it is a sad situation that hopefully will never repeat itself.

France Telecom & Employee Motivation

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France Telecom announced last week that it plans to begin basing up to 30% of a manager's bonus on social criteria, including job satisfaction of the people on the manager's team.  The change was implemented as part of a plan to address the company's rash of suicides over the last two years. [story]

Many of the people at the company who committed or attempted to commit suicide blamed their actions on working conditions, forced transfers, or fear of job loss.  In response to the problem, France Telecom's leaders have implemented training programs for managers and supervisors, and hired additional physicians, psychologists, and human relations personnel. Last week's decision to tie bonuses to worker satisfaction, absenteeism, and other people-oriented measures was the latest effort to deal with the problem.

Why Wait for Suicides?

My initial thought about this latest action was that it was a good move to improve the environment and working conditions at the company.  In addition to stopping the suicides, it can result in improving productivity and quality of service.

Upon further consideration, however, I wonder why it would take a rash of suicides for a company to understand the need to hold managers accountable for the satisfaction of those who report to them.

It is the responsibility of anyone in a supervisory position to create a positive environment for those on his or her team.  This includes coaching, motivating, and developing people, as well as creating an atmosphere that continually challenges people to improve.  A good leader also has to truly like people.  Although liking people does not necessarily make someone a good leader, disliking people definitely makes for a bad one.

Also, senior leaders must accept the responsibility to promote and hire only people with leadership capabilities into management positions, and commit to regularly develop the abilities of these people to become better leaders.

Remember Maslow?

Those who learned in management classes about Abraham Maslow's theory of motivation will undoubtedly remember his hierarchy of needs.  In his book, Motivation and Personality (HarperCollins, 2006),  Maslow theorized that people have five levels of needs, ranging from the most basic (physiological, safety, and love/belongingness) to the highest (self-esteem and self-actualization).  Maslow further stated that people cannot be motivated by appealing to higher level needs when they feel their basic needs are not consistently met.

When applied to the workplace, it becomes clear that fear and other aspects of poor leadership keep people at lower levels - specifically, the need for safety and security.  Change, innovation, and improving productivity, on the other hand, require people to be at higher levels.  In other words, we will never achieve the type of environment that fosters quality, improvement, and dedication necessary for long-term success and growth without helping team members satisfy their lower level needs.

Unfortunately, France Telecom is learning this the hard way.  Other companies can learn from their misfortune and create the type of environment that values employees.   The results of such an effort will be rewarding, not only for workers, but for all stakeholders.

Wal-Mart Warns Against Unions

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We live in a country where – in spite of what we’d like to think – employees are mistreated. Worker satisfaction among Americans is at an all-time low and is dropping even further with each successive survey. What is really unfortunate about this situation is some executives have gotten so blatant about it that they actually think it is good business practice to mistreat workers.

On page 1 of the August 1 Wall Street Journal is an article about Wal-Mart’s warnings about what will happen if Barack Obama wins the presidential election. According to the article, Wal-Mart human resource managers are holding meetings with store managers to warn them that a Democratic win in November will mean changes in federal law to make it easier for workers to unionize. In a bizarre twist to the message, though, company management is claiming that employees would be forced to join unions and pay dues while getting nothing in return. So they’re not concerned about what unions would do to stop the company from taking advantage of workers – as they’ve been doing for many years - they’re merely looking out for the welfare of their employees.

Whenever there is talk of unionizing within a company, cries of socialism, work stoppages, and higher costs are thrown around. And to be fair, there have been times in this country’s history when unions have taken advantage of their power sending companies – and entire industries – to ruin. What many people don’t understand, though, is that unions only exist because of poor treatment of workers by managers. If workers are satisfied with their jobs, feel fairly compensated, and trust management, they have no need to unionize.

In Wal-Mart’s case, the company has had years of accusations and charges of unfair labor practices – which is just as destructive to the company as union strife (one actually causes the other). Wal-Mart management is not known for respecting workers – and this move is strengthening that perspective even further. According to a person who attended one of the Wal-Mart meetings, the person running the meeting said, “I am not telling you how to vote, but if the Democrats win, this bill will pass and you won’t have a vote on whether you want a union.” It is really amazing how little respect company managers have for the intelligence of their workforce.

Wal-Mart has long followed several practices that lead to destruction, and it is only a matter of time before the company enters the same death spiral that has plagued so many other American institutions. It’s a question of leadership and always acting in a way that is best for all of the company’s stakeholders (which, believe it or not, includes workers). Undervaluing employees, squeezing suppliers, and losing sight of the fundamental purpose of the company are all practices that break down the company’s ability to survive.

As long as the market remains strong, the company can appear to be successful with no sign of breakdown. It’s when something external occurs that the weakened immune system becomes evident.

I led a company in the past that had been unionized for many years. Although I had no intention of eliminating the union, I did want to improve the relationship with workers so they did not feel they needed the union to make things better. By walking around the operation to talk with people and inviting the union representative into our planning meetings, a level of trust between workers and managers began to develop.

As a result, worker morale improved along with productivity, quality, and our financial results. Besides the financial success, the company became a more satisfying place to work.

It’s time we stop wasting our energy on fighting against workers and start realizing the potential value they bring to the company. By allowing workers to take pride in their jobs, there will be no need for workers to unionize or managers to waste money on misinformation campaigns to tell people how to vote. In the end, we will all win.