Accountability, Fear, and Changing a Culture

Uber finds itself in the news for lots of reasons, not all of them good.  The most recent story concerns the firing of 20 employees for a variety of bad behaviors to show that they were being held accountable for their actions.  I am not so concerned with whether this was a good move as much as if it will lead to change.

Certainly, the publicness of the firings meant that they were done as a message to Uber employees and the investment community.  It says, “Yes, we hear you about our culture and we are doing something about it.”  What it doesn’t say is, “You have been rewarding our CEO who does the same things, but we are not so sure what to do about that.”

Firing a bunch of people does not improve a company’s culture, even if it was the right decision.  Rather, it instills fear.  And while it may convey a message of what will not be tolerated, the action does not reinforce any positive behaviors that senior management would like to see.  It is almost like sentencing people to hang by the neck until they cheer up.

Uber has grown their business by the asking for forgiveness rather than permission.  That type of a model, by definition, rewards people for bending the rules to the extreme.  Their challenge is how to continue with a culture based on disrupting the status quo but respects the people who support it.  That will require threading a pretty small needle.

Changing a culture requires time and consistency.  Management needs to look at every aspect of its people processes (recruiting, hiring, onboarding, training, compensation, performance management, and succession planning) and ask, “Have we put in the right incentives and are we modeling the correct behaviors for a sustainable culture?”  Cultures do not happen overnight and they do not change after a few heads roll.

Another Step Towards Engaging Millennials

When writing previously about employee engagement, I discussed how companies can encourage employees to be engaged by taking steps to connect them with the organization.  We also know that, as a group, millennials tend to look for ways to connect with their employers and co-workers in ways that go beyond whatever product or service they are delivering at work.

This article describes a start-up that provides experiences for groups of employees to help encourage engagement in a way that is enticing to millennials.  This includes unique experiences they can together and being involved in community service.

Of course, this type of thing is not brand new.  Companies have been involved with stalwart social service organizations like United Way and Red Cross for many years.  But, I think it is fair to say that millennials are looking for something a bit more active than fundraising and giving blood (both worthy endeavors, by the way).

Companies do not need to outsource their engagement activities and management can brainstorm things that would appeal to their employees and fit with their culture.  But, this does show how companies are trying to get younger workers more engaged by experiencing intrinsic rewards (feelings of accomplishment) rather than extrinsic ones (here is a thing for doing well).  It also underlines how it is important to proactively create engagement you want to improve teamwork and reduce turnover.

Higher Minimum Wages and Success in the Hospitality Industry

The state of California and several of its cities have been on the forefront of raising the minimum wage.  The arguments for (people cannot live on the current minimum wage) and against (it will cost jobs because business will need to lay people off) it are familiar.  But now there is some data that makes a very interesting link between quality and the impact of raising wages.

This study looks at the impact of raises in the minimum wage and restaurant employment in the San Francisco Bay Area.  Don’t be fooled by the academic nature of the paper—the authors do a good job of explaining things in English before digging into the math (though you can get another explanation here with an eye towards the political).  The main takeaway from the article is that well run restaurants (in this case, defined by high Yelp ratings) are not impacted by minimum wage hikes.  Crappy restaurants (based on quality, not menu price) saw their already higher closure rate go up with the increases.  So, what does this mean for HR?

  • Well run businesses can absorb higher wages when their competitors cannot. This may mean higher prices (in some instances people will pay for quality) or that these businesses can survive on lower profit margins.  HR can contribute to this through good hiring (brining in people who can deliver high levels of customer service) and training (developing a learning culture) practices.
  • Use data to improve quality. The study shows that online feedback (in this case, Yelp reviews) is strongly correlated with business success.  This customer input should be used to improve service and quality.
  • If we presume that the vast majority of the workers at the restaurants are at minimum wage (as the paper does), this research tells us that paying more is not an indicator of quality or success. If restaurant A is getting a rating of 5 and restaurant B is getting a rating of 3, it is not due to wage differentials.  Rather, it is likely based on the quality of the product and the level of service.  HR may not have much impact on the former, but it certainly does on the latter.

What the paper really tells is that that business can succeed without necessarily being the one that pays the highest wages.  When wages are held constant, hiring the best people from the available labor pool may lead to higher service delivery.  This, in addition to a good product, can keep a business successful, even if wages are forced to go up.

He Knows When You Are Working, He Knows When Are Logged Out

As long as there have been workers, management has looked for ways to manage performance.  In the case of piece work, it was mostly used to provide incentives for productivity.  As the economy became more service oriented, performance was also measured so that throughput could be forecasted more accurately (think about a telephone center predicting the number of call to be handled on a certain day).

The use of this data has traditionally been used to “gamify” work as well.  That is, make reaching certain performance level an incentive in and of itself.  Sales competitions are a great example of this.  The logic being that if something is like playing a game it will be more fun (read: motivating) than something that seems like work.

Big data gives companies more ammunition to gamify work.  It also provides opportunities for the application of it to go beyond making or selling widgets.  As this article points out, Uber is at the forefront of this (though, make no mistake, they are not the only ones doing it).

Uber really has a love/hate relationship with its drivers.  Right now it needs them, but they foresee a day where they will need fewer people behind the wheel due to the automation of cars.  Uber needs a lot of drivers to provide high levels of service, but a glut of them leads to fewer occurrences of surge pricing (Uber’s version of raising prices and being more profitable when demand is high compared to the supply of drivers), which leads to fewer people being available since they will not make as much money.

Forecasting labor availability is key for the company in order to maintain service levels.  But, since Uber insists that the drivers are independent contractors who can work whenever they want, they cannot schedule the appropriate number of drivers to match anticipated demand.  So, to keep drivers logged in the app and behind the wheel, they have employed the same techniques that video game designers use to keep people playing.

In the article, the author clearly thinks that tapping into these motivations is “tricking” drivers into spending more time behind the wheel than they may want to.  But, is this really any different than traditional motivation techniques used by leaders such as providing intrinsic motivators like praise (“I appreciate the hard work you put into that presentation”) to reward and encourage future efforts?  Is it more coercive than, “You need to work at the store on Thanksgiving or your fired.”?

The answers really depend on whether the goals that Uber wants to achieve are aligned with those of the drivers.  If keeping more people in the app leads to more idle time (time spent without making any money), then I have a real problem with it.  If it helps manage the drivers’ time in a way that allows them to be more efficient and them and Uber to be more profitable, then I am good with it.

Worker performance has always been managed to help achieve organizational goals.  New technologies allow companies to look at these issues more closely than ever before.  HR should examine closely whether these efforts enhance engagement and, in the case of independent contractors, financial viability.

Lost Communication and the Death of Process

The business world is both transient and stable.  People and priorities change, but as long as the organization is in existence it has processes that continue on.  When the information gets disseminated is becomes institutional knowledge.  We often connect this with an individual (When Maria leaves we are in trouble because she has so much institutional knowledge.), but keeping this information available improves the understanding of processes throughout the enterprise.
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But, how we speak about things changes over time.  For instance, organizational commitment became employee satisfaction, which became employee engagement.  There are subtle differences between them, but what we have always been talking about is, “How much do people want to be here and contribute?”  Yet, if we did not have records about how we understood these concepts we would have some difficulty understanding how and why we conduct (or don’t conduct) employee surveys.

The challenge is how to keep track of the amount of information that organizations generate and keep it in an update language that makes sense as the business changes.  For instance, in my practice it is normally takes quite a bit of communication and presentations to keep validated testing programs going when there is a change in HR leadership.

Perhaps a more interesting example is outlined in this article, which describes how a group of volunteers are taking handwritten letters to reconstruct the English language during Shakespeare’s time.  You may say that 400 years is much longer than any business organization has been around, but think about the rapid changes in computer languages and how important understanding the “old” ones are in maintaining or updating systems.  The archaic can be useful

What potentially gets lost over time and change in language are the research and reasons for doing things.  We lose the ability to answer the most basic of business questions, “Why are we doing this?  Why are we doing it this way?”  Being able to communicate the answers those questions allows for adapting processes when the environment changes and prevents reinventing the wheel.

 

 

CEO Accountability…Really!

I could fill up this post with examples of CEOs that got raises when the performance of the company they were running got worse.  But, that’s too depressing.

Rather, here’s a story about Tim Cook and other Apple executives getting their pay cut because the company did not hit its numbers.  Sure, Cook and the others are not going to start clipping coupons any time soon, but it is an all-too-rare example of executive compensation being linked to actual company performance.  In this instance, profit was down 16%, so pay got cut 15% (though I doubt whatever formula was used was quite that simple).  In this case, the cut is not receiving 100% of a cash incentive, which had been paid out in full previously.

Cynics will say that the cut amounts to change in the cushions for the Apple executive team, which I guess is true.  However, it does send a message to employees (and shareholders) that if executives are accountable for the overall performance of the company.  And this type of message is important in establishing a culture of accountability.

What this step also does is establish the purpose of executive variable compensation—to reward provide a reward based on recent company performance.  This is separate from any gains/losses in the stock price, which is supposed to be a forward looking metric.  Is this going to make Tim Cook work any harder?  Probably not.  Does it tell Apple employees that senior executives are accountable for the development and execution of business strategies?  Absolutely.

How Far Will You Go to Emphasize a Culture of Customer Service?

I am a regular listener to the podcast of This American Life.  Recently, they had a segment on customer satisfaction and L.L. Bean’s extreme version interpreting it (“Our products are guaranteed to give 100% satisfaction in every way. Return anything purchased from us at any time if it proves otherwise. We do not want you to have anything from L.L.Bean that is not completely satisfactory.”).  You can read the transcript here (go down to “Act Two. Bean Counter”) or download to podcast (I recommend the latter).  Some of the stories are stunning.

The first issue is who gets to define customer satisfaction?  The company?  The customer?  Of course, only the customer knows if s/he is truly satisfied with a product or service and the satisfaction is generally derived from whether or not they got exactly what they wanted out of the transaction. So, the question really is what will a company do when the customer is not satisfied?

In non-competitive marketplaces (think government services or other monopolies), don’t hold your breath.  To them, customer satisfaction is a cost, not an investment.  There is no incentive for them to make you happy (though, one could argue that working in a customer service oriented environment would lead to a better culture, which leads to better word of mouth when it comes to recruiting).   Lucky Patcher app The same goes for pseudo-competitive marketplaces (like cable/satellite TV) where you have some limited choices but making a switch is really a pain in the ass.

However, in competitive marketplaces, like apparel, delivering superior customer service is a differentiator.  All of us can think of how different retailers interpret customer satisfaction and the investment they put into it.

What I found most interesting during the podcast was the training that went into ensuring that LL Bean’s return policy was carried out.  It’s one thing to say, “OK, we’ll take back anything that you bring back for store credit” and another to do it in a way that provides for a satisfying experience for the customer.  Note that they trained people who work in returns to execute the letter and the spirit of the policy.  LL Bean also selects people who work in that department who have the personality and skills to carry it out.

What this tells us is that customer service does not just happen.  Rather, it is a combination of strategy, culture, and the right people to treat customers the way the company wants to treat them.  What is your plan to align all of these?

Really, Autonomy is NOT Overrated

To use a tired cliché, they call it Show Business for a reason. Fortunately, within the last 10 years or so, the news media in Los Angeles has been covering that industry as it would any other large one in the region. So, it made a local splash when the Chairman and CEO of CBS said at a conference when discussing the artistic freedom that streaming services and others give filmmakers, “Autonomy is overrated” and “I helped cast ‘Friends.’ I was an executive… We help the process at the studio, at the network.”

I think there are better ways to support your argument than a one-off example from 20+ years ago. Also, Mlodinow’s book The Drunkard’s Walk cites some pretty good examples how much randomness goes into the success of entertainment ventures, so for each positive example he provided for casting I’m sure there is another one where his control over the decision making process hurt the project. Or, maybe the show would have been just as successful with the original casting. But, I digress.

Autonomy is freedom from external control or influence. It does not mean doing something without input or ideas from others. It is a state of independence in that you have the final say on decisions. Perhaps from an executive’s point of view that’s dangerous or nerve wracking, but for employees it is anything but overrated. The data show that perceived autonomy is related to many important organizational outcomes, including productivity and job satisfaction.

What he was really talking about was his company’s willingness to invest $X million of dollars into anything without having some veto rights in terms of content, casting, etc. In this case, it’s buying content and the struggle is over who really owns it. In a more typical scenario, it’s hiring people to execute a business plan and the struggle is over how much control the managers feel they needs to have over employees.

This week I’m working with a retail client in building competency models. They have recently moved to a business model where customer engagement is more important than it had been in the past. One example that middle managers gave of this was getting rid of a multi-tiered refund policy (this happens if you have a receipt, this happens if it’s after 30 days, etc.) and giving the store managers the decision making authority to say “Yes” to pretty much any reasonable refund request. I’m guessing that customers don’t think that this autonomy is overrated.

Autonomy is also a key part of the “gig” economy. While there are important legal issues as to whether these people are employees in certain situations, the larger issue is that there’s a strong need for them to feel that they are controlling their own destiny. A few months ago I got a ride from a woman who was living the gig economy dream. She had a “regular” part-time job where she had control of her hours. She drove for two ride sharing services and rented out a room in her house. When I asked her if that was a lot to keep track of, she responded that she was a good time manager (obviously) and that the freedom to work (or not work) any specific set of hours was important to her.

My observation is that millennials enjoy the autonomy that technology gives them. This leads to an expectation of it in the workplace. Employers should use this as an opportunity to create engagement.

Giving people (appropriate) decision making authority should not be scary if they are properly hired and trained. Executives who fear autonomy are missing out on engaged and high performing employees.

Are Employee Owners More Engaged?

Among the incentives employers provide are stock incentive programs.  The thinking is simple—if someone is an owner of a company (no matter how small) they’ll act in a way that is more beneficial to the enterprise.  With startups, it’s a bit of a gamble (take less cash up front, but if this thing takes off you’ll be rich) and with more established ones it probably helps stabilize the stock price.  But does this incentive lead to better organizational outcomes?
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Most of the available data says yes in the sense that companies that offer these types of programs out perform those that don’t.  However, correlation is not causation.  It is probably only companies that are already doing well that make this type of incentive available.  Also, in high tech and bio tech they have come to be expected, so they probably don’t work as motivators.

What is interesting, and probably effective, is the psychological aspect of begin an owner.  Except in small companies, an employee is rarely going to see the direct affects of his efforts on the bottom line.  But, having an ownership position, no matter how small, does invite more engagement.  A perfect example is with the Green Bay Packers football team.  The team offers stock to its fans, but it’s essentially worthless.  But, when it’s offered it sells so that fans feel that they have ownership in the team.

The idea of “owning” one’s work or destiny is a powerful one.  In change management we often speak of authoring or owning change.  Having ownership feeds into our need for autonomy, or control over our destiny.  Whether it is through owning stock or having meaningful input into work product, we want to be able to say, “I did this so I could impact an outcome.”  And that is important, regardless of whether the outcome is a stock price or how the widgets get engineered.

This is a powerful incentive to be used by management, but it involves each level giving up a bit of its own ownership position.  But, some executives, such as at Chobani think it is worth it.

Filling Diversity Buckets

With great fanfare, Intel announced recently that it is making progress in meeting its diversity goals. I’m not going to pick on their numbers as their current demographics are what they are. There are some good lessons we can learn from how they approached the issue.

  • You have to be holistic. They understand that culture, recruitment, and retention all play a part in attracting, hiring, and keeping diverse talent.
  • Drill down in the data. Intel looks at hiring and retention in different job categories. Saying that you are diverse overall, but not in high paying jobs, is not much of a victory.
  • It takes significant resources to make changes. Developing a pipeline of diverse talent requires money in scholarships, helping schools, etc and finding untapped recruitment pools take time and money.
  • Just like any other business outcome, the goals are reached only if they are measured AND if there are rewards for doing so. Sorry, but you cannot assume that people will strive for noble goals out of the goodness of their hearts.
  • It’s more than hiring numbers. You need to get the compensation and culture right to retain people. Oh, and selecting and developing good managers, as that has a huge influence on turnover.

This article goes into a bit more depth about the challenges Intel are facing. Not surprisingly, there are concerns about balancing multiculturalism (celebrating differences) and integration (making one big happy family). It also points out that if people are spending time on diversity programs, it takes them away from their “real” job (unless they are in the diversity department) and makes it tougher to get promoted and make the higher ranks more diverse.

Just as importantly, this is a case study about what doesn’t work. There is a lot of good science about unconscious bias. However, Intel found that training people about it doesn’t really affect their decisions, or at least as much as tying their compensation to it does.

You can see how Intel treated this as a supply chain as a human resources issue. It’s an interesting approach that probably led to some creative ideas. You’ll note that there is no discussion about lowering standards, which is divisive and bad for the businesses. It is also something that probably is not discussed when they are sourcing equipment. Just something to keep in mind when making important business decisions.

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