6

GREEN AND GROWING

Learning

We are committed to continuous learning so we invest in ongoing training and development.

The illiterate of the future are not those who cannot read or write. They are those who cannot learn, unlearn, and relearn.
—Alvin Toffler

With Christmas just around the corner, a man whom kids all over the world counted on to delight them was busy in his workshop.

On December 23, 1935, Walt Disney was at his desk typing an eight-page memo to Don Graham, who had been brought on board at Walt Disney Productions to turn cartoonists into animators.

Snow White and the Seven Dwarfs was in the early phases of development and already was being labeled “Disney’s Folly” because of Walt’s ambition to turn this work into the first-ever feature-length animated film. Disney was undaunted by the talk sweeping Tinsel Town, but he recognized that the animation he demanded for Snow White required something more, something new. Those who had been drawing Mickey Mouse were now going to be asked to elevate their game. “Some of our established animators,” Disney wrote Graham, “are lacking in many things.”¹

To shore up this deficiency, Disney spelled out in great detail to Graham a “systematic training course” to address these deficiencies. Disney recommended a “method of procedure” that called for the animators to “minutely analyze” the “idea to be presented, [the] result [that] was achieved, and [an assessment of] what could have been done to the picture … to improve it.”²

More than improvement, however, Disney wanted Graham to transform these cartoonists into a new breed of animator by expanding their perspective, exposing them to new styles, and teaching them new skills. Graham’s pupils would need to unlearn what had brought them to the pinnacle of their career and then learn a whole new way of thinking and drawing. And they would have to do it quickly.

A COMMITMENT TO LEARNING

Walt Disney’s commitment to create a structured program within his studio for his most valuable team of employees is remarkable on two levels: First, Disney sought to bring a disciplined process to creativity. He was “convinced that there is a scientific approach to this business,” and he did not want to rest until “we have found out all we can about how to teach these young fellows the business.”³

Second, the investment Disney made in his teachers, employees, and the films he produced constituted a significant financial bet, particularly when his move to institutionalize learning within his studio coincided with the depths of the Great Depression when nearly 20 percent of Americans were unemployed and the country’s industry was climbing out of a deep hole after hitting bottom just two years earlier.⁴ Disney mortgaged his home to finance the work of 750 animators who produced the 1 million images that became the film Snow White.⁵

It’s clear from Walt’s memo—from his sense of urgency and insight into the qualities that make a good animator, to his insistence that these techniques be learned and applied by “young and old as well”—that not every animator would make the jump.⁶

Walt Disney was giving animators the tools, the training, and the opportunity to develop the new skills that would be needed as the Golden Age of Animation was dawning. The company was doing its part.

Those on the receiving end of Disney’s investment in their learning and development would be held accountable for doing theirs.

GREEN AND GROWING

Halfway across America in Oak Park, Illinois, a young man who had met Walt Disney when they served in the same ambulance-driving regiment during World War I was trying to figure out what he wanted to be when he grew up.

It took him awhile, but, at age 52, Ray Kroc made the best decision of his life when he purchased a small hamburger operation from Dick and Mac McDonald and changed forever the way the world eats. “I was an overnight success all right,” Kroc later recalled, “but 30 years is a long, long night.”⁷

Three years after founding McDonald’s, the company had sold its 100 millionth hamburger, and three years later in 1961, Kroc launched a program he later called Hamburger University, whose sole purpose was to train operators and franchisees “in the scientific methods of running a successful McDonald’s.” This institution of higher learning boasts more than 80,000 graduates.⁸

Like Disney—and like you—Kroc needed a team to achieve his vision. Kroc envisioned a “restaurant system” stretching from coast to coast and, later, around the world that could churn out burgers, fries, and drinks so consistently they would taste the same in Peoria, Illinois, as in Paris, France. And like Disney, Kroc believed in the power of learning through systematic training for his most promising employees in order to improve individually and organizationally. Learning, training, and development were key ingredients in McDonald’s success. “If you aren’t green and growing,” Kroc often said, “you’re ripe and rotting.”⁹

Investing time and money in developing your team has always been important to leaders of high-performing companies.

LEARNING BEGINS IN YOUR BACKYARD

Learning continues to be exceedingly important because the pace of change has never been faster; and it will never again be as slow as it is today. Research from the University of Southern California estimates the average person produces the equivalent of six newspaper pages of information every day, compared with one-third that amount 24 years ago.¹⁰

So it’s understandable if you are drowning in the tidal wave of information that’s washing ashore in your business. How can you and your team keep up with learning all that you need to know? How do you know what you need to learn to do the job you’re supposed to do?

You are wise to look beyond your four walls to learn from changes occurring in the competitive, political, regulatory, cultural, technological, and financial arenas that will make an impact on your business.

But before you look outside your organization, first look inside.

When you do, you likely will find things happening in your organization—under your nose and behind your back—that will surprise you. Learning does not have to be expensive, but not learning can cost you a fortune.

WANT IMPROVEMENT? ASK YOUR EMPLOYEES

Before I conduct a strategic planning session with a company’s leadership team, one of the decisions the CEO must make is determining the participants. Where do we draw the line on who attends and who doesn’t? I’m often asked.

It depends, though the easy answer is that all of the CEO’s direct reports must attend. There may be a second level of leaders that should also participate, and the CEO and I discuss that option.

Are there people on your team whose input you’d like but who cannot attend the planning session? I ask. If so, I’ll call them. We’ll be learning something from this next tier of employees.

Here’s how it works. The CEO sends an email advising the leaders who will not attend the planning session that I will be calling, and that (a) no preparation is required; (b) everything said during the call is confidential; and (c) the call will take just 15 minutes.

When I call, I ask these four questions:

1. What’s working well at your organization? I hear what sounds like the company line of “good products,” “dependable services,” “good people,” and “solid financials.” No surprise.

2. What’s not working? Typically, the employees begin to unload … to a complete stranger. By the time I’ve talked with half the people to be called, I can anticipate with accuracy what I will hear on subsequent calls. What’s the learning? First, it’s an indication of a pent-up demand among your employees to be asked and to share. Second, it’s an indication of issues that are either unknown or underestimated. Third, it could be the indication not of a problem, but of a lack of communication around a particular program, policy, or person. Communication, training, and accountability regularly top the list of what’s not working in most companies.

3. If you were in charge, what decision would you be making? This question moves the person from complainer to problem solver. Again, I’m looking for patterns of problems or opportunities to address. Frequent feedback is a need for more communication from the CEO about where we’re going, how we’ll get there, and how we’re doing. Another is getting rid of underperformers. (More on that topic is found in Chapters 7 and 9.)

4. What’s one thing the organization can do to make you more effective? You might be surprised by the suggestions for simple fixes this question prompts. “Stop making salaried employees punch a time clock! Don’t you trust us?” And “By having me report to two different people, I’m often working on competing projects with competing deadlines.” And “Why can’t we invest in an admin? For every penny they think they’re saving on salary, they’re burning a nickel of my time doing work that’s not my primary focus.”

A CEO in Toronto told me that going through this process was a waste of time. “I already know what my people think,” he told me. “Besides, we can’t possibly implement everything that you hear on these calls.”

“You’re right,” I responded, “we can’t do it all, but we can pick one or two of the biggest issues we uncover and work on those. Plus, just because you don’t ask them doesn’t mean they’re not thinking about this stuff.”

When I completed the calls and made my report, the CEO was surprised to learn that he was not as plugged in as he thought, and we went to work on an issue strangling his organization’s effectiveness.

Remember the results of my survey of the 82 leadership teams in Chapter 2? Your position in the organization will give you a biased view of performance. The higher your position, the more optimistic your view of how things are going.

Once you learn the truth—or the perception of the truth—it’s your job to eliminate or minimize the obstacles that make it harder for your colleagues to meet your expectations. That’s why I tell leaders they are in the barrier removal business.

One more thought on who to invite to your planning session: I advise against inviting board members (though I’ve done it), because one of the purposes of the session is to build trust. Trust building is accomplished when the team addresses meaty issues, including lack of accountability among peers, and it’s often difficult to get these issues on the table among those who work together; it’s even harder with outside board members present.

Learning doesn’t just come from the top. Nor does it come only from experts conveying information and training to your employees. Learning can and should be bottom to top and side to side, just like accountability in high-performing organizations.

If you don’t want to improve, don’t ask your people for their feedback. Ignorance may be bliss, but its price can be costly, as the following example illustrates.

WHEN LEARNING IS A SURPRISE

As noted previously, I spend a significant portion of each month serving as a coach, consultant, and confidant to 32 CEOs and 16 key executives who are leading successful organizations in a variety of industries. Once a month, I facilitate a meeting for a group of CEOs in noncompeting businesses who act as a sounding board for each other. They discuss problems and opportunities, question decisions before they’re made, and then hold one another accountable to implement the decisions made in the meeting. Between the monthly meetings, I conduct private coaching sessions with these executives to ensure that accountability becomes reality.

At one of these monthly CEO meetings that I lead, the executives had gathered for their regular meeting. The host was given 30 minutes to present his business update. The CEO had told us month after month how great things were going. He’d told me the same thing in our private sessions. Key new talent was being added, he’d told us. Plans to move to a new, larger building were moving forward. An acquisition was pending. Life was grand, or so we were told.

During his presentation, the CEO shared his financials. Imagine our surprise to see that sales were down. Expenses were up. Cash was tight. Yikes!

Was the CEO embarrassed to tell us the truth? What role had I played in not creating a safe space for the CEO to share this information? What questions had I and the other CEOs failed to ask month after month? Or were these problems blind spots for this CEO?

Who knows? It didn’t matter. What the CEOs learned was that simply taking a person at his or her word was no longer enough. The surprise learning prompted the CEOs of that group to make a significant decision that day.

FORM A SWAT TEAM

The CEOs of my group—stunned to learn the facts from a peer whose financials showed he would have a terrible year—made the decision that day to minimize future surprises.

Here’s the process we use in my two CEO groups, and it’s a form of learning you can use in your organization: Before a CEO hosts a meeting, four CEO peers visit the hosting CEO’s company. We call this process “a SWAT team visit” (i.e., special weapons and tactics units), not to be confused with a SWOT (strengths, weaknesses, opportunities, and threats).

The SWAT team members meet privately with the CEO’s employees without any boss being present. The SWAT team asks questions, compares notes with one another, and, based on what they learn, makes recommendations to the CEO.

When we started the SWAT team visits, the process initially was viewed as the most feared day in the life of the CEOs because they realized that any masquerading on their part was about to come to an end once the SWAT team completed its visit.

Now the process is considered an incredibly valuable day because of the learning everyone—not just the host CEO—receives, and because of the recommendations to capitalize on opportunities and fix problems based on feedback from a group of peers. It’s also a huge accountability tool.

You don’t have to belong to a Vistage group to gain the benefits of a SWAT team experience. Find four noncompeting business executives you trust and whose only motive is your success. You must be willing to learn the truth, or the perceived truth, of how your colleagues believe you’re running your business. If you enjoy those kinds of relationships and you can deploy them on a SWAT team visit, it often prompts invaluable learning.

HIRE FOR VALUES, TRAIN FOR SKILL

The leaders of companies I work with have been inoculated against a deadly disease plaguing many organizations.

The disease is known as unique-itus. Leaders can be a carrier of this disease without realizing they’re infected.

The chronic symptom is a belief that the technical skills and experience required to contribute to their business are so different, so special, so unique, that only people who have spent years in their industry are the best fit for their organization. With the exception of doctors, lawyers, and scientists, most of the work we’re asking our colleagues to do can be taught and learned on the job.

Yet we often hire or promote people largely because of who they used to be. We are mesmerized by their past. So we scrutinize a candidate’s résumé, examine past experience and accomplishments, check references as best as we can, and ask candidates to take some type of assessment that largely confirms what we already sensed: That this candidate is a Driver, an Analytic, or some other personality type. We then attempt to project that historical personality and performance into the future. We’d do well to remember the disclaimer wealth management firms use: Past performance is no guarantee of future results.

When things don’t work out with the person we hired, it well may be because of underperformance and accountability-related issues.

Just as often, however, people are fired because of who they are. And for this reason, character counts. Character is more than a personality trait; it’s a deep-seated set of values. And our values are revealed during times of adversity.

The next time you hire or promote someone, look beyond technical capability and take a closer look at the person’s character. Are this person’s values and beliefs consistent with ours? A deeper dive may reveal an abusive sales exec, a manager who blames others for problems they helped cause, or a person who is unwilling or unable to talk about tough issues.

These people are unlikely to change their behavior. That’s who they really are, and we ignore those characteristics at the peril of our culture and, ultimately, our success.

Your team is one of the best predictors of future performance. Are you evaluating your team based on who they were or who they are?

Even when you hire great people with values that match your own and who share your enthusiasm for the work, you still need to invest time, money, and patience to help them reach their full potential in your organization. Of the executives I surveyed, 67 percent said, “We view ongoing training as an investment, not an expense,” and 74 percent said “We give our employees the tools and training they need to succeed.”

Hire for values. Develop skills.

ONBOARDING AT SOUTHWEST

When Southwest Airlines decides you’re a good fit for the company, it uses a comprehensive process to ensure new hires understand what it means to be a member of this elite club. The company receives more than 100,000 résumés each year for about 2,000 positions, so the competition is pretty stiff.

Once a person is identified as a good fit for Southwest, they are asked to participate in several different activities to immerse them in the company’s culture. “We want to ensure that employees are having a consistent experience whether they’re in Los Angeles or Baltimore,” says Elizabeth Bryant. So every employee comes to Dallas for a new hire class called Freedom, LUV and You, or FLY, for a full day of learning around the company’s history, values, and culture, and to understand what’s expected of them.

Employees are asked to view their role not just as a job or even a career but as a cause. “Our employees,” says Bryant, “are providing Americans the freedom to go, see, and do when they may not have been able to do that before. We rally them around this cause we have at Southwest Airlines, and we ask them to commit to that.”

From there, new employees experience multiple connections with the company, ranging from lunch with senior leaders to a variety of company-wide events and celebrations. “We want to ensure new employees understand what it means to be part of Southwest Airlines,” Bryant says.

Many companies throw a small party for an employee’s last day on the job. What changes would occur—in commitment, in culture, in performance—if you threw a party on a new employee’s first day?

RNDC’S THIRST FOR TALENT

Republic National Distributing Company (RNDC) is one of the biggest companies most people have never heard of. Yet most of us consume what they sell.

At $6.5 billion in annual sales and 7,900 employees, RNDC is the second largest premium wine and spirits distributor in the United States with wholly owned operations in 22 states and the District of Columbia; it’s the thirteenth largest company in the world based on alcohol revenue.¹¹

Bob Hendrickson is RNDC’s executive vice president of operations in the Americas, and like other leaders I spoke with, Hendrickson has made a successful career for himself in a company he “fell in love with” shortly after graduating from college.

“By the time I’d graduated from college,” Hendrickson told me, “I already had some of the best training for the industry I chose.

“I was in a fraternity,” he jokes.

Hendrickson was recruited by Gallo in Los Angeles as part of its college training program and spent about three-and-a-half years with Gallo. Gallo placed Hendrickson in one of their distributors that became part of RNDC with the idea that he would work in this Dallas distributor for a two-year assignment and then return to California to continue his employment with Gallo. “So 29 years later,” says Hendrickson, “I’m still waiting for that phone call.”

Hendrickson has been one of the driving forces behind RNDC’s growth. His early focus was on sales and he still spends 70 percent of his time on the road, but as his responsibility grew he made talent development a priority.

Of RNDC’s 7,900 employees, about 65 percent are in sales, with associates in operations and administration comprising the other 35 percent. About 45 percent of RNDC’s employees are Gen Xers, about 28 percent are baby boomers, and about 27 percent are Millennials. Identifying, attracting, developing, and retaining talent, especially among the Millennials, is an essential component of RNDC’s success.

RNDC recruits most of its talent at the college level, talking with deans of business schools and recruiting on campus. RNDC brings the best candidates to Dallas for a day of extensive interviews then sends them out in the field so they understand what their job is going to be.

“When I joined in 1986,” says Hendrickson, “I remember hitting $100 million in sales and thought, ‘We’ve hit the big time,’ and now we’re over $6 billion. Our average annual revenue growth the last five years is nearly 15 percent, and we bring on board about 100 new employees every year. So our thirst for talent is never-ending.”

RNDC’s approach to learning and development reached a new level of focus in May 2007 when National Distributing Co. (NDC) and Republic Beverage Co. (RBC) merged to create RNDC. The two companies had enjoyed considerable success on their own, but their respective leaders understood that consolidation was the name of the game in the beverage industry, and they wanted to lead the field, not fall behind.

The two companies shared similar values and similar operating cultures, and these similarities have been the foundation of the merged company’s continued success. This merger of equals resulted in a rare blend of a family-owned company whose owners are actively involved in the business that’s managed by outside executives like Hendrickson who were the key players in the two legacy businesses. RNDC’s operating approach is markedly different from other companies in the alcohol beverage industry: RNDC’s leaders effectively created a culture, structure, and operating system that look and act more like a public company while retaining the values and strength of a family-owned business.

INVESTING IN TALENT

Lorraine Luke joined RNDC as the company’s vice president of human resources 16 months before the NDC and RBC merger, bringing considerable training and development experience from her 20 years working at YUM Brands, parent company of KFC, Pizza Hut, and Taco Bell. Once the merger was completed, Luke and her team worked with RNDC’s senior executives to assimilate the two companies’ compensation and benefits program, then developed a long-range plan to address recruiting, retention, and development.

Hendrickson, Luke, and other RNDC executives made two significant talent-related commitments. First, RNDC enhanced its process to identify and bring on board top talent effectively and efficiently. Second, the company committed to developing its people so that they’re three or four people deep in every key position.

“We were doing a pretty good job in both areas, but we knew we had to get better,” says Hendrickson. “For example, we expect Texas to push past $2 billion in sales. Texas is a great model of a deep talent pool where we focus purposefully on the professional development of our associates. It’s important they understand what it means to be part of the RNDC culture, from job expectations to standards of operations and best practices. As a result, Texas has become a strong exporter of top talent, bringing best practices to other markets.”

Although these two priorities of onboarding and development were clear to RNDC’s leaders, implementing the changes was a two-year process.

As leaders analyzed turnover metrics, they saw that most of the turnover occurred in the “backside of the house” versus the “front side of the house” and it was occurring within the first 90 days on the job.

“We expected this to be the case,” says Lorraine Luke, “because we have night crew, day crew, and merchandisers, and those jobs require physical work. A lot of these are entry-level positions, noncollege requirements, and so these people can go across the street and work for similar wages. But that turnover is disruptive, wasteful, and not good for our reputation, so we worked to compress the onboarding experience from six months to 90 days through more structured training, heavy involvement of the manager, and a lot of follow-up.”

The most significant new piece added to the onboarding process was assigning a mentor to new hires. The mentor is generally outside the new hire’s scope of responsibility so the new hire can talk to this mentor without any repercussions in terms of the chain of command. RNDC also provided more communication and coaching around a new hire’s development path.

“The quicker we can get new hires on board,” says Hendrickson, “the quicker we can help them understand what it takes to be successful with us and show that we are taking responsibility for training them, the better it is for us and for those who choose to stay.”

Development is evaluated as an investment, not an expense. “If there’s a training need,” says Hendrickson, “for the most part it’s not a question of finance, it’s a question of Do we need to do it? How is that training going to help our organization? If those two questions are answered positively, then we proceed. If we start viewing our talent development as a financial issue then we are going backwards.”

Just as accountability is a two-way street—Can I count on you? Can you count on me?—so, too, is learning. What’s good for the employee is usually good for the company.

Successful companies understand they can learn from their employees, so they survey their workforce to learn how employees feel about the company, to measure employee engagement, and to assess whether the company’s training, development, and communication initiatives are working.

RNDC’s internal survey shows that “92.7% rated their overall satisfaction with RNDC as good,” and “97.4% of associates were motivated on the success of RNDC.”¹²

CAREER DEVELOPMENT AT RNDC

As part of RNDC’s focus on improving employee retention, a renewed emphasis was placed on career development.

The company learned through exit interviews that some people were leaving because they didn’t know what lay ahead for them, so Luke developed a program where managers nominated their associates to participate in an extensive career development program.

“You don’t really punch a clock around here, so you really have to like what you do,” says Hendrickson. “If that passion shows up in their performance, an associate will be presented to the management team and be given the chance to participate in our formal succession planning program.”

Managers present their top talent in person and then the management team is excused so executives can discuss who will be selected as bench players for key roles. “It’s not a slam-dunk to get into this program,” says Hendrickson, “although the success rate is close to 90 percent of associates we identify as ‘top talent’ moving their career forward two or more positions within five years.” The talent review continues with presentations by district managers, area managers, division managers, VPs, and EVPs who are each presenting to the senior leadership team. “It’s a great day for us,” says Hendrickson, “because we know where our talent is, and—just as important—our associates know where they stand.”

Strengths are praised and weaknesses are coached, so when a promotion becomes available, these up-and-comers are well positioned to interview for that job.

RNDC’s career development process also means leaders had to learn how to have difficult conversations about an employee’s ability to learn and perform. Fact-based conversations minimize the emotional component of the feedback process. “This process,” says Hendrickson, “has given us a venue to sit down with an employee and say, ‘Here is what you’re doing well, and here’s what you need to do to improve.’ At first, our managers were scared to have that conversation. It’s human nature not to want to have that conversation. But you have to have those conversations so that your people have a clear understanding of their path with us.”

Most RNDC managers believed they would lose people by having honest conversations with them about their performance. “The reality,” says Hendrickson, “is that we didn’t lose anybody because, if anything, the people who needed to improve appreciated the fact that they knew where they stood.”

“Not everybody wants to move forward in their career,” says Lorraine Luke. “A lot of people are happy with what they’re doing, and we’re glad to learn that about them because it helps us in our decision making. On the other side of that coin, we have an 85 to 90 percent promote-from-within rate, which is tremendous.”

ADVICE FROM STANLEY MARCUS

The Container Store’s culture determines how it hires, who it hires, and how it develops people. “We’ll hold out forever to hire the right person,” says Kip Tindell. “It’s not easy, but it can be done—even in retail. You must first believe that it’s possible. I’ve found most people have truly given up on that notion. You can hire great people, but it takes astronomically higher levels of HR resources to attract, recruit, hire, train, and retain great people.

“We put our money where our mouth is, so we pay 50 to 100 percent more than most in the retail category,” he says. “How can you afford not to do that if you’re hiring winners? We commit to a 10 percent-per-store payroll versus 3 percent industry average. We don’t take economy of scale on wages; we look for savings in other areas. Everybody wants to see you win. We treat our vendors just like we treat our employees. They love us. And we get the best price in the country. We buy stuff cheaper than mass merchants even though we buy 5 percent of the volume that they do, but we have a much better relationship than those big retailers do. You can’t beat them on volume so let’s beat them on relationship. That’s easier.”

To get this winning performance, Tindell says, “we invest in training and training and more training.”

Stanley Marcus was the CEO of luxury retailer Neiman-Marcus, the store his parents founded. “He was my hero,” says Tindell, who scheduled several visits with the legendary retailer.

“He once said to me, ‘You have the best people in the business. How do you do it?’ So I told him about our training, and he listened in his gentlemanly way and then said, ‘Mr. Tindell, you train bears and seals, you educate people.’ With apologies to Stanley Marcus, we still call it training, but I learned a lot from our conversations because he’s right: it’s about educating people and arming them to the fullest.”

Tindell recalls the story of Albert Einstein sitting on a train and watching a parallel track as another train was pulling away. It appeared the other train’s wheels were spinning backward. Einstein immediately conceived the theory of relativity. His mind was prepared for that flash of intuition.

“Intuition,” says Tindell, “does not come to an unprepared mind. You must train to make it happen. Intuition is the sum total of one’s life’s experience. Yet we’re taught that intuition has no place in business—just logic. Why would you leave intuition at home when you come to work?

“You can’t imagine how hard it is to get an employee to leverage that intuition,” Tindell continues. “The key to high-performing, problem-solving employees is preparing them to use their intuition, not training them to act.”

It’s cliché for companies to say “our employees are our greatest asset.” Companies invest millions of dollars in equipment then skimp on salaries and shortchange people when it comes to their development. High-performing companies believe that great people are hungry for learning, so they feed that hunger.

“Every first-year employee receives about 263 hours of training versus eight hours that most retailers provide, and most of that is video training,” says The Container Store’s Casey Shilling. “We provide video training and web-based training. But most of our training is eyeball-to-eyeball because you’re having conversations with your employee, and you can gauge if they’re getting it. So we establish expectations for accountability, and then we circle back with employees to make sure they’re applying what we’ve taught them.” The company has full-time sales trainers in each store and provides ongoing training not just on product and operations, but also on its Foundation Principles, Conscious Capitalism, and leadership.

“A lot of people don’t take the time to train the way we train because it costs SG&A [selling, general, and administrative] dollars,” Shilling continues. “The Container Store’s SG&A budget is probably about 48 percent of our sales, and that’s really high. But we believe that when you communicate, you train, and you make sure that you’ve got a high-performance culture, people want to stay here. Obviously that training pays off when you’re not having to hire people over and over again. That’s core to our business.”

OMNICOM UNIVERSITY

Learning takes many forms at high-performing companies.

Learning is not limited to training, though training is certainly a big component. Talent development includes workshops to help employees improve their specialized skills and can be conducted by outside consultants and specialists as well as by internal subject matter experts (SMEs). Remember, the so-called theoretical driver described in Chapter 5? These individuals, who may be on your team, are fulfilled by the opportunity to continually learn and then share their learning by leading workshops for their colleagues. By tapping in to the talent of your own people, you are honoring them as they help their colleagues learn and develop.

My wife, Janet, led the Dallas office of DDB Worldwide, the international advertising agency whose longtime client is McDonald’s. The best companies can learn from anyone, and DDB’s holding company, Omnicom, followed McDonald’s lead by establishing Omnicom University in 1995. Janet attended Omnicom University in Boston with other agency leaders from around the world where case studies and courses on leadership and other subjects were taught by professors from Harvard as well as by other well-regarded instructors. A lot of the learning occurred outside the classes. Janet brought what she learned back to the Dallas office and shared it with her colleagues.

Your organization can provide funding to allow employees to become certified or receive continuing education credits in finance-, engineering-, technology-, and legal-related courses, or to pursue a postgraduate degree.

Learning can include forming cross-functional teams from different departments or business units to attack inefficiencies and to brainstorm ideas for new products and services based on observations and feedback from customers. Or to streamline workflow and minimize inefficiencies to improve time-to-market execution, reduce waste, and boost profits.

More than anything, learning is an attitude and it’s a way of thwarting complacency, attacking problems, and spurring intellectual, skill-based, and, ultimately, financial growth.

“One of the best tests of an organization, particularly in a challenging economy, is how it invests in its people,” says Ernst & Young’s David Alexander. “Are you really, truly committed to your people? I don’t think you can hold yourself out as having that commitment unless you sustain training over time, especially in challenging times. Sure, there’s some things that you can do to help slow down the spending in training in challenging economic times, but if your people sense that you really don’t have that commitment, and the only time that you’re willing to spend on training programs for your people are during the good economic times, then they will quickly sense that and realize that you’re not committed to their continued development throughout their career.”

EMPLOYEES OWN THEIR CAREER

Leaders of high-performing companies share an expectation that the company will do its part to provide training, tools, and development opportunities, and the employees will do their part.

“Accountability,” says Nucor’s Ray Napolitan, “starts with a personal commitment to do what you say you’re going to do, when you said you’d do it. It’s also about continual improvement, continuing learning, and focusing on results, not just activities. We provide tools and training, and it’s the teammates’ obligation to also develop tools and help train themselves. This allows us to set common and clear expectations and then require accountability for getting great results. So, that’s the model. One of our goals as leaders is to help our people succeed.”

“When we hire somebody,” says Southwest Airlines’ Elizabeth Bryant, “we want them to grow with this company. So we’ve got to invest in them and provide them with development opportunities throughout their career at Southwest.

“We also send a pretty strong message to employees that they own their career. As an employee of Southwest Airlines, if I want to grow within this organization, what’s my responsibility around that? So instead of waiting for a leader to approach me about an assignment, what can I do to get involved? What classes can I take? What mentor can I seek out to help me develop this skill? Let me focus on my individual development plan, and sit down with my leader and talk about my short- and long-term goals and come up with a plan together on how I might be able to get there.”

Talented employees want to grow, and that doesn’t always translate into a promotion. Growth can be a stretch assignment, an opportunity to learn something new, an opportunity to work on an assignment with a person outside of their daily work environment. Growth can mean participating in an outside learning seminar or spending a day with another employee in the office to better understand that side of the business. Or reading a book and sharing the learning with others. Numerous ways can help you keep your people “green and growing.”

“My response to a leader—regardless of company size—who says a career path is just not feasible,” says Elizabeth Bryant, “is ‘Plan on having a robust recruiting arm, because you’re going to lose those employees.’ It’s the responsibility of the leader to provide an environment for learning, and it’s the responsibility of the employee to seek out those opportunities for learning and growth.”

Like everything else in the accountability equation, the responsibility for learning is shared equally.

LEARNING AT ERNST & YOUNG

Long before David Alexander became a vice chair of Ernst & Young, overseeing a 10-state region with approximately 250 partners and another 3,000 employees, he was a client-serving accountant in the firm.

Accounting requires a lot of technical expertise and the firm has training programs to help people achieve that goal. Yet Alexander watched some people get so removed from the academic side of the profession by serving clients that they didn’t take the time to study and pass the rigorous CPA exam. “You can’t go anywhere in public accounting without that certification,” Alexander told me, “and you can be told 100 times that you need to pass the CPA exam, but it’s up to you to prepare for it, take it, and pass it. I quickly realized that unless I passed my CPA exam it would be a short career, so getting my certificate was goal number one for me coming out of college.”

Every professional services firm has a career path. In Alexander’s case, after passing the CPA exam, the next step on that path—and it was a long next step—was eight years of 60- to 70-hour weeks serving clients in the firm’s Lexington, Kentucky, office, topped off by 40 hours a year of mandatory continuing education.

Even with this workload, Alexander made two critical decisions that required additional investments of his time. Those decisions helped his development, and they also propelled his career to the top of Ernst & Young.

TWO CRITICAL DECISIONS

When you’re working long hours, the last thing on your mind might be deciding to volunteer for activities that require even more of your time. But volunteer he did. “A lot of people were so exhausted by their client commitments that they didn’t have anything left in the tank,” Alexander says. “I was always the first to raise my hand for community activity. I thought volunteering and giving back was the right thing for the firm, and I also thought it was a good way to demonstrate leadership.” Alexander volunteered for United Way responsibilities, recruiting activities, and anything else that didn’t require a partner’s presence. “A lot of it was grunt work,” Alexander recalls, “but after a while, the partners started noticing what I was doing and I took on even more responsibility.”

Alexander next was asked to move to EY’s national office for a three-year assignment. He served as a consultant to all of the EY offices that relied on Alexander for research and advice on complex accounting matters and disclosure issues. “I later realized,” says Alexander, “that I was being groomed for a regional director position.”

Taking on responsibility was starting to pay off.

Alexander’s second critical decision was seeking out mentors. “I’ve always been a big fan of mentoring programs, but I think that some of the most effective mentoring happens informally, by gravitating toward people you admire and respect. That’s one thing I always tell our people: ‘Seek out mentors.’”

It was Alexander’s early mentors—first, Bob Lee in Lexington, and then Bob Guido in the national office—who helped prepare him for the tough journey and the tough people decisions he would need to make as he continued moving up the firm’s ladder where, increasingly, he was charged with holding people accountable.

While in the national office Alexander was named a partner in the firm and was asked to move again, this time to Nashville where he was named partner-in-charge of the national office’s Entrepreneurial Services group.

It was in Nashville that Alexander reached the lowest point in his career from a work-family balance standpoint. He was still working 60 to 70 hours a week in a stressful work environment with constant regulatory deadlines and difficult client demands, and this schedule was hampering his role as husband and father.

“I was working for a managing partner who was difficult and someone that I didn’t respect personally or professionally,” Alexander says. “I found it ironic because I believed I could make a positive influence in peoples’ lives, plus I’d worked so hard for so long to achieve my dream of becoming a partner at EY. Now I was so discouraged that I considered leaving not just the firm but the profession. Thankfully, I had another mentor in Nashville, Bob Whelan, who was a steadying influence and urged me not to make a decision that I would later regret.”

A Saturday morning phone call from Ray Eanes, the Southeast managing partner in Atlanta, changed Alexander’s career—and life.

The long hours, quality work, and an attitude of placing the firm first resulted in Alexander being offered a position as the firm’s Southeast regional director of human resources, reporting directly to the firm’s vice chair. Not only did this opportunity allow Alexander to exit Nashville gracefully, it meant he could begin putting his stamp on the firm’s people policies and procedures, which is where his career interests lay.

THE LEADERSHIP REVOLUTION

It’s natural for a global professional services firm to claim talent development as a priority. In Ernst & Young’s case, the firm’s commitment to learning has been validated regularly by Training magazine, where EY is in the Hall of Fame, and by MAKE (Most Admired Knowledge Enterprise), whose global MAKE panel has named Ernst & Young for 14 consecutive years as one of the world’s top learning organizations. Should learning be viewed as a necessary expense or a great investment? What’s the payoff? Although Ernst & Young is a private firm, its NYSE-traded peers—also recognized along with EY as 2012 Global MAKE Winners—delivered impressive results:

For the 10-year period 2002–2011, total return to shareholders (TRS) was 19.7 percent, nearly three times the average Fortune 500 company median.

Return on revenues (ROR) was 12 percent, 3.2 times that of the Fortune 500 ROR median.

Return on assets (ROA) was 9.9 percent, nearly four times that of the Fortune 500 ROA median.¹³

“We all know about the Industrial Revolution,” says Alexander. “In the mid-1980s, we started going through what we began calling a ‘Leadership Revolution.’ We realized that there were a lot of requisite leadership skills that partners weren’t fully equipped to handle. For example, how do you go from being a client-serving technical partner to a leader of a practice? At the time, we didn’t have any formal leadership development training. Back in those days, the firm would say, ‘You’re going to be the managing partner. Good luck.’”

Alexander needed more than luck when he was named regional managing partner of the firm’s Southwest region in 1993. He inherited a region fueled by energy, technology, and real estate and those industries faced huge challenges, which had a negative impact on the firm’s Southwest operations. Even worse, Alexander’s predecessor had abdicated some of the tough decisions, costing the predecessor his job.

Upon being named to his new role, Alexander made the difficult decision that the Southwest practice was overstaffed by 10 partners and 100 staff members. “I lost a lot of sleep over that decision to let so many people go,” says Alexander, “and it affected my personality because I knew whatever decision I made was going to impact not only their career but also their families’ lives. It was an ugly situation. I had hoped to be on an early ‘honeymoon’ with my new partners. There wasn’t anything else to be done but make the cuts, so everybody was scared of me. And that just wasn’t my style.”

Alexander needed to rebuild trust, so he asked a senior partner for feedback after he’d given the partner his review. “I asked, ‘What do you think I could do better?’ And he said, ‘You know, David, you could focus more on ministering to the partners.’ I said, ‘What are you talking about?’ And he said, ‘Get to know them, get to know their families. Get to know their issues, their challenges, their stresses. Figure out how you can help them bring the whole person to the workplace.’”

That candid conversation helped David Alexander realize that it was now time to develop a more systematic approach to applying the lessons he’d learned over the years from his mentors.

FIVE LIFE LESSONS

David Alexander brought in Charlie Baker, a former ordained minister, and together they began to change the culture of the firm’s Southwest region.

They started with a new leadership development program with a fitness module and paid a trainer to work with five partners on a trial basis. Other modules were offered and included nutrition and work-family balance. At the core of this leadership development program was the desire to build trust so that meaningful conversations about challenging issues could occur.

“Initially I got some strange looks from my partners,” Alexander says, “and they started thinking that maybe Charlie was my spy, but I said, ‘No, Charlie doesn’t report back to me on any of his conversations. It will be more effective if those conversations are treated as confidential.’ The partners didn’t trust Charlie at first, but pretty soon they were telling him their life story.”

Alexander also realized the firm was losing some talented partners because spouses didn’t fully understand what their spouse was experiencing at the firm. Next up: Baker began talking with spouses. “That was sort of out-of-the-box,” says Alexander, “and, after a while, people could see that we really did care. When I became regional managing partner, I instinctively began putting into action things that would rebuild trust and confidence. I decided that there were a lot more things that I was interested in and that we would measure other than technical capabilities and the operations of the firm.”

The pilot program worked so well that the program ultimately was offered to the entire partner group over a period of years.

David Alexander’s character—reinforced by his mentors—shaped the learning and development programs he initiated as he continued to live out and teach others by example:

1. The principle of influence. “When I taught training courses for the firm,” Alexander says, “I would tell our people, ‘The firm needs you to be a leader from day one.’ And they’d say, ‘We can’t be a leader, we’re not in charge.’ And I would say ‘Not everyone can be the leader, but everyone can be a leader.’ Your influence affects others to the degree that you place their interests first.”

2. The principle of others. “I watched my first mentor as we would attend events, and he would call everyone by their first name. I said, ‘Bob, how do you do that?’ He said, ‘Before every event I attend I make it a point to get the attendance list, and I study it, and I’ve trained myself to have name/face recognition.’ Every person you meet is worthy of your best.”

3. The principle of vision. “Always help others see the promise of a better tomorrow. I had a different explanation of my CEO title. I always told my partners it didn’t stand for chief executive officer, but rather chief encouragement officer. They liked that.”

4. The principle of positivity. “My mother contracted a severe case of polio when she was eight months pregnant with me, and she wasn’t expected to live. She became paralyzed. Despite her physical handicap, she never had a bad day. She was always positive, and she never said ‘Why me?’ When life presents roadblocks—and I’ve had my share—I would think about her. As a leader, it’s up to you to stay positive so you can encourage your colleagues.”

5. The principle of mission. “Live a life with integrity and with an emphasis on relationships. There’s a saying that ‘People don’t care how much you know until they know how much you care.’ No matter what business you’re in, when you care for people and build relationships, when you have something to say, they will listen.”

Three years after being promoted to regional managing partner and right-sizing the practice, Alexander fully gained the trust of his colleagues. His next career milestone included being named America’s Managing Partner of Regional Practices. He next was asked to join EY’s board as a vice chair of the firm.

The leadership lessons that David Alexander learned from his mentors transcended the technical training Ernst & Young provided to help develop great CPAs. As a result, the firm began to focus increasingly more time and money on helping its employees become better leaders, and, ultimately, more fulfilled human beings. Not surprisingly, the firm’s performance also soared.

WATCH, LISTEN, AND LEARN

“On one of my first client meetings with my mentor,” says Alexander, “I asked, ‘What role do you want me to play in this meeting, Bob?’ And he said, ‘I don’t want you to play a role. I want you to watch and listen and learn.’ So I would watch and listen and learn, and I might interject a comment or answer a question. I learned how to ask the right questions, and I learned how to interact with people. This is a skill, an art, really, that is lost on many people because those are soft skills, and there’s a tendency to lean on technology rather than conduct business face-to-face.”

Because talent is a key predictor of future performance, reexamine the time, money, and energy you are investing in your single greatest asset: your people.

Not all employees are good managers. And not all managers are good leaders.

When times are good, effective managers keep the machine—your business—running smoothly, cranking out products or services on time and on budget. When times are tough, a person’s character and competence are revealed. The worst global recession in 80 years tested seasoned and new managers alike. As tough times continued, some managers were expected to do something for which they were unprepared. They were expected to lead.

In talking with EY associates, what I hear repeatedly is a marked difference in how work gets done at EY versus other firms. At other firms, hierarchy is important so supervisors tell associates what to do and the associates do it. The EY culture is one of showing people what to do, giving them the responsibility to execute, and then holding them accountable.

If you want to grow your business, you must grow your people. And the gap you and they are facing often is not a skill gap. It’s a leadership gap. Lieutenants who are smart enough and skilled enough often lack vision, confidence, interpersonal dexterity, and judgment. The gap must be closed as you move from Point A to Point B.

Stanley Marcus told Kip Tindell that training was for bears and seals. David Alexander recognized the need to develop leaders, not just accountants. Whether you call it training, development, or learning, on-the-job education involves people and that makes it difficult.

Roger Enrico was the brand manager who helped introduce Frito-Lay’s Doritos chips to the world, and he eventually became the CEO of Frito-Lay’s parent company, PepsiCo. “The soft stuff,” he noted, “is the hard stuff.”