Goals are accomplished to the extent people are committed to accomplishing them. To the extent that people find the goals relevant to them personally, they will do whatever is required and within their power to meet them.
If the goals are not as relevant to the action players, all innovation and direction must come from top management where there may be little visibility to customers or awareness of customer needs.
It sounds simple. Of course, goals must be relevant. However, management all too often assumes relevance based on a limited view from the top. In fact, in most cases, the people who do the work aren't even aware of the company's goals, much less find them relevant.
As with goals, much has been said and tried with regard to compensation and other relevance systems. The purpose here is to put relevance in the context of the cultural system solely to motivate people (meet employee goals) in synch with the customer and owner goals.
UPS, during its high-growth phase, had the best system to motivate the managers in its business, and because it promoted from within, it was a relevance system available for anyone in the company. UPS gave stock, not stock options, but company ownership. It made managers into owners, and every stockholder received the annual reports.
UPS has always focused on productivity as the key company goal. This was measured in cost per package at the manager level and meeting standard at the driver level. Today, UPS pays its drivers according to the work dispatched (meeting standard). More specifically, if a driver is dispatched with X stops, Y packages, and Z miles, based on the specific route, he or she will be paid for the amount of hours required to handle that mix of work.
It took UPS decades to perfect its standards system to the point that the union bought in, but it works today. This also provides more freedom for the driver. If the drivers want to work and think harder, they earn a raise and get 8.5 hours worth of work and pay done in 7 hours.
On the other hand, if they want to take it easy and pace themselves, they can do it in 9 hours. They still get paid 8.5 times their hourly pay rate.
Now, this type of system can be very self-defeating and suboptimizing unless very well thought out. For example, in the 50s, as part of its department store delivery division called retail, UPS, attempting to provide relevance around productivity, gave drivers five cents a package in addition to their hourly pay.
It was a simple piece-rate pay scheme and, at first, it seemed to work very well. Productivity went through the roof.
After some time, however, department store customers began to complain. These customers would visit the department store, make their purchases, and have them delivered to their door. Customers would ride the bus from their apartment and didn't want the hassle of carrying packages home on public transportation.
Like all good relevance systems, when the goals are clear and relevant, people will do what is necessary to meet them, often at the expense of another beneficiary. In these examples, the customer also benefits with high-quality work at the best possible cost.
A few drivers learned that they could pay doormen two cents a package to take all the packages for an apartment building. Instead of making 20 or 30 deliveries to individual apartments, they delivered all to one person—the doorman. This saved enormous time, and productivity jumped. It didn't take long to spread the word, and soon every driver was employing this highly productive solution.
After receiving the packages, the doorman would notify the recipients, and they would come get their packages or pick them up on their way in at night. Back then, customers wanted delivery because they didn't want to carry packages. They wanted them delivered to their door, not to a doorman, so they complained, and UPS dropped the suboptimizing system.
Under the present pay-per-load system, this same danger is present, but UPS thought it through this time and had already put into place some very strong service standards that must be met in order to get paid for work performed.
It is interesting to see how well the clear expression of goals, and the actions that make those goals relevant, enable employees who cannot be supervised directly to perform at exceptionally high levels.
Although this story is 50 years old, the balance of productivity and quality is still equally important today.
Another example is an industry that is just emerging into a Performance Pay System™ and that is the heating and cooling industry.
This is a similar industry to delivery in the sense that its technicians work away from the office, and it is difficult and time consuming to properly supervise their work. Additionally, it is an industry driven by many small companies that do not have the management systems in place to manage these people.
Several heating and cooling companies have implemented a system using flat-rate pricing similar to the pricing system implemented in the automotive industry.
For example, when you take your car to most automobile dealers to get new brakes, the dealer will enter the work to be done, and the time to get it done (flat rate) will be in a database. The dealers charge you that flat rate and pay their mechanics for the flat rate hours as well.
This same type of database is available for the heating and cooling contractor that may be repairing your home heating and cooling system. What has been missing is an ability to monitor the quality of the work. Technology is currently available that enables the contractor to test a home to scientifically determine whether or not the technician's work met the quality standards.
This type of relevance system rewards high-performing technicians and gradually eliminates the less-productive people. This is exactly what the UPS system does as well.
As most managers recognize, business is complex enough these days without having to manage every action and effort that employees take. Pay by the hour means employees earn more by taking more time, which puts employee goals in direct conflict with owner and customer goals. I believe most industries have begun to move away from this destructive goal conflict.
After a solid relevance system is in place, actions will reflect efforts that meet both the owner's goal and the employee's goal while maintaining the quality necessary to keep the customer coming back.
A few examples…
I was riding with a UPS driver in New York City delivering to a large office building. As we got on the elevator, the driver pressed the elevator buttons for the top floor and the floor we were going to. As we got off the elevator, he pressed the down button outside the elevator.
At the first stop I watched this, but didn't ask. We made our delivery and as we returned to the elevator, the doors parted like the Red Sea, so we didn't miss a step or wait for a down elevator. He had it timed perfectly. After we got off, the elevator would go up to the top floor, receive a down signal, and return to our floor.
In another case, I was riding with a driver in downtown Utica, NY. He would come to a stoplight, press the brake, grab a package, make a delivery, and come back just before the light turned green.
This driver had a goal to rise to the top of the company. This is another major part of relevance. UPS promotes from within. It hires young people with a certain profile and then develops them as managers and executives. This provides enormous relevance for people with ambition, but not necessarily with the education required in most companies.
Given a combination of pay-for-performance and the driver's desire to be promoted to increasingly higher levels in the organization, people get very innovative within their scope of activity.
These are the types of actions driven by clear goals and relevance. Most people are smart and, left to their own devices, will find better and better ways to serve their customers, peers, and owners successfully.
Manager attention makes goals relevant. If the manager continues to talk about customer and people goals, but his or her questions continue to revolve around how many sales the employee is making, sales (owner goals) become more relevant than customers or people.
“Give a person a sense of control over their own destiny and they will do anything you ask.” This comment came from Federal Express founder Fred Smith. All too often, company leaders espouse all the right things and then take actions that change the relevance equation or, to put it another way, wrest control from the employee and give the power solely to management.
For example, one top manager observes people and their performance, but, instead of coaching for performance and going through a methodical process for getting rid of poor performers, he simply fires them without warning, often somewhat arbitrarily.
Whether he is right or wrong about his observations and evaluations was immaterial to the company's relevance systems.
People generally make up their own minds about management actions and, if they perceive the action was arbitrary and not based on objective reality, they learn to take actions that are safe and noncreative. Over time, the organization becomes stagnant because hanging on to their jobs becomes more relevant than finding better ways to serve customers and owners.
As a result of this negative relevance system that is often driven by egos rather than sound business sense, Federal Express employed two policies to give employees more control over their own destiny: No Layoff and Guarantee of Fair Treatment (GFT).
Most company leaders want to improve productivity by automating repetitive functions or by simply finding more productive solutions using the technology available. To do that properly, they need their employees' support either to find more productive ways of performing the task with better tools or to support company automation projects.
In this case, improved productivity is the relevant goal. Then, when the productivity enhancements work, they lay off the people. It only takes one of these scenarios for the employees to read the real relevance system at work here. “Support improved productivity solutions and lose your job.” Therefore, people fight building better ways of serving their customers, and, more often than not, they fight them covertly as in the Federal Express hub example given earlier.
Seeing this relevance issue clearly, Fred Smith began the company with a no-layoff policy.
In the beginning, pilots would work in the hub, hit the street as salespeople, or work as station managers to avoid layoffs caused by lower package counts. Although layoffs would have been an easy way out, Fred stubbornly held to the relevance principle.
At that time, GET THE PACKAGES was the vision and the goal. Laying off people would deliver a strong relevance message that cost control was more important than company growth (package count) and the employee value of control over their own destiny.
As part of its continual evolution of customer-focused technology, the company implemented its PowerShip system where highly profitable, high-volume customers received a terminal that enabled them to create their own airbills, schedule pickups, and trace their packages. This technology, later followed by InternetShip, eliminated the need for 1,200 people who entered customer airbills into the computer and people who answered the phone, scheduled pickups, and traced packages.
Again, it would have been easy to lay these people off and send a message to the rest of the people that automation meant loss of job. Instead the company developed a rather sophisticated system of placing these people throughout the organization. Many of them were put in a special services group to handle customer issues with the new technology.
Nearly all of these people that might have faced layoffs in most companies found themselves in better jobs.
What was the end result? It was a company full of people constantly looking for better and better ways to serve their customers and a company that constantly employs new technology to maintain its edge in the marketplace.
The second major relevance policy implemented at Federal Express was the GFT.
Fred realized that, in order for the company to grow, it would have to place people in management positions before they were ready and that often people, when they have new-found power, abuse that control. The result would be management actions taken without rational cause and that people could be at the whim of their supervisor and therefore lose control over their destiny.
The GFT policy specifies a grievance process for any employee at any level who believes they have been treated unfairly. UPS had the same type of policy only it was dictated by the union's grievance policy and available only to union employees.
There are specific steps that employees and their managers must take in the process. For example, the employee must talk to his or her supervisor first about the issue before going any further. Then, there are several levels, ending with a jury of peers making the final decision.
At Federal Express, GFT is essential to give people a sense of control over their own destiny, and, for this reason, it is robustly adhered to, even though some employees have used the policy frivolously. The principle is an important part of the Federal Express culture.
Positive relevance actions tie reward directly to performance, and more covert relevance actions give people a sense of control so that they are free to pursue achieving organizational goals without personal or team penalty.
Relevance goes far beyond pay. People are obviously motivated by several actions that can be taken by management, of which compensation is only one. It is the most visible and objective, so some time has been given to its discussion.
Follow-up or feedback is a significant part of making goals relevant.
In a recent example in the heating and cooling industry, service technicians were “spiffed” $25 to talk to their customers about having a diagnostic conducted for their home when warranted. The technicians had a simple and objective test they could conduct that took about five minutes and enabled them to say with confidence that the test was in the customers' best interest.
After several weeks and meeting with the technicians, each of these technicians produced only one lead. The process was explained to them in simple terms. “For a simple service call, you make about $20, and it takes you an hour. Add five minutes, and you can make another $25.”
Technicians fought the system in the beginning because the diagnostic technology was used after they completed the work, and, if their work didn't resolve the issues, they would be held accountable and have to go back a second time. This worked for the customer, but was in conflict with the technicians' immediate goals of getting in and getting out.
A follow-up system was implemented to make the system part of the daily routine. The invoice that was also a service ticket left behind after the work was completed was reprinted to include the five-minute test, whether or not the technician conducted the test and entered the reading, and whether or not the technician then recommended the more complete diagnostic.
These new invoices were then reviewed each day by the service manager, and, when the technician did not comply with the new process, it was discussed.
This type of feedback and follow-up is often necessary to get people to implement new practices, particularly practices that are perceived as immediately detrimental. Leaders must make the importance of the new process clear to the employee, get employee feedback as to what it will take to make it habitual, and implement the relevance systems to ensure compliance.
At worst, new procedures may mean some employees have to leave before the new becomes habitual.
Some more simple relevance practices include congratulating an employee for great work or celebrating each success for the team or an individual.
A great technique used in many companies is to hang a bell in a prominent place and ring it when something eventful occurs. This provides a simple, but quite effective, way of routinely celebrating successes and the people who are responsible.
Many organizations use an employee of the month type program to make goals relevant. This certainly makes meeting the goals visible, but tends to make one person the hero while many of the rest of the team see it as something they can't readily accomplish. I prefer a system where everyone who exceeds goals or performs a notable action is rewarded.
An example here is the Federal Express bravo-zulu system where any extraordinary act is rewarded with a letter from the chairman and a $25 bond.
Another example is where one of Larson-Juhl's general managers sat down with each employee at the beginning of the year and worked out a special gift if the goals were met for the year. The special gift might be a golf club or some other personal gift. Money often doesn't work because it goes to pay routine bills instead of being a true reward. At the end of the year, if the employee and team met their goals, the general manager personally went out and purchased the special gifts and handed them out at their Christmas party.
If you recognize what you don't want, you make that relevant to your employees. If you look for and recognize what you do want, you get more of it.
Most management styles tend to look for the exceptions and correct them. The assumption is that, if 95% of what is going on is good, all you have to do is to catch the 5% that is not what you like and focus people on it. Those 5% behaviors will then be corrected.
The only problem is then your attention goes to what you don't want, and you get more of it.
I was making that point one night to a friend who was a kindergarten teacher, and he agreed. “In fact,” he said, “if you want concrete evidence of that principle, I'll give you proof.” I asked what he meant, and he invited me to his class to experience the results of “you get what you recognize.”
I had some time that week, so I met him at his class. After introducing me to a room full of five-year-olds, he asked me to step aside with him, and he would demonstrate his point. As we talked, a little boy got off the floor and began moving toward one of his friends. My friend told him to sit back down, which he did, but then another did the same thing.
After a few more admonishments, more and more children were moving around. It wasn't long before it was clearly getting out of hand.
My friend then said “watch this,” and he went over to a little girl who was engaged in drawing something. He knelt down and admired her work with great relish. He asked her what she was drawing, and she explained it to him. Then, he went over to another boy who had not moved and did the same. And then another.
It wasn't long before his class had settled down, and all the kids were back in their area drawing and well behaved.
He came back to me and reiterated my point. “You get what you recognize,” he said. “Did you notice how when I admonished the behavior I didn't want, I got more of it and vice versa?”
I was stunned as I watched the children all quietly going about their work.
Now one might argue that adults are different, but, after 40 years in business, I don't buy that argument. I believe adults behave exactly the same way. They simply don't express it quite as openly or as quickly as I experienced in the classroom that day.
We were working with a software company in Dallas, TX, where I made the point about getting what you recognize to a team of frontline people during our weekly “Hierarchy of Horrors” resolution meeting. The team decided to take it on and invent ways of recognizing people for what they wanted.
It created an “EAGLE” card (see Figure 6-1). This was a simple thank-you card about twice the size of a business card. On one side was “THANK YOU” with several lines for the person to write a brief note. On the other side were the words “Thank You For Great Service” and then the acronym spelled out:
E: You EMPOWERED me as a customer
A: You ACCEPTED full responsibility
G: You GAVE what you promised
L: You LISTENED and responded
E: You ENJOY what you are doing.
You are an EAGLE!
The culture we were creating was then called an EAGLE culture where everyone mimicked the EAGLE. The EAGLE constantly looks for the opportunity. If he or she takes a risk and it doesn't work, the eagle goes back up soaring and looking for the next opportunity.
The EAGLE cards were printed, and each week each person on the team agreed to hand out at least two cards to people who delivered good service to them.
I remember my first card. We were eating at a Japanese restaurant the first night after we had gotten the cards. While waiting for dinner, the bartender was particularly engaging, and I wrote out an EAGLE card and handed it to him. He looked at the brief note I had written and smiled. He said, “You know, I appreciate this more than a tip. It's difficult to explain what it's like to serve people night after night. Yes, you get tips, but that's not what I like about this job. I like people, and I like to serve them. This simple thank you is so rewarding.”
Every week we got similar stories from our team members who were engaged in the process. One woman was waiting in line at her bank when she observed how incredible the teller was serving the people in her line. She decided to write her an EAGLE card and, for some reason, put it in an envelope. When her turn came, she slid the envelope under the bars and the teller, not knowing what was in the envelope, pushed the alarm button thinking that it could be an attempted robbery.
Most of the stories were quite touching. One man had given an EAGLE card at a Chinese restaurant. The waitress was clearly Chinese, and she accepted it without any expression and went back to the kitchen. Almost immediately she came running out of the kitchen and said “hug, hug.” The man stood up and gave her a hug wondering what was going on. Then, he realized that she did not read English and went back to the kitchen and had the note translated.
We then began using EAGLE cards wherever we went as a consulting team with the same results. Employees in our client companies had EAGLE cards on their personal bulletin boards. Employees began kidding one another as to how many EAGLE cards they had accumulated.
As I personally gave out the cards, I began to see how acutely aware of service I became. I also saw what a joy it was to acknowledge great service and how people, after receiving an EAGLE card, went out of their way to serve. As we discussed these experiences at our weekly meetings, nearly everyone had the same reaction.
They also commented that, as they began looking for and recognizing extraordinary service, they began giving it as well because it was the little things that created the extraordinary experience. After you became conscious of what it was like to receive good service, you began to give it as well.
The EAGLE cards make the goal of serving customers relevant. Nearly every one of our clients continued the use of EAGLE cards long after our consulting engagement was completed. It is a great way to raise peoples' awareness of service and to make the service goal relevant to your people.
There are nearly as many ways of making goals relevant as there are people in the organization. Suffice to say, relevance systems that are in alignment with company goals give people the strong perception that meeting the goals is essential to the company, are very relevant to each person, and are the types of relevance systems that work in building your CustomerCulture.
Whenever you attend a seminar about customer service, you are likely to hear some great stories about extraordinary service. A few examples…
There is the Nordstrom tire story. A customer returned a set of tires to Nordstrom, and it took them back and gave a full refund. This is not surprising until you learn that Nordstrom doesn't carry tires.
Or, the time a man was on his way to Wisconsin to play golf with a CEO client. En route, the client called and said that, instead of golf, he needed to meet with the board of directors that afternoon.
The man had no formal clothing. He called Nordstrom to see if it could somehow resolve the problem. When he landed in Chicago, he was met at his arrival gate by a Nordstrom representative. The representative had already scoped out the departure gate and had a complete outfit ready to go. The business man stopped in at the men's room and made his change.
Or, the Federal Express courier who rented a helicopter to deliver a part to a mountain site in the middle of a snowstorm.
The point is that stories do as much to create relevance as anything a company can do. Stories express behaviors that are either desired or not desired, but they tell people what is acceptable or not in an organization.
I started my career at UPS as a salesman. In the early days, when selling the UPS service, you started at the top of an organization and tried to convince the CEO of at least small-to-medium distribution companies that UPS was the solution to its distribution problems. The problem with seeing CEOs, as every salesman knows, is getting through receptionists or assistant screeners who are paid to protect their boss from unwanted salesmen.
The UPS vision was determined people can accomplish anything. If you didn't get what you wanted, you simply weren't determined, and stories often demonstrated in more detail exactly what determination meant.
I'll never forget the stories that began to spread about how to get in to see the president.
A salesman in Philadelphia had repeatedly been rejected by the receptionist of a medium-sized company. Finally, out of total desperation, he asked the receptionist where the guy's office was. Jokingly, she said that he was on the fourth floor and had a fire escape. It was midsummer and before widespread air conditioning.
The salesman climbed up four levels of fire escape stairs and, instead of knocking, simply threw his briefcase through the open window, totally startling the president. He quickly introduced himself and said this was the only way he could think of to get past the receptionist. After recovering from the shock, the president laughed and listened as the salesman convinced him to begin using UPS.
A good friend of mine (the same guy who went to bars to hire drivers at Federal Express in the beginning; see Chapter 1) had the same problem. He had been working on getting to see CEOs in Texas, and the CEO of a major garment manufacturer had continually eluded him. After hearing the Philadelphia story, he decided to try something different.
He was in New York and picked up the phone and called the CEO person to person, collect. He got right through because the outside telephone operator told the receptionist that the president had a collect call from New York (the heart of the garment industry). The president, thinking he had an important customer calling, took the call.
“Hi, my name is Walt Lindenfelser from UPS,” my friend introduced himself.
The president was incredulous. “You mean you're a salesman calling me person to person, collect, to sell me something?”
Walt told him that was the only way he seemed to be able to get through. The guy laughed and heard Walt's story and soon became a major witness and customer for UPS in Texas.
About the same time, two of us were selling in Rhode Island. We had the same problem getting in to see the president of a major electronics distributor. We were in the lobby of the customer company and asked for the president. The receptionist said he was in a board meeting. We asked where the meeting was, and she pointed to a door. Without further conversation, we knocked and walked right into the boardroom.
The board members were sitting with very serious looks on their faces, and my partner introduced us and said we needed to see the president on a very urgent matter that would affect his company. The president just wanted to get us out of there and agreed to a meeting, which we later had with him. Although he was visibly upset, he said he admired our tenacity and agreed to try our service.
Later, at Federal Express, we learned to institutionalize the legendary stories. We developed a system to encourage legendary behavior done for the right reasons, gather the stories, spread them, and provide a simple reward for delivering great service.
One courier had a package at Christmas that was wet. She decided to open the package and found it was a sweatshirt wrapped around a bottle of wine that had broken. She took it upon herself to call the shipper and suggest a solution. She then took the sweatshirt home that night, laundered it, picked up a new bottle of wine, packaged it all, and delivered it the next day.
There are literally thousands of stories about this kind of legendary personal caring for Federal Express customers today. These types of stories do not happen because top management mandates good service. They happen because people naturally care and want to be liked and to deliver great service, and…
They work in a culture that appreciates people who care.
After leaving Federal Express, I had reason to be talking to the president of a major insurance company. He mentioned that he was totally loyal to Federal Express. When I inquired why, he said, “doggy bones.”
He went on to say how he and his wife spend several winter months in the South. They are both CEOs of large companies and receive urgent letters each day from UPS, the USPS, and Federal Express.
“We have two dogs,” he said. “They are very gentle dogs, but make lots of noise, often scaring people. The way that the USPS driver handles them is to pull out his mace. He has never used it, but has often threatened. Our children are grown up. These dogs are our children. Would you use mace on kids if they ran up to your truck?,” he asked.
With some kids, I might, I thought to myself as I listened.
“Well, our Federal Express courier takes a different approach. She gives them doggy bones. They can't wait for her arrival each day. To make the story even better, we eventually had a pen built for our dogs. Now she goes over to the pen each day to give them their reward for being her friend.”
Again, these types of stories are the millions of small acts of kindness that add up to millions of stories and loyal customers over time.
Summarizing relevance, the question that must be continually asked is this:
Do management actions make goals relevant to the people who must achieve them, or do they send an opposite message, making the goals irrelevant or relevant not to achieve? Do you pay attention to, recognize, and reward the behaviors you want, or do you recognize the behaviors you want to eliminate?
As far as next steps go, implement these ideas:
Capture and spread legendary stories. I have not yet been in a company where they don't exist. People just naturally deliver extraordinary service at times. All you need to do is capture the stories and spread them around the organization.
Implement the EAGLE card program. This program will make people vitally conscious of what it feels like to both give and receive extraordinary service, and it doesn't cost anything. Remember, the bartender said it was better than a tip, so you can save money.
At this point, the CustomerCulture is moving toward completion:
You have a clear vision that gives people an overall sense of direction.
People are clear about the values that are important within the culture.
Goals are balanced and clear to the people best able to meet them.
These goals are relevant to the people who must meet them.
There are two missing ingredients to the CustomerCulture stew. People have a need to know how they're performing against the goals, and then actions have to be taken to achieve the goals.
The following chapter deals with the issue of letting people know how they're doing compared to the company's goals.