Compelling employee insights

In momentum-deficient firms, employees can often be an enigma. What drives them? What motivates them to work? What current life changes may affect their workplace attitudes? But firms that make an effort to truly understand the concerns and motivations of their employees will be rewarded many times over.

Employees have an unlimited potential for growth. They are not faceless numbers but human beings, and an exquisitely valuable source of sustainable momentum. Systematically discovering insights into employees is just as important as doing the same with customers – and the same tools can be used for both. In particular, the insight discovery matrix that we profiled in Chapter 4 (Figure 4.1) for use with customers can also guide a systematic exploration of employees’ unsatisfied needs.

When applied to employees, all four discovery paths (knowing–doing, listening, learning and white) can help uncover sources of value and equity that can fuel internal momentum. However, while customers are usually very willing to speak their mind, many employees will not respond freely unless they trust the openness and genuineness of the process. We have sadly witnessed meetings between senior executives and employees that were conducted like elaborate royal visits – the great leader descending, surrounded by his entourage, and condescending to talk at the little people for a while, as nervous supervisors keep watch to ensure that no one creates any embarrassment by suggesting that things are not absolutely perfect, thank you very much. The process of discovering compelling employee insights must be carried out with the same level of humility and openness as is applied to discovering compelling customer insights. Humility and openness can be tough pills to swallow when it comes to one’s own employees, but the rewards are substantial.

IKEA swallows the pill effortlessly. Every year, management spends several weeks working in showrooms and warehouses to ensure that they keep in touch with their fellow workers. This is a chance to spend quality time with employees and truly understand any issues they may have concerning their roles in the firm.

IKEA calls them ‘anti-bureaucrat’ weeks and believes they ensure that managers don’t forget the nitty-gritty. This annual exercise leads to key discoveries about employees, new insights and perceived needs ‘back on the floor’. It is a key source of internal momentum.⁴

Compelling employee value

The customer value wedge (Figure 5.2) showed how customers choose to buy a brand for reasons other than its price. So too, most people today are motivated at work by elements other than the simple financial package. The value that employees seek from their employment also involves functional, intangible and emotional issues such as access to public transport, availability of daycare centres, personal development, belonging, moral support, meeting interesting people, self-respect etc.

For example, ISS, an international cleaning services firm based in Denmark, stumbled on a key emotional issue for their employees – their children’s feelings about their occupation. Many kids, they discovered, were embarrassed by their parents’ profession. In school, when teachers asked pupils what their parents did for a living, most of them were reluctant to admit that Mum or Dad was ‘just a cleaner’. How can you deliver compelling value to your employees if they know their job makes their kids ashamed of them?

ISS systematically set about increasing the cleaning profession’s respectability. This included increasing the technical content of the jobs, offering extensive training and providing uniforms. But it also appeared that its vehicles played an important role in building the firm’s image. ISS decided that they should always be clean and impressive looking. The goal was for cleaners’ kids to be able to walk in the street, point to a passing ISS vehicle and proudly say: ‘My Mum works for that company!’

Value can be created for employees in a multitude of ways. But, as with customers, that value lies in their perception of it. For instance, what is the perceived value for a Virgin Atlantic employee of meeting Richard Branson? It can be enormous in many ways. Properly handled, such encounters can foster learning, self-respect, belonging, motivation and confidence – not to mention the opportunity for bragging rights with colleagues, family and friends.

To encourage a deeper respect for their staff, some companies have banned the word ‘employee’. Wal-Mart has ‘associates’, IKEA ‘co-workers’, Disney parks ‘cast members’ and Club Med villages ‘GOs’ – gracious organizers.⁵ But here, too, companies that come up with a new name for their employees can create cynicism when it is not coherent with other actions. It is all about perception. Creating value for employees requires a deep sensitivity for the key drivers of this perception.

Compelling employee equity

Obviously, different employees deliver different value to the firm, and this has implications for leadership when it comes to allocating attention and resources. But management must realize that every employee should have potential to bring value to the firm, in addition to his or her specific routine tasks.

Employees should be recruited in terms of the values they contribute, and these should be coherent with the company’s core values. In some companies this has led to an ‘attitudes first, skills second’ principle for selecting front-line staff.

At First Direct, for instance, the principal rule of recruitment for call centre representatives is that candidates should have no previous banking experience – otherwise they may have been infected with the virus of poor banking practices. Many of First Direct’s finest representatives have previously been employed in teaching, nursing and other service professions – but not banking.

Recruiting the right people is the first crucial step. Beyond that, management at every level must realize and assume responsibility for an essential fact of business life – all employees do not contribute equally to a firm’s prosperity. Those who are delivering great value must be treated as a separate target group and be particularly nurtured. With those who are not, the cause of their underperformance must be examined. In many cases, the reason for poor performance is rooted in something the firm itself has done or failed to do. In these cases, the firm must act to remove the block to performance and encourage and assist the employee to reach his or her full potential. However, employees in firms with internal momentum recognize that respect is a two-way street and that those who do not deliver fair value in return will be challenged to improve or leave.

Employee power offers

The two-way street of providing substantial value to employees and, in turn, receiving substantial value from them is the basis of a sustainable win–win relationship. This relationship is strengthened by employment packages that employees perceive as power offers. These offers should be targeted at the type of employees the firm wants to attract, satisfy and retain. Because there is more than one type of employee, there need to be different power offers targeted at different parts of the organization, each delivering different compelling value and securing different compelling equity. But they should all deliver a better value proposition than an alternative employers’ offer for any given employee, while at the same time being cost effective.

First Direct’s understanding of employees’ needs saw it discard a range of fringe benefits common to the banking sector. Instead, the bank focused on benefits that aimed to improve the stressful conditions of 24-hour call centres. These included free nursery facilities for working mothers, free vending machines, a 24-hour cafeteria and night time security services. Employees appreciate the firm’s generosity in providing services that meet their needs. The value to them is immediately obvious – they are motivated.

Other, established banks offer a more diversified range of benefits accumulated over decades following negotiations between management and unions. The cost of these benefits is much higher than what First Direct spends, yet workers at these competing institutions still perceive their management as stingy because the relevance of the value is less obvious. This is an important competitive advantage for First Direct in terms of both employee mobilization and cost efficiency. It is the same thing as the win–win philosophy of a customer-focused approach – maximize perceived benefits at the most effective cost.

Vibrant employee satisfaction

It often happens that firms realize the importance of employee satisfaction after they have undergone a crisis. This spurs them to try measuring employee satisfaction with surveys. They take some token action, wait for the survey results to demonstrate improvements and then use it to congratulate themselves that they are good with employees. But this is no way to show the importance of employee mobilization in a competitive environment.

Procter & Gamble did it in a smarter way. The leading global consumer goods company showed it could investigate employee satisfaction in depth and effectively resolve major issues, with benefits accruing to both employees and the firm. In 2000 it was losing market share in half of its top 15 brands, and its stock-market price had plummeted. Morale was low. Rather than looking for a quick fix, P&G took the time for a thorough diagnosis. Sources of employee dissatisfaction included a perceived devaluation of the marketing profession, lack of training and short termism leading to cynicism, conflict and mistrust.

Management had the courage to investigate the problems and make the findings known within the company. Then it drew up a portfolio of initiatives. One of them was to measure how much time marketers spent with consumers – it had dwindled to an average of less than six hours a month. This led to a new company mantra: ‘If you are losing energy, passion or focus – get out of the building and into the store.’⁶

Obstacles to employee satisfaction have to be discovered and eliminated. Inadequate or inappropriate resources, inefficient internal communications and outdated and bureaucratic processes can all be major sources of friction that frustrate employees trying to do their best.

Employees need to believe in the company if they are to win in today’s competitive markets. Companies that excel in employee relations don’t make a big deal of it – it’s just a part of normal business, a win–win situation.

Vibrant employee retention

Employee retention is crucial for a momentum-powered firm, just as much as customer retention. Low employee retention is expensive, ramping up costs in recruitment, training, coherence, culture and customer interaction.

By ‘retention’ we mean vibrant retention. The firm’s best employees – the ones who have other options – choose to stay with the company. The more valuable the employee, the more alternatives he or she has, hence the more possibilities for finding work elsewhere.

The smart firm nurtures employees in the same way that it approaches customer retention. Loyals should be gratified, Adventurers and Switchers regained, and Settlers and Prisoners motivated and re-energized (or, in the last resort, dismissed) before they damage the organization’s reputation. Finally, Runaways must be intercepted so that even if they cannot be turned around (which should be your first goal) lessons can be learned from their reasons for defecting.

William C. Weldon, chairman and CEO of Johnson & Johnson, is known for going out of his way to hold on to his best staffers. When he heard that the head of the pharmaceutical R&D group was considering leaving the company, he called him early the next morning and invited him to his home for breakfast. Weldon himself prepared breakfast for this top executive while discussing his concerns. Within the following week he had taken steps to address the man’s issues, who decided to stay at J&J. Weldon’s commitment to showing respect and appreciation for a valuable company asset was the right reflex at the right time.⁷

Vibrant employee engagement

Employee engagement is a crucial aspect of sustainability because it motivates outstanding behaviour. As we already saw, Daniel Vasella’s passion to develop the drug Glivec reverberated throughout the company’s oncology division, motivating every employee to a personal involvement in the boss’s emergency action. Vasella’s inspired leadership brought the drug to cancer sufferers with record-breaking speed and confounded the pessimists who had advised against the development programme as a money loser.

Virgin Atlantic is a completely different kind of company from Novartis, but its boss Richard Branson has instilled the same kind of go-forward culture as Vasella created when bringing Glivec to market. Every Virgin employee is treated as a potential source of ideas that can affect the future of the entire company.

Employees of momentum-powered firms actively participate in their company’s success story by striving for the highest standards of value delivery and customer satisfaction – in other words, in executing the customer power offer to the best of their ability. Their motivation derives from a sense of shared intellectual and emotional participation that causes them to act reflexively to power the firm ahead. This is the virtuous circle of internal momentum, as laid out in Figure 12.1.

Figure 12.1  The virtuous circle of internal momentum

In the finest moments of the success stories of companies such as Wal-Mart, Microsoft, Southwest Airlines, First Direct and Starbucks, this circle exists without even being noticed. It is natural. It’s just part of the culture.

The model explains the strong internal momentum Wal-Mart had at one point and the way it was lost. Initially, vibrant employee engagement was won through a combination of factors, including the provision of jobs and development opportunities that were lacking in local communities, the physical presence of Sam Walton and his family, stock options for all employees, pride in being part of a successful operation and team spirit based on being part of a counterculture against ‘big corporate America’. Correspondingly, it was lost through a combination of factors, including the perception of a growing disparity in the sharing of rewards between shareholders and top management on one side and low wage employees on the other, guilty feelings of contributing to the death of ‘mom-and-pop stores’ and of the small-community spirit and atmosphere they fostered. The same framework can also be used to systematically identify the actions that Wal-Mart should take to regain its internal momentum.

The customer spirit: ‘The real battlefield is outside’

Customer spirit, the first pillar of this winning ethos, goes deeper than simply understanding the customer. It is the recognition that a company’s battlefields are the markets it serves. Employees must be mobilized to win on those battlefields.

The problem in large, complex companies is that the battlefields paramount in people’s minds are often the internal ones. Managers often fight each other – sometimes with style, sometimes with terrible brutality. The battle there is with the boss, with subordinates, between departments, between headquarters and subsidiaries.

There is no need to dwell on how much energy is wasted in this internal strife. The resulting inefficiencies are significant and obvious to all witnesses, and it is the customers who lose – that is, until they find better solutions with better companies.

Developing a customer spirit within a company involves raising awareness and a sense of urgency of the external battlefield by continuously emphasizing the importance of the customer. Think of Sam Walton’s Wal-Mart Cheer, created after Walton visited a supplier in Seoul, South Korea, where he observed factory workers starting the day with gymnastic exercises. This mass participation struck a chord. The cheer he designed after this trip became part of everyday life at Wal-Mart.⁹ It is not prescriptive – there are no details of how to deal with customers because employees face far too many customer situations to make that possible – but it continuously nurtures the ‘customer spirit’.

The only way to keep employees energetically serving customers is through a consistent, unceasing emphasis on putting the customer’s needs first. This is the first of the two foundations of a momentum culture.

The competitive spirit: ‘Outsmarting your opponent’

Competitive spirit, the other pillar of the winning ethos, is a matter not just of analyzing the behaviour of competing firms but of making competition a tangible, human, motivating activity that is actually fun.

True competition is first and foremost a battle of wits. Every employee should see him or herself not as a faceless soldier in one army fighting another army but, rather, as an individual pitted against corresponding individuals in competing firms. The goal is to outsmart one’s counterpart.

For example, product managers have to excel against a maximum of three to five product managers who serve the same markets in other firms. Even if they don’t know the names of their counterparts, they should realize that they are not powerful, mythical forces. They are just other people in similar situations. They are probably about the same age – they face the same challenge of balancing their private and professional lives. They all deal with promotions, bonuses, budgets and other daily issues. These sensitive and vulnerable counterparts are the real competition.

Competing against a giant army can be overwhelming, but doing better than one’s peers – that’s enjoyable and stimulating. Competition can be a tremendous advantage when used as a source of stimulation. The competitive spirit should be present at all levels of an organization.

In this, the example should come from the top. Sam Walton was very successful in developing competitive spirit. When travelling, he would systematically take the opportunity to visit competing stores. On one trip, when he was already famous as one of the world’s richest men, he visited a Price Club in San Diego, talking into a little tape recorder, noting prices and other ideas. He was arrested by security and his tape was confiscated. Sam surrendered the tape gracefully with a note addressed to Price Club CEO Robert Price, congratulating him on the quality of security and asking if he could get his tape back. A few days later, he received the tape, intact, with a friendly note from his rival.

Wal-Mart’s German fiasco

Wal-Mart’s Cheer is only one aspect of its culture and its way of doing business. While the cheer has become a daily staple of its US operations, the retailer has struggled to introduce it in other markets. As Wal-Mart has expanded and grown internationally, it has sometimes faltered in adapting to local culture.

Different people in different cultures can share the same strong values, but express them differently. When Wal-Mart expanded into Germany in 1998 and 1999, by buying two existing chains of hypermarkets, it made a number of mistakes. A lack of experience in foreign acquisitions led the American retailer to attempt to transplant its culture – lock, stock and barrel – to a completely different market.

It moved hundreds of Wal-Mart employees to Germany in an effort to turn the acquired firms into German-speaking Wal-Marts. Trying to impose the Wal-Mart Cheer – archetypally American – on disconcerted German employees was a bungle. They viewed the cheer as a ridiculous, demeaning ritual and refused to participate. It should have surprised no one that they hated it. Germans aren’t from Arkansas.

By 2006, Wal-Mart had failed to make its German operations profitable. Less than a decade after its entry, the firm decided to sell its 85 stores. Wal-Mart Germany CEO David Wild acknowledged: ‘We made mistakes. Many of our product buyers in Germany were Americans. Some real goof-ups occurred as a result.’¹⁰

Recognizing mistakes is an important aspect of a momentum culture and is essential to exploit new opportunities better. Wal-Mart’s German experience should have offered it several valuable learning points for its global expansion. This, and other problems it was progressively encountering, should have indicated that the company needed to take action to maintain its momentum before it was lost.

Johnson & Johnson and the Tylenol crisis

Johnson & Johnson is a widely admired firm. Experts in the pharmaceutical industry recognize its corporate culture as a crucial competitive advantage that the company has sustained for decades. This culture is so strong that it’s easy to spot J&J alumni years after they’ve left the company for new pastures.

In the history of crisis management, Johnson & Johnson’s handling of the ‘Tylenol crisis’ is both a remarkable success and a fine example of how a business that has excelled in nurturing a corporate culture can create the right momentum-building reflexes. The internal momentum created by this culture protected the firm during these events and ensured swift, efficient action to contain the situation.

The tragedy struck in America in September 1982. Malicious tampering with the J&J product Tylenol (lacing capsules with potassium cyanide) resulted in seven deaths and a wave of national panic. The Tylenol brand appeared doomed, and Johnson & Johnson lost a billion dollars in market capitalization within a few days.

What happened? J&J reacted quickly and massively, demonstrating that they placed the public health far ahead of cost considerations. J&J halted all Tylenol advertising and alerted consumers across the nation to stop using the product until further notice. Every bottle of Tylenol in the country – 31 million of them, with a retail value in excess of $100 million – was recalled. J&J offered to exchange every Tylenol capsule in consumers’ homes with tamper-resistant Tylenol tablets. They collaborated positively with law enforcement and offered $100 000, a significant sum in 1982, as a reward for tracking down the killer. They reintroduced Tylenol capsules in November in a tamper-evident package, pioneering a new approach to consumer goods packaging. Throughout the process, J&J chairman James E. Burke kept the public informed of what the company was doing on the case. He obtained the support of both the public and J&J stakeholders. It was clear that from the top down that the company’s only priority was the safety of the public and it thus demonstrated that it would not evade its responsibilities. Had the company not developed a strong customer-focused culture, this would not have been feasible.¹¹

J&J’s actions received much praise. Less than two weeks after the first death, The Washington Post published an article headlined ‘Tylenol’s Maker Shows How to Respond to Crisis’. Two months after the crisis, Tylenol had recovered 70 per cent of its market share – and its market leadership.

J&J had the right reflexes. Its past successes notwithstanding, the company’s future was seriously jeopardized. By responding swiftly and without compromise, it recovered and built a new momentum. The high investment of responding to the crisis was recovered many times over. Twenty-five years later, sales of the Tylenol brand exceeded $2 billion and continue to grow. As of mid-2007, Johnson & Johnson was among the world’s 20 richest companies in market capitalization and the first among pharmaceutical companies.¹²

This is a remarkable example of momentum at work. From start to finish, J&J focused on safety, fairness and health above all other things. The company was willing to spend unlimited amounts of time and money to correct the situation. Johnson & Johnson is convinced today that it achieved swift and successful resolution of the Tylenol crisis because company managers and employees made countless decisions that were inspired by the philosophy embodied in the Credo.

Written in 1943, by then chairman Robert Wood Johnson, the J&J Credo develops earlier ideas that he published in the appropriately entitled pamphlet ‘Try Reality’, emphasizing the corporation’s responsibility to customers, employees, the community and shareholders. An essential feature of the Credo is its flexibility. It is not set in stone and has been carefully updated over time while preserving the original spirit.¹³

So what about this Credo? It’s a very simple document, less than a page long, expressed in words to which everybody can relate. In four paragraphs, it addresses each of the firm’s four stakeholders – customers, employees, communities and shareholders. This order is no accident. Robert Wood Johnson believed that putting the customer first would ultimately produce the best returns for all stakeholders.

In the current version, its opening lines read as follows:

We believe our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices.

The J&J Credo is not a detailed map – it is a guide to thinking and action. Nor is it a banal public relations tool gathering dust – employees refer to it regularly. When managers get stuck on a difficult issue, somebody often says ‘Let’s go back to the Credo’ or ‘How can the Credo help us resolve this dilemma?’ At another company, just the mention of an expression like ‘the Credo’ would raise eyebrows and cynical smiles. But not at J&J. That explains why it’s easy to spot J&J alumni even when they’ve gone to work elsewhere. They’re believers.