AcknowledgmentsxiAbout the AuthorsxvIntroductionxixPart I:Worker Motiv - PDF document

AcknowledgmentsxiAbout the AuthorsxvIntroductionxixPart I:Worker Motivation,Morale,and Performance1Chapter 1:What Workers Want„The Big Picture 3Blame It on the Young 4What People Actually Say About Work 7Three Factors9The Evidence 20How the Three Factors Work in Combination26Individual Differences 28Chapter 2:Employee Enthusiasm and Business Success 33Making the Connection 33Tell Us in Your Own Words 35A Few Leading Organizations 39Enthusiasm and Business Performance 44Building the People Performance Model 47 Part II:Enthusiastic Workforces,Motivated by Fair TreatmentChapter 3:Job Security 57Justice and Job Security 58Best Policies and Practices 68Chapter 4:Compensation 77Money as Seen by Workers 77Money as Seen by Employers 78The Level of Pay 81Pay for Performance88Strategies for Effective Compensation96Chapter 5:Respect 109The Heart of Respect 112Humiliating Treatment113Indifferent Treatment115The Speci“cs of Respectful Treatment120Physical Working Conditions121Status Distinctions125Job Autonomy 127Constrained Communication 131Day-to-Day Courtesies134Part III:Enthusiastic Workforces,Motivated by AchievementChapter 6:Organization Purpose and Principles 139Elements of Company Pride140Company Ethics and Business Results143Ethics in the Treatment of Employees 150Getting Practical:Translating Words into Deeds 154Chapter 7:Job Enablement 167Ah,Bureaucracy! The Evil That Just Wont Go Away 173A Management Style That Works 179Layers of Management 183The Bene“ts of Self-Managed Teams 186The Enthusiastic Employee AcknowledgmentsAs the saying goes,it takes a villageŽƒto do any number of things. Well,in our case,it took the efforts of an entire company over many years tomake this work possible. We refer,of course,to our colleagues,past andpresent,at Sirota Consulting. Over the years,Sirota Consulting has beenfortunate to have some of the best minds in the “eld of industrial and orga-behavior in the workplace and assist in the improvement of organizationeffectiveness. Many of our colleagues provided research and statisticalanalysis; others offered the value of their experience and insights. Still oth-ers gave freely of their time to review and professionally critique our work.In particular,this book would not have been written without theencouragement,assistance,and generous support of Jeffrey Saltzman andDouglas Klein,the principal owners of Sirota Consulting. Not only didthey freely offer their own expertise,but they provided us with the fullsupport of the company to undertake the work. Others at Sirota Consultingplayed equally important roles:Martin Brockerhoff,Ph.D. and Shawn DelDuco provided key statistical analyses. Patrick Hyland,Joyce Chan,andJeanine Andreassi were extremely helpful in tracking down supportingevidence. John Sherman,Ph.D. offered thoughtful insights while Cynthia About the AuthorsDavid Sirotahas two abiding professional interests:organization behav-ior and survey research. Both of these interests took hold at the Universityof Michigan,where he received his doctorate,and which,in that universi-tys Institute for Social Research,was a leading center for applying survey methods to the study of organizations,their employees,and theireffectiveness.Upon receiving his doctorate,he was recruited by the InternationalBusiness Machines Corporation to help initiate behavioral scienceresearch there. He stayed at IBM for 12 years in a variety of managementand research positions,leaving in 1972 to set up his own “rm,Sirota Consulting. Sirota Consulting specializes in the diagnosis and improve-ment of the relationships of organizations with all of their key constituen-cies:employees,customers,suppliers,investors,and communities. In1996,David became Chairman Emeritus of the “rm,after completing hisown succession plan with key employees. He continues to consult withselected clients,primarily on matters of teamwork within and betweenorganizations. IntroductionThe impact shook everything for blocks. Fire,charged by thousands ofgallons of jet fuel,sucked so much oxygen out of the air around the impactzone that windows in nearby buildings blew out as the towers of the WorldTrade Center began to wither and then collapse. On the 32World Financial Center,the of“ces of Barrons Magazineers,of“ce supplies,and equipment ”ew out the windows. Stunned work-ers held on for dear life. Then,they carefully made their way out of thebuilding to safety. The editorial and business of“ces of Barrons Magazinehad been almost instantaneously decimated. The damage was so great thatit took more than a year to refurbish the of“ces.Yet,on September 11,2001,as people ”ed the building,Barronsemployees had already turned their attention to the task of publishing themagazine on time. Months later,Ed Finn,BarronsManaging Editor,recalled that the attack had not prevented his employees from publishing afull edition of the magazine three days after their of“ces were destroyed.In fact,the idea of not publishing never even came up; the only questionany employee asked was how the team would accomplish it. None of uswould want to face the challenges that Barrons„and many,manyothers„faced that day,but we can all appreciate what the Barrons The biggest problem here is the maze of bureaucracy and redtape. I frequently see long e-mail chains that show very clearlyhow often people have spent days,if not weeks,just trying totrack down the proper person or department to contact for assis-tance or approval. Why do we need so many approval levels? Ioften feel this company cannot get out of its own way,not unlikethe ill-fated Titanic.Numerous similar comments about bureaucracyŽappeared in that com-panys survey. Our other major sources of qualitative information are:€Focus groups,conducted before just about every survey withsmall groups of randomly selected employees from throughoutthe organization. We use these free-wheeling discussions to helpdetermine the unique issues that need to be addressed in that orga-nizations questionnaire and to help in the interpretation of thequantitative data that the questionnaire generates.€In-depth interviews and case studies from clearly identi“ed high-morale,high-performing client organizations to give greaterinsight into what those managements do. These are both totalorganizations and segments of them (such as BarronsMagazinewhich is a division of Dow Jones).€Our own informal observations and discussions over the manyyears we have been doing this work. For example,we haveobserved how managers struggle with a variety of pay-for-performance plans,seeking the one that will best reward and mostmotivate employees (or,at least,will result in the least dissatisfac-tion). As we move from company to company,we observe whichplans seem to work best and which least well,and we share theseobservations with the reader. When sound research on these issuesis available,we bring it to bear on our conclusions.Therefore,the data in this book consist of a of quantitativeand qualitative data.proponents of the two kinds of information,important„neither stands well by itself. One provides statistical reliabili-ty and proof,the other provides meaning„it brings the dry statistics toThe Enthusiastic Employee life and can also provide direction for dealing with the issues uncoveredby the survey. Most of the underlying framework for our book,however,comes from the quantitative data„the percentages of employees thatreport satisfaction or dissatisfaction on our surveys and the way thosemeasures of performance. As will be seen in this book,our results,as wellas the survey results of others,repeat themselves in similar basic patternsin study after study. This is the great bene“t of quantitative research:itstive information„such as anecdotes„dont have that power:one canproveŽor disproveŽanything through a selected anecdote or write-incomment. Their power lies in their giving depth to the statistics.In conclusion,Sirota Consulting has been studying the attitudes ofpeople at work„and the business consequences of those attitudes„formore than three decades. Since 1994 alone,we have surveyed approxi-mately 2.5 million employees in 237 private,public,and not-for-pro“tclient organizations in 89 countries. Sirota Consultings database ofresponses is extensive and,supplemented by our sources of rich qualita-tive data,provides insight into what workers want and why smart man-agers give it to them!It is a well-known phenomenon that the overwhelming majority of peoplebegin a new job with a sense of enthusiasm. As they enter a job,people arenaturally excited about their work and their organizations,eager to be partof a productive team of co-workers,and reasonable in how they expect tobe treated. This is true for about 95 percent of any worker population; theother 5 percent„largely those who might be described as allergicŽtowork„should never have been hired and,while at work,can be managedonly with continuing close supervision and credible threats of dismissal. Amajor problem is that,in many organizations,management generalizes thebehavior of this small group to just about every worker,which makes thework environment oppressive for all and suppresses the natural enthusi-For that reason and others,usually starting about six months after beinghired,something happens to the great masses of employees who begin work Solid Theory,Research,and Management Practice toWhich We Are in DebtWe therefore “nd ourselves in sharp disagreement with those in our “eldwhose views are supported neither by research evidence nor businessresults„these are pet nostrums and fads that fade away after a burst ofpublicity and experimentation. But there has also been a great deal of sub-stantial and illuminating research and theory that,while generating lesspublicity,has had a signi“cant and steady impact on management practiceand has been immeasurably important to our own work and to this book.For one,we are indebted to the seminal work of “ve giants of our “eld:Douglas McGregor (his Theory X„Theory YŽparadigm),DavidMcClelland (the needs for achievementŽand af“liationŽ),AbrahamMaslow (the hierarchy of needsŽ),Elton Mayo (the importance of socialrelationships at work),and Rensis Likert (management systems andA good deal of what we ask in our surveys is strongly in”uencedby the concepts of these “ve,as are our interpretations. For example,ourrepeated assertion of the desire of most workers to do their work and do itwell is a direct descendent of McGregors Theory X„Theory Y.We are also greatly indebted to a number of contemporary researchersand we reference their relevant studies throughout the book. Among themore important for us have been Jeffrey Pfeffer,Edward Lawler,JamesCollins and Jerry Poras,Fredrick Reichheld,and Wayne Cascio. Theirwork is distinguished by solid research and thoughtful interpretation andwhile they cover somewhat different areas than we do,there is,where weoverlap,considerable congruence between their “ndings and conclusionsHow This Book Is OrganizedThis books organization is straightforward. Chapter 1,What WorkersWant„The Big Picture,Žand Chapter 2,Employee Enthusiasm andBusiness Success,Želaborate on the general ideas of employee enthusiasmand its consequences for performance. They also contain a description ofand an introduction to the Three Factor Theory„the three key needs ofemployees whose satisfaction is the basis for an enthusiastic workforce.The Enthusiastic Employee Worker Motivation,Morale,andPerformanceWhat Workers Want„The Big Picture . . . . . . . . . . . . . . . .3mployee nthusiasm and Business Success . . . . . . . . . .33 What Workers Want„ Picture ere it is ere it is ell treated. Itcannot be driven; it can only be attracted.Ž„Walter Wriston, An accurate understanding of motivation in the workplace is more than anacademic pursuit. The effectiveness of critical business policies dependson the extent to which our assumptions about human motivation are accu-rate. If they are not accurate,they either have no impact at all,or worse,they boomerang and damage the organiation. Accuracy depends not onlyon wisdom and experience,but on systematic researcus from personal bias,seeing what we want to see instead of what is there.Research also protects us from the lure of fads and fashions.The problem with many theories in this “eld is not that they havenothing to say,but rather that they:e central motivator (and,there-fore,the central explanation) of employee morale and performance.€Claim that most people are frustrated with the achievement of thataspiration (the sky is fallingŽscenario) and that dealing with thatsingle frustration will solve all problems.€Typically assert that what the theorist has uncovered characteria new generationŽof workers and is therefore novel. It is helpful to look at a few of the more prevalent management fads beforewe review the results of real research.Blame It on the Younor reasons that we will soon show are misguided,popular theories ofwhat employees want change continually,and the change is often couchedin terms of new generationsŽof workers whose needs and expectationssomehow magically differ from their predecessors. We are told that thereare important differences between the baby boomersŽand GenX.ŽDont look now,but here comes Generation Y,followed almost immedi-ed that they all need to bedealt with differently because they are all different.These seemingly signi“cant differences make for interesting reading,and the business media have surely accommodated us. Numerous storieshave been published on generational change and its implications for man-agement practice. Generation X,for example,is widely assumed to putmaximum emphasis on individual freedom and minimum emphasis oncompany loyalty. A few years ago,the author of aFortune advised that,If your competitor lets employees keep a birdbath in theof“ce,you will have no choice but to follow suit.ŽTime summed up the generation as one that,ƒwould rather hike in theHimalayas than climb a corporate ladder.ŽThese observations areseductive; managing people is a dif“cult andcomplicated job “lled with many headaches,and most managers want tolearn all they can about human motivation. urthermore,the answers pro-vided by the theories on generational change seem intuitively correct.When a certain age in life is reached,people almost inevitably begin totalk about that new generationŽin a way that means,Whats this worldcoming to?ŽThe new generation is not only not like us,Žbut they are notlike we wereat that age.ŽThis discussion has been going on forever.The fact that young people are so often viewed with apprehension bytheir elders should make us think about the validity of assertions aboutgenuine generational change. It may be just a matter of age,but even moreimportantly,it may be a confusion of whats apparent,such as the clothesand music preferences of young people,with what is real,such as theirbasic goals as they enter the workforce.mployee An example of this tendency to confuse youthful tastes with humanneeds became most dramatically apparent in the early 1970s. As thetumultuous 60s ended,a deluge of books,television specials,and news-paper articles spotlighted a new generation of workers. These young peo-ple were (supposedly) severely discontented with work. ven worse,itwas popularly suggested that the traditional sources of worker grievances(unhappiness with pay,bene“ts,hours,and working conditions) were nolonger the primary causes of worker dissatisfaction. We were told that thevery nature of work itself drove the newŽworker to near distraction. Thisworker was shown as a product of the 60s,when rebellion against over30Žadult materialistic values appeared widespread,and freedom and self-ation were the goals. These workers,it was claimed,would notsettle for their fathersroutine and mind-numbing jobs.The concern about workers and work at that time was perhaps bestducation,and Welfare (HW),titled ork in Americaprofoundly negative impact work seemed to have on so many youngemployees,the studys editors reported the following:The discontent of trapped,dehumanied workers is creating lowproductivity,increasing absenteeism,high worker turnover rates,wildcat strikes,industrial sabotage,poor-quality products and areluctance of workers to give themselves to their tasks.Work-related problems are contributing to a decline in physicaland mental health,decreased family stability and communitycohesiveness,and less balancedŽpolitical attitudes. Growingunhappiness with work is also producing increased drug abuse,alcohol addiction,aggression,and delinquency in the workplaceand in the society at large.That statement was quite an indictment,and one that the media repeatedendlessly. Of course,when a single factor (in this case,dehumaniwork content) is presumed to be responsible for so many business,social,and personal ills,rest assured that a single cure would soon follow. In theW report,the cure (or,more accurately,the cure-all) wasseen as the magic of job enrichment.ŽChapter 1What Workers Want„The Big Picture he Lordstown Strike and Job Enrichment SolutionŽbergs motivator-hygieneŽtheory,jobenrich-ment was seen as an attempt to reinvigorate work with the prospect forreal achievement,thus creating genuine satisfaction and motivation. Inbrief,the motivator-hygiene theory states that the work itself„the chal-lenge of doing a job from start to “nish,and so on„is the true motivatorof workers,while the work environment„hygieneŽfactors such as pay,bene“ts,and human relations„cannot positively motivate workers but,when adequate,temporarily prevent them from feeling unhappy. There-fore,the key to true motivation and lasting satisfaction is job enrichment,structuring work so it provides workers with a sense of achievement andThe motivator-hygiene theory and the job-enrichment solution wereextraordinarily popular in management thinking and teaching for much of the 1970s,but have since faded from view. That is not surprisingbecause,for one thing,cure-all solutions for cause-all problems are sel-dom real. Despite its academic trappings,the hullabaloo smacked ofpatent-medicine salesmanship. In fact,considering that so much of theexpressed concern was about blue-collar workers on assembly lines,nolabor unions had placed demands for more meaningful work on their collective-bargaining agendas. Indeed,many labor leaders explicitlydeclined to join the rising chorus of voices concerned with job content.The attention given to a 1972 workersstrike in the Lordstown,Ohio,assembly plant of General Motors (GM) reinforced the skepticism aboutjob enrichment and its claims. This strike was widely interpreted to be theing nature of assembly-line work. However,thereality of Lordstown vastly differed from the way the strike was generallyThe GM Lordstown plant was a sprawling complex of factories. In the1960s,GM built a new factory at Lordstown that was specially designedto assemble Vega passenger cars that GM hoped would prevent foreignmanufacturers from eroding GMs margins in the compact-car arena. By1966,GM was hiring workers for the factory,eventually employing about7,000 people. This new plant,built by GM with advanced robotics,repre-sented a $100-million investment by the company. GM recruited younger,better-educated workers who,it was claimed,were products of the ethosof the 1960s. Many of them even had long hair,so this was indeed a newgeneration.ŽThen,GM adopted a variety of ef“ciency rules designed toincrease the production of the new Vega plant from 60 cars every hour (ormployee employees want a of things most.ŽIndeed,it is a psychological illnessto want just one thing,such as money to the exclusion of everything else,oraffection to the point that one is willing to sacri“ce anything for it,includ-ing fair compensation for ones labor.hree FactorsWe assert that there are three primary sets of goals of people at work:ievementand camaraderie. We call this our ree Factor T1.These three sets of goals characterie what the overwhelmingmajority of workers want.or the overwhelming majority of workers,no other goals are3.To our knowledge,these goals have not changed over time andthey cut across cultures,at least the cultures of the economicallydeveloped sectors of societies (the only sectors we studied).4.Understanding these sets of goals,and establishing organicies and practices that are in tune with them,is the key to high work-force morale and “rm performance. There is no con”ict between thegoals of most workers and the needs of their organi Keep in mind that our focus is on the goals of people There is more to life than work,and our theory is not meant to cover all human motivation.What is the evidence on which our assertions about human motivation areor one,we have been in the business of observing and queryingemployees for more than four decades. After all this time and the literallytens of thousands of employees with whom we have had direct contact andthe millions we surveyed by questionnaire,we see certain themes repeat-ing themselves time and again. They repeat themselves no matter what theoccupation„from assembly-line workers to research scientists„no mat-ter what the region of the world (North America or urope),and no matterChapter 1What Workers Want„The Big Picture The overall ranking of items is similar within most of the individualorganiations that we survey. When we discover an exception to the pat-tern,it is cause for particular attention. Take safety,for example. In gener-al,safety is highly rated in our surveys,but there are a few organiespecially in heavy manufacturing,where it is one of the lower-rateditems. But,there are exceptions to that,too. As an example,see Chapter6s discussion of Paul ONeill (the former Secretary of the Treasury) andhis work on safety when he was chairman of Alcoa. These exceptions tothe exceptionsŽare particularly noteworthy and illuminating because fromthem we learn that in management practice,little is foreordained. MuchAlthough this pattern tends to hold up across organiexceptions,as noted),the levels of satisfaction„within the same broadpattern„vary widely. Thus,for example,employees in companies A andB can rate safety among the highest and pay among the lowest of all theequity items,but company A employees can be much higher than those incompany B on both of these (and on just about every other equity item).The great variations among organiTable 1-1,andthey are extremely important. irst,they lend the lie to thecommonly held assumption that people,no matter where they work,aresimilar to each other in their disgruntlement with their employment condi-tions. What management does is critical and the differences among organiations in management behavior„and therefore employeeresponse„can be huge. Second,the variability allows us to answer theSo what?Žquestion about employee attitudes:does satisfaction matterfor business success? In Chapter 2,mployee Success,Žwe show how business performance varies markedly amongorganiations with different degrees of employee satisfaction.Achievement. To take pride in ones accomplishments by doing thingsthat matter and doing them well; to receive recognition for onesaccomplishments; to take pride in the organizations accomplishments.A sense of basic equity in theemployment relationship serves as the foun-dation on which high employee morale can be built:the powerful need tofeel proud of ones accomplishments and the accomplishments of theorganiation is then freed to drive behavior toward high performance.Pride comes both from the employeesown perceptions of accomplish-ment and from the recognition received from others.mployee e the importance of his pay dissatisfaction. Discontent with paycan be ameliorated only by more pay! Similarly,unhappiness with a bor-ing job can be solved only by restructuring the job or transferring theemployee to work that is more interesting. Paying the employee morewont solve the issue. ach goal„and most every subgoal„must be dealtwithindividually. There are no panaceas.We make rather strong claims„some might say startling and unbeliev-able„about the pervasiveness of the three sets of goals. We claim thatthey are nearly universal,applying to roughly 85 to 90 percent of a work-force (thats just about any workforce).Our assertions might appear to be counterintuitive„they go againstcommon observation and common sense. Managers and employee-relations experts talk endlessly about differences:the differences betweenindividual workers and between categories of workers (such as males andfemales,older and younger workers,professionals and non-professionals)and between workers in different countries. Are we saying that this is hog-wash? Yes,in part.We already discussed what we consider to be distortions about gener-ational differences„the belief that younger workers are not interested inworking as hard as their elders and that they are not concerned about jobsecurity. We have solid evidence for our assertion that generational differ-ences are greatly exaggerated as are other purported differences and wewill soon provide that evidence.irst,however,consider the following questions in relation to the threefactors:do you believe that an entire category of workers„demographic(age,sex,race,and so on),occupational,or national„does not considerbeing fairly treated by their employer„say,in wages„to be of very highpriority? Do you believe that a category of workers exists in which theoverwhelming majority does not want to take pride in their work and intheir organiation? Do you believe that there is a category of workers for whom having congenial and cooperative co-workers is unimportant?Of course,there are to whom these rules do not apply„even individuals who willingly allow themselves to be exploited economicallyby their employers„but never more than a very small minority in any category.mployee all the correlations highly signi“cant,which veri“es the importance of thegoals,but to all intents and purposes,they are also the same in all cate-gories of employees.Which aspects of work do we “nd correlated with overall em-ployee morale? They tend to be about what might be termed the frillsŽofwork. Although senior management often spends much time on them,theydont really touch on workersbasic goals and what goes on in importantways in their daily workplace activities. We refer to matters such as theaesthetics of the physical work environment (such as the wall color),recreational activities (such as holiday parties),various formal pro-gramsŽ(such as suggestions programs),and formal communication mech-anisms (such as a company newsletter). Its not that employees dont careabout these at all,but that they matter much less than other more funda-mental concerns. It matters much less to them,for example,that there be awell-designed company newsletter or a suggestions program than thattheir immediate supervisors communicate and listen to them. We are in noway suggesting that the frills be dropped„almost everyone likes a holi-day party„but that they be seen as supplements to,not substitutes for,theended questions. This type of analysis shows that the things employeesspontaneously write in about what they like mostŽand like leastŽabouttheir organiations almost invariably involve the three factors. These “nd-ings are given as examples throughout this book. The frills are almostnever mentioned.How the hree Factors Work in CombinationOur analysis shows that thethree factors interact with each other in aninteresting way. The Three actor Theory asserts that employees seek tosatisfy three needs„equity,achievement,and camaraderie„in anyemployment situation. It further asserts that,when all three needs are met,it results in enthusiasm directed toward accomplishing organigoals. As we discuss in Chapter 2,enthusiasm is not just about being hap-pier or more content„it is employees feeling that they work for a greatcompany,one to which they willingly devote time and energy beyondwhat they are being paid for or what is expected and monitored. A greatcompany for employees is one that largely meets equity,achievement,and camaraderie. Until that happens,it is no morethan a goodŽcompany. mployee levels signi“cantly different from each other,nevertheless exhibit quite abit of internal variability.or example,in one of our companies with the highest morale„avery large corporation with hundreds of departments„the bulk of thedepartments show high overall satisfaction,but the range across depart-ments is 100 to 41 percent. In one of our lowest scoring large corporations,the range across departments is 65 to 30 percent. These ranges are typicaland there are many reasons for them„the most important being differ-ences in the styles of individual managers within those organiWhy do we call organiations with superior overall satisfactionWhy not simply call them highly satis“ed?ŽBecause something going onat these elevated ranges is much different from what we “nd in organitions where employees are just moderately satis“ed. And,as we show inthe next section,on average,organiations with enthusiastic employeesorganiell Us in Your Own WordsNot only do thesehigh-enthusiasm/high-performing organidifferent in the statistical data,but their people literally sound differentwhen giving write-inŽcomments. At the end of most surveys,we askemployees to summarie their views in their own words instead ofresponding to a multiple-choice question. As mentioned in the previouschapter,employees are usually asked,In your own words,what do youlike most about working here?Žand What do you like least?Ž(or occa-sionally,What do you most want to see improved?Ž). We categorianswers into various content categories.Listen to whatsome workers in enthusiastic organiations say. the responses from a very positive organiremember,by having more than 75 percent of its employees satis“ed andless than 10 percent dissatis“ed). Heres a sampling of what they say theymost like:e are totally committed to our customers. Tis company from te executive suite to my colleagues on tfront line. I kno from “rst-and experience tat customersbelieve tey are te primary focus of our business and greatlyappreciate te level of service and attention e provide tmployee nthusiastic employees arecaught up in the organiwith it,so its successes and failures become,in effect,the employeessuc-cesses and failures. This is above and beyond a pragmatic calculation,such as the impact of the companys performance on employeesincomepotential or job security. This is a psychological and an economic phe-nomenon:psychologically,the company becomes part of an employeesself-image so that company performance is felt as if it were the individ-uals own performance. This is not too different from the avid sports fansliving and dyingŽwith the ups and downs of his team. This is my team;this is my company.Individual employees usually come to mind when managers think ofdifferences in enthusiasm. There are,of course,differences in pronenessto enthusiasm among individuals (some people are by nature more upŽthan others),and no company has policies,practices,and managers thatsuit everyone and evoke uniformly positive attitudes. But,as our datashow,there are very marked organiational and unit differences in theenthusiasm felt and displayed by workforces as groups. Lets examine afew speci“c organiations that have enthusiastic workforces.A Few Leadin Oror about 20 years,Intuit hasled a burgeoning industry of software devel-opment and sales in the important area of business and “nancial manage-ment of small organiations,the accounting professions and consumers,through its wildly popular Quicken,QuickBooks,and TurboTax products.Intuit also surveys its workforce regularly,most recently through SirotaTake a look at their data. irst,overall satisfaction measures at 83 per-cent. This,in and of itself,is a very high percentage„much higher thanthe Sirota norm of 64 percent. But,the Intuit data are yet more instructiveand impressive. The Intuit survey includes questions that address the threefactors. or example,the company asks its employees to rate managementon its respectful and digni“ed treatment of workers (equity),the extent towhich employees are encouraged to “nd innovative ways to do things(achievement),and their sense of belonging to a group that works wellTable 2-1 shows that the Intuit results on those questions are wellabove external norms.mployee Intuit Survey Results Versus the Norms %Favorable IntuitNorm quity88%67% Achievement79%61% Camaraderie83%63%Intuit gives its workerssomething to achieve:Our goal is to create newways to manage “nances and small businesses that are so profound andsimple that our customers cannot imagine going back to the old way.ŽThecompany has an mployee Value Proposition that it takes seriously andtracks continuously. The proposition states that Intuit will create a greatplace to work by ful“lling the following employee expectations:€Help me be productive,do great things,and be the best I can be.€Let me know where I stand and how Im doing.€Invest in me to help me grow fast.€Pay me based on performance.€Make me an integral part of the team and create a positive workenvironment.Intuits dedication to ful“lling its promises to employees is exempli“ed byits tracking of how they are doing:The measurement system [employeesurveys] at Intuit provides an ongoing check on how the company is livingup to its values,values that re”ect what managers know to be related to the “rms ultimate “nancial success.ŽThe fact that survey results aretaken seriously by the company is indicated not only by the high scores it achieves,but by the 90%+ response rates to its surveys year after year. mployees clearly trust that the surveys„and the mployee ValueProposition„are more than public-relations exercises.mployee enthusiasm is not just a feeling or an attitude:it is a moti-vated state,impelling people to action. And unlike sports fans,employeescan do a lot to directly affect the success of their team; in fact,if all theydo is cheer from the sidelines,the company gets into trouble. veryonewho has worked knows the potential that can be tapped when peoplemployee really care about their companies and their jobs. That potential is anemployees discretionary effort,that is,the difference between the mini-mum an employee has to do on the job and what he is capable of doing.nthusiastic employees routinely produce signi“cantly more than thejob requires,often working all kinds of hours to get things done (and doneright); search for ways to improve things rather than just react to manage-ments requests; encourage co-workers to high levels of performance and“nd ways to help them; welcome,rather than resist,needed change; andconduct transactions with external constituencies„such as customers„inways that bring great credit (and business) to the company.A moderately satis“ed workforce,on the other hand,is a generallywilling workforce,doing what the company wants (and usually withoutcomplaint). However,it is more of a passive loyalty. nthusiastic employ-ees dont need to be asked. Consider this example from Herman Miller,anof“ce-furniture company widely admired both for its business success andfor its highly progressive employee relations practices:On learning that the American Airlinesnational of“ce was aboutto become their neighbor,enterprising employees at a Dallasbranch of Herman Miller,the of“ce-furniture company,wrote aletter asking the airline to consider furnishing their new of“ceTheir initiative paid off in a siable order. But,the week beforethe airline of“ce opened,the employees who went over to checkthat the order had been delivered properly found that the packingcrates had crushed the plush on the fabric of hundreds of chairs.So,the employees formed teams to work around the clock andover the weekend to raise the plush with steam irons.as Herman Millerthat demonstrate the great lengths„sometimes,nothingshort of heroic„to which highly motivated employees will go to servetheir company and its customers. rederick Smith,the founder of xpress,tells this story:ƒa Rocky Mountain bliard had knocked out a mountaintopradio relay,cutting off phone service at several of“ces. The phone company would not be able to repair the con-nection for “ve days. So,Hal (a mployee expert) chartered a helicopter (using his personal credit card).When the pilot couldnt land,Hal jumped out,slogged throughwaist-deep snow,and reconnected the cables. He didnt gothrough layers of approval. He just acted. He knew what he had to do was right.nthusiasm is actually one of the stated valuesŽof Crescent Realty Trust,which is a well-known real-estate company. The company values includeintegrity,leadership,people,teamwork,innovation,service,communica-tion,relationships,discipline,and performance.ŽDetailing its peopleŽvalues,Crescent declares,We will hire,develop,retain,and rewardexceptional and (emphasis added) people.ŽCO John Goffpointedly commented to us,Id rather have enthusiasm than smarts.ŽSo,the following comments by Crescent workers should not come as a surprise:e never stop trying to outdo ourselves in regards to te provide. Our people bring pride,passion,andcommitment to real estate. Everyone I talk to takes pride in t a passion to see our company succeed.e people respect eac oter and believe tere is value in tcontribution tey make individually and as a team to make torkplace environment solution oriented.Žork does not feel like a core but a e day.e problem may be,tey [te extra mile to try and solve te problem and makesure te person and/or persons are taken care of.Crescent really cares about its employees. Tat personalization,in my opinion,is at breeds loyalty by team members. (You feellike a real person„not ust a number.)nthusiasm is not a recipe for perpetual bliss or automatic success,and ithas little in common with contentment.ŽAvid sports fans want their team to win all the time and so frustrations are inevitable. So,caringemployees are often frustrated employees. After all,they care. Not onlydoes their company„their team„sometimes lose,but in a changing andcompetitive business world,the status quo is rarely good enough,so thedrive for success translates into a continual striving for improvement. It ismployee internal customersŽ(that is,a lack of cooperation with other units),absenteeism,tardiness,theft,and,in more extreme cases„when angerturns into rage,such as in explosive labor disputes„violence and acts ofsabotage to the companys property.A feeling of injustice,then,produces anger but,as we have shown,and by itself). It is a precondition for enthusiasm. That is,although it isnearly impossible to be enthusiastic about an organiemployees poorly in terms of the basic conditions of employment (pay,forexample),being treated well in those respects is just a part of the story. Anassembly-line worker can be very well paid,have good bene“ts,and soon,but be terribly bored with the tedious routine. He is then likely to bemoderately satis“ed.ŽBut,because the equity needs are being met,theemployee doesnt feel much anger. Also,bored workers “guratively or lit-erally go to sleep; they dont strike out at the company. However,add asense of injustice to that and anger is the likely result (remember thespeed-up at the Lordstown Plant that was discussed in Chapter 1).Enthusiasm and Business PerformanceThus far,our evidencefor the relationship between morale and perform-ance has consisted of anecdotes. As interesting as anecdotes are,we dontrely only on them to make our point. After all,as we have said,any argu-ment can be proven (or disproved) with a few stories. A very large andimpressive body of evidence,which comes from solid,systematicresearch conducted over many companies,clearly demonstrates the strongemployee enthusiasm and business performance. Here is just some of therelevant research.Jeffrey Pfeffer,in his comprehensive review of the research,con-implementing work practices that result in high employee commitment.The studies covered by his review are wide-ranging; they include investi-gations of the survival rates of initial public offerings of companies with different work practices and detailed research on the impact of thesepractices on pro“tability and stock price in many different industries. or example,a study of steel mini-mills reveals that mills ƒusingmployee commitment-oriented management practices required 34 percent fewerlabor hours to produce a ton of steel and showed a 63 percent better scraprate.ŽA study of nearly two hundred banks “nds that differences in suchpractices are associated with an approximately 30 percent difference inFortune Magazinecompiles and publishes many lists,including oneAmericas Most Admired Corporations(based on ratings of factorssuch as value as a long-term investment) and the ork For in America(based on a review of companiespolicies pertainingto employees and employee attitude survey data). Year after year,the cor-relation between these two lists is strong. or example,in 2001,of the 15companies rated as the most admired,Ž9 are on the list of the best com-panies to work for. (Not all companies choose to compete to be placed onthe 100 BestŽlist.) But none of the 100 BestŽcompanies are in or any-Our research on the relationship between employee morale and busi-ness performance is equally striking. To take one recent example,consid-er stock-market performance in 2002,which was a bad year for the market(the S&P Index declined 19 percent). We analypublicly traded companies we surveyed in 2000…2001. Using overall sat-isfaction as our measure,we divided the companies into high morale (75+percent favorable),moderate morale (between 74 and 60 percent favor-able),and low morale (less than 60 percent favorable). The stock marketperformancein 2002 of each company was determined and the averageperformance for the three morale categories calculated. Since differentindustries perform differently on the stock market in the course of a year,and the companies in our morale categories differed considerably byindustry,it was necessary to compare the performance of each our compa-nies with the performance over the year . Table 2-2shows the average changes in stock market price of the companies in eachmorale category,the average changes in the industries of those companies,and the difference between the two. their industry comparison group„about 20 percent„actually showing aslight increase in stock-market value in a bad year for the overall market.The moderate and lowest morale companies performed somewhat worsethan their industry comparisons,about 5 percent. Similar “ndings arefound for other standard measures of company performance,such asreturn on investment and return on assets.mployee The broad measures of business success are heavily in”uenced by howpeople perform day-to-day on the job. Our own research shows,for exam-ple,that enthusiastic workers often increase the quality of work by hugeWe and others“nd high positive correlations between employee satisfaction and cus-tomer satisfaction and sales.In a fascinating study done for the NationalOceanic and Atmospheric Administration,strong positive relationshipswere found between the organiation cultureŽindex of their variousnational weather service of“ces (as measured by an employee satisfactionsurvey) and a critical success index,Žwhich is an objective measure oftornado warning performance that takes into account positive forecastsfollowed by an occurrence,occurrences that were not predicted,and falseIn short,the evidence for the positive impact of very high levels ofemployee morale on their performance and on business success is strong.Or is it? A statistician might object to the suggestion that we have pro-vided proofŽthat morale has a positive impact on performance. We knowthat our kind of research„as opposed to a pure experiment„never permits“rm proof of causality or its direction. We can speak of a statistically sig-ni“cant relationship,Žbut the relationship may be from performance tomorale rather than the reverse; that is,it is business success that breeds hap-piness,not happiness that breeds business success. As one executive com-mented to us regarding the rather mediocre survey results for his company,Look,what weve got to do is get the pro“ts up and the stock price up„thatll take care of morale. The morale problem is that our performance hasbeen lousy.ŽWith this comment,the executive minimiboth employee morale and the management practices that impact morale,mployee mployee Morale and Stock Performance Averae 2002 Stock Market PerformanceOf Companies inOf Industry oryComparision CompaniesDifference g High+1.80%…18.23%+20.03% Moderate…14.41%…9.19%…5.22% Low…24.92%…19.93%…4.99% mployee No organiation exists without customers,and numerous studies havebeen performed that link the satisfaction and purchasing behavior of cus-tomers to the attitudes and performance of employees. This link allows usto include customer satisfaction and behavior in the model (see 2-5). Customer satisfaction with a company has quite consistently beenfound to relate to a companys pro“tability.We “nd that customer satis-faction is a function of the products or services purchased from a compa-ny,the business processes with which the company interacts with itscustomers,and the way customers are treated by the companys employ-ees. The treatment employees give customers,in turn,largely depends onhow an organiation treats and manages its employees (for example,howorganiations pay,show respect for,and assign goals for its employees).As previously noted,customer satisfaction is also part of a feedback loop:it is both a cause and effect of employee morale. Equity … Achievement … Camaraderieure 2-5 Workforces,MotivatedFair TreatmentJob Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77Respect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109 Job SecurityLets begin our exploration of the policies and practices that facilitateemployee enthusiasm with the concept of equity (i.e.,the degree to whichpeople believe their employer treats them with fundamental fairness). Thiscan be addressed either from the point of view of individual employees(perceptions of treatment relative to others in the company) or the treat-ment of large segments of a workforce. Our focus is on the treatment oflarge groups,potentially an entire organior these purposes,equityrefers to the collective treatment of workers relative to fundamental andare a living wage,Žadequate non-wage bene“ts (such as medical insur-ance),sensitivity in handling layoffs,safe working conditions,a reason-able workload,and equality of employment opportunity.ship of employers and their workers,and the extent to which groups col-lectively conclude that they are decently treated. Traditionally,unionshave been concerned about these issues,but the matter is somewhat morecomplex.Perceptions of equity are not limited to the obvious physiological andeconomic factors that are normally the focus of collective bargaining. So, for example,a key psychological essential in most workersconcept offairness or justice is the need to be treated with respect. In the workplace,respect means simply to be treated as responsible adults,rather than aschildren,criminals,or enemies. Respect might not feed families,but it isvital for employee self-esteem. The extent to which that need is satis“edhas wide-ranging and profound implications. Chapter 5,Respect,Ždis-cusses respect in detail. The subject of this chapter is the most basic ofmost workerseconomic needs,namely,job security.Justice and Job Securityirst,a caveat:the fact that we addressjob security and its importance foremployee morale and performance does not mean that we advocate life-time employment guarantees. Thats impossible for just about any organi-ation. We do urge,however,that if an organiation seeks to haveenthusiastic workers,it must understand that those employees are not fun-How do workers,in general,view their job security? Our surveynormŽ(or average) is 60 percent,which is not too bad,but the rangeacross organiations is enormous:90 percent to 6 percent.To be sure,the lowest scores are,in part,explainable by reality. All theorganiations with scores at the lower end of the range are,in fact,thosethat recently experienced employee layoffs,had announced plans to do so,or where rumors were rampant that a downsiing would soon occur. example,in one company whose data are at the bottom of the range,a verylarge downsiing had just been completed. In another example,a compa-ny had sharply cyclical sales,more than most,so it was repeatedly laying-off and staf“ng up by large numbers. It,too,had a low score for this item.Another company went through a series of layoffs (three waves inonly three and a half years),even though the company had promised thatthere would be no more layoffs after the “rst wave. Surveyed employeesexpressed a belief that the layoffs were merely short-term measures toplease the investment community and were driven by broad quotas,pay-ing no attention to the critical skills the company lost,had destroyedmorale,and had a devastating impact on one small community.One conclusion might be simply that when workers express anxietyabout their job security,it is because their jobs are insecure! Of course,that is only part of the answer. It does not,for example,explain why somemployee companies report much higher scores on attitudes toward job securitydespite the fact that they,too,have experienced layoffs caused by eco-nomic downturns. Nor does it address the rather straightforward notionthat if job loss is the result of “nancial necessity,why dont workers sim-ply understand that and suck it upŽ(emotionally speaking)? Why,in somany cases,is there anger? Why dont these peopleŽsimply understandthat job loss is one of the most commonly used and necessary organitional responses to the ups and downs of the economy and that businessThe fact is that workers often experience layoffs not as prudent busi-ness stewardship but rather as base inequitable treatment. Where does thisattitude come from? The answer has two parts:the sense of substantiveequity (whether the thing itself is fair),and the sense of procedural equity(whether what is done is done fairly). irst,consider substantive equity.Alan Sloan captured the spirit of a new era in a 1996 Firing people as gotten to be trendy in corporate America,in tat building ne plants and being considered a goodcorporate citizen gave you bragging rigts 25 years ago. Noyou “re orkersorkersto make yourcorporate bonesall Street and Big Business in-your-face capitalism is makingAmerica great.This new management attitude includes ordering layoffs when a company. In the early 1990s,several large corporationsdownsi York Timesƒdespite being consistently profitable,the Xerox Corporationƒ(stated)ƒthat it would cutƒnearly 10 percent of its workforceoverƒthree years to improve productivity.ŽIn so doing,Xerox becameanother big company trying to improve the ef“ciency of its operations bydismissing large numbers of people. The day it announced these layoffs,What message does management convey by these and similaractions? It might be an encouraging message to the investment communi-ty (although later we argue that it should not be) but to workers it is sim-ply this:orget all that talk about you being an to the company;you are really a cost and a disposable commodity. And we will keep ourcosts down!ŽChapter 3Job Security thinkers posit that the new workersŽwant an environment where theyfeel empoweredŽand self-actualiedŽand,above all,in which they candevelop the necessary skills to “nd a job in another company when theydecide to leave.Suppose,however,that employment elsewhere is dif“cult to “nd.How uninterested in job security are these young people then? It was notsecurity in general that became unimportant for many young people in the90s„instead,it was security . The late 1990s were boomemployment in any one company if employment elsewhere is so easy toobtain? But,times changed in late 2000. The high technology sectorimploded and the country experienced its “rst economic downturn in adecade. Hundreds of thousands of workers were laid off and,once again,the media were “lled with tales of high anxiety in the workplace. Surveysclearly showed that job security rose to its usual high position on the list ofworker concerns. or example,workers in the telecom industry ranked jobsecurity as the number-one attribute they looked for in employers.Dont believe for a moment that stable employment„the predictabil-ity,not just the sie,of a paycheck„is ever a trivial issue for most work-ers. An environment in which many jobs are available is,by de“nition,asecure environment. The late 90s-type boom is uncommon in the careerexperiences of the great majority of workers,so for most people most ofthe time,the employment stability that a company offers is critical. Whena company downsies,its a major event and,for many employees,it istraumatic,even if they have not been laid off (at least not yet).qually momentous is a companys decision to downsiother companies in the industry take that path. Such companies exist. Thein-your-face capitalism described bySloan and others,while increasinglyprevalent,is not a universally accepted model. The alternative philosophyis exempli“ed by these comments from two highly successful CSure,e could take out a lot of our people. But our future. One,ed demotivate to remained. Tey surely ouldnt ey ree,ifere ere any good people left,tey ouldnt be ere long.eyd be looking around. And uncertainty reduces risk taking.Ž„Wolfgang Schmitt,RubbermaidCwhen growth of his company slowedChapter 3Job Security I ays “gured out to maintain full employment,because I totally believe torkforce,teyre taking on debt,teyre building families.eyre trying to go forard in terms of teir lives. To pull tfrom under tem is probably one of te biggest disgraces I couldever imagine.Ž„Jack Stack,CO of Spring“eld Remanufacturing CorporationThe policies represented in these views are not just humanitarian„are te business.How do we know that? Lets examine theheart of the claim,which is that layoffs are good for a company in theordinary course (the implication being,of course,that the “nancial bene“ttrumps the human issues). To some readers,Xeroxs actions (describedearlier) will no doubt sound like good business. These are the kinds ofactions that,we are told,have “nally dispensed with old-fashioned andinef“cient paternalistic management.Sure,a layoff often results in a short-term spike in a companys stockprice. However,the impact on the long term can be quite different. ere a mountain of evidence te ef“cacy of dosizing for many companies as a cost-reduction strategy.At the least,theprojected savings are greatly overestimated. Basically,the studies showthat only about one-third of companies that downsiductivity and pro“ts over the subsequent 3- to 5-year period. urther,the stock market over that time. Researchdone in the mid 1990s found that downsiS&P only slightly during the 6 months following news of a restructuring,then lagged badly,netting a negative 24 percent by the end of 3 years.The theory of keeping a company lean and mean,Žthen,may reallybe only mean.ŽOne study found that,on average,a 10 percent reductionin workers resulted in only a 1.5 percent reduction in costs.Why the surprisingly poor results for downsiThurowof MIT writes,Layoffs are painful and costly. There are innu-merable reasons they should be avoided if possible:Severance paymentsmust be made. Higher training costs lie ahead. The skilled members ofthe team whom a “rm has laid off will not be there to be rehired whentimes get better. Morale suffers among the remaining workers,and fewerwill be willing to make personal sacri“ces to help the company while itneeds it most.Žmployee Contrast the in-your-face-capitalism approach with the approach ofenterprises that have made it company policy to avoid ore layoffs:€Southwest Airlines has never laid off any workers,not even afterSeptember 11,2001. C. Parkersaid at that time,Weare willing to suffer some damage,even to our stock price,to pro-tect the jobs of our people.Žmost important asset,as evidenced by its People,Service,Pro“tŽcorporate philosophy. People are deliberately placed “rst because,in the companys view,putting people “rst makes good businesssense. These are not just words:x has an explicit commit-ment not to lay off employees except under the most extreme €Lincoln lectric is a Cleveland manufacturer famous in the man-agement literature,both for its extraordinary business successover more than a century and for its innovative management prac-tices. These practices include guaranteed job security for itsemployees. The former chairman,James . Lincoln,wrote,Thegreatest fear of the workerƒis lack of income. The industrialmanager is very conscious of his companys need of uninterrupt-ed income. He is completely oblivious,evidently,of the fact thatthe worker has the same need.Ž€Nucor,a successful steel company„by far the most pro“table inits industry„has never had a single layoff. Ken Iverson,NucorsO and the creator of its culture,writes,Painsharinghas helped us get through the tough times without ever laying offa single employee or closing a single facility for lack of work,even when the industry overall was shedding thousands of jobs.But,our history of no layoffs is not noble,altruistic,or paternalis-tic. Its not even a company policy. Weve told our employees timeand again,Nothings written in stone. Well lay people off if it isa matter of survival.The question is,when is laying people offthe practical and sensible thing to do? To compete over the longterm,a company needs loyal,motivated employees. Can manage-ment expect employees to be loyal and motivated if we lay themoff at every dip of the economy,while we go on padding our ownpockets?ŽChapter 3Job Security Our point,obviously,is not that companies should never lay off employ-or some,that would be suicidal. or example,Continental Airlines,a company very similar to Southwest in its approach to employees and in its business success,laid off 12,000 workers in the aftermath of The real issue is whether employees see the companys decisions asbalancing its immediate business interests with a consideration of howthose decisions affect employees. Or,is it all just this quarters earningsand stock price,and everything else be damned?ew people would expect employee well-being to be the sole,or eventhe paramount,consideration in business conduct. Certain actions had bet-ter be taken in the short term because,otherwise,there might not be a longterm! However,things are rarely that black and white. Many factors affecta decision,and the problem,from the point of view of employees in somany companies,is that employeesinterests are a distant last in top man-agements calculations (if they count at all).As we have seen in most companies,downsiing the workforce isfre-such as Southwest Airlines. A signi“cant part of its longer-term perspec-tive is a respect for employees as assets that are not lightly disposed of.Another example:Fortune,in its 2002 report on the 100 Best Companiesto Work or,describes the philosophy of dward Jones,a stock brokeragethat is now Number 1 on this list:dward Jones was hit particularly hardby the gloomy stock market,and it responded by cutting back bonuses.But none of its 25,000 employees got the ax. We want to build the kind ofrelationship with workers that makes them willing to go the extra mile,says JonesCO,John Bachmann. You cant do that if you get rid ofthem whenever times are rocky.ŽFortunereport continues,Of course,sometimesƒpay cuts,reduced workloads,hiring freees,and so on arent enough,and compa-nies are forced to take the most drastic step:“ring employees. So whenlayoffs did happen,we gave companies credit [for placement on the 100Best list] for offering generous severance and compassion. Cisco,Number15,for example,garnered goodwill by offering to pay terminated employ-ees who chose to volunteer for a social service agency one-third of theirCisco salary for a full year. Cisco also threw in full bene“ts and a promiseof priority if the company starts hiring anew.ŽThereport also contains a description of how Agilent Technologiesresponded to suddenly plummeting sales and a large workforce surplus.mployee wondering why their employees are indifferent to the goals of the compa-ny. Perhaps this motto should be placed on their mirrors because the prob-lem stems from the executives themselves. or,ultimately workers willnot reward the indifference of managers to their employeesbasic interestswith high levels of enthusiasm and performance. Practices relating to jobsecurity are central to employeesbasic interests.Best Policies and PracticesSo far,we provided glimpses of how companies that are genuinely com-mitted to providing their employees with stable employment treat thoseemployees. This section gives a more systematic review of these practices,organied under the following “ve basic principles to which all these com-1.These companies are dedicated to exhausting all possible alterna-tives before laying off people.2.When layoffs are impossible to avoid,these companies use volun-3.When layoffs are impossible to avoid and voluntary methods arenot feasible,too costly,or do not achieve the required numbers,they handle involuntary layoffs with generosity and care.4.They communicate honestly,fully,and regularly with theiremployees throughout the entire process.5.They are cogniant of the impact of the layoff on the survivorsand take steps to minimiThe speci“c practices are as follows.Principle 1:Exhaust all possible alternatives before laying off people.Thealternatives to layoffs are most usefully thought of as rings ofdefense;Žthat is,defenses against involuntary layoffs. They fall into threecategories:€Providing meaningful work for surplus employees through meas-ures such as the following:€A hiring freee that,because of normal attrition,opens upjobs that surplus employees might “ll,or be trained to “ll.mployee defer some budgeted hires,defer some budgeted activities,heighten awareness of current situation,discuss at staff meet-ings,and monitor overall economic conditions.In the middlestages,the plan calls for,among other things,soliciting ideas tocut costs and improve productivity and ef“ciency; cutting over-time; accelerating new product introductions; voluntary leavesand furloughs; deferring lower-priority capital items; deferringraises; and reducing hours. At Stage IV,the most severe condi-tion,where Re”exite generates losses for a period of two quar-ters or more,the plan calls for salary deferments or reductionsfor balance of exempt employees,trim bene“ts,early retire-ments,voluntary resignation offering,and„“nally„layoffs.Principle 2:When layoffs cannot be avoided,“rst ask for volunteers.After all the options are exhausted,before resorting to involuntary layoffs,these companies seek volunteers to leave the company,through either vol-untary separations or early retirement. This is accomplished by offering“nancial incentives (for example,cash bonuses coupled with an extensionof health insurance coverage and other bene“ts). Invariably,outplacementassistance is provided. Such programs are typically very successful in pro-ducing the number of volunteers the company needs.The major reason the programs succeed is that,for many employees,the offers are simply too good to refuse. They make it “nancially possiblefor people nearing retirement to retire early and for others to begin newcareers that might not otherwise have been feasible. Also,employees whodo not accept the packages leave themselves open to the possibility ofinvoluntary layoffs if the company cannot achieve the suf“cient numbersof volunteers from their efforts.or many companies and employees,therefore,voluntary downsiis,to a large extent,a win-win situation. To the company,the downsides ofthese programs are that,in the short term,theyre more costly and time-consuming than involuntary layoffs. Also,by offering voluntary separa-tion,a company might lose some employees with the most-needed skillsbecause of opportunities that,prior to the offer,the employees could onlydream of. Companies that have successfully downsied often make a spe-cial point of telling these employees how muchthey are valued andencouraging them to stay.Chapter 3Job Security thought in managements decisions?ŽIf so,employees can be enormouslyappreciative of their organiations,even in times of pain (as we saw in thecase of Agilent). Consider Continental Airlines,which laid off about one-“fth of its workforce in the wake of September 11. In its story on theevent,KPRC,a Houston radio station,reported the following:ousands of Houston-based Continental Airlines Inc. employeesfound out Friday tey ere on t personal items.Hugs and tears ere a common sigt at Continentals quarters in does good people,and I felt sorry for more tould probably be tard-at,you kno,you orked for 15 years because teyre like family,Žsaid Troy Curtis,ob.Im being laid off,but Ill be back. Its te best company I everorked for and Ill be back. Teyre going to rebuild and teyregoing to need people back,Žsaid a former employeeContinentals problems,of course,came on suddenly. More typically,theproblems emerge over a period of months. The following should be con-tinually communicated to employees from the time that labor surplus€The companys business environment,both current conditionsand,to the extent discernable,future prospects.€The companys vision and strategy to deal with the business envi-ronment,such as new product development,sales initiatives,andthe restructuring of work processes to make them more ef“cient.€How the company seeks to enlist employeeshelp to deal with thebusiness conditions,such as getting ideas for cost reduction.€How the business environment can affect employees and what thecompany will do to buffer that impact.€What,to the best of the companys knowledge,employees canexpect„in general and as individuals.mployee €A potent symbol of the value that the organicontribution of both the workforce as a whole and of the individ-ual employee.Money as Seen by Employersmployers want money to:€Attract and keep the number and kinds of employees they need.€De“ne the organiations objectives,because what the organition pays for„not necessarily what it says„is what it truly wants.€Motivate employees to perform at the highest possible level in theservice of the organiations objectives.€Avoid labor con”ict.Although executives generally (and incorrectly) assume that employeeswill never be satis“ed with their pay,Žthey are aware that extreme dissat-isfaction„a sense of great inequity„hampers the achievement of theirattraction,retention,motivation,and industrial peace objectives. To avoidthis,companies install pay systems that they hope prevent inordinate dis-content and that can be held up as fair but ones that,at the same time,meetthe organiations desire to obtain services at the lowest overall cost. Whatdoesour research (and the research of others) show about attitudes towardpay,its determinants,and its consequences? Here are the basic “ndings:€The level of compensation,and the system by which it is deter-mined and distributed,are generally equal in their importance toworkers.€People want to earn as much as they can,and it is rare for workersto express that they feel overpaid. In fact,because most employ-ees (about 80 percent) rate their performance as above averageŽin their organiations,it logically follows that people would notfeel overpaid.€However,although it is the rare employee who feels overpaid,only about 23 percent (which is our normŽ) actually express with their pay. Simply put,only 23 percent of ourmployee its most important assetŽseen as nickel-and-diming the workforce whenservice made real with rewards for those who produce high quality andprovide good customer service? Our surveys frequently reveal large gapsbetween words and deeds,with employees often de“ning deedsŽin termsof how an organiTypically,management bases its evaluation of its pay-system effec-tiveness on objectiveŽdata,such as labor cost percentages and trends,salary surveys,and formal job evaluations. Aside from the question of thevalidity of such data,they beg the fundamental question, do ers see tor example,if they see no pay for performance,ere is. To reward and motivate,pay for performancemust beseen orkersto exist. As we now explore pay attitudes andtheir effects in detail,keep in mind the basic proposition that manage-ments views of its policies„pay fairness,its relationship to performance,and so on„are irrelevant (except for managements views of In thinking about pay and formulating recommendations for effectivecompensation policies,it isuseful to distinguish the level of pay from theway it is distributed,especially in relation to performance.he Level of PayWe previously mentioned thatit is virtually impossible for companies toinspire loyalty and commitment in workers who are treated as disposablecommodities. Similarly,it is dif“cult for a company to obtain loyalty andcommitment from its workers when its seen as one of the lower-payingStill,for many workers,job security comes “rst; when a choice has to bemade,workers will usually moderate their pay demands to preserve theirjobs. But,pay is a close second.Contrary to popular belief,employees dont expect wildly generouspay for their labors. In fact,they would likely question the motives orcompetence of management if pay were astonishingly high. Therefore,wemust differentiate between the wish for a lot of money and workersviewsof what is reasonable and fair. They are capable of separating wishes and fantasies from realistic expectations. Most workers express satisfac-tion with pay that they consider to be competitiveŽand greatsatisfactionwith pay they consider to be even a few percentage points above the Chapter 4Compensation Now,what is the impact of pay level on organiation performance,such aspro“tability? One would think that,everything else being equal,the high-er the pay,the greater the cost to a company and therefore the smaller thepro“ts. We already commented on the relationship between pay andenthusiasm,so there is some reason to believe that the relationshipbetween pay and cost would by no means be perfect„the positive effecton employee morale and performance should offset to some extent theimpact of labor costs on pro“ts. But,it goes further than that.In economics,there is a body of theory,termed ef“ciency wage theo-ry,Žthat deals with this issue. On the basis of observations such as the factthat higher pay rates are found in more pro“table industries,the theorystates that compensation above what a “rm has to pay (that is,above thecompetitive market-clearing wageŽ) drives up labor costs,but also pro-duces other bene“ts,such as greater work effort,and thus output and rev-enue for the firm. In his article,Can Wage Increases Pay forThemselves?,ŽDavid I. Levine concludes that business units thatincrease their relative wages for workers of similar human capital [skilllevel,training,etc.] have productivity gains approximately large enoughto pay for themselves.ŽHe found that,in units where wages declined overa three-year period (factoring in in”ation),worker output increased 2 per-cent. Wherewages increased,worker output grew by 12 percentThe research evidence points to four explanations for the relationshipbetween wages and productivity:Worker reciprocity and morale.The giftŽof higher wagesfrom the employer is reciprocated by a giftŽfrom workers ofhigher productivity. This is in line with what we have said aboutmployee performanceover the long term,of course,is not just a matter of productivity,but also the cost savings and pro“ts generated by higher quality,better customer service,and so on.Lower turnover.Higher paying companies lose fewer peopleand,therefore,have lower turnover-related costs,especially forDecrease in shirkinor those employees not inclined towork hard,higher pay means that dismissal is a greater penaltyHigher pay attractsa largerChapter 4Compensation All four factors appear to play a role.Obviously,theres a limit to the relationship between high wages andproductivity. Levine found that the relationship holds less strongly in“rms with large percentages of unionied workers. In those companies,hesuggests,wages have gone beyond what could be made up by increasedproductivity.An important practical lesson of the research on wages is the error ofrates of how much is paid to workers„thats the rate„but also how muchworkers produce. The correct measure of the labor cost to organithe ratio of wages to productivity,what economists callunit labor costs(ULCs). Low wages and low productivity can offset each other in terms oftheir effects on ULCs,potentially making labor expensiveŽwhen wagesare low.ŽIn this connection,it has long been observed that the nationswith the highest wage rates tend to be the most productive. Although low-wage countries still have a competitive advantage,that advantage is cut inhalf,on the average,when comparing ULCs.The analysis also applies to individual companies within a countrywhere there are large differences in productivity. or example,Japaneseautomobile manufacturers in the United States have long had a hugelabor-cost advantage over their American-owned counterparts,despitesimilar wage rates,because they are much more productive. Table 4-1shows the historic difference,which was measured in 1996,between thelabor hours that North American automobile manufacturers require to pro-duce a vehicle. Labor Hours per Vehicle Produced by Manufacturer Automobile ManufacturerAvera Nissan27.36 Toyota29.44 Honda30.96 ord37.92 Chrysler43.04 General Motors46.00mployee measured and rewarded,we often “nd workers cutting corners to producewhat is expected. Workers might run machines at higher speeds thaninstructed,the quality of the output might be sacri“ced,and so on. This isnot only an attempt to reach the expected production levels,it is also partof the game,the tug-of-war between workforce and management. Okay,you want number of pieces,well give it to you and wait until the junkcomes back!ŽManagement has to then introduce additional controls andpenalties to help assure quality and protect the equipment. Its all expen-sive and,as we will show,needless.Is piecework ever appropriate? Yes,if its applied in the right condi-tions and to the right people. The problems and costs of piecework tend tobe least when the tasks are simple,repetitive,and can be done independ-ently,and when management genuinely responds to workersconcernsabout wages and the accuracy of the standards. Complex,non-repetitivejobs generate the most disputes about standards,and the impact of indi-vidual incentives on teamwork is largely irrelevant if teamwork is rarelyconcern for their employeeswell being can make individual pieceworkthe most effective system. A good example of this is Levi Strauss,a pro-gressive management that switched from individual piecework to group-based incentives and suffered a decline in production.Some workers prefer an individual piecework system. Research donein the 1950s by William found that these workers tend to besocially isolated from their co-workers,owners of their own homes,andRepublicans. Making money has a moral dimension for them,providingproof that they work hard. They are the rate busters,disliked,but unin”u-enced,by their fellow workers„and beloved by management.Salespeople are similar to the rate busters in their compensation pref-erences. Differences exist between the two groups in their personalitytraits and abilities„on the average,salespeople have much stronger socialand communications needs and skills„but great similarity on traits suchas independence,assertiveness,con“dence in their ability to achieve highearnings,and high earnings serving as a major source of self-esteem. Thesalesperson personality pro“le “ts the sales job perfectly and is,of course,why those people gravitate to that type of work. It is also why a compen-sation plan that is oriented to individual rewards attracts them (the salesor most of them,it would be frustrating to work inany other environment and,with few exceptions„such as when teamworkis absolutely essential for high performance„that is the incentive planChapter 4Compensation The vertical axis of the grid de“nes the pay range of the job (from mini-mum to maximum). The line graphs represent employees at different lev-els of evaluated performance. The major objectives of the grid are todifferentiate the increases of employees with different levels of perform-ance while containing salary increase costs. These objectives are,in prac-tice,somewhat contradictory. or example,newer employees are typicallyat the low end of the range . Also,thesalary increases of employees at the upper end of the range level off eir performance. Both outcomes help contain costs,butTechnically,the organibut controlling for position in range. Unfortunately,employees dont per-form the mental gymnastics required to allow them to feel that they haveindeed been rewarded for their performance. An employee doesnt say,Its okay that I received a smaller increase this year than last year,eventhough my performance was the same. After all,my pay is now higher inthe range.ŽIt would take a saint to accept that reasoning„and a clairvoy-ant one because,in many companies,employees are told little aboutwhats going on concerning ranges,grids,and so on.The following further compounds the problem:In recent years,organiationssalary increase budgetshave been approximately 4 percent. Thesebudgets are especiallyimportant to control because they are not one-time costs:a salaryincrease becomes part of an employees base salary and is there-fore an expenditure as long as the employee stays with the com-pany. But,managers with a 4 percent budget cannot make a lot ofdifferentiation among employees without angering those who arenot outstanding,but still satisfactory performers.Salary increase budgets change year-to-year depend-ing on how much the organiation believes it can afford to pay.The amount of increase for a given level of performance willtherefore change with the budget,adding to the ambiguity andperceived arbitrariness of the relationship between an employeesWe have said thatif an increase does not exceed therate of in”ation,it is usually not viewed as an increase; if it is lessthan in”ation,it can be felt as a decrease. If,then,in”ation is 4percent and managers with a 4-percent increase budgetare askedmployee to differentiate increases on the basis of performance,some„maybe half„of their employees will feel that their pay has beencut. Most of these employees are likely to be wholly satisfactoryurthermore,companies almost never distinguish foremployees the amount of the increase that is due to the rise in thecost of living,which makes the performance-pay relationshipeven more ambiguous. Market-based increases to meet the competition„again,rarely distinguished from merit increases„We can now understand why it is so dif“cult for many employees to see arelationship between their pay and their performance. It comes down tothis:most managers very much want to pay for performance,but to gettheir day-to-day management jobs done,they tend to be more concerneding employee discontent. The merit pay system,coupledwith their own discomfort at delivering unpleasant news,makes it dif“cultto reward as they truly believe they should. Therefore,managers focus one of the increase for each employee that results in thefewest problems for them. They know,for example,who is likely to com-plain and who is likely to accept their word that,This is really a toughyear for the company,I dont have much money to spread around; Imdoing the best I can.ŽThey try to make sure that all„or almost all„oftheir employees receive as much of an increase as their budgets allow andthen give some more to those who are likely to give them a particularlyhard time. This minimies differentiation among employees,with theexception of the squeaky wheelsŽand,sometimes,those whose perform-Managers also seek ways around the system:foremployees who arelikely to leave the organiation (and whose leaving would be a loss),orwho might raise hell,or who are,indeed,truly outstanding performers,they might seek exceptionsŽ(a larger increase than the grid suggests),orin-grade promotions,or position re-evaluations to move the jobs to higherlevels. It depends on what is possible and what will least frustrate otheremployees and those in a position of power.The result is a half-baked version of pay for performance with whichnot many are satis“ed,but one that normally doesnt have serious repercus-sions:people live with it.ŽOur statistical studies of organiationsmeritpay systems show that tenure,not performance,is by far the highest corre-late of employee pay within a job grade. That is,the net effect of the sys-tem,and the machinations that surround it,is not that much different fromapproaches that base pay exclusively on seniority. Only,it is less clear.Chapter 4Compensation Lets elaborate on these:Variable pay versus merit salary increases.ture we recommend is one in which employees receive base salaryor wages variable pay that is geared to performance. This issimilar to piecework systems where employees receive base payplus an amount per piece; the difference,as we shall see,residesin the way we recommend performance be measured (as a grouprather than on an individual basis). Using a base-plus-variable-pay approach is different from meritpay. A merit pay increase becomes part of the salary„it is,ineffect,an annuity cost for the organiation. Variable compensa-tion,on the other hand,is tied to the organiations ability to pay,such as to its pro“tability or to cost savings that have beenachieved. This is an enormous advantage because it makes payrollcosts much easier to control. It might not seem like a plus foremployees because the extra compensation does not become partof their salaries. But employeesbase pay will increase anyway tocompensate for in”ation,and most people are pleased to knowe recognition and reard portion of tperformance,cost-of-living,and market-based increases areGroup versus individual performance.of the workforce,we recommend that variable pay be based ongroup,rather than individual,performance. We have two reasonsirst,performance of a group is usually easierto measure; its more objective and credible than that of an indi-vidual. At the total company level,for example,contrast the rela-tively objective measurement of company pro“t with the highlysubjective judgments about the contributions of individual seniorexecutives to that pro“t. In a cost center,such as a manufacturingplant,contrast measuring the cost performance of a plant as awhole with measuring the ef“ciency of individual workers. Wesaw how individual production standards can generate a ”ood ofgrievances about their accuracy. If the goal is to distribute “nan-cial rewards among workers according to their individual per-formance,workers must be comparedto each other. How is theduction worker? Not easily.Chapter 4Compensation formance almost always depends not just on individual capabili-ties and effort but also on teamwork. The profoundpower of payshould be used to encourage,not discourage,teamwork. Individu-ally based plans do little,at best,or nothing to stimulate coopera-tion; at worst,it can produce dysfunctional competition andcon”ict. The teamwork that group pay plans encourage has twopositive effects:it boosts performance in and of itself,and it satis-“es workerscamaraderie needs,which adds to their enthusiasmHow about the shirkers,Žthose who prefer not to work hard?Doesnt a group approach give them an out,a way to be rewardedfor not much effort? Research shows exactly the opposite:under agroup pay plan,the responsibility for dealing with workers whowont work is shouldered in part by the work group. Shirkers hurtgroup performance and,therefore,workerspay,and a groupnorm develops that puts pressure on low producers to produce.This is almost invariably more effective than management dealingHow about the truly outstanding performers? Isnt a group pay-ment approach unfair to them? Our experience with employeesworking under these plans reveals few problems in this respect.The reason is that these outstanding performers are contributingsigni“cantly to the well-being of the entire group and receive agreat deal of recognition from their co-workers. This contrastsstarkly with the reactions of workers to rate bustersŽworkingunder piecework. In those cases,high performance is seen asdetrimental to the groups interests. However,later we suggestthat the informal recognition that high performers receive undergroup plans be supplemented with individual formal awards.What are the group compensation plans that are available toorganiations? Countless plans exist,but almost all can begrouped into three major categories:stock ownership,pro“t shar-ing,and gainsharing. Which one(s) to choose? Here are the crite-ria that should govern the selection of a plan. A plan is moreeffective to the extent that:€It steers employee performance to the achievement of impor-tant organimployee €It allows employees to see the impact of their performanceand to see that impact in a timely way.€The optimal achievement of the goals requires teamwork aswell as individual effort.€The performance measures are clear and credible.€The “nancial return to employees is,in their eyes,substantial.€The plan serves to satisfy employeesequity,achievement,€The plan enhances employeesidenti“cation with the organi-Of all the plans,gainsharing meets the above goals to the greatest extentby far. But it,too,has gaps and so for most organithe plans is preferable. The following are descriptions of the plans and thekey research “ndings on their effects.Employee Stock OwnershipThe ownership by employeesof stock takes three basic forms:employeestock ownership plans (SOPs),pension assets invested in employer stock,and stock owned directly in the company through stock option and stockpurchase plans. Combining the three forms of owning stock,it is estimatedthat about one-“fth of American workers hold stock in the company inwhich they work.mployee stock ownership has strong proponents,some almost evan-gelical in their advocacy. Their arguments are based on both “nancial andmotivational considerations. Stock ownership is touted as a good way foremployees to increase their assets through participation in the growth of theAmerican economy. This certainly was a credible theme in the late 1990s,but the recent severe decline of so much of the stock market has made that argument somewhat shaky,at least for the time being. On the motiva-tional side,two claims are made. irst,by creating a capitalist workingclass,Žstock ownership increases the identi“cation of workers with the free-enterprise system. Second,and of particular relevance to this book,is theargument that ownership of an employers stock increases employeesiden-ti“cation with their companies and their motivation to perform.What is the research evidence concerning the impact of stock owner-ship on employee attitudes,behavior,and on company performance?Chapter 4Compensation Overall,the “ndings are modestly positive,the largest impact tending tobe on employeesidenti“cation with the company. A smaller percentageof studies„but still most„show a positive effect on more speci“cemployee attitudes,such as job satisfaction; on employee behavior,suchas absenteeism; and on company performance,such as overall labor pro-ductivity. Regarding labor productivity,the average productivity improve-ment that appears to result from employee stock ownership is on the orderof 2…6 percent. To our knowledge,there has been no instance (at leastnone published) where the effect on performance has been demonstrablynegative. (The studies in which the results were not positive simplyshowed no signi“cant impact one way or the other.)Why is the impact on “rm performance not greater,especially becausestock ownership seems to increase employeesoverall identi“cation withthe company? Part of the answer lies in the indirect relationship betweenhow employees perform on the job and the performance of their compa-nys stock. Numerous market forces affect stock price well beyondemployeescontrol (and even a companys control). ven if these broadmarket forces did not exist,in most corporations there are few individualemployees (or groups of employees) whose performance realistically canbe said to have an impact on stock price. Workers can feel proud of theircompanys stock performance and feel good about the “nancial bene“ts tothem„those are important„but what is almost entirely missing is thedirect impact and acievement. of our criteria for the selection of a variable pay plan is that it should allowemployees to see the impact of their performance. Theorists in the “eldrefer to this as line of sight,Žwhich is the extent to which employees cansee the impact of their work. Of all the variable group pay plans,stockownership is the weakest on this criterion.mployee identi“cation with the company in relation to stock owner-ship needs some elaboration. Although systematic research is lacking onthis,anecdotal and indirect evidence point to the company culture„espe-cially employee participation in decision making„as affecting the impactof stock ownership on performance. Think about it:suppose a companyhas a broad-based stock ownership plan,but has a top-down managementstyle (a do as youre toldŽstyle). The problems of line of sight are thencompounded because employees have no mechanism„other than sheerphysical effort„to in”uence even their own performance,much less the“rms overall performance. or most employees,ownership is both a psy-chological and a “nancial matter. To obtain the full power of ownership,mployee owning shares and owningŽpsychologically the product of ones job(because of involvement in decisions about it) should reinforce,notnegate,each other. The strength of gainsharing,which is discussed later inthis chapter,comes in signi“cant measure from this reinforcement.With regard to “nancial andpsychological ownership,consider thecondition opposite to that we have described; namely,employees havemuch decision-making involvement,but no “nancial return that is a directresult of that involvement. The theory behind many participativeemployee ideas that cut costs„is its own reward. Not quite. In the U.S.,the history of these techniques suggests that,when successful,employeesat some point begin to question why they are not sharing directly in the“nancial gains. This is more than employees seeing an opportunity foradditional income. At least equal in importance is their sense of equity:the desire not to feel manipulated and exploited. Also,the impact ofmoney on an employees sense of achievement is lost when participationAnother important issue regarding stock ownership is,of course,theimpact on employees of a drop in stock value. Things are terri“c when thestock appreciates but a decline can be not only disappointing but canthreaten to severely decimate an employees lifes savings This can hap-pen when the stock price drops simply due to economic or market condi-tions but,as we have seen,sadly,in recent years,can be the result ofunethical or blatantly illegal “nancial manipulations by corporate execu-tives,The risk inherent in stock ownership can therefore militate againstthis vehicle being selected as the primary„not to speak of the sole„means of variable compensation for a workforce. Pro“t SharinAbout one-“fth of U.S. “rms have some form of pro“t sharing,with thepercentage among publicly held “rms being close to two-“fths. The bulkof pro“t sharing is deferred,where the share is put into an employeeretirement account.The plans are cash-only in one-“fth of the cases and,inone-tenth of the cases,employees can choose whether to defer or receivetheir share as cash. There is great variability in the pro“t-sharing formulasthat are used„both in the amount distributed and in the threshold beforedistribution„and,in many “rms,the formula is discretionary and canchange each year.Chapter 4Compensation As with employee stock ownership,pro“t sharing has its strong advo-cates. The argument is that it is not only a way of sharing with employeesthe “nancial fruits of their labors,but a mechanism to increase employeesWhat does the research show about the effects of pro“t sharing onemployee attitudes,behavior,and on “rm performance? Surprisingly,there is little research evidence concerning employee attitudes and behav-ior. About the most that can be said reliably on the basis of the research isthat employees generally like the plans,which should come as no surprise.The exceptions,of course,are the times when there is little or no pro“t toshare,especially after years of signi“cant pro“t sharing when it hasbecome an expectedŽpart of ones earnings or retirement savings.tudes such as identi“cation with the “rm,we would be surprised if theywere much different from stock ownership. Pro“t sharing should promotea feeling that were all in this together,Žespecially if there are not largethose of the rest of the workforce.Quite a bit of work has been done on the effect of pro“t sharing on“rm performance. The “ndings are similar to employee stock ownership(that is,the results range from positive to neutral,with the averageimprovement in labor productivity also in the 2…6 percent range). The pro-portion of studies with positive results is actually somewhat greater than isthe case with stock ownership.Pro“t sharing is similar to employee stock ownership in its relativelyweak line of sightŽbetween employee performance and the end result.The ”aw might be less severe than with stock ownership,because prof-itability is not as affected by uncontrollable events as is stock price. Nev-ertheless,the contribution that most employees and employee groups canmake to overall “rm pro“tability is indistinct,so there is little impact onones personal sense of achievement. Some companies have sought to dealwith this issue by instituting unit„such as divisional„pro“t-sharingplans. But,these units have also tended to be rather large entities,and it isdoubtful that much improvement in line of sight was realismall organiations,such as small business units or independent busi-nesses,the problem should be much less severe.In both stock ownership and pro“t sharing,the lack of timeliness ofthe reward magni“es the line-of-sight problem. It is well established that amployee reward has more impact if it is given close in time to the behavior beingrewarded. (It better reinforces the desired behavior.) This is a major prob-lem in merit increase programs (where the employees performance is typ-ically appraised and the salary increase is given annually) and is also aproblem in stock ownership and pro“t-sharing plans.As with employee stock ownership,some evidence shows that pro“tsharing has a greater impact when its part of a generally compatible cul-ture,such as a high level of employee involvement in decision making.Although its not as well known to the general public as stock ownershipand pro“t sharing,research shows that gainsharing has the largest positiveimpact on employee attitudes and performance. As the name says,it is amethod for sharing gains with employees (the gains that employees them-selves,as a group,achieve for the organiation). Although a number ofgainsharing plans exist,the most common being the Scanlon Plan,theRucker Plan,and Improshare,they share the following characteristics:€They are used in relatively small organiwhen the number of employees is less than 500).€The performance is an operational measure,such as productivityor costs,rather than a “nancial measure such as pro“tability; onlyemployee-controllable performance is used.€The organi€Performance improvement over the base creates a bonus pool,which is the savings that the improvement has generated. Typical-ly,about one-half of the pool is paid to employees,usually as apercentage of their base pay,with all participating employeesreceiving the same percentage. If there has been no gain,there isbasis„the idea being that they should be paid as closely as possi-ble to the performance that is being rewarded.€Almost all gainsharing plans include employeesheavy involvementin developing and implementing ideas for improving performance.Chapter 4Compensation standardŽdeveloped by an engineer is often disputed and is likely to beincreased if exceeded by the worker (through greater effort or a change inwork method). Therefore,doing more (especially by being smarter) isusually the path to a heavier workload,not greater earnings. In gainshar-ing,the standardŽis the past„workers know it can be met because it been met,and rewards are distributed based on improvement over the past.rather than discourages,improvement.It is fallacious to think that gainsharing,despite its obvious advan-tages,can be introduced simply as a formula mechanically relating pro-ductivity improvementto compensation. Its organiational context iscritical:by far,the most successful applications are paralleled by a highlyparticipative and team-enhancing process because the primary way gainsed is by employees working collaboratively and innovatively toimprove performance. We made this same point about ownershipŽin ourdiscussions of employee stock ownership and pro“t sharing,but it is evenmore obvious and important here. Gainsharing ties the bonuses of a groupof employees to their ability to improve performance„the performancethat they control„over the last year. Because gainsharing focuses on aspeci“c group,it would be self-defeating„even ludicrous„if the organi-ation were not to encourage the group members to work together to gen-erate and try out improvement ideas. The very structure of gainsharingcalls for a process that achieves results greater than the sum of the effortsof individual employees. This is not nearly so much the case with employ-ee stock ownership and pro“t sharing where,because of the broad com-pass of the measure(usually an entire company),the emphasis can still beon individualsperformances.Given its proven effectiveness,why is gainsharing not more wide-spread? Among the most important of the conditions that make gainshar-ing dif“cult to implement are the following:€When it is dif“cult to quantitatively measure the output of theorganiation,such as that of a research laboratory.€When performance measures ”uctuate widely because of factorsbeyond the employeescontrol,and the employeesimpact cant€When it is dif“cult to differentiate relatively autonomous,proper-ed entities in an organiChapter 4Compensation should be handled not by differentiating bonuses by individual perform-ance,but by giving special awards to group members who make particu-larly outstanding contributions. Although these awards should have amonetary value,their basic function is to individuals. Chapter 9,eedback,Recognition,and Reward,Ždiscusses such outstanding contri-bution awards. Suf“ce it to sayfor now that they should be truly special„given infrequently,given publicly,and signify appreciation from bothChapter 4Compensation This page intentionally left blank The kind of respect that we have in mind„and that has such profoundimplications for worker morale„does not come from deference to poweror the expectation of reward,but from a sense of the intrinsic worth ofhuman beings. We de“ne the equity need as the desireto be treated justly in relation to the basic conditions of employment.These conditions are expected simply by virtue of being employed andderive from generally accepted ethical and community standards. The twomajor “nancial components of equity are job security and pay. The majorA few write-insŽfrom our surveys vividly illustrate what we meanby respectful and disrespectful treatment of workers.irst,here are some comments from workers who obviously struggleMy boss acts like a prison guardƒand ere tain gang! Te barks orders feels like a treat. And e expects obedience.Ive never felt tis lack of basic uman respect before.e most frustrating aspect of t degree ofrespect our management portrays toard employees ere. Ibelieve tat all employees on my team are responsible adults constantly make decisions based on as no respect for us. Snasty,sarcastic comments on to me and everyone in my team. Serself doesnt ave respect for our so-called corporate values.ƒleaders oƒare mean spirited and tear individu-n instead of building tem up. Senior leaders do not getavior.e same commitment and respect given to customers is not giveno are te building blocks of te company. e total lack of respect and general condescending attitude ofour management and supervisorsattitudes,sconstant reminder of incompetence and te lack of direction inat is preacnot practiced,tere is discrimination and favoritism,so manyundesirable traits our leaders all possess. I callenge topmanagement to do a toroug clean up,or can tey!!he manager] is te most unprofessional managerŽI ave everumiliates many of my peers. He seemsmployee to lack respect for anyone. He is extremely controlling and is could be a great place to treat people so poorly.orkers ere are like peons. If youre not one of tsuits,youre noting,a moron. Its from te getself-respect.ere aled like cildren o cant be trusted.e supervisor sneaks around to make sure e are not playinge computer or making personal p oter. Its amazing e dont room. Tats probably next.Now,here are some write-ins from workers who are more positive on this are tis company.From my senior director and immediate supervisor and all of my reps,I feel everyone respects eac oter,and ard for one anoter.s integrity and supports me ave a lot of respect for er,and valueat my leader treats me individuallyand considers atever callenges I face respect and consideration.ad to make anddeliver dif“cult decisions,but sensitivity andrespect.ell respected and ly regarded as a role model. His openave experienced at ere because of as created.Heƒunderstands peoples needs and pays attention to everyemployee request. He is ell respected for onesty,dedica-tion,and people skills tat reports to ob. He is tChapter 5Respect that sharply differentiate status in a way that is particularly demeaning tothose at lower levels (for example,separate entrances for hourly workers,ing eating facilities,and separate park-The major point of these managerial behaviors and status distinctions is to clearly delineate higher from lower orders of humanity in the work-place. They have no other goal because they have little to do with actualfunction„that is,with getting the job done. In more traditional societies,they are a way of saying (both on and off the job),I was born right andyou werent.ŽIn America,their meaning usually is,Ive achieved andyou havent.ŽThe civil rights,womens rights,and gay rights movements demon-strate the degree to which American society can be traditionalŽ:beingborn with the wrongŽrace,sex,ethnicity,or sexual orientation causespeople to be classi“ed as less thanŽthose in the more favored strata ofAmerican society. These social movements are all about equity,certainlyeconomic equity,but also psychological equity in terms of respectfultreatment. We dont need to repeat the innumerable humiliations that vari-ous disfavored groups have been subjected to. Suf“ce it to say that theyhave not been just petty annoyances and frustrations,but often sources ofrage and powerful drivers for change.In organiations,the consequences of humiliation show up most dra-matically in labor con”ict. The humiliation felt by workers has been sig-the serious industrial disputes we have studied.These disputes have also been about economic issues„we make no claimthat economic demands are less important than,or somehow a displace-ment for,psychological deprivation. But,we have not seen genuine rageby large numbers of workers unless they have also felt seriouslydisagree about money but,despite their angry public rhetoric,can stillrespect each other and work toward a settlement in a business-like way.Thats collective bargaining. But,how does one bargain about assaults onworkersdignity?The incidence of the more severe forms of humiliation„both interper-sonaland structural„has almost certainly lessened over the years in theAmerican workplace. There are numerous reasons for the change,includ-ing the reduction in manufacturing employment as a proportion of the U.S.workforce (by and large,factory workers are treated less respectfully thanmployee of“ce workers),the in”uence of modern management theories beingtaught in U.S. business schools,the demonstrated effectiveness of softerŽation,and the in”uence thatJapanese industry has had on American management practices. The lastreason has been especially profound because Japanese companies havebeen remarkably successful in competition with American businesses,sowhat they have espoused cannot easily be relegated to eggheadŽor soft-headedŽtheory.The Japanese approach to workforce managementemphasiemployee participation in decision-making,teamwork,the minimiof status distinctions within a “rm,and job security. Although few U.S.companies have embraced the Japanese philosophy fully (especially theimportance of job security),its in”uence has nevertheless been signi“cant.Indifferent reatmentMore common than blatant humiliation is simple indifference. Indiffer-ence covers a wide range of management practices. Sometimes,it appearsto overlap with outright disrespect,but is often better termed benign neg-lect. As an example of the former,consider American Airlines,which is acompany with a long history of contentious labor relations. In 1993,P.T. Kilborn wrote in York Timesabout the causes of strikes at e pay or bene“ts or sometimes grinding four-and “ve-city,one-day trips or te interminable,unpaid delaysdants at American Airlines say grate on tlack of respect. Tey treat us like ere disposable,a number,Žoff,a 33-year-old ”igt attendant. Anotdant said,Id rate planes. But Ive got to stand upat I believe. My self-respect is more important tob.Žay. Four years later,en troubles atAmerican Airlines breed again,teme remained te same. Adisgruntled pilot complained,As long as you treat your employ-ees as merely unit costs,like te Styrofoam coffee cups out after every ”igt,morale ill remain at rock bottom.ŽChapter 5Respect The felt indifference of the company to its workers was aggravated overthe years by the in-your-face style of the then-chairman,Robert Crandall.He was seen as being only interested in the bottom line and as beingextraordinarily aggressive in his methods„with competitors,the commu-nity,the industrys regulators,and with the workers and their unions.Crandall was labeled with nicknames such as Darth VaderŽby hisemployees who feared his wrath.In other words,he was an extremelytough and outspoken businessman who did not suffer fools (as he sawthem) gladly or silently. However,employees believed him to be smartand,although insensitive to employees and their needs (as they de“nedthem),dedicated 100 percent to the airline and its success. But,his adver-sarial and extremely brusque style greatly magni“ed otherwise manage-Crandalls style puts him at one end of the indifference continuum.Most managements that are seen as indifferent to workers dont experi-ence the labor con”ict that he suffered. Here are some typical commentsfrom that other environment,the one we term benign neglect:Here,youre pretty muc a number. Tey dont care stay or leave. I stay because te pay is pretty good and I like t. And I tink most companies are pretty muce same.at can I say,its a ob. Management doesnt botey pretty leave you alone. You ardly ever see ttant for me,its a very convenient location.Ive seen better and orse. Tages are OK and tbene“t is good. Medical insurance is very important to mebecause of my sons medical problems. On tand,I dontget muc feeling ere tork is really valued,I almostnever ear from my boss„im from a distance exceptas to appraise me.Employee comments,suggestions,and concerns get ignored.Management lets me knopany does not really care about my ideas.Management does not seem to care about you or your ideas.eir attitude is you are replaceable.mployee I dont feel management cares er-levelmore knoledge and knoan management gives tcredit for. Tey says telling. Ifyou dont ave a college education it doesnt mean you are stupid.eyre businessmen„teyre not mean,but to it,all tey care about is pro“ts.ave a negative feeling about te lack of leader presence. Hedoes not make is presence knon to staff and if in tork area,one. It ment could take a fe moments to extend common courtesies,i.e.,ello,good morning.ork several ours after I start,andnever ever comes over to say ello or even let you knoas arrived. Some days,you never even see er,even t youer.Why do we say that an indifferent management,even one thats relativelybenign,is inherently disrespectful? It is disrespectful in its implicationthat workers are not worthy of managements time and attention; therefore,workers feel insigni“cant. Indifference is a sin of omission„involvingdo„rather than a sin of commission,such as humiliation. Indifferent managers are not cruel or abusive,they are simply unconcerned with workers other than as replaceable economicentities. It is the essence of the previously described transactionalŽworker-management relationship,epitomied by the view that,We paidyou,now were even.ŽWe de“ned respect as the treatment of workers as important andunique. Indifference conveys the message to people that they dont matter,more dif“cult to deal with than being humiliated. Is the worker expectedto shout,Pay attention to me!Ž? In fact,other than in opinion surveys andamong themselves,workers are unlikely to voice their need for attention.The desire for attention might be a profound human need,but in the busi-ness environment,it is not thought of as acceptable to come out and say it.Unless aggravated by the behavior of someone such as RobertCrandall at American Airlines,the workersresponse to indifference isless anger than disappointment and withdrawal. It is usually accompaniedChapter 5Respect by a sort of free-”oating anxiety because workers get little feedback frommanagement on their performance and often assume the worst. Althoughthey might receive annual performance reviews,the reviews are usuallyformalities and not too informative. On a daily basis,they hear about theirperformance mostly when management is unhappy with it:I feel like te back for tat I do over andabove for te client. You alrong andose,but people tend to groare praised. I feel like my ould speak for itself.A situation largely devoid of positive feedback gives rise to a feeling thatmanagement doesnt care whether an employee stays or leaves. In fact,management will probably “re the employee at the “rst sign of a businessdownturn or if he can be replaced with someone less expensive or who isjudged to be a better performer or who is otherwise more favored (such asbeing a friend of a manager). Therefore,job insecurity can be pervasive inan indifferent environment:It seems like e are easily replaced if e make a mistake or te are all tired of earing about outsourcing. At every meeting,reatens us te are going to be replacedbecause outsourcing e company.ey seem to make some of tarderto meet. It really doesnt motivate me into coming to en you feel you are being ere is alays someone to replace you,or at leastey tell you if youre not appy.I see people around me being let go out good reasons,makes me feel like e are not muc to te company and areeasily replaceable. I am not truly valued by te company. Tgiven moment,I could be replaced and no one [in management]ould care.Of course,the reality is that rarely is any one person indispensable. But,thats irrelevant to the point we make. mployee organiation is usually an immature wish. But,a worker wants to believe,that she is not invisible,and this is not a childish wish atall. It is an important need throughout life. When workers have that feel-ing,it pays off in incalculable ways for the organiIndifferent managements are usually exclusively focused on the bot-tom line; for them,its all business,and usually short-term business resultsat that. Because of this,one group of employees does receive much favor-able attention:those who,at any point in time,are clearly the top produc-ers. This small fraction of a workforce„perhaps 10 percent„oftenreceives lavish praise and rewards. But,we dont categoriattention as respectful treatment because what those employees receive isstrictly a function of their performance,and it can quickly evaporate.Although they overlap to some extent,it is important to distinguishbetween respect and recognition for performance. The key difference isthat respect is unconditional; it does not derive from what the employeebut what he „a human being. Recognition,on the other hand,isgiven to workers who have earned it by virtue of their contribution to theorganiation. Both are important,and Chapter 9,eedback,Recognition,and Reward,Žexplores recognition.Is unconditional respect„is unconditional anything„realistic in anorganiation? It sounds more like advice for a sound parent-child relation-ship (the admonition for unconditional love) than one between manage-ment and workers.Whether its “nancial or non-“nancial,the point of basic equity is thateveryone is entitled to it. Not everyone is entitled to the same degree andkind of recognition. The distinction is seen most clearly in the way recog-nition and respect might con”ict with each other. or example,not every-one can be promoted,and not everyone will be a boss. Promotion is animportant form of recognition for most people,and no organidisrespectful? Only when it serves not just to get the right person in theright job,but in addition comes to signify,by the way the promotion ishandled,the essential inferiority of those who didnt get the promotion. Inother words,although it is rarely possible to promote someone withoutdisappointing others,it is possible to do so without demeaning others.Demeaning others does not have to be consciously humiliating; it cansimply be the result of indifference to the needs of those others (for exam-ple,to understand why they were not selected for the promotion,and whatthey might do to increase their chances for future promotions).Chapter 5Respect It is impossible to feel welcome in an organiation whose work environ-ment is unnecessarily dirty,congested,poorly lit,poorly ventilated,orugly. Not taking care of oneself physically„in dress,cleanliness,and soon„is usually a sign of self-disrespect. Not taking care of the environ-ment in which employees work is a sign of disrespect for them. Workersdont expect lush surroundings; they would consider that a waste ofmoney. However,they do expect an environment that,as the saying goes,is “t for a human being.ŽHere are some comments from our surveys:ysical of“ce conditions are cramped and sabby compared to least possible expense onis area is clearly te priority. Te company gener-ays but Deteriorating orking conditions re”ect little te leaders ofe companyŽvalue us. alk past roare for 8 to 10 oursa day. And remember casual Fridays? Te morale-boosting tool didnt cost a red penny? Gone. I guess tats progress.orking conditions are orrible. aredcubes and it is very dif“cult to get daily ork done. No one any room to spread out tere not asked for any input. Everyone no knos exact-at grade you are by ave.e restrooms are orrible. Its an insult to us.e great ttions. You could eat your lunc off te ”oor! Joohe plant man-ager] insists te keep our ork areas orderly and clean ande clean-up cre doesnt slack off. at a difference fromomwhere I used to as dirty,greasy,messy,noair conditioning. Tey treated us like pigs. And because of it,ere alays getting lost.Good physical working conditionsnot only make getting the work doneeasier; it boosts worker morale and productivity because of the respect forworkers that it conveys.mployee Status symbols are decidedly not good for organiations because,atthe most obvious level,they can act to physically limit interaction amongthe organiations members. xecutive ”oors,separate eating facilities,separate entrances,and so on isolate higher from lower echelons andseverely reduce the exchange of information and ideas among employees.Status symbols also inhibit interaction by reinforcing differentiationsin importance and authority. In organiations,the problem with respectfor authorityŽis that there is generally too much,not too little,of it:mostgreater power. The free exchange of information and views is critical forperformance,and organiations should encourage this exchange by mak-ing people less,not more,deferential to power in the way decisions arearrived at. ing overt symbols of power helps great-ly in achieving this because it makes power and position less awesome.Žor the sake of open communication and to demonstrate an egalitarianphilosophy,an increasing number of companies have removed many ofor example,author Shari Caudron writes that ƒthenew Alcoa Inc. corporate headquarters in Pittsburgh was designed so thatworkspaces,all of which share the same dimensions,are nonhierarchical.ŽAs Agus Rusli,architect for the project explains,Cloistered spaces forthe privileged few are replaced by open,”exible arrangements of work-stations.Žbusiness purpose. A business purpose refers to what is needed for effec-tive on-the-job performance. What is the business purpose served by separate dining rooms,parking spaces,rest rooms,and entrances,or dif-ferentiations by colors of badges,uniforms,hard hats,type of coffee serv-ice,and quality of of“ce decoration? Most often,none!While he was on the Board of General Motors,Ross Perot observed,In Pontiac [Michigan],GM executive parking garages are heated,whilethe poor guys who work in the plant freee their tails off walking to workin the snow. It costs $140,000 a year to heat one parking garage. Id shutthat thing down. It has nothing to do with cars.ŽShould executives have private of“ces? That sounds like a hereticalquestion,but a number of organiations have entirely eliminated privateof“ces. Meeting rooms are set aside for the times when privacy is neededfor whoever needs it.mployee Providing job autonomy to workers obviously has profound implica-tions for the respect in which they believe they are held by management.An organiation mandating every step to be taken by trained and experi-enced workers in the performance of a job,and then closely supervisingthem to make sure that the steps are followed exactly,is treating workersas untrustworthy or incompetent.The following comments illustrate this point:My manager is a nitpicker. He doesnt seem to make sound busi-allenge lenge less relevant tink/act strategically. Hedoesnt respect us,isnt a leader,and e isnt respected. Currently,te biggest callenge I am facing is at micromanages to a point ere I feel excessive micromanagement by our leadersip group. It ising to monitor day-to-day activity but yet anot you and over your soulder,auditork,and listen in to pat you are making toadvisors and clients.e most frustrating aspect ere is t degree of respect orsense of competency our management portrays toard employees.I believe tat all employees on my team are responsible adultso constantly make decisions based on client,but tey are not treated tay.e bureaucracy is sti”ing. Upard feedback can get you “red.People arent treated respect. Tey are treated like cildren.The view that people at work cant be trusted to carry out their jobs with-out close supervision is one of the hallmarks of bureaucracy. As we previ-ously said,a primary focus of bureaucracies is rules,especially whatemployees at all levels are not permitted to do or can do only if othersapprove. These rules affect a wide range of positions:from the plant man-ager who,even though he might be leading an organiproduces millions of dollarsworth of goods,cant purchase anything onhis own that costs over $10,000 to the of“ce worker who has to “ll out a15-line form and get it approved to buy postage stamps.mployee The rules,especially for employees at the factory and shop-”oorlevels,extend beyond the performance of the work itself to issues ofbehaviorŽor conduct.ŽWe refer to edicts about dress,tardiness andabsenteeism,length of rest breaks,personal use of company equipment,freedom to leave work stations,conversing with co-workers,and,as onerulebook we saw put it,loa“ng during working hours.ŽViolating theserules is almost invariably accompanied by disciplinary procedures,up toIn the discussion of employee manuals,we saw how in both substanceand tone,the rules as typically written send a message to employees thatthey cannot be trusted. We contrasted that with Nordstroms startlinglysimple and respectful message to its employees„rule #1:use your goodjudgment in all situations. There will be no additional rules.Unlike their reactions to time clocks,most employees resent themyriad,detailed rules organiations write to govern their conduct; theysee these as appropriate for children,not adults:ate being micromanaged (time off,pone breaks,lunced like cildren.ob is demeaning. Having every moment micromanaged,e restroom,being reprimandedfor 2 to 3 minute variances is degrading. Its easy to dread ere. my leader everyday is a callenge. He treats every-ere like grade-scildren and as no respect for e get ere on time and dont leave a minute early.e are on te front line taking care of people,problems,mess-ups,questions,concerns,and e are test paid and treatedorst. e are treated like e are in grade scool,not adults.ave to take a trip to te restroom,everybodys about it and supervisors make a big issue out of it.You are aled. Its very Big Brotere. Tare alays listening to your calls,alays monitoring,alcoming around your desk,dont otob. Treat us like responsible adults!Chapter 5Respect Does an organiation needstandards of conduct? Of course it does. venNordstrom,through its training and daily communications makes its stan-dards clear. But,such organiations are different from others in twoirst,they would never even consider rules such as prohibitingemployees from conversing on the job. What could be more demeaning orenforce this kind of restriction (in supervisory time and employee resent-ment). Second,when rules are needed,they are expressed in a positivetone and mostly as general guidelines or expectations rather than as rigidor example,consider the following paid time offŽ[Company] is a dynamic organiour ability to perform complicated and large projects on a timelybasis. The scheduling of these services is often done by ourclients on the senior management level and affects thousands ofpeople throughout the clientsorganideadlines and delivery goals is of paramount import.This high level of responsiveness requires that we all,in turn,beas ”exible as possible in scheduling time off,whether for vaca-tion,personal days,sick days,family emergencies,or religiousobservance. As fellow employees,we acknowledge that we needto support and contribute to the companys efforts; as individuals,we know that each of our personal needs for time off work will bePlease note that paid time off does not normally carry over intothe next calendar if unused. However,we recognimay be unusual circumstances related to workload or other inter-vening factors and your department head is authoried to makespecial arrangements to carry over some or all of the paid time offdays for a period of time that they will determine,not to exceedone additional year.We recognie that there may be times when emergencies or otherunanticipated occurrences will cause someone to be unavoidablysible if this occurs and,if at all possible,in advance. However,mployee absent or late does not mean that it is appropriate. In fact,absences and lateness are elements that will be taken into consid-eration during performance reviews. Your supervisor is expectedto monitor excessive absences or lateness and take the appropriateThe moral is thatmost employees are responsible and reasonable adultswho understand reasonable rules and dont have to be threatened intocompliance. The few employees who are,indeed,irresponsible need to behandled individually and “rmly.In discussing status symbols,we put forward a basic proposition:if a distinction between employees is simply puffery for those in higherechelons„not being made on the basis of a business need„considerjunking it. The same holds for rules about communications (for example,who is told what when). Knowledge might be power,as the saying goes,but it is also :I know something you dont,so I must be moreimportant.ŽIn business,one of the most counter-productive guidelines is to dis-tribute information on the basis of need to know.ŽIt sounds right„we,too,stress business need as a criterion for designing policies„but as inter-preted in practice,it is usually a way of severely,unnecessarily,anddestructively restricting the ”ow of information in an organispirit of the guideline is rarely inclusiveness:communicate this to who have a need to know,Žbut rather exclusiveness:communicate thisto those who have a need to know.ŽThe constraint is meant to keep con“dential information con“dential.very organiation,of course,has information that needs restricted distri-bution. But,three problems undercut managements intentions. ly believes; second,plenty of information that management thinks is con-“dential is widely communicated anyway through the grapevine or othermeans; “nally,employees “ll in information gaps with surmises and,inthese,they usually assume the worst.tive,and they act to reinforce many employeessense of second-class Chapter 5Respect mployeesfrustration with a lack of communication is one ofcomments. These comments are responses to the question asking whatemployees like least in their organiree biggest concerns:communication,communication,com- policies are implemented,not all associ-ates are informed. Dont e extreme lack of communication bete various of“ces as of“ce.ere is e vest. Its ridiculous,e areI “nd it dif“cult to do my angesat affect me or ay of getting tandle. A lot of misdirected calls,causing frustration for taround. If tas clear,tere tration for te customer and myself.e lack of communication allenge. ere givenŽbasis only and several times,as been too little,too late. ey back information ave? It makes no sense.Lack of communication from management [about our] businesspractices. Overall,tere is a level of confusion,uncertainty,e organization.allenge in my department is keeping up anges duee lack of communication anges are made.Organiations need to hold back very little information from employees.Consider “nancial information. Perhaps the most well-known proponentof sharing such information with all workers is Jack Stack,the CSRC Holdings Corp. (formerly Spring“eld Remanufacturing Company).ed his approach and termed it open-book management.ŽHis view that “nancial information should be open for everyone to know,mployee talk about,and focus on,is a marked changed from the statusŽuse ofDo you want to know what I consider to be the biggest and mostdangerous lie in business? Information is power. This wrong-nies today. It encourages people to hoard information„to use itas a weapon against colleagues rather than as a way to solveThats why SRC embraces open-book management. We are build-ing a company in which everyone tells the truth every day„notbecause everyone is honest,but because everyone has access tothe same information:operating metrics,“nancial data,valuationestimates. The more people understand whats really going intheir company,the more eager they are to help solve its problems.Information isnt power. Its a burden. Share information,and youshare the burdens of leadership as well.Stacks open-book management approach is part of his broader manage-ment philosophy that includes sharing the “nancial gains of improvementwith employees,and the company doing its utmost to preserve employeejob security. His business results,which are largely attributed to this inte-grated philosophy,have been impressive.Both function (what employees need to do their jobs) and psychology(what makes employees feel respected,included,and con“dent in thehonesty of management) dictate that few restrictions be placed on the ”owof information to the workforce. Providing assurance that the company isrun honestly is a particularly important matter for all of a companys keystakeholders who rely on accurate business information for their owndecisions. This has come to be referred to as transparency,Žand as recentevents have shown has become a major issue of our times in corporateThere are only two limitations to our admonition to be fully commu-nicative to employees. irst,obviously,a few items are indeed con“dentialor need to remain con“dential for a speci“c period of time. Second,theinjunction to communicate fully does not mean ”ooding the workforcewith unorganied,un-prioritied,and irrelevant information; that is an-other way of Chapter 5Respect In thinking about business and respect for people,it is easy to overlook thecritical role of basic civility and courtesy. How a boss talks to employeesis enormously important. It might sound trivial and even corny,but com-mon courtesy re”ects an egalitarianism at the most basic human level; it isthe boss saying,My authority and power in no way diminish your worthto me as a human being.ŽThis is illustrated vividly in the way workersreact to an informal visit by the head of their company to their work area,especially if he refers to them by name. They are pleased,even ecstatic;they might talk about it for days and tell family and friends about it.Interestingly,workers might feel that the friendliness is somewhatstaged,that the boss has probably been briefed on their names and perhapssomething about them individually. But,it doesnt seem to bother them;theyll say,Hes a smart businessman,he knows how to win over people.ŽThat is,they admire his understanding that winning over theorkersis important to the effective functioning of a business. To them,that is a sign of respect and how different it is from the way they see man-agers who dont even make the effort to stage it and who,therefore,comeacross as indifferent to,or even contemptuous of,workers. The bosssIts dif“cult to take a cheerful good morningŽseriously when its givenby someone who refuses to spend the money needed to correct bad work-One of Tom Petersand BobWatermans major contributions in theirIn Searc of Excellence,is their emphasis onmanagement by wandering around,Žwhich is best known by its acronymMBWA. They suggest that supervisors should be out of their of“ces 75percent of the time. Doing what? Mostly wanderingŽto provide anopportunity for informal two-way communication with their people. Themajor functions of MBWA are listening,teaching,and facilitatingŽandthrough this method„in contrast to the traditional and formal bureau-cratic channels„managers can learn the most and help their employeesHowever,MBWA can back“re if it is a method for micromanagingemployees. It needs to be aconversationexchange information and learn from each other. It can back“re as well ifit is only a state visit,Žwith retinues,a rigid time schedule,and predeter-mined cannedŽquestions (and,likely,the company photographer torecord the executives visit with the folksŽ). To be successful,the visitmployee would have been unthinkable on that railroad a year earlier. To a person,both company and union of“cials were pleased and a dinner was arrangedto celebrate the projects success. At the beginning of the evening,whileawaiting the arrival of the companys CO,one of the authors was chat-ting with the president of the railroads largest union. The union of“cialcommented on how amaed he was at the success of the undertaking,con-sidering how rancorous relationships had been until then. He was happywith that,but then the company president arrived and the of“cial com-mented to the author:Watch now,youll see how he wont even sayHelloto me. That hurts.ŽThe company president didnt say HelloŽuntil he was reminded bythe consultant to do so. The union of“cial is a tough guy„known over theyears as being particularly belligerent toward management„for whomsmall gestures of common courtesy would seem to be irrelevant. Theyrenot. Underscored once again is the danger of oversimplifying humanneeds,trying to “gure out what thing matters to an individual. Manythings are important to this union of“cial,some are obvious,such asachieving results for his members,and some are not so obvious,such asbeing treated with basic respect by people in positions of authority.mployee This page intentionally left blank It is dif“cult to exaggeratethe importance to most people of being part ofsomething they can be proud of and care about. We clearly see this in theway people identify with a nation,an ethnic or racial or religious group,acity,a school,and even a sports team. Workers start their employment car-ing a lot about the company. When their caring diminishes,it is largelybecause of the characteristics of management and the company,not thoseof the individual. or example,people “nd it dif“cult to be loyal to,or feelpride in,organiations that treat employees as little more than costs to betolerated or reduced,rather than as genuine assets to the business.It is also dif“cult to be loyal to an organibut making money. Obviously,making money is far from trivial; in fact,the “nancial achievements of a company can be an important source ofpride for its employees. But,just as an individual employee derives pridefrom more than his income (from doing high-quality work,for example),so does pride in an organiOur research reveals a strong correlation between pride in the organi-ation and the overall satisfaction of workers with that organi“nd that there are four main sources of pride,all of which re”ect differentfacets of a single attribute„excellencexcellence in the organiations “nancial performance.xcellence in the ef“ciency with which the work of the organixcellence in the characteristics of the organiations products,such as their usefulness,distinctiveness,and quality.xcellence in the organiations moral character.People want to work for an organiation that does well but also does good.Roughly speaking,the “rst two of the factors listed relate to doing well(working for a business that is pro“table and well run),and the latter tworelate to doing good (providing something of real value to its customersand conducting its business ethically). These four aspects of excellenceare,of course,interrelated. It is dif“cult to produce excellent long-term“nancial results without providing value to customers,or to succeed formployee long with unethical business practices. But,as determinants of pride,eachof the four is distinct and important. Thus,the desires of employees thattheir company act ethically and produce high-quality products are impor-tant in and of themselves,not just because ethical behavior and quality aregood for business.You might be surprised by our assertions about the importance tomost people of working for a goodŽorganiation. Our evidence comesfrom both the statistical analysis of our survey data and from our qualita-tive material (the write-in questions and the focus groups,where bothdoing well and doing good receive signi“cant mention). Indeed,employ-ees want their companies to do of good. Here are a fewtypical write-in comments from employees in a number of companies.irst,positive comments (these are responses to the question,What doyou like best about working here?Ž):e best. TThave the money to be te best,and tey spend it. Keep up tep up tjoyworking for [company] and want to continue working for thecompany long term. Great product,great strategy,great leadersip,great concern foremployees,great care for customers,great onesty. Senior man-agement is terri“c. e are very lucky.It is a pleasure an executive leadersordsgets it done for customersareolders. Tanks. It is great to part of teat to part of tI am insanely proud of my oud of my job] for [company] andinsanely proud to be ere. It is universally recognized as a great very standards and integrity. Most important-ly,I gro and learn every day,do and feel Im contributing to a common goodIn fact,I stillfeel,after several years ere,tilege of orking for [company]. I couldnt afford tat,really,butyou get tIts te game,like being on te roster of an organiza-tion like t York Yankees.Chapter 6Organi Now,some negativecomments (these are responses to the question,What do you like least about working here?Ž):As a company,e are not leadersŽin any areas anymore. longer strive for innovation or excellence. at every-one else is doingŽyet to be best in class.ŽYoucant ay. To leads must break te sure are becoming mediocre.e seem to be going out of business a knee-erk approac toeveryting. e talk gro but tats all it is,talk and no groe are ting out everytats not tied doorkers. e great company tere?Top performance is desired and is needed,but top managementas done almost everyting possible to make it a non-performer.e top for approvals. Having tpresident determine te transfers er levels of a tecnical function is incredibly inef“cient and it takes forever to get adecision made. ere is te leadersey put up Quality posters all over talls but te foremanust get te door. Nobody believes any-e company says; its all baloney. Tey lie to customers.ey as ever been. Its getting embarrassing to tellere I come as a surprise to most readers,and most agree that employees dontwant to work for clearly unethical management. But,regard-regarding product quality? You bet!Again,read the positive comments to sense the worker pride that comesfrom corporate excellence and ethics. Keep in mind that,here,we discussthe determinants of employee ,not contentmentŽand certain-ly not just the absence of anger. It is dif“cult to be enthusiastic about acompany whose “nancial performance is mediocre,but of comparableimportance are the questions:how is the business being conducted and towhat ends? Without good answers to these questions,ones job and organ-ation tend to become mere means to the achievement of other goals,mployee especially “nancial. They have no value in themselves and wont arouse orsustain enthusiasm except in those few people who are motivated by noth-ing but “nancial gain.If you doubt what we say about workers,ask what,in addition to yourwant from your employment. or example,whatdoes it mean to say,I have done a good days workŽ? Is it not a feelingthat you did quality work that day,that your work showed skill,that yourwork was having a signi“cant,positive impact on the organiurthermore,except for gangsters and other sociopaths,peopleusually dont feel good about a days work that requires lying,cheating,And,people dont want to work for that act that way.People dont want to produce products of mediocre quality. In early sur-vey work for U.S. automobile companies,in the late 1970s,workers com-factories. In that period,the workers and their union were often blamed forshoddy U.S. products. However,most orkersthey said they were being forced to produce.usiasm about ones company requires a company purpose,especially in relation to its customers,and principles.express tendeavored to live up toHere is it sums up:remember te try never to forgete people. It is not for te pro“ts. Te pro“ts,and if ave remembered tat,tey ave never failed toappear. Tave remembered tat,te larger tey „George Merck II,O,Merck and CompanyWhy isnt it enough for an organithat werent dif“cult enough to achieve)? After all,pride in ones organi-performance and excellence of process. Aside from purely moral consid-erations,is there truly that much more to be gained as a businesspursuing a higher good? Moreover,can most companies “nd a higherChapter 6Organi ing you can be proud of. Tere is a symmetry of logic ine provide real satisfaction to real customersbe pro“table.That view is contrasted by Collins and Porras with HPs comparison com-pany,Texas Instruments:e revieed over 40 at TI exists for reasonsbeyond making moneyTI appeared to de“ne itself almost exclu-sively in terms of size,gro,and pro“tability. For TI,biggeras better,periodeven if te products ere lonical contribution. For HP,bigger e context of making a contribution.Such contrasts in vision are found in pair after pair. The authors speak ofthe core ideologyŽof a company,and they are at pains to stress that thereis no rightŽideology„the key is that it consist of a vision that is morethan pro“tsŽand that it inspire and guide the companys employees. the authors,Citicorps value,autonomy and entrepreneurship,Žis asexpressive of a core ideology as Johnson & Johnsons,the companyexists to alleviate pain and disease.ŽNevertheless,as we review each of the visionary companiesideolo-gies,a strong moral component is found in almost all of them. Here aresome examples of moral components in the corporate ideologies ofCollins and Porrasvisionaries:Absolute integrity.Improving the quality of life through tech-nology and innovation.Hewlett-Packard.Technical contribution to the “elds in whichwe participate (we exist as a corporation to make a contribu-tionŽ); respect and opportunity for HP people,including theopportunity to share in the success of the enterprise; contributionand responsibility to the community; pro“t and growth as a meansof achieving all the other values and objectives.Give full considerationto the individual employee; spenda lot of time making customers happy; go the last mile to makethings right; seek superiority in all we undertake.Chapter 6Organi Johnson & Johnson.The companyexists to alleviate pain anddisease; we have a hierarchy of responsibilities:customers “rst,employees second,society at large third,and shareholders fourth.Motorola.The company exists to honorably serve the commu-nity by providing products and services of superior quality at afair price; continual improvement in all that the company does,inideas,in quality,in customer satisfaction; treat each employeewith dignity and as an individual; honesty,integrity,and ethics inall aspects of business.Nordstrom.xcellencein reputation,being part of somethingSony.To experience the sheer joy that comes from the advance-ment,application,and innovation of technology that bene“ts the general public; to elevate the Japanese culture and nationalstatus; respecting and encouraging each individuals ability andcreativity.Walt Disney.No cynicismallowed; fanatical attention to con-sistency and detail; to bring happiness to millions; to celebrate,nurture,and promulgate wholesome American values.ŽCollinsand Porrasdata clearly support the proposition that,on the whole,a strong moral component in corporate behavior is certainly not inconsis-tent with long-term business success and,in fact,appears to signi“cantlycontribute to it. Other studies supporting the positive relationship betweenenship and business success abound,and we cite a few here.In 1996,Waddockand Gravesfound positive correlations between thereturn on sales,and return on equity. Social performance was de“ned bythem as the way corporations treat not just shareholders,but other keystakeholders as well (such as customers,employees,and theA recent longitudinal Harvard University study found thatstakeholder-balancedŽcompanies showed four times the growth rate andeight times the employment growth of companies that focus only onBesides the enthusiasm and pride that employees feel for an organition with purpose,Žthe research suggests a number of other reasons forthe positive relationship between doing good and long-term corporate per-formance. One reason is the impact of broad corporate reputation,and themployee that promote and sustain long-term pro“tability. A company should wantcustomers who are willing to go the extra mile to purchase its services,employees who give their all for the organiation,suppliers who feelthemselves as genuine partnersŽwith the organito deliver their best work to the company and in a timely manner,and acommunity that vigorously supports the companys legitimate businessinterests. The importance of these relationships might not be obvious inthe short run,and they wont appear to be needed in ”ush times,but theyare critical to sustain good performance over the long haul and especiallywhen business conditions turn tough. A major mistake that companiesmake is to take their key constituencies„their stakeholders„for granted.More About PurposeWe have described doing good as consisting of purpose and principles.relates primarily to how an organiation serves its customers,to its moral character„its behavior against legal and ethicalNow,the fact is that most organiservice about which their employees can be proud,at least potentially. Wesay potentiallyŽbecause workers might feel embarrassed by the qualitywith which a product or service is provided. Not just astronauts,emer-gency-room personnel,or special-forces soldiers feel pride in the type ofwork they do. We survey all kinds of organifrom cleaning services to research laboratories,sanitation workers toinvestment bankers„and an overwhelming majority of employees feelthat they provide a valuable service.A sanitation worker in a focus group tells us,Theres no job in thecity more important.ŽA packer of cookies says,Im doing something thatmakes people happy.ŽA cleaning lady asks,Do you know what this placewould be like without us?ŽWe must put ourselves into other peoples shoes when we think aboutthe meaning,dignity,and purpose of work. The fact that some peoplemight not feel particularly proud of packing cookies is irrelevant. We wantto know what e cookie packerfeels and,for her,this is not demeaningwork. Is collecting garbage demeaning? All of us might do well to con-sider whether our own jobs are indeed more important.scores are as high as they are:the norm is 74 percent,with the least favor-able company still being 48 percent. Despite this restricted range,ourmployee research shows that enormous gains in morale and performance can bereaped when management behaves in a way that moves the scores towardMore About PrinciplesSome companies view business ethics only in terms of compliance withthe law and contributions to charity. This chapter focuses on the impactthat business ethics has on the morale of employees,and our researchindicates that,in this respect,the de“nition of ethics needs to includemployees are interested in the quality of the relationshipsthe company enjoys with all its key constituencies,and genuine pridecomes from more than simply obeying the law. It comes from goingbeyond that,and treating the companys constituencies with a genuineconcern for their needs by having tomers,employees,suppliers,investors,and the community.Our discussion of purpose centered on customers and,therefore,over-laps with this discussion of principles. Customers are key stakeholders,and providing them with high-quality and useful products and services isnot only the organiations purpose,but also an ethical consideration.mployees certainly see it that way. At a minimum,they expect their com-pany not to cheat or deceive customers,whether or not some action istechnically illegal. Ideally,they want the products and services customersbuy to be exceptional. Questions relating to quality and customers showamong the highest correlations with employee morale.When asked what they like most about their jobs,many people talkere is a great sense of satisfaction elp someone,customer or peer,o is really in need. Tat person te boxŽand at makesmy day.I love customers,knoat I impact peoplesem,I er.at I like best about tord to customers,and believes in doing ting. e never stop trying to out-do ourselves in regards to te provide to customers. It is little e do a great ob of retaining our customers.Chapter 6Organi When he took over at Alcoa,ONeill announced that he wanted amarked improvement in the companys safety record as a chief objective:e “rst day torks for Alcoa sould everabout really caring about eac ote “rst response predictable. Te senior people came to explain to me tere already in tird of all companies in tour safety performance as measured by tday cases. At torkday averageƒ 100 employees per year. Te 1987 number at Alcoa as 1.87,soey ere very proud of tey didnt say it to my face,but tay conversation as,e next toug econom-is. He doesnt kno anyt can ere telling us ere going to do about safety?ŽAnd so I set out to make it reality by traveling around to Alcoamanufacturing sites. Te “rst place I Tennessee and after lunc 45 people tagement and top union representativesork for Alcoa. I told tem its not a pri-ority,but its a pre-condition. Important tings are not priorities,eyre pre-conditions. So I said to te management From tard,ill not budget timprove safety conditions. If you needs to be done,you save an excuse list tell put it into next years budgetat no one gets urt.ŽAnd torkers,If te management doesnt follo up eres my one number.ŽA lot of tmanagement as really orkersone number,but I did. Its interesting tey could demonstrate tere being violated,I tookrom a speech at the University of Minnesotas Carlson School ofManagement,June 2002.Chapter 6Organi 1.The most important reason is that,despite the resources devoted totheir composition,the avowals by senior management that this isreally serious,Žand their widespread and repeated communicationto everyone in the workforce,the statements are in truth felt bysenior management as largely peripheral to the business. It is as ifthe executives attended church at the retreat,but its back to busi-ness on Monday.2.The statementsphrasing can be so general that they seem meaning-less or so concrete and detailed that they become un-inspirational.3.Other than telling everyone about the statement,the companylacks an effective method to translate it into a daily reality thatendures over time.What is decidedly not an issue is semantics. The meetings in which thesemeanings of terms such as vision,Žmission,Žand purpose,Žand whetherall or just some of these should be incorporated into the companys state-ment. Who cares? Any one of a variety of combinations of these categoriescan be used to good effect. Our preference is to limit the statement to twocategories:purpose (what the organiples (the values that guide it). Probably the most time-consuming andunnecessary semantic debate concerns the difference between visionŽandmission.ŽDespite having sat through innumerable lectures and discus-sions on the topic,we still dont understand the difference.Lets look in detail at each of the real reasons missionŽ(or whatever)statements often have little effect.or doing goodŽto be more than just subject matter for a retreat,twothings are required on the part of top management,one emotional and theother a matter of business judgment.At the emotional level,the requirement is a top management (especial-pro“ts. These kinds of executives simply would not want to be associatedwith an enterprise that produced shoddy products or treated its employeesand other constituencies badly (whatever the short-term business bene“ts).The “rst issue,then,comes down to the personal makeup of executives,what makes them,at their gut level,feel good or bad about the way theirorganiation functions. They can be highly moral people and do all kindsChapter 6Organi of good outside of work,but unless an important source of personal pridedoing goodŽ(not just well),it is best to forgetthe purpose and principles exercise. It will be just that„an exercise.The second aspect,business judgment,concerns the relationshipbetween doing good and doing well in the long term. Personal values,pas-sion,and pride are strongly reinforced if executives also believe that,overtime,the impact of pursuing a higher purpose will signi“cantly bene“t thebusiness. The ethical criteria that de“ne a business purpose are rarelyblack and white; this allows for considerable ”exibility before executivesconstituency. Immediate business pressures,such as the desire to cutcosts,therefore often override the doing-good considerations. A companythat prides itself on customer service,for example,might respond to costpressures by reducing expenditures in that area,or at least,no longer striv-ing to improve service because doing so would cost money.However,suppose that doing good is believed to be a businessative,albeit long-term,not just a moral imperative or a matter of pride.Then,the argument on cutting corners with customer service becomes abusiness discussion,and the response to the question,Can we afford tomaintain this high a level of customer service?Žmight well be,Can weafford to?ŽThis doesnt necessarily make the decision easier,but itcertainly evenly balances the sides of the argument. Most frequently andbene“cially,what it does is cause management to seek ways to meet objectives to the extent possible:reducing costs in a way that minimidamage to customer satisfaction with service. In fact,the total qualitymanagement movement offers many examples where the reduction ofcosts (such as by eliminating bureaucratic obstacles in responding to cus-customer satisfaction.How about orkersviews about integrating doing good with busi-ness objectives? Although workers feel positive about an organidoes good,they understand that they are not working for a charity. SamuelGompers,the “rst president of the American ederation of Labor,knewthat. The worst crime against working people,Žhe declared in 1923,is acompany which fails to operate at a pro“t.ŽThe second-worst crime,Gompers would no doubt add,is a companythat operates at a pro“t through exploiting its workforce,or,we wouldadd,through exploiting any of its key constituencies. Workers are espe-cially appreciative of a management that sees doing well and good as notonly compatible,but mutually reinforcing:doing good contributes to acompanys long-term business success,and business success enables acompany to do good things.mployee This statement is particularly impressive. After all,it was composed in asmall organiation devoid of the high-powered executive attention andprofessional wordsmithingŽsuch statements normally receive. It alsowas composed in the kind of department often known for its “xation onbureaucratic rules and procedures. It is a statement truly from the heart,with the focus in the right place:on caring for people,rather than havingor the statement of principles (the values that guide the organiin the achievement of its purpose),the same three general guidelinesdescribed for the statement of purpose should be followed to the extentpossible. A statement of principles will,of necessity,be more detailedthan one of purpose,but brevity should still be a goal. Although certainethical principles are indeed applicable to any organiever irrelevant?),the wording should re”ect,as well as it can,the issuesand conditions of the particular business for which the principles are beingIn many companies,the statement of principles goes well beyondwhat might normally be considered ethicsŽand depicts the major fea-tures of the companys desired internal culture. Thus,besides integrity,companies might stress the need for an internal environment that is open,empowering,collaborative,diverse,creative,and so on. These areperfectly appropriate and useful in the context of principles. In fact,theseelements of internal culture often derive,in part,from ethical considera-tions„empowerment as an outgrowth of treating people with respect,andopenness from the need for honesty and transparency.Here are a few more particularly good examples of statements of prin-LandsEnde do everyte can to make our products better. e improvematerial,and add back features and construction details ters ave taken out over te years. e never reduce tproduct to make it ceaper.e price our products fairly and onestly. e common retailing practice of in”at-ing mark-ups to set up a future pony sale.Že accept any return for any reason,at any time. Our productsare guaranteed. No “ne print. No arguments. e mean exactlye say:GUAmployee of. ip items in stock te receive te order. At tseason,te longest time an order ours,excepting monograms,ours.e believe tere understands tpeople are trained to kno our products,and to be friendly andey are urged to take all te time necessary to take caree even pay for your call,for atever reason you call.e are able to sell at loe dont buy branded mercprotected mark-ups; and because ave placed our contracts manufacturers ave proven tey are cost consciousand ef“cient.e are able to sell at loe operate ef“ciently.Our people are ard-orking,intelligent,and sare in te company.e are able to sell at lo overead. Ourmain location is in tmiddle of a 40-acre corn“eld in rural MerckOur business is preserving and improving uman life. All of ouractions must be measured by our success in acieving te value above all our ability to serve everyone from te appropriate use of our products and services,terebyproviding lasting consumer satisfaction.e are committed to test standards of etics and integrity.e are responsible to our customers,to Merck employees andeir families,to te environments abit,and to tide. In discarging our responsibilities,not take professional or etortcuts. Our interactions all segments of society must re”ect t standards e profess.e are dedicated to test level of scienti“c excellence andcommit our researc to improving ande quality of life. consumers and customers; e devote our resources to meetingChapter 6Organi e expect pro“ts,but only from umanity. Our ability to meet our responsibilitiesat invites invest-ment in leading-edge researc and tat makes possible effectivedelivery of researc results.e recognize te ability to excel„to most competitively meetsocietys and customersneeds„depends on te integrity,knoedge,imagination,skill,diversity and teamly. To tcreate an environment of mutual respect,encouragement,andork„an environment tat reards commitment and per-formance and is responsive to tchosen to show that there are no rigid formulas for such things. They areall effective,yet differ from each other in signi“cant respects. Dont beconfused by the fact that these statements of principles often appear tooverlap in content with statements of purpose. Mercks “rst principle,Our business is preserving and improving human lifeƒŽcertainlysounds like a purpose. Indeed,sometimes purpose and value statementssons famous credo:e believe our “rst responsibility is to te doctors,nurses andpatients,to moters and faters and all oters o use our prod-eir needs everyt quality. e must constantly strive to reduce our costsin order to maintain reasonable prices. Customersorders mustbe serviced promptly and accurately. Our suppliers and distribu-tors must ave an opportunity to make a fair pro“t.e are responsible to our employees,t us trougorld. Everyone must be considerede must respect teir dignity and recognize tey must Compensation must be fair and adequate,and clean,orderly and safe. eir family responsibilities. Employees must feelfree to make suggestions and complaints. Tere must be equalmployee the formulation of the statement,this is but a small fraction of what will berequired for it to be effectively implemented. There is no great mystery about what is required to make noble-sounding words into a day-to-day reality:€Strong and visible top-management support,especially the COs€Clear,enforceable,and enforced policy.€Internal processes that enable the policy to be carried out.ull communication to the workforce of the policy and its €Training of the workforce in implementing the policy on theirown jobs.€Tools that the workforce needs to carry out the policy (including€The workforces participation in developing the methods used tocarry out the policy.€Measurement of the results.€A reward system geared to the results.Two of those requirements„top-management support and workforce participation„deserve some elaboration. Much has been written abouthow important it is to get the workforce involved in de“ning organipurpose and principles. Our view is that,in certain key respects,this can-not be a participative process because its essence„especially of an orga-ations purpose„must come from tThe exact wording andelaboration of the statements,and certainly their methods of implementa-tion,will pro“t greatly from the involvement of others,but it is a littleO to expect others to give her a purpose for the organi-ation. As we argued earlier,the CO must be the type of person who,ata gut level,takes pride in achievements in addition to those re”ected in“nancial statements and believes that such achievements are important forlong-term business performance. The Cthat the organi-ation behave in conformity with these values; there can be no room fordebate about this. The only question is they will be achieved,includ-ing how their meaning can be best captured in words; for this,broad work-force participation is extremely bene“cial.mployee We can provide many examples of effective implementation of pur-poses and principles. Throughout this book,we deal with such implemen-tation in the employee realm. As the primary example in this chapter,letsrelate to the customer constituency.The great majority of purposesand principles statements by Ameri-cas corporations contain commitments to excellence in the products andservices provided to customers. However,in many companies,surveys ofboth customers and employees reveal large gaps between what companiessay they aim to do,what employees say they actually do,and what cus-tomers say they experience.The companies where those gaps are smallest„in fact,where cus-tomers often say that they receive more than they expect„are predomi-nantly those in which total quality management(TQM),or some versionof it such as Six Sigma,Žhas been effectively introduced. TQM originat-lar in the West since the early 1980s. Although TQM was originally seenby many as another management fad,in our view,it has been an extraordi-narily successful initiative for those companies that have taken it serious-ly. It is responsible in significant measure,for example,for thetransformation of muchautomobile manufacturing in this country and thatindustrys ability to compete on quality with Japanese imports. TQM is an outstanding exampleen taken seriouslypose can be successfully translated into action.Many de“nitions of TQM exist,but we de“ne it as a culture and meth-ods that aim to provide customers with products and services that fullysatisfy their needs. TQM requires continual improvement in the quality ofall aspects of the companys processes so that things are done right the“rst time,and defects and waste are eradicated from operations. Includedis a focus not just on thingsŽ„processes,products„but on people aswell,such as the need to obtain workforce involvement in ideas for quali-ty improvement and getting people to work collaboratively within andTQM is not a one-time event,Žas are so many management fads. Itencompasses a detailed methodology that takes considerable effort,time,and culture change to carry out well. The systematic use of TQM has beenal governments Malcolm Baldrige National Quality Award. Created in1987 by congressional mandate,this program seeks to create an aware-ness of quality as an important part of organiChapter 6Organi excellence,encourage the sharing of performance excellence strategies,e those organiations with particularly effective practices.ŽThe Baldrige awards are given to organiations on the basis of evaluationsby trained examiners on a series of criteria that include both external andinternal quality performance. The criteria provide a well-reasoned,well-accepted roadmap for companies that seek to signi“cantly improve theirperformance,whether or not they apply for the award.Many organiations have qualityŽprograms of one kind or another,but relatively few take them seriously enough to be strong candidates forthe award,even if they were to apply. Sadly,professionals in the “eld esti-mate that only about 20 to 30 percent of TQM efforts have been imple-mented in a truly effective way in American companies,with signi“cantor the majority,it is a fad or an isolated andstaged event in one part of the business for public relations purposes.What does taking a program such as TQM seriouslyŽmean? arlier,we listed the actions that we see as necessary for turning noble objectivesxpress was a Baldrige award winner in 1990 and,Baldrige or not,is a company with an outstanding and widespread reputa-tion for the excellence of its service to customers.xs quality policy calls for 100 percent customer satisfaction100 percent of the time.ŽThat charge comes directly from the companysrederick Smith. How has this clear-as-a-bell policybeen followed?Here are some of the ways:€Two customer guarantees:if in delivering a package,the customer does not have to pay for it.x cant do it with-in 30 minutes,the customer doesnt have to pay for it.€Many millions of dollars invested in the companys tracking sys-tem (customers want the security that comes from knowing wecan track their packages every step of the wayŽ).€An executive quality board oversees the quality process; qualityadministrators and employee facilitators are assigned throughout€A Service Quality Index(SQI) measures service failures categories,such as delivery late on the right day,delivery on thewrong day,missed pick up,damaged package,and calls to themployee company abandoned by customers. (The focus is on failuresbecause the company says that 99 percent is not good enough; 99x translates into millions of failures.)€Twelve root-cause teams,one for each SQI category,seek reasonsfor failures in each category and act to assure they do not recur.ach team is led by a senior executive.€Cross-functional teams in every geographic market that meet reg-ularly to “gure out what needs to happen in their market to getthose airplanes and trucks out on time every night. €Quality-action teams work on speci“c projects.€Regular surveys of customers (2,400 calls per quarter) to deter-mine their needs,satisfactions,and dissatisfactions.€Regular surveys of employees with disciplined follow-up on theissues uncovered. (To achieve the greatest level of customer satisfaction you need to keep your employees happy. Customerscan sense if employees do not have tremendous pride in theircompanyƒ.Ž)mpowerment of employees to do whatever it takes to satisfy cus-x employees,Daily,theygo above and beyond to serve our customers. They are the oneswho trek through all kinds of weather; deliver every package,each one critical; they persist in solving every customers prob-lem; they ferret out the root cause of every problem to prevent itfrom ever happening again. Their talent,ingenuity,and commit-ment drive our quality standards closer to our goal of 100 percentcustomer satisfaction.Ž)€Intensive six-week training for couriers and service representa-tives in customer interaction.mployee satisfaction,service quality,and pro“tability goals.€Bonuses are tied to the achievement of the goals.xs devotion to quality is a superb example of what we mean by turn-ing an organiations purpose into a day-to-day reality.Does serious attention to quality pay off in “nancial performance?Innumerable studies demonstrate unequivocally that it does. One suchstudy involves the BaldrigeIndex,Žwhich is a “ctitious stock fund madeChapter 6Organi Our operations are needlessl y comple x result in too many ur eaucr e need approvals for ust about every-e number of sign-offs is ridiculous.allenged by teams and individuals t esist hang e ave silo mentalities. Cost contr g or tec hnolo g y spending is not w ell contr olled or under stood restricts my businessability to effectively understand costs andreengineer. actices people o are aid of c hang e o are an obstacle for te company.eres also k of comm unica tion about processes and poli-e company, results in redone ork and failure.e dont talk muc to eac oter across department lines and soeres a lot of duplica tion of ef f and continual r ein h h .ŽIt is extraordinarily time c hasing n umber e are not looking ate product; ust make sure it moves fast. It can be dirty andugly but lets make sure it moves. everybody as a different interpretation of.ork processes so employees can get t y dela ys We need to slo do all t hang e make,as anagency. ave to endureanges bot systematically and programmatically,itas been entirely too muc to absorb. Te staff believes qualitymust come “rst but tey also cannot afford tospend s sear c h - ing f w er to a question e largest obstacle ere istoo m uc w and creates a tremendous amount of stress due toƒlack of bal-ork and family life. k of cooper a ote organization. Everyone customer, means teir cooperation in serving your customer,your customer is not tare a lo priority.mployee The r ed ta pe is an obstacle I face in getting my ob done. y politics ere unica tion from our managementstaff as to te direction,roles,and responsibilities tave. r h instead ofƒplanning.elac k of tr aining to extend my areas of expertise is one obsta-cle I face in getting my ob done.ere are constant or g tional r estr ing angesƒIm noteven sure v e maintenance ere. e por ere required toey ere for! Tey fall into a big pit neverto be seen again.However,when things go well,when workers genuinely feel accomplish-ment,their spirits are buoyed. Again,we highlight the key sense of theemployeescomments:uge advantage temployees like me are empo w ed to mak e decisions ere isvery little to no red tape,unnecessary delays,no asted time,noasteful proects,and no unnecessary reporting. Management,keep up te group I is led by a manager a unique leader-ip style. S ws indi vidualsƒto full y utiliz e their cr ea b usiness kno w , and talents ,in ateam vir allenges of our business. eac proect,tere isays a great sense of pride and accomplis not the one in the spotlight e applause.My immediate leaders bot allo me to perform my daily level. Tey dence and tr ust in th decisions I mak e . This trust and their being a v forself-con“dence and performance levels to be above expectations.em for listening to and resolving our concernsen presented.Chapter 7Job I ave the fr eedom to g bo v e and be y ond f he customer em “rst. T e offered by orking from a vir tual of “ like to create my oedule in order to accomplis pendentl enever I need my teams assistance,t e al w a t th e main strengt to k eir customer s on a one-to-one basis. Tis makese customer feel more con“dent in tey cbusiness and makes my enoyable.You kno w w ha t y ou ha v e to do and (you have) the tools to accom - e task team encouraged. da te equipment .The empo w levels ave risen in my department,and forat,I say ting is more encouraging table to say to a customer,I can do t for you,Žor,I can get it done by tomorro no problem,Žand mean it. eall y pr oduce d ynamic cutting- edg e solutions . I love orking for an organizationƒtes many great results and as great care and compassion for people.The survey data discussedin Chapter 1,What Workers Want„The BigPicture,Žwhich portrayed how workers feel about their ability to get theirjobs done,showed variability in two ways. irst,organiations differgreatly from each other. or example,although on average,57 percent ofemployees rate their organiations favorably on the overall effectivenesswith which they are managed,the range is enormous:24 to 92 percent.Obviously,some organiations are seen as highly effective and in others,from the employeesperspectives,it is a wonder that anything ever getsdone! Workers dislike the latter intensely because they have little or nosense of accomplishment„indeed,working there embarrasses them„andbecause an ineffectively managed organilong-term job security or advancement prospects. A high degree of per-ceived effectiveness is a condition for worker enthusiasm.mployee Besides the differences between organiations,variability also existshampers employees from getting the job done. Over the manycompanies we surveyed,the highest average percent favorable (84 per-cent) is obtained in response to the question,I have a clear idea of theresults expected of me on my job.ŽOne of the least favorable percents (39percent) is in response to a question about bureaucracy interfering withTherefore,the pervasive problem is not lack of information aboutwhat to do. It is getting tasks done in the face of the obstacles organitions erect,however unintentionally,to their accomplishment. The latterillustrates the law of unintended consequencessuch as a decision-makingprocess that makes it excruciatingly dif“cultfor or made in a timely way.Where in organiations do we “nd the most pervasive obstacles? Wepreviously established that employees tend to be most positive toward twoopposite poles of the organiation:the immediate work environment andthe total organiexpected from the worker,the immediate supervisors technical compe-tence,the skills and abilities of co-workers,and the job itself. The totalorganiation level includes views of pro“tability,the quality of the prod-ucts or services the organiation produces for its customers,and the orga-ations ethics in the conduct of its business.Although some organiations are viewed as dysfunctional from top tobottom,the tendency is for the major problems,as seen by employees,to bein the middleŽ(below senior management and the organiand above the immediate manager and immediate work environment). It isas if the products produced and the pro“ts achieved come on internally (for example,the need for continual rework to be able to even-e (product) e (governmentagency) is of suc quality considering tave,te politics in management,people “nger-pointing andscreaming at eac oter,and te unbelievable red tape andbureaucracy. Te quality costs a bundle,of course,because of e reaste,but tats at taxpayers are for.The middleŽis where coordination and control among the parts of theorganiation take place. When employees complain about bureaucracy,Žthey dont usually see the villain as their own boss or the CO,but ratherChapter 7Job middle management and staff departments,such as inance or IT. Whenthey complain about a lack of cooperation,they most often see the prob-lem stemming from departments other than their own and not being dealtwith„in fact,sometimes magni“ed„by the middle managers to whomtheir and those other departments report. A complaint about disorganition is usually directed at inef“cient work processes that cut across depart-ments,such as the way staff groups and the line dont communicate orcoordinate well with each other.Because this chapter is about the ability of workers to get their jobsdone,we focus largely on middle-organiwhere,on average,the most severe impediments to performance originate.It is where,on matters of performance,organiworkforces most differ from their counterparts.Immediate supervisors are,of course,important,but in surveys theyreceive quite high ratings in just about all organisurveys done by others as in our own.) Our surveys show that 78 percentof employees are positive toward their managerstechnical skills (know-ing the job). Although the rating on theirhuman-relations skills is lower(66 percent),it is still much higher than the ratings we obtain on issuessuch as bureaucracy. In almost all companies,only about 10 percent ofmanagers receive ratings that can be described as unfavorable. That 10percent can do much harm and require attention,but,by and large,we “nd“rst-line management to be bulwarks of organiations,even of thoseorganiIt is telling that the attitudes of “rst-line managers toward levels abovethem and toward staff groups are often identical to those of their subordi-nates. Managers see themselves as buffersŽwho protect their workers„and their performance„from the damage that those levels and groups A frequent theme in senior-management discussions and in the man-agement literature is the presumed weakness of “rst-level management:they are blamed for various employee morale and performance problems.It makes sense intuitively to target those managers because they are indirect contact with the workers and might be relatively inexperienced inmanagement. Yes,they are a big in”uence,but usually for the better!Therefore,intuition fails here and improvement steps,to the extent thatthey target the “rst level,are often misplaced.mployee e structure is disorganized,and I dont feel as if I canget a clear anser.e are completely disorganized and ave no real planning e roll out ne products and services!is matrixŽstructure ere is very confusing„everyone seemsey can give me orders and tey con”ict eac oter. do I satisfy many masters? is place seems completely disorganized. Every cange seems toerk reaction,and it seems tat leadersto go back and cange tey see tasnt orked.eres no stability. Tis place needs an over ere are toomany old Band-Aids over old os in carge ere? Nobody seems to ant to take responsibili-ing. Its a spineless management,starting at tNo leadersip,all CYA.eres little documentation en programs cange„it drives mecrazy. en people leave,tledge of ats been done leaves We are not arguing for the bureaucracy overkill that we have all come toknow and hate. However,chaos is not the only alternative to that type ofbureaucracy. In their studies of group functioning,social psychologistsmake a useful distinction between three types of leadership:autocratic,-faire,and democratic. We call the last of these participativeŽbecause democracy usually means that the leaders are chosen by the ledand that concept has little applicability in the employee-management rela-tionship. The key criterion is not how leaders are chosen but how theyemployees,in”exibility,and a belief that discipline and punishment arethe most effective means to get most workers to work. This characterition can be applied to individual managers,such as compulsive,micro-managing autocrats,and to the formal structures and processes thatconstitute excessive bureaucracy:approvals required for even the smallestdecisions,a multitude of rules rigidly enforced,and work divided intoextremely narrow tasks. Both at the individual manager and structuralChapter 7Job levels,a fundamental assumption underlying autocratic management is adistrust of workers and their ability or willingness to do their jobs withouta high degree of top-down control.Autocratic management is not necessarily a malevolent managementin the sense of unconcern for the economic well-being of workers. Somepaternalistic organiations treat their workers well„in pay,bene“ts,andjob security„but because of the father knows bestŽattitude,their man-agements are normally highly autocratic. These organiations are benevo-At the opposite extreme from autocratic management is a laisse-fairestyle,which means to let (people) do (as they choose).ŽLaisse-fairemanagers are divorced from their employees,uninvolved in what they do(either in a directing or helping sense). These proverbial weakŽmanagerscan,in their way,frustrate employees as much as autocratic managers.On a structural level,laisse-fairemanagementis the anti-bureaucracy,Žwith few or no approval processes,rules,paperwork,or specialitask. We know of no organi-faire in its pure form,butthose companies that even approximate this management style cannotendure:they soon disappear or are overhauled in order to survive. Howev-er,individual laisse-faire managers can survive for a while,especially inprosperous times when no one pays much attention to a departmentsmediocre performance. When times get tight,these managers can nolonger be tolerated and are removed.Unfortunately,new executives brought in to get this place under con-trol,Žusually go to the opposite extreme:the pendulum swings and theyturn what was chaos into what employees feel is a virtual prison. Theassumption is not just that things need to be tightened up„of course,theydo„but that workers somehow enjoy chaos and must therefore be man-aged with an iron “st. So,the frustration of employees formerly working-faire management turns into resentment because of theseverity of the controls that have been imposed and the view that employ-ees are untrustworthy.The alternative to laisse-faire and autocratic management is participa-tive management,whose key characteristic is shows the three management types depicted in terms of in”uence patterns.Autocratic management is top-down,laisse-faire is bottom-up (theinmates running the asylum,Žas the joke goes),and in participative man-agement,in”uence goes both up and down. The point of two-way in”uencethat there is no boss or that everyone is boss. That is a laisse-faireenvironment,and it is not what we mean or what workers want.mployee igure 7-1,the arrow pointing downin participative managementes the importance of certain traditional,top-down managementprinciples. These principles are important to both the organiworkers because both the effectiveness of organiations and worker satis-faction require that there be clear and decisive direction from leadership;clarity of responsibilities,authorities,and accountabilities; authority that(each employee has one boss); and a clear approval process and rules gov-erning acceptable employee behavior.These principles are familiar and uncomplicated,and they encompasskey aspects of what is normally termed bureaucracy. Although they arefamiliar,the principles deserve to be repeated because they are fundamen-tal and,as we have said,they are seen by some in”uential modern theo-rists as largely out-of-date and dysfunctional,especially in the neweconomyŽor post-industrial ageŽand with so-called Generation X work-ers. These theorists talk about recasting traditional hierarchical organitions into all kinds of new forms,such as spiders webs,Žstarbursts,Žwagon wheels,Žor shamrocks.ŽTo seriously advocate the destruction of any semblance of hierarchyshows a lack of experience with the debilitating consequences of workingin a directionless organiation,or getting con”icting instructions from dif-ferent bosses,or being unable to decipher who is responsible for what,ornot having the authority to carry out ones responsibilities. ese severeorkers,ey Žor oldŽeconomy and atever teir generation.ŽHowever,the fundamental top-down principles can be taken to theopposite extreme,and that is the nub of the problem created by thebureaucracy and the bureaucrats that we abhor. or example,being deci-sive can sometimes mean rejecting all the subordinatesinput into Chapter 7Job AutocraticLaissez-FaireParticipativeure 7-1 decisions. Also,providing direction to an organimicro-management:instructing trained and experienced subordinates onhow to do their jobs in every detail and requiring them to seek approvalsfor even the most minor deviations and decisions. So too,making respon-departments,which makes collaboration impossible (the familiar problemof organiThese examples depict the slippage of common-sense organiprinciples into a rigid machine model of bureaucracy. A machine cannotfunction without a place for everything and everything in its placeŽandwithout external initiation and control. Thats the nature of an inanimatemachine. But,people are not machines or parts of machines:they canexercise judgment,do more than one task simultaneously,and initiateactivity. And they have emotions,such as feeling disrespected and angrywhen theyre treated as if they cannot exercise judgment,do more thanone task at a time,or initiate activity.orkers ant,and organizations require, order as isappropriate to te need,and no more.Workers in a machine shop do notpretend that they can set corporate or divisional strategies,so they wantleaders who know how to do that and do it well. But,they can run themachines,and they are a rich source of ideas for how to make thosemachines run better and how to improve many other aspects of their workenvironments and work processes to increase performance. Managers whoobsess about how their employees do their work,and about minutiae suchas the exact amount of time they take for rest breaks,are not only doingwhat they shouldnt be doing (meddling),they are not doing what theyneed to be doing:the planning,expediting,counseling,and coordinatingthat truly help employees get their jobs done.The consequences of autocratic management„by an individual auto-cratic supervisor or a system that is excessively bureaucratic„are twofoldin terms of worker performance. On the one hand,spurts in performancecan be obtained by such top-down methods,but unless the pressure is con-tinually applied and employees are supervised closely (and the supervi-words,achieving performance becomes completely dependent on outsideforces applied on resistant employees instead of on their internal motiva-tion to do well and be proud of their work.mous loss of brainpower:the ideas and ingenuity that the people whoknow the jobs well (the workers) can apply to improving performance.mployee Autocratic management„whether by an individual manager or by anoppressive bureaucracy„makes the very costly mistake of assuming thatwisdom is related directly and almost entirely to hierarchical level.hat WorksAlthough autocratic andlaisse-faire managing are different styles,bothdemotivate the overwhelming majority of workers,and both place severeobstacles in the way of their getting their jobs done. The research done inthis area strongly supports a third approach,which is participative. Thisapproach is not simply a middle ground between the other two styles ofmanagement (a little less of this,a little more of that); it is really an entire-ly different method.When moving away from autocratic management,some people adopt-faire attitude; this is an abandonment of leadership,not a leader-ship style. Participative leadership is an active style that stimulatesinvolvement,not a passive style that forfeits leadership. In an effectiveparticipative organiation,no one is in doubt as to who is in charge. But,that person expects employees to ,to exercise judgment,and not justdo. Judgment is expected from workers in performing their speci“c tasksand in identifying and implementing ways to improve the organiationsperformance as a whole. That is the environment in which impediments to performance can be removed and in which employee enthusiasm Our advocacy of participative management is based on more thantheory or a democratic ethic. A great deal of research evidence demonstratesthe superiority of participative management for . The evidencecomes both from laboratory experiments and from “eld studies in realorganiations. It has been collected in systematic ways since the 1940s.Also,contrary to what is commonly assumed,its value is not limited toOver the last two or three decades,participative management hasfound widespread acceptance in industry,so our arguments,which wereperhaps once considered radical,might now strike some readers as unsur-prising,almost truisms. Unfortunately,much of the acceptance of thismanagement style has been super“cial:in our studies,we “nd signi“cantgaps between what organiations and managers say„and even believe„and what they actually do,as their employees report it.Chapter 7Job Second,although work may be highly standardia company wouldnt want individual workers to deviate too much fromthe prescribed method,improvement opportunities invariably abound thatworkers can spot. These potential improvements can be fully discussedand carefully planned before theyre implemented. The results are encour-aging and,sometimes,astounding.One of this books authors,consulting with a plastics manu-facturer,heard workers in a focus group comment on the enor-mous amount of trim wasteŽin the plant. A participant said thathe had long had an idea for a device to be attached to the cuttingmachine that would reduce the waste by at least half. The consult-able meetings,the engineering department decided to try out theidea; it was made and installed on one cutting machine,and thetrim waste was reduced by 82 percent! The device was installedthroughout the plant. When asked why he hadnt mentioned theidea before,the worker simply said,Nobody asked me.ŽJeffrey Pfeffer writesof a department in the ƒworkers tired of “xing equipment that broke down and suggested thatthey build two new automated machines themselves. They did it for lessthan a third of what outside vendors would have charged and doubled theoutput of the department in the “rst year.ŽTom Peters reports on an experience in the Tennant Company wherethe engineers devised a system to increase the ef“ciency of a weldingdepartment. The system,designed to reduce the need to store units duringthe welding process,would cost $100,000,which the company deemedtoo costly. A small group of welders tackled the problem. They designedan overhead monorail that could carry welded parts from one station toleaving the departmentƒThey discovered a supply of I-beams in a localjunkyard and bought them for less than $2,000. In two days,they installedthe monorail. In the “rst year of its use,the new system savedƒmore than$29,000 in time and storage space.ŽAnyone who has workedwith manufacturing employees and kept hiseyes open would not be surprised by these and the many thousands ofother instances of the contributions these people can make„if only theymployee ese levels of management and tat are tbut to be messenger boys and ork like crazy to keep tey people to supervise so teyre all over te unneeded multiple levels of management and texists. Managers tat only care about tprocess or te people are useless. I see very little value add of allese levels. If you asked me o my real manager as,I o levels above tey call my immediate manager.Essentially,I dont knoey need is manager.ere is a lack of clear communication betlevels of management,creating confusion about goals andievements. Its like tone game. By tsage gets to us,its garbled.A question we often see asked,in answers to open…ended survey ques-tions,is the caustic,What do all these people do?ŽIt is actually a goodquestion,and one that is occasionally asked by the people who occupy theTwo major reasons exist for steep organiation structures:control andation. Its interesting that the number of employeesspan of control. The more controlthat is desired (in other words,the less people are trusted to control them-selves),the fewer the number of people that report to managers at eachlevel,and thus the greater the number of management levels that isrequired. In that sense,the steep organiation consists of checkers uponcheckers.In addition,the role of managersin each layer of the hierarchy is tocoordinate with other managers of interdependent departments. The “nerthe division of labor (functionaliationŽ) in an organieach individual or department performs just one function rather than beingresponsible for the whole thingŽ(e.g.,a whole product or a whole cus-tomer)„the greater is the interdependence,and,consequently,the greatered organiation,noone is responsible for the whole thingŽexcept the very top to which allthe functions report through their individual,and usually multi-layered,hierarchies. We return to this matter in detail in the section,The Bene“tsmployee managers and their staff groups,directly or through endless reportrequests,is another expense source. Yet another is the inherent delays inthe ”ow of needed information through the hierarchy and in decision mak-lems and to a changing business environment. Last,but by no means least,is employee frustration and demotivation. There is no such thing as anenthusiastic workforce in an excessively layered organiA goal of every organipossible,probably to somewhere between 5 and 7 levels for the totalorganiation,and just three levels in any single facility.lat organitions lend themselves to decentralihave less time to get involved in the minutiae of day-day-to-day decisionmaking. Organiations that dont take advantage of this„that simply cutmanagers and management levels without consciously and deliberatelymoving authority down the line„“nd that the workload of the remainingmanagers has increased enormously,the quality of their work has likelydecreased,and their work lives have become correspondingly miserable.These organiations eventually add back managerial staff,which causescosts to balloon once again. They accomplish worse than nothing becausereorganiations and re-reorganiations are expensive and pendulumswings in structure foster (or reinforce) a cynicism in employees abouttheir managements competence.ationthat allows for effective ”attening of an organi-ation(not just head chopping) is,by far,best accomplished by establish-ing self-managed teams (occasionally known by the acronym SMTs).SMTs are teams of workers who,with their supervisors,have delegated tothem various functions and the authority and resources needed to carrythem out. Ideally,the team does the whole thing,Žbuilds a whole productor provides all the services for a de“ned customer or set of customers.You could go so far as to suggest that SMTs are required for effective”at organiations,if for no other reason than some of the work performedIncreasing control by,not of,employees is the essence of the SMTapproach to management. This self control is a product of less need toobtain managements approval for many decisions because these havebeen delegated to the team (verticalŽautonomy) and less need for themployee ard not toget in a rut. Sometimes,te pressure of tob can get to you. Youe anxiety building up as soon as you enter te building.ob is monotonous. After say,tree monts,tere is nolonger any callenge. Just being able to sit at a desk for ours atallenge I face.ob is mundane. It can be very boring,so it is a callenge toork I do,even t I enole.ob does not require muc grey matter. I tThose comments are from people for whom challenging work is importantand whose jobs dont provide it. As previously stated,the literature is fullnature of routine work. We are all familiar with the depiction of muchwork as so boring that only a trained monkey could bear it.Therefore,we would expect a large percentage of people to be unhap-py with their work. ven more broadly,as we have said,it is widelybelieved that people are inherently averse to work anyway,no matter howit is structured. According to this view,job satisfaction is a contradictionin terms; we work because we are forced to,not because we want to. It isa widely held,in fact ancient,notion.But,it is a misconception.Our researc disproves tat most people are uney do.As reported earlier,76 percent of millions of surveyed orkers sayey like tobs. Only 8 percent report dissatisfaction. urthermore,therange of responses from the most positive to the least positive organion this point is from 95 percent to 52 percent. Therefore,even in theorganiation with the employees least happy with their jobs,more thanhalf of the workers are nonetheless still favorable. These results,as wehave pointed out,show surprisingly little variation by the type of workor example,while 76 percent of salaried employees expresssatisfaction with their jobs,72 percent of hourly employees do so as well.mployee (Additional dislikes werethen mentioned such as sometimes being askedto work overtime on too short notice,heating and air conditioning thatdont work well (its either too hot or too coldŽ),a co-worker who getsaway with murder,Žand the factory general manager who just looksstraight ahead and never says HelloŽ).Moderator:Nobody mentioned the actual work you do,packingcookies and crackers. Do you like this kind of work?orker 1:Its “ne; its a job. Im happy to have it and I do it well.orker 2:Well,really,the work is boring; Im doing the samething over and over again. Id rather be doing something else.Sometimes,I feel like I just cant do it anymore. I feel like amachine,but Im too old to change jobs now.orker 3:Its not very interesting,its the same thing every day,but to tell you the truth,I dont much care. Because we donthave to think on the job,we can talk to each other. We reallye; I love that,with all the ladies.orker 4:Look,Im lucky to have a steady job. My father wasalways getting laid off,always worried.orker 5rankly,although I wouldnt say I hate the work,it doesget boring. Id like to do something more interesting. I want to dobookkeeping and Im thinking of going to night school for it.orker 6:This job is good enough for me. I couldnt be a book-keeper,numbers make my head spin.orker 7:As (name) said,its a job and a pretty good one whenyou consider that I dont have much education.Moderator:Would any of you be interested in a promotion to amanagement position,such as forelady?orker 2:Not interested„who needs all those headaches? WhenI leave work,I dont want to think about it.orker 7:And wed lose our union membership and overtimepay. Its more work for very little more pay.orker 6:I couldnt stand managing people. Theyre a headache.And Id lose my friends because of the things Id have to do,likediscipline them. Id be terrible at that.mployee example,65 percent of employees who are dissatis“ed with the work itselfexpress dissatisfaction with the company overall,while only 10 percent ofthose satis“ed with their jobs express such dissatisfaction. Table 8-1shows the relationship between satisfaction withthe work itself and over-all satisfaction with an organi Relationship Between Job Satisfaction and Overall Satisfaction Overall Satisfaction Job SatisfactionSatis“edNeutralDissatis“ed Satis“ed74%16%10% Neutral32%44%24% Dissatis“ed13%22%65%Given the importance of the work itself and the diversity of jobs available,why do some people wind up in jobs they dislike?or one,mistakes can be made in job choices,especially in initialor example,people might misjudge their abilities or be wrongabout the abilities a job requires so,early in their employment,they searchfor other,more compatible opportunities. This is why most voluntary ormutually agreed…upon turnover occurs within the “rst year or so ofemployment. (That is healthy turnover because people should not stay injobs they dislike and organiations should not want them to stay.)Sometimes,however,people get stuckŽin a job that it is dif“cult orimpossible to leave,often for “nancial reasons. The need to earn a livingcan lead people to take and keep a job that is disliked,sometimes intense-ly. That is truly a sad situation,spending eight hours a day being miser-able,and is most pronounced in times of economic downturn (when workis scarce) and in a persons middle and later career stages when leaving anorganiloss. The latter is the familiar case of the golden handcuffsŽ:pensions,stock options,and the like hold employees in jobs with which they areunhappy and in which they might remain for a long time just for “nancialreasons. Certainly,man does not live by bread alone,but bread is impor-tant,especially with mortgages,college tuitions to pay and,later in life,the need to retire with “nancial security.Chapter 8Job Challenge Give him a territory,a challenging quota,a clear,accurate com-pensation plan,and a smart leader who points him in the rightdirection,and he is a happy employee who will deliver the goods.What else would someone want from a salesman?Unfortunately for Terry and the company,Terrys day is signi“-cantly consumed by something other than selling. Paperwork isthe bane of a salespersons existence. Some of this administrativeactivity is seen as an unavoidable and necessary evil by sales-people and is absolutely required to keep track of importantTerry also unfortunately reports to Mr. Pit,a former top sales-man,who also fashions himself an innovative administrator. Mr. established an elaborate database that tracks every interactionTCTS (Total Customer Tracking System). The level of detail ofhis database grows every month and,thus,its attendant burden onhis salespeople. In fact,part of the performance evaluation of hispeople is the thoroughness of their data input. Mr. Pit presentedhis system to top management and they were impressed.Terry and his colleagues must track each contact they have withcustomers and record the nature of the customers business (itsgross revenue,number of employees,geography,and ten otherdemographic characteristics); details of the conversation (whomthey talked to and their job title,whether they bought,if so howmuch,the tone of the conversation); and the reasons of those whodidnt buy (budget issues,satisfaction with current supplier,repu-tation of Terrys company).Despite the fact thatsome of this information could be useful,Terry feels that he has been relegated to doing the job of a clerkrather than a salesman for a signi“cant part of his day. It inter-feres with his ability to sell. Terry would like to leave the compa-ny,but he feels he cant because of his pay and pension; he feelsthat he cannot duplicate them elsewhere.Terry loves the work itself„sales,but not his sales job in this company.Of course,some people just wont put up with a job in which theyre mis-erable,no matter what the “nancial impact of leaving; witness the follow-ing write-in comment from a survey:Chapter 8Job Challenge ity,very little value is placed upon it; e all important numbers,te quantity,tproduction,etc. My over 100 percent quality means absolutely my lo numbers. Poor quality is OK, numbers are not! But poor quality is not OK me!e incredible fast pace tat everyone problem. I cant elp but an incredibly fast pace. Tings cannot keep speed-ing faster and faster, seems to be te cant do t quality e are capable of because tere is not enougtime to read,tink and make smart decisions and plans.ere are so many customer complaints due to layoffs and out-sourcing of systems, result in poor quality and sloresponse times. Supposedly it saves money,but don times areincreased and clients and customers are given poorer service. earing customer complaints but teres note say,e are budget driven ratIt is easy to interpret resistance to production pressure as proof of workersiness. However,few workers want a lax,laisse-faire environment„there is no pride in that. They object to an emphasis on quantity when itbecomes excessive and detrimental to their physical well being,the qualityof their work,and the organiations reputation with its customers. valued skills.Self-esteem”ows not just from performingwell,but doing so in a way that uses what the employee considers her val-ued skills. In a broad sense,the importance of quality derives from thisbecause quality is associated with traits that workers value,traits that aredistinctly human,such as craftsmanship,dedication,and judgment. Sheerproduction,on the other hand,is most closely associated with the non-human world,such as robots and the proverbial trained monkeys.ŽInfact,for speed of output,usually nothing human can beat a machine.Within the human world„the world of workers„there are numerouskinds and levels of skill. Most workers become frustratedwhen their jobsdo not make use of their skills:is organization must e abilities and brainse administrative staff. Its very dif“cult doing exactly tChapter 8Job Challenge same tasks over and over every mont. Just because you are verying does not mean its all you are capable of!My management does not ave suf“cient tec skills to manage menical environment. Tey do not use my skills properly. Iork more as a tecan an engineer. Its galling not to betreated as a professional.e bureaucracy is sti”ing. I ave a management title and believeave strong management abilities,but Im not allotion as a manager. I am micro-managed every step of tay. Mymanager constantly goes around me directly to my employees.roug me,Im ust a messenger for ired ere to run Sales. Tay. I get almost no latitude. I ired t ideas because terestagnant. Tust talk. Im really is A.A. [administrativeassistant]. Hes not going to cange and its time to get out ere.I feel like a trained monkey on tob. Its so routine and prede-ere is absolutely no room for using my my education. Its really debilitating.My greatest callenge is surviving te day. I feel tere is empasis on administrative activities,ratcustomer needs. My customer service skills are atropying.On the other hand,when workersfeel that their skills are being fully used,it becomes a source of joy:I like te autonomy given me by my leader to use my professionalskills and experience to accomplis my daily tasks. I am especial-ly pleased about my leaderscon“dence in me as a person and inmy abilities. Ters me 100 percent dedication tomy client and my employer.I am really using and furter developing my skillsust love it!ave believed tob likeis at my ageey trust me ma asmanaging relations pretty big customers. mployee is department. Tats te is. Compliments like tat keep me going.en all is said and done is providinge customers. Pleasant and satis“ed customersmake tork seem like fun.at I feel I am contributing to my cus-tomerssuccess. It is especially gratifying er. I feel tats ere!is company,tey dont make you feel small. Tey make everyemployee feel important,te is a key part of tpanys success. Torks like magic for our morale.mployeesinterest in doing high-quality work comes,in part,from theirconcern for customers. Customer satisfaction is mentioned frequently inemployee focus groups:on the positive side when workers feel that theyserved customers well,and with frustration and disappointment when theyfeel they have not,usually because,as they see it,their ability to providequality service was severely hampered by workload or other obstacles.Making a difference to customers again brings us to the matter ofworkers doing the whole thingŽrather than each worker being responsi-ble for a fragment of a product or service. Although its usually discussedin terms of products,such as producing an entire automobile engine,letsapply it here to servicing customers. Our “rst example is a bit far-out:thecustomersŽare laboratory animals.One of this books authorswas engaged by the chief veterinarian of apharmaceuticals company to help the veterinarian understand and dosomething about the morale of his laboratory-animal caretakers. He saidthat the caretakers were lethargic about their work,such as not cleaningthe cages well,feeding the animals late,and coming to work late. In hiswords,They are a really unenthusiastic crowd.ŽHis continual exhorta-tions to them to improve did little good:things changed for a few days andthen returned to their previous mediocre level.On the basis of in-depth interviews with each of the caretakers,weconcluded that the key issue for these people was their highly fragmentedwork. They were happy with the basics of their employment (pay,bene“ts,and job security) and liked their supervisor,but found their jobs dull andalmost without meaning. But,they also said that they enjoyed animals andsaw the work done in the laboratory as important. How,then,could it bemployee The heart of the problem was that each caretaker was responsible forjust one function:“lling the food and water dishes,or cleaning the cages,or administering medications,or keeping daily records (of food intake,weight,and so on). The work became routine:cleaning out the cages inthe same way every day with little or no use of higher order skills and littleor no sense of responsibility for,or impact on,the customer,Žthe customer. As one caretaker put it,My job is not to take care of the animal; its to shovel sƒ.ŽUnlike the cookie packers,the animal caretakers greatly disliked theirfragmented jobs. The solution was obvious and was put into effect; eachcaretaker was given his own group of animals and almost all the responsi-bility for their care. This required some training of the caretakers in theirvarious functions,including instruction in rudimentary diagnostic tech-niques to help them know their animals and their condition. The trainingand brief learning curves on the job were about the only costs incurred inollow-up interviews uncovered signi“cantly improved job satisfac-tion,including the feeling that their caretaker work was now more profes-sional. The veterinarian reported that,with the exception of one caretakerwho continued to be a problem and was eventually dismissed,the per-formance problems had almost evaporated.Almost by de“nition,a sense of accomplishment means something,doing a job from beginning to end so that you can see the fruitsof your labors. But,as previously pointed out,this is not always easy toaccomplish because doing the whole job,Žon an automobile assemblyline,for example,can result in severe ef“ciency losses.As a general principle,every effort should be made,within the con-straints of maintaining ef“ciency,to design work so that workers have asense of completeness to their tasks. A second principle is that it is almostinvariably desirable„and especially when ef“ciency issues severely limitproviding complete tasks for individuals„to organiself-managing(SMTs) that do have beginning-to-end responsibility for signi“cantoperations. As noted in the previous chapter,SMTs are delegated responsi-bility for tasks such as scheduling,assigning work,improving methods,maintenance,on-the-job training,and quality control. These are a completeand enriched set of responsibilities in which individual workers participateand from which,as a team,they obtain a sense of achievement and pride.To the extent possible,the team should also be responsible andrelations customers. This is important because itChapter 8Job Challenge their work has,indeed,made a difference. Of course,many employees donot have contact with external customers,but everyone in an organican be said to have a customer,if not external,then internal. or example,on an assembly line,those who machine parts have those who assemblethem as customers. The customers of product development are manufac-turing and sales. The customers of staff groups,such as Human Resourcesand Information Technology,are the line divisions.Chapter 10,Teamwork,Ždetails the relationships between an organi-ations units,and between them and the external customers. or now,suf-“ce it to say that effectiveness and job satisfaction are greatly enhanced byorganiing the teams,when possible,around identified customers(whether theyre external or internal),and setting the primary goal of theOrganiing around customers allows employees to not only focus oncustomers and their needs,but it permits them to know the extent to which those needs are being met. We have said that making a difference„to customers,their organiation,perhaps to their profession„is importantfor job satisfaction. What we have largely omitted from the discussion ishow employees know that they have made a difference. They might feelthat they know based on self-evaluation,but that is usually inadequate.Clear and regular feedback is absolutely vital from those the work ismeant to affect. Such feedback provides both the information workersneed for evaluating and improving their performance and the recognitionfor good performance that is so crucial for maintaining a high level ofworker motivation and morale. The next chapter discusses feedback,recognition,and reward.mployee Feedback,Reco wo months on a goodcompliment!Ž „Mark TwainThe previous chapters have focused on the satisfaction (or dissatisfaction)thats intrinsic to the work itself. Now,we turn to the external sources ofsatisfaction. Here,we refer to that sense of achievement and accomplish-ment that comes from the opinions of others,especially the opinions ofthose whose views we respect or can in”uence our careers and earnings.eedback from others enables us to improve how we do our work,and sowe obtain an even greater sense of achievement.Do Workers Get the Feedback When asked to rate their own organiations with regard to feedback,thesurvey data are,at best,lukewarm. Remember that the great majority ofemployees (84 percent) in our surveys say that they know whats expectedof them. However,only 53 percent claim to receive suf“cient feedback onhow well they do their work. Similarly,only about 51 percent say that theyare satis“ed with the recognition they receive after a job well done. Mostinterestingly,only 38 percent of surveyed workers disagree ment,I get critici praised for good performance,Žwhich means that the performance of mostemployees is more likely to be recogniedŽin a negative sense when it isperceived to be sub-par than when it meets or exceeds a managers expec-tations. The following comments,which respond to the question,Whatdo you like about working here?Žexemplify the data: my manager since every timee gives feedback,it is alays negative. Tork. Am I going to get moreis negative feedback? I leave my a negative feel-ing,drive to a negative feeling. en I “nally get ere,ill never,never,never„I repeat never„from my supervisor about my ork. Its as if praising an employee lessens ters ere. But make a mistake and es on your back immediately.My manager is a pretty good guy and certainly knoob butat you dont only give feedback to an employeerong. He praises very,very rarely.Its unfortunate that many managers appear to have trouble giving goodfeedback. By this,we mean constructive feedback; it need not always bepositive to be effective,but it must always be helpful. Considered mostbroadly,performance feedback is a vehicle for the following:The improvementsan employee must make in hisperformance,and the steps he can take to improve. This is amongthe most basic of a managers responsibilities.Evaluation.How the organiation regards the employees per-formance in relation to expectations and to others. Is the employ-ee doing well,poorly,or average?Recognitiontranslated into something tangible (usu-ally money).Direction.Communicating or reinforcing whatthe organineeds,values,and expects from employees.mployee hair to our liking from a mirror; whether were speeding from aspeedometer; whether we get to work on time from a clock; whether wereexercising too hard from a heart monitor. eedback allows us to modifyour behavior:for example,we can decide to take a faster method of trans-portation when late for an appointment,and the next time we have thesame appointment,we can decide to leave home earlier.Critical to us as humansis feedback from other humans. Some feed-back requires human intervention to give it real meaning,such as a doctoronly be from other humans,like much of the feedback people get on theappropriateness of their behavior in daily life (whether,for example,theirbehavior conforms to basic civility and good mannersŽ).At work,the most crucial feedback people can receive concerns theirperformance. Without feedback,there can be only a limited sense ofachievement and opportunity to improve performance,and at work,it hasboth nonhuman and human sources. Almost all organiations have numer-ous performance measures:pro“tability,sales,costs,delivery time,customer defections,productivity,defective parts,absenteeism,and so on.Ideally,those measures are designed into the business or work process so that they are provided automatically and frequently„sometimescontinuously„to the organiation and its employees.ven the most comprehensive and most automatic measurement sys-tems almost invariably require human intervention. By themselves,num-bers have limited meaning within organiations. What matters is howmanagement and employees interpretthose numbers. How do the num-bers,for example,stack up against managements expectations? Are thechanges observed in the measures,improvements or decrements,consid-ered signi“cant by the organiation? Do other events,such as the intro-duction of new equipment or a change in general economic conditions,account for variations in the measures? How do the measures compare toeach other (say,an increase in quality accompanied by a decrease in pro-ductivity),and what is the signi“cance of that comparison? In general,what is the relative importance of the various measures (they are rarelyThe answers to these questions are vital to make sense of the numbersand to enable both the organiation and the employee to decide on a prop-er course of action. If,for example,the productivity of an employeedeclines soon after the introduction of new equipment but declines lessthan whats expected,its likely that no action would be required of thatmployee employee and management might even reward him in some way. If,on theother hand,an employees performance improves but is less than whatsexpected (say,months after the use of the new equipment has been fullyintegrated into the employees work),that could signal the need for cor-rective action. The action might include greater clarity in what is expectedfrom the employee or additional coaching on using the new equipment.Both the employee who performs well and the employee whose per-formance is below expectation need feedback,not just from the num-bers,Žbut from a manager capable of interpreting the numbers andconveying their meaning. Part of what is also being conveyed to theemployee is,of course,direction:what really matters to management inthe employees performance and behavior. (At the end of the chapter,weGiving performance feedbackis easier said than done. Many man-agers consider it among their most dif“cult tasks. Here is a commentabout giving performance reviews from a managers perspective:e annual performance revies I am required to conduct my 12 direct reports is tob. Iays put it off until Im called by t Department and amforced to do it. My employees often cant take targue me. Tey say teyre surprised at ey is about teir salary increase. I tryto make tem as brief as possible,get tem over as soon aspossible. Sure,I slant tard te positive. trouble? Yes,Ill put in sometat needs improvementŽso Iont be botered by my boss or H; its ust a game.ay,I avent ever been appraised by my manager,e VP of Manufacturing,since I cant remember to do it,too,but Hont get after This comment is not atypical:by and large,managers dislike (even dread)giving performance appraisals; they want to get them over with as quicklythat it is a problem of time and onerous paperwork,ranking up there withorganiThe problem,however,is about as common in providing informalday-to-day feedback throughout the year. Comments such as this one areeedback,Recognition,and Reward ould like to ear from my manager no and ten. You kno a fe tips I can improve and migt be a compliment from time totime. But formance appraisal,e likesand doesnt like about my performance. Tear froman appraisal time is te rare occasion I ave screup royally. He reads me te riot act and I probably deserve it,butays takes me by surprise. en appraisal time rolls around,I expect torst. It usually goes okay,but Im albefore roug my appraisal numbers.A Short Course on Givin GuidancePerformance feedback is donemuch less frequently than it should be.When it is done,it is often poorly handled. It does not have to be so. Alarge amount of researchhas been done on the conditions that make foreffective feedback.rom these studies,numerous speci“c guidelines formanagers have emerged. Adhering to these guidelines makes performancefeedback much less onerous for managers and more helpful to employees.Here are the key guidelines:Do not equate performance feedback with the annual per-formance appraisal.Many managers make this big mistake.Aside from the fact that many such appraisals tend to be some-what perfunctory and,to avoid unpleasantness,are positivelybiased,reserving feedback for that time (even when it is compre-hensive and unbiased) violates a basic principle of learning andchange,namely,that feedback should be given . If an employee is performingunsatisfactorily in some way,it should be obvious that he needs toknow about it then and there so that the behavior does not con-good performance; we discuss that later in this chapter.) Many ofthe dif“culties encountered during performance appraisal ses-sions come from employees being surprised by what they hear.mployee The extent to which employees learn something entirely newabout their performance during the appraisal review is a measurefailureof the performance-review process. The purposes ofan annual review are to summarie,in the form of ratings andcommentary,the employees performance over the year; to morefully discuss that performance and the effectiveness of theimprovement steps the employee has undertaken to improvemanager must do to help the employee); toand other rewards; and to plan for the next year,such as settingthe employees performance goals.The formal annual appraisal session,then,is a mechanism for clo-sure on one year and for planning the next. Also,it provides timeaway from immediate job pressures to simply talk about topics ofrelevance to the employee and his manager. In many organitions,this is a rare opportunity for a conversation that is more thanperfunctory. Managers should be requiredto do it,and do it withDont assume that employees are only interested in receivinpraise for what they do well and resent havin areas in need ofimprovement pointed out to them.People enjoy being praisedand prefer praise to criticism,but it is a myth that they have nointerest in learning what they dont do well and what they must doto improve. This is not a hypothetical statement or wishful think-ing. Take a look at some common types of write-in comments:I love my supervisor. He is one of te best managers I ere. He encourages us to do and keeps us e need to do,and gives us feedback in a calm,rong. I “nd very carefully.My manager assists me an actionable plan for mycurrent ob,tings I can do better,as ell as my career/professional development. He provides avenues for groand development. In fact is manager and e make up agreat management team. Its a real education eedback,Recognition,and Reward irritating or discouraging them. So they tend to either avoid itentirely,deal with it through vague and indirect communications,or,most commonly,oscillate between saying little or nothing and,when that is no longer possible (as in the last strawŽ),overreactin a harsh way that surprises and angers employees.Of course,some managers neither hold back nor oscillate in theircriticism:these managers dont much care what employees think,and they can be unrelenting in “nding fault with the performanceof their employees. These managers are inclined to believe thatworkers dont want to work (or are careless or stupid) and thattheir performance will always be de“cient unless they are contin-ually reminded of what they are doing wrong and the conse-quences of not improving. Interestingly,we “nd this managementstyle to be as common„perhaps even more so„in the way man-by high-level executives) as in the way non-managerial employ-ees are treated by their managers. In some companies,managersare subject to much verbal abuse,including humiliation in front oftheir peers. After all,senior management argues,isnt being ableto take itŽone of the reasons managers are paid a high salary? Ifthey cant stand the heat,they should get out of the kitchen.ŽBut,how do these people actually react? Here are just three examplesMy manager treats all is direct reports equally,tout respect and dignity. Hes like a tyrant gives feedback someting. Herants and raves,and doesnt do tof“ce. He doesnt care o is around,even tork for me.ere is a total lack of respect and a general condescend-ing attitude by our management. Tstant reminder of managerial incompetence and te lack ofdirection in preaced,respect,is blatantly not practiced. I and my col-leagues dont be our employees. Hoese upper-level managers get ere tey are?e?he CEO] treats torkers kid gloves,es likeer. us,es usually a “rst-class [expletiveeedback,Recognition,and Reward deleted]. He even blasts us for doing somete askedanged is mind. Nobody dareser back or question es te king.Whatever the pattern,managers rarely have good role modelswhen it comes to giving feedback. As they observe employeesand their own reactions to the process,their belief is reinforcedthat performance feedback is a dif“cult and unenviable job. Weknow that some mangers are good at it:they dont procrastinate ingetting it done and they get the performance results they wantwith little distress for themselves or their employees. It comesdown to a matter of skill (to be discussed in detail later in thischapter) and to the fundamental assumptions that managers makeabout people at work. Do managers assume that their employeeswant to do the best job possible and would appreciatements observations and guidance about their performance? Or,do they believe that employees dont care about doing a good joband so they have to be bludgeoned into doing any work at all ordoing the work correctly? Or,do they believe that employees careabout doing good work so much and their egos are so fragile thatpointing out any performance problems would be considered amortal wound?Our view is that besides a small minority of employees (thoseallergicŽto work and those inordinately sensitive to criticism),the “rst assumption is valid:employees want to perform well andlearn how they can improve. If a manager operates on the basis ofthat assumption,he will succeed,provided he follows the fewbasic guidelines we spell out here. But,without accepting thatbasic premise,these guidelines become meaningless.To summarie,feedback needs to proceed from a managersintentions to help and guide his employees. The goal should belearning,not venting,shaming,or lambasting.An employee whose overall performance is satisfactory andappreciated by the oration needs to be made aware ofIn the course of an employee doing his job,the work isusually satisfactory,and even outstanding at times,but occasion-ally will not be good enough. That pattern is true of the over-whelming majority in every organiation,and it is vital that anmployee employee understands that management sees his performance thatway. In other words,most everyone is good,but nobodys perfectand it is to the employees and organiations bene“t that strivingfor improvement be . (We discuss the caseof poor performers who should never have been hired into theirjobs or into the organiation later in this chapter.)In the statistical data,we saw that most employees agree with thestatement,A person here gets criticipoor performance than praised for good performance.ŽThat man-agement style makes people uneasy about managements view ofoverallperformance and contribution to the organiis then dif“cult for an employee to feel anything but insecurityed on any aspect of his performance,no matter how valid and needed the criticism is and how small theobject of criticism is relative to the employees total performance.It is easier to accept the need for improvement„in fact,manyemployees welcome it„when they believe that managementbasically likes what they do and is helping them to do it even bet-ter. To believe that their contribution is genuinely appreciatedWe are happy with your work here.ŽTo be accepted as genuine,general comments and evaluations require a factual basis that isachieved by recognition of accomplishments,such as,That report you wrote is great. I especially liked the part whereyouƒ.Žis given for effect (a sort of public-relations gesture). It is helpfulin pointing out the areas of performance that the employee needsto maintain. This brings us to the importance of speci“city indealing with improvement opportunities.Comments about areas that need improvement should be spe-ci“c and factual rather than evaluative,and directed at thePositive feedback and feed-back about improvement needs are similar in that both require themanager to be as speci“c and factual as possible. Although com-ments on positive aspects of performance should,indeed,conveya positive evaluation,it is better to avoid a negative tone whenpointing out a need for improvement.eedback,Recognition,and Reward It is helpful to say,You did a good job on this,Žbut it is not help-ful to say,You did a poor job on this.ŽInstead,you might say,Here is something that I think needs to be done differently.ŽTerms such as good,Žgreat,Žexcellent,Žand “rst class,Žespe-cially when accompanied by the speci“cs that support those eval-uations,build pride in employees and reinforce the performanceso that it is sustained. But,is there any point to saying to an other-wise satisfactorily performing employee that she did a poor,Žshoddy,Žunprofessional,Žor below standardŽjob on some-thing? She already knows that a problem exists because a manag-er has told her and is being speci“c about the problem. Adding anevaluative comment is likely to discourage or offend the employ-ee and,in the long run,diminish her motivation and performance.It gets worse when the negative evaluative comment is directed atthe person rather than the persons performance. This is seen mostintention of the employee,such as,You must not have been pay-ing attention when you did that,ŽYou must “nd it dif“cult tochange and do it a different way,Žor even,You must have gottenup on the wrong side of the bed this morning.ŽAlthough the man-ager might feel he is being helpfulŽwith these remarks,theemployee views them as attacks on his character and reacts withdefensiveness. urthermore,managers are not being paid or askedby the organiation or their employees to be psychologists. ing in amateur psychology is often a power-play anyway (it says,I can see into youŽ) and employees feel that and resent it. To sum-e,stick to what the employee There are exceptions to the recommendation to avoid negativeevaluations of the employees performance. irst,the formal per-employee on various dimensions of performance,and these mightnot be favorable:You did well on this aspect of your perform-ance,but not on this.ŽObviously,we all would like to receive pos-itive rather than negative performance evaluations,but because theformal appraisal sums up the year and can be the basis for rewardssuch as salary increases,in our view,you cant escape their neces-sity. urthermore,employees expect and want to know how theirperformance over the course of the year stacks up in manage-ments eyes. The negative effects of unfavorable ratings are greatlymployee mitigated if,per our guidelines,the evaluations have a factual basisand are unsurprising because they are,indeed,a summary of thefeedback the employee received throughout the year.The second exception to the recommendation regarding unfavor-able evaluations is the case of the truly unsatisfactory employee;he has to know and must know early. (We discuss this situationlater in this chapter.)Feedback needs to be limited to those aspects of employeebehavior that relate to performance.feedback,some managers dwell on aspects of employee behaviorthat are personally objectionable to the manager but are unrelated,or only marginally related,to the employees performance or tothe organiations success. These aspects might be completelyoutside the work situation,such as the way the employee spendsher leisure time,gets along with her spouse,or raises her children.On the job,some managers are overly concerned and criticalabout employeesdress,even when it is wholly within the boundsof appropriate work attire. One employee bitterly complained inan interview about his managers dislike of his southern accent.Indeed,many aspects of what an employee does on the job or theway he lives are truly none of the managers business or are triv-ial and re”ect little more than a managers personal preferencesand prejudices. Some managers see themselves as parental “g-ures who provide helpfulŽguidance to employees about allthings,whether its wanted or not,whether its related to job per-formance or not,and whether its important or not. The managermust try to stick to the job and those factors that signi“cantlyaffect job results. Advice on other matters should be given onlywhen the employee seeks it (assuming the manager has knowl-ivin performance feedback,encourae two-way When giving feedback,it is almost alwayssensible to involve the employee in determining what the problememployee. Obviously,this isnt wise when the employee is so newon the job that asking his opinion adds no value. It also shouldntbe done those few times when the manager is absolutely certainshe knows what needs to be done and just wants the employee toeedback,Recognition,and Reward ngaging the employee in a participative conversation atthat point„other than to clarify what the manager wants„is seenas manipulative by the employee. Other than those occasions,themanager needs to ask the employee what he thinks and shouldgenuinely listen to him. After all,the employee is on the job andhis experience and observations must be taken into account todetermine how a performance problem is to be overcome,includ-ing what the manager might be doing to harm the employees per-formance. A real conversation also makes the employee more of apartnerŽin the improvement process rather than simply a targetof criticism. It helps create an atmosphere in which the employeehelp him improve his work. In this regard,the most propitioustime for performance feedback,of course,is when the employeeoal of feedback is action that improvesperformance.This guideline is obvious,but it is violated in anumber of ways. One major example is where the managerassumes that the issue is the employees will or character,inwhich case he simply admonishes the employee to,Pay attentionto what youre doing!,Žor Get moving,we need more fromyou!,Žor Stop talking with everyone!ŽThose comments areappropriate for only a few workers,the ones for whom insuf“-cient motivation is indeed the problem. However,they are unhelp-ful to the great majority of employees and convey disrespect forthem. What is needed is a speci“c,doable action plan that attacksthe problem,not the person,as shown in the following exampleed from actual events):Manager:Id like to talk to you about meeting deadlinesfor reports that my boss asked you to prepare. I think youmissed a couple of deadlines recently.:I didnt realilines. He just dropped by my desk and,in a low-key man-ner,asked me to obtain some information.Manager:Thats his style. Pleaseremember to translateany request he makes as urgent. I had the same problemearly in my career. You might want to ask him when hemployee wants this. Hes likely to say as soon as possible. This usu-ally means he wants you to start on it right away and haveit to him in a day or two. I realie this puts you in a dif“-eel free to come to me when he makes hisnext request.A second way this rule is violated is to request action that is not ingiven. Remember that the action must be doable; to make it somight require resources outside of the employees immediate con-trol. Heres an example of a manager really going to batŽfor heremployee. This is what you want to see happen (and read in yourcompany survey):onest,and I am able to be ter. S my development. Forexample,I didnt understand t system canges e not only provided me some materials to readarded te relevant training courses available,but an expert to call enever I a problem. I dont tere if it asnt er.The third major way in which this rule is violated is where anemployee is so overwhelmed with identi“ed problems and actionway. A good rule of thumb is to have the employee work on nomore than two or three signi“cant action items at any time. Arriv-ation,which is governed by what isFollow up and reinforce.or most action steps following feed-back,the manager needs to follow up with the employee to assessprogress:whether action has been taken,what the results were,and what,if anything,still needs to be done. ollow up also givesthe manager the opportunity to compliment the employee on thechanges made,which positively reinforces the behavior. more,the act of following up„and the employee knowing that itwill take place„emphasies to the employee the importance thathe take action.eedback,Recognition,and Reward Provide feedback only in areas in which you are competent.We leave the most obvious guideline for last:know what you aretalking about. Our guidelines,as focused as they have been onfeedback should be conveyed,cannot substitute for inaccura-is conveyed to an employee. Only underduress will employees pay attention to feedback from managerswho know little or nothing about the workersjobs. We see thisproblem frequently where the organiation hires recent collegegraduates into supervisory jobs. These new supervisors “nd them-selves managing workers who have been on those jobs for yearsand who,in many respects,are more knowledgeable than theirmanagers. We often see comments such as this one from this frus-trated worker:front-line supervisory positions ey lege diplomas. Tey come on tbut tey kno diddly squat. Tey tey can learn teek,but it takes years to knoatsreally going on inery,o really knoats e old days,te foremen rose trougranks. e respected tey kneBe modest and honest about what you know and get the right kindof help for the worker. When we discuss advancement later in thischapter,we question the wisdom of most of the hiring that is doneBefore we leave this topic of cognitiveŽfeedback,we should mention atechnique increasingly being used,namely,360Žfeedback. Thus far,ourfocus has been primarily on feedback from managers to employees.Through the 360 process,ratings on various aspects of performance aregathered from a variety of sources in addition to the manager,especiallydirect reports (if the employee is a manager),peers,and internal and exter-nal customers (hence 360Žfor 360 degrees,i.e.,feedback from a numberfeedback. 360 feedback is valuable precisely because it provides datafrom a number of sources and perspectives. A manager may be personallymployee biased in his evaluations of employees but even if not biased may beunaware of crucial aspects of employeesbehavior,such as the way theyinteract with their peers. There is quite a bit of research data supportingthe effectiveness of 360 feedback in changing behavior,particularly whenthe process is facilitated and supported by well-developed counseling andfollow-up activities.Evaluation,Reconition,and RewardSo far,we concentratedprimarily on the cognitive side of feedback (feed-back that is factual and non-evaluative). Now,we consider in detail theaffective,evaluative side,which is the managers and the organiationsthe employee does and the implications of thatIn our previous discussion,it was impossible to ignore entirely theaffective side because although it is desirable to avoid evaluative com-ments when the feedback concerns improvement needs,we dont separate facts from evaluation when the employee does something well. Inthat case,evaluation and facts are inseparable because nothing needs tochange in the employees performance and,therefore,theres no reasonfor that feedback other than to praise and thank the employee for goodHow important is employee recognition in terms of generating enthu-siasm and maintaining good performance? On the surface,it would notrom the organiations perspective,isntthe company already the employee for good performance? But,providing such recognition is vital:to receive recognition for onesievements is among tWe see thisearly in life. Think of young children eagerly awaiting their parentspraiseeven if its not always as visible. Just as parents do well by their childrenwhen they express admiration for their childrens work,Žso do managerswhen they praise their employeescontributions. In our interviews and thewrite-in questions on our surveys,workers tell us with deep feeling howmuch they appreciate a compliment.On the other hand,when managers do not bother to acknowledge highlevels of employee performance,the effect can be discouraging and evendevastating to some employees.eedback,Recognition,and Reward The desire for recognition of ones achievements is neither childishreud,the pre-eminent student of both childhood and neu-roses (and their relationship),is said to have quipped at his 80th birthdayparty that,An individual can tolerate in“nite helpings of praise.ŽSome-times,we hear people deny that recognition is important to them; a workermight say forget the praise,just give me the money,Žbut their behaviorbelies this assertion. Once,we did a study at a media organiwhich a tough chief executive scoffed at high-priced workers in the organ-ation who craved professional recognition. However,those employeesO was passed over for a prestigious industryaward,there was much fulminating and stomping around his of“ce.Of course,the desire for recognitioncan also be extreme and dysfunc-tional. We see this in some people in the way their need for praise is insa-tiable:they require it continuously,often for achievements not particularlynoteworthy,and become depressed or agitated when it is not forthcoming.urthermore,they are not too discriminating about the sources of therecognition; they want it from everyone:from people they respect andfrom those they disdain,from those with power and from those with noin”uence over their careers. Often,they are the employees we see vyingfor the spotlight and grabbing credit for achievements that are either nottheirs or not solely theirs. They tend to be noisy and visible (often whiny),but as with the other needs we have discussed,this extreme constitutes atiny percentage of the workforce.Psychologically healthy people want to be recogniuine achievements and are concerned primarily with the opinions of thosewhom they admire and,because they are realistic,with the opinions ofBefore we continue this discussion,we reiterate the difference betweenrecognition for performance and respectful treatment of workers,whichwas the subject of Chapter 5,Respect.ŽAs we use the term,respect is athats owed to employees simply by virtue of their employ-ment,just as they are owed a living wage. It is,in other words,a function ofwho they are„employees and human beings. On the other hand,recogni-tion is for what they :their performance and contribution to the organi-ation. The two are not entirely independent,of course. The termrecognition has two meanings:to acknowledge someones and to acknowledge someones existence. The latter is a mark of respect inmployee the workplace,such as managers being sure to say HelloŽto employeesand referring to them by name. As we have said,that is important to aworker,but is not the kind of recognition that is the subject of this chapter.or recognition,the parallel comment is,Thank you!ŽWhether,howmuch,and how a worker is thanked varies with the workers performance.That differs from respect,which dictates that everyone deserves a hello.ŽThe importance of recognition is evident in the panoply of awards(both “nancial and non-“nancial) dispensed by public,private,and non-pro“t organiations throughout America and,indeed,the world. The rangeis enormous,from Nobel Pries,Oscars,and building and street names forthe famous (or soon-to-be famous) to company pins,plaques,gold watch-es,and various cash awards for the obscure (and soon-to-be less obscure).These are the formal means of recognition,and organithat they meet deep-felt needs. Unfortunately,they might be administeredin a way that severely dilutes their impact or even boomerangs to the detri-ment of the employees and the organiwhen executives think of employee recognition for their organithey usually equate that with formal recognition programs and give notnearly as much attention to informal recognition,such as managersacknowledging good performance day-to-day on the shop or of“ce ”oor.Or,they equate recognition with the compensation system„pay,payincreases,bonuses,stock awards,and so on. In that view,recognition pro-grams,if they exist,are seen as icing on the cakeŽ„nice to have,but notreally at the heart of what employees want,which is money.There are four major meansto recognie employees. No one vehicle,such as money,suf“ces to provide the recognition to employees that ismost important to them and bene“cial for the organiProvidingdifferential compensation toemployees based on performance.Informal recoDay-to-dayrecognition of performance,most importantly by the immediate manager.Special awardsgiven for performance as part offormal awards programs and that may be accompanied by cash.Promotion.Advancement tohigher-level positions for per-eedback,Recognition,and Reward This sounds nutty. Shouldnt $500,000 be enough? Doesnt theamount of money speak for itself? No,it doesnt. It is terribly importantthat employees alsomployees in that companydescribe the chairman as wanting to keep employees on a slippery slope,Žperpetually anxious about his evaluation of them. When he meets employ-ees in the hallways,he almost invariably greetsŽthem by mentioningasntthing they haventdone. The chairman has a dif“cult time expressingappreciation to others,even when giving them large bonuses; that,ofcourse,would be an ideal time to do so. The executive left the companyabout six months later because,as he put it in a private conversation,itwas an opportunity I couldnt refuseŽand I could no longer take [chair-mans name].ŽThe needs for both money and non-“nancial rewards are important.Neither can replace the other. There are also,however,two senses inwhich they are interdependent. irst,they are multiplicative„not justadditive„in their effects. Put negatively,if one form of recognition isabsent,not only is the total effect reduced,it is reduced by more thanwould be expected simply by its absence. This is because it also dimin-ishes the impact of the other form of recognition. We saw this clearly inthe previous example where not getting a thank youŽreduced the positiverecognition to another increases the value of the latter. Consider hon-ori“cs,which are the formal awards programs of organiations. The les-son of our argument for those programs is that their impact on employeesis usually increased when money accompanies them. Just as in the invest-ment bank case,adding words of appreciation to the bonus would increaseits value for the executive,so adding money to an award conveys to anemployee that the organimoney where its mouth is. To be most effective,then,most formal awardsprograms require both mouthŽand money. Although the money involvedis no substitute for basic kinds of compensation (salary increases,bonus-es,and so on),it should be substantial enough to be seen as more than justa token.ŽOur argument does not,of course,imply that day-to-day recognition be accompanied by money.But,what is said informally losesits impact if it is not re”ected at the appropriate time in employeeseedback,Recognition,and Reward The three means of recognition are also interdependent in that theyor example,if a company has embarked on a quality improvementeffort„at least in its public statements„it is likely to use its formalawards programs to recognie employees for quality contributions and todo so in a public way. In day-to-day informal communications and recog-nition and in compensation (such as pay increases),the message might bedifferent:if it is then really quantity that counts,the message is inconsis-tent and counter-productive. Its the kind of contradiction that creates con-fusion among employees as to what management wants and skepticismabout managements integrity; those severely compromise the impact ofan organiations recognition efforts. The criteria must be aligned and thisshould be achieved by aligning each with the organiations real goals andvalues. In that way,employees are rewarded,and the goals of the organi-ation are advanced and its values reinforced.To be most effective,organiof componentsthat need to be used (and used consistently) witheach other and with the organiations goals and values.How is recognition best implemented? There are a number of basicprinciples here,which we summarie. We touched on some of these earlier: recoThe employeeneeds to be praised for concrete achievements. This both rein-forces the particular behaviors that the manager wants to seerepeated and,in the eyes of the employee,increases the sincerityAlthough this might sound obvious,recogni-tion by long distance or proxy is not nearly as effective as face-to-face recognition.Be timely.Give recognition as soon as possible after the desiredbehavior. By and large,the more the time between the completionof a behavior and the delivery of a reinforcing consequence,theless effective is the reinforcement. This advice is wonderfullyed in the phrase catch them at being good.ŽCatchingpeople in the act,as it were,is usually reserved for misdeeds,butapplying the same principle to good performance is exactly whatThe guidance regarding timeliness is applicable primarily to infor-mal feedback. The other forms of recognition„compensation andmployee spot. However,they are important to formally reinforce the rein-forcementŽand to demonstrate to the workforce that the organition backs its words with money and public recognition. Takentogether,as we have said,the three means of recognition constitutea powerful package.Be sincere.This is an odd piece of advice; after all,a managereither means praise sincerely or he doesnt. We can do nothing tohelp a manager who does not genuinely appreciate her employeesperformance. Some managers never do„they genuinely believethat only their efforts count„and this book is not an instructionmanual in acting sincerely. Other managers,however,are sincerein their praise and yet it doesnt come across that way to theiremployees. They might be so general in what they say or so tardyin when they say it that expressing appreciation seems to employ-ees like something a manager feels he has to do rather than some-thing he genuinely wants to do. Or,they might give mixedmessages about an employees performance,such as,You didwell on that,butƒ,Žor Thank goodness you “nally got thatright.ŽPerhaps because of their own discomfort,managers mightundermine the effect with humor,Žsaying something like,Youve done such a good job,you would never know that you hadan MBA,Žor Hes so loyal to the company,he hasnt seen hisfamily in months.ŽManagers can overdo it,exaggerating theachievement with meaningless ”attery,such as,The most won-derfulƒ,Žthe greatestƒ,Žnever in the history of the compa-nyƒ.ŽAlthough much of the advice about how to giveeven corny,be assured that recognition is vitally important toat employees listen carefully to every ord t. The simpler and more direct the compliment,the better,such as,You did a great job onƒand I want you toknow that. I especially likedƒThank you very much.ŽIf the praiseis exaggerated or too ”owery,it wont be believable. If it is a mixedmessage,the employee most remembers the negative comment orimplication,even if the manager “nishes on a positive note. Sim-ply stated,people want honest and deserved acknowledgment oftheir contributions and,when received,it is greatly appreciated.Dont spoil it.eedback,Recognition,and Reward iven for both roup and individualperformance.Chapter 4,Compensation,Žsuggests that,formost employees,pay for performance should be based on groupaccomplishments. We argue that individual reward schemes (suchas piecework and merit pay) are usually administrative andemployee-relations nightmares that result in many employeesfeeling no sense of reward and that they tend to diminish team-work. But,we must still deal with the fact that in a group,someindividuals contribute more than others (perhaps much more).Should„and how do„these people get recognirecognition is obtained from co-workers,especially when the payor bonus is group-based. An outstanding contributor is valued bythe group under that condition because his work is “nanciallybene“cial to all (which is in contrast to the rate busterŽwithinindividual pay systems who is ostraciformance is detrimental to his co-workers).ully employing the three means of recognition allows both indi-viduals and groups to receive due acknowledgment for theirefforts. Although we suggest that for most workers compensationfor performance be based on group performance,informal recog-nition by the manager will usually be given to individuals. As theoccasion warrants,the manager will also bring the entire grouptogether for a collective thank you.ŽHonori“cs,which are the formal awards,need to also be distributed toboth individuals and groups. However,in our view,these must be largelyreserved for truly outstanding achievements:the organiations Nobeles.ŽWe suggest dispensing with the multitude of recognition awardsdistributed by some organiations,such as gift certi“cates,reserved park-ing spaces,dinner-for-two,and employee-of-the-month. After they are inplace for a period of time,our attitude surveys never show anything betterthan a lukewarm response to these programs. Indeed,they generatenumerous complaints,especially about who is selected for the awards andworkforce„after all,they are designed to provide recognition„but theyseem to have the opposite effect on most employees. Upon hearing of thecomplaints,management often revises the programs to distribute theawards more widely so people dont feel excluded. As recognition for per-formance,most of these programs then become increasingly meaningless.mployee mployees who are clearly and continually unsatisfactory come inthree general varieties:€Those who,with competent guidance,clear goals,and consider-able encouragement,can improve to a satisfactory level in their€Those who are in the wrong job or organiimprove until they are correctly placed.€Those who do poorly no matter how much guidance they receiveor in what job or organiation they are placed.workers. In fact,among the largest and most consistently negativeemployee survey “ndings are those about the organiations approach topoor performance. When asked,How do you feel about the extent towhich (the organiation) faces up to poor performance?Žthe percentagesobtained,on the average,are revealing (see Table 9-1).Response to the Question To What xtent Does Your Company Face Up to Poor Performers?Ž AnswerPercenta Much too much2% Too much5% About right52% Too little29% Much too little12%It is not that 41 percent of employees (29 percent plus 12 percent) are seenas poor performers. The poor performers are typically a small percentageof any employee population,usually just one or two employees in an indi-vidual department. However,they aggravate many employees. What isespecially discouraging is managements perceived unwillingness to con-front this problem and do something about it. The problem is clear toeveryone and there is usually no disagreement among the workers as towho the culprit is. In focus groups,they almost always point to the samemployee or example,we once did a focus group in a government agency andthe group consisted of all ten employees in a particular section. One of themajor complaints expressed by many of the participants was that oneemployee in the section loafed all day.ŽThe discussion about thisemployee went on and on even though that person must have been presentbecause everyone in the section was there. The discussion “nally shiftedto another topic,and a worker who had been quiet up until then “nallybegan to participate. The rest of the group in seeming unison nodded at themoderator; they had subtly let him know who the loafer was.The consensus among co-workersis not just about the culprit,but alsomployees are usu-ally insightful when it comes to diagnosing the problems their co-workershave,such as a lack of training or a mismatch between employee and job(such as,Hes just not a salesmanŽ). About others,they say simply that,Nothing can be done about him.ŽThey want help given to those they feelcan be helped and understandably have mixed feelings about what to dowith employees they consider incorrigible. mployees typically do notwant their colleagues “red,but become reconciled to it if they believe thatmanagement has done whatever is reasonable to help the employeeimprove and has otherwise treated him fairly.Whatever the reason for poor performance,it is critical that it be dealtquickly,squarely,and fairly.The “rst step is to provide guidance and,in a way that conforms to our previous suggestions,including,important-ly,the opportunity for the employee to express what he believes the prob-lem is and what the solution might be. Improvement goals need to be setand follow-up done to assess whether satisfactory performance„or atleast suf“cient progress„has been achieved. If not,and enough time haselapsed,the manager (in consultation with his management and usuallyis to transfer the employee to another job in the organiTransfers should not be sought for two kinds of employees:those unlikelyto have the ability for any job in the organiture?),and those who have the ability but whose personality (overly rebel-lious,overly passive,totally disorganied,just plain lay,and so on)would make them a poor risk as an employee anywhere.Here,we wont review the legal and administrative requirements thatgovern the “ring of employees,such as providing suf“cient notice to themof impending action and having adequate documentation. Suf“ce it to saythat those requirements need to be followed,and not just to avoid lawsuitseedback,Recognition,and Reward customer-call center hear from their managers only when the the calls they process is insuf“cient,they learn that it is quantity„notquality„that really counts. If the company talks about ethics,but winks atemployees cutting corners as long as the numbers come out rightŽ(infact,may ard them for those numbers),the message about ethics toemployees is clear:dont take them too seriously. If the company talksabout excellence in everything we doŽand does nothing about poor per-formance,excellenceŽthen becomes a high-sounding word with littlerelevance for how the organiAn explicit vision and values statement can be bene“cial if the com-pany takes it seriously,which means bringing the messages conveyed byperformance feedback and recognition into line with that statement. Thatis the reason why,in Chapter 6,Organiation Purpose and Principles,Žimplementation of overarching goals and values that employees learnwhat the organiation really cares about. Having serious gaps betweenwords and deeds is worse than having no words at all because the gapsbreed employee cynicism about managements competence or motives.eedback,Recognition,and Reward This page intentionally left blank This page intentionally left blank eamwork ang togeter,or,mostassuredly,ang separately.Žmountain,lo,imself.Ž „Tibetan Proverbmembership and identi“cation with others and getting pleasure from giv-ing and getting help,it is natural that healthy people cluster into groups,spending most of their lives in association with others,especially familymembers,friends,and work associates.This book is about the workplace,not about relationships per se. Yet,the quality of social relationships in the workplace„its social capitalŽ„is of enormous importance,not only because of the general need peoplehave for camaraderie,but because cooperative relationships are critical foreffective performance and,therefore,for a sense of achievement in oneswork. In a sense,it is almost comical toconsider a time when the great majorityof businesses deliberately and forcefully discouraged social interactionamong workers,fearing that it would lead to wasted time,and be nothingmore than an opportunity to goof off.ŽOnce,in a survey we did in anindustrial setting,we received the following comment:If you try to talk,te forelady comes running over a lot moreork to do,or se yells,y arent you “nisIt sounds like something out of a comedy routine,but it nonetheless repre-sents the state of human relations at work not all that long ago.The “eld of industrial and organiation psychology emerged in the1920s and 1930s,largely in reaction to these jaundiced views of workermotivation and behavior. On the basis of the famous Hawthorn studies,lton Mayo,who is widely considered the founder of the human rela-tionsŽmovement in industry,made the social needs of workers central toMans desire to be continuously associated in work with his fel-lows is a strong,if not the strongest,human characteristic. Anydisregard of it by management or any ill-advised attempt to defeatWhat did Mayo meanby a defeat for management?ŽHe refers to twomanifestations:“rst,the negative impact on employee morale; second,thereduction of the cooperation required for the effective performance ofalmost every job.The “eld has come a long way since the human relationsŽmovementand,although its theories and prescriptions have been broadened toinclude other human needs,such as those addressed in this book,youcant deny the importance of social relationships for both the satisfactionand performance of people at work.mployee Youre not helping me because youd like to see me fail,so Id betterdefend myself and the best defense is a good offense.ŽIf these battles are ignored by senior management,they escalate as amatter of course and can be costly. The costs are not just the time spent inbattle,but also not being able to exploit opportunities collaboratively.Just as a lack of cooperation can escalate into a large-scale problem,good cooperation can have a signi“cant synergistic effect. When organitions are managed as more than a collection of individuals,the resultingwhole is typically greater than the sum of its parts. Although groups areoften derided as promoting dull conformity (groupthinkŽ) or conversely,arre solutions (a camel is a horse put together by a committeeŽ),theresearch evidence shows that the quality of group performance,such as inproblem solving,is by and large superior to that of an individual workingalone. In addition to the esprit de corps they generate,groups,when struc-tured and managed correctly,allow for the emergence and considerationof different perspectives,which is vital to solve problems and make gooddecisions,and they generate greater acceptance by the members of theOur own analyses almost invariably show strong positive corre-lations between teamwork in organiations (as perceived by employees)and organiAt the obvious extreme,there is absolutely no way the Manhattan orApollo projects and thousands like them could have succeeded withoutor those cynical about doing work by commit-tee,Žkeep in mind such well-known products of committees as the U.S.Constitution and the King James Version of the Bible. Committees orteams fail when they are not structured and managed properly (more onthat later),or when they are devices put in place to avoid,rather thanmake,decisions. Those are not the committees or teams we have in mind.Contentious Workroups Are a DraAs we said in Chapter 1,What Workers Want„The Big Picture,Žoursurveys revealthat teamwork tends to be good within work units (73 per-cent satis“ed),but considerably less so between units (51 percent satis“ed). Its favorable within units because there is a natural inclinationto cooperate and,unless management acts in a way that disrupts thoserelationships,people “nd ways to work together. Take this example,whichmployee is from an executive interview in a retail corporation,of a senior managerdisrupting naturally forming cooperative relationships:He (the manager) keeps telling us that we dont work well to-gether. Hes right,were always arguing,but its mostly his fault.or example,someone gets an assignment in a meeting and then,after the meeting,he gives someone else the same assignmentwithout telling the other person. Were all running around„andout others are doing it,too. So we assume that the others areinvading our turf and were p.o.d at each other. And its a greatwaste of high-priced time. Another thing:hes always bad-mouthing us to each other.When it occurs,con”ict within units is often the result of a managers par-ticular style or the quirks of one or two individual employees. Con”ictbetween units is more frequent because,in addition to individual factors,broad organiational forces at work can create discord. Organidivided,by necessity,into business or functional units,and the membersof the units focus primarily or exclusively on the achievement of their owngoals. They are convinced that achieving their own goals is bene“cial notonly for them,but for the organiwith which they interact. In practice,however,they are often at odds withor example,many organidisputes between lineŽand staffŽfunctions. Line functions,such asproduct development,production,and sales,are directly responsible foraccomplishing the end purposes of the organiation,while staff groups,such as information technology,human resources,“nance,and legal,existprimarily to assist the line in its work. (The term staffŽderives from therod or stick that assists walking,and it comes from a Sanskrit root mean-ing support.Ž) Although staff personnel “rmly believe that they are dedi-the opposite is often the case. As the saying goes,with such friends,wedont need enemies.ŽProbably the most frequent example of this kind of con”ict is the onebetween information technology and the line. We detail that relationshiplater in this chapter. Perhaps the second most common type of con”ict Chapter 10Teamwork employees„yes,employees! Shouldnt the Human Resources departmentemployees? Well,take a look at some of these comments:oosing (a bene“ts package),I found tere mation from H caused muc stress. I found tesources department e areI am never able to “nd tquestions related to uman resources. I go in circles being trans-ferred to multiple people less te next one.I am completely frustrated talking Human esources aboutpayroll issues,canging bene“ts,and getting reimbursement fortime or business expenses. Human esources regarding a range of issues.er I cant reace proper person or te person gives merong advice and ansers. I t division of tave a quali“ed representative on site tat really It is dif“cult adesources and compensationanges tat are enacted by te leaders of tarning,suc as te elimination of overtime/e beginning of te busy season. He employee but noting more ter management.ey [tesources department] are ust a bunc ofbureaucrats„everyting is forms,forms,forms and tersare no,no,no. esources.Inter-unit con”ictis not limited to line-staff relationships. Consider thetensions between production and sales,which are two line organiillingcustomers but our produc-tion organization doesnt andle my orders in tcustomers of my sales opportunities areerefore lost. Ho can e get tem to respond in a timely man-ey seem completely resistant to trying out nemployee ings up. Also,it often takes days for tem to returnmy calls. Its muc easier dealing otould understand e can produce and fast e can do it. Promising tcant deliver in a time e cant deliver it frankly drives us crazy.Before making a commitment,it ould be great if tey cecked us “rst. By not doing tis,escalations are te norm rate exception. e are not Working together is a natural human instinct and yet much internal dis-cord exists. The work community we spoke of earlier seems not to extend,in many cases,to the organiation as a whole. Ironically,the problem ismagni“ed by the need for camaraderie. Heres the downside of the desirefor strong relationships with others:it might be satis“ed at the expense ofrelationships with those not in the immediate group. Whoevers not in theimmediate group can be viewed as competitors and even as the enemycamp.Žmployees frequently refer to a we-theyŽatmosphere within theirorganiations:theyŽmight be the people in another department on theof the country or world.Con”ict,of course,is not inherently detrimental. On the broadestlevel,con”ict and its corollary,competition,are at the heart of our eco-nomic and political systems,and they yield great rewards. Companies inthe same industry,for example,need to compete aggressively with eachother. But such aggressive competition among entities within a companydoes serious harm to the organiations effectiveness. The damage hasthree major elements:the resources that need to be expended to pursue thebattle,the loss of collaborative opportunities,and the negative impact onemployee morale. Regarding morale,although the we-theyŽphenome-enemy,Žfew employees enjoy such con”ict over the long term. It inhibitstheir performance,the organiations performance,and it is tiring. Mostemployees want to battle the competition„that can be exhilarating„noteach other.Besides being wasteful and debilitating,much of the con”ict in organiations is needless and irrational. It is needless because its resolv-able:the parties can be brought together in a collaborative or win-winChapter 10Teamwork As we have said,con”icts differ in how real or psychologically basedthey are. Approaches to reduce con”ict must take this into account andthere are two basic strategies:establish mechanisms to help avoid and settle disagreements.Partnership buildinThe parties agree to actively collaboratein the achievement of mutual goals (that is,to establish a relation-ship aimed at adding value and not just minimiCon”ict management ismost appropriate when the con”ict stems from areal divergence of interests; partnership building is appropriate when theroot cause is misperceptions. The labor-relations arena provides goodexamples of the two approaches. An antagonistic and costly relationshipbetween labor and management can be converted,through con”ict man-agement,into one where workers and the company agree on mechanismsto prevent and handle disputes,such as an orderly and relatively non-contentious grievance procedure and commencing bargaining well inadvance of contract expiration to prevent strikes. That happens when theparties,despite their different speci“c “nancial interests,recognithe mutual interest of the parties is served by containing or reducing thecosts of con”ict that can only shrink the economic pie thats available toHowever,the parties can agree to go beyond this result to considerhow they can work together to increase the economic pie that they share.They can do this by improving ef“ciency,quality,and the like. That is thedifference between a relationship of respectful adversaries and one ofactive allies.Getting management and labor to cooperate in areas such as improv-ing quality “rst requires successful con”ict management. Antagonismbetween the parties on basic equity issues makes a collaborative relation-ship on other matters dif“cult. But,managing such con”ict well does notguarantee that the parties will move to the next level. Another hurdle mustbe overcome:the misperceptions the parties usually have of each otherregarding their interest in matters such as quality improvement and theirinterest in establishing a truly collaborative relationship to achieve thoseends. With regard to quality,for example,management tends to assumethat workers dont really care about quality,while workers tend to assumeChapter 10Teamwork that all that management wants is production,no matter what the quality.These beliefs are rarely accurate or,at least,they are distorted by a signif-icant amount. Unless misperceptions are clearly identi“ed and acknowl-edged,the parties have no chance of becoming allies in a sustained way toimprove quality. The foundation for success (like that of the self-managedteams described in Chapter 7,Job that they share a common goal.How Can the Misperceptions Be Uncovered,Confronted,and Corrected?The “rst step toward resolvingorganiperceptions of the various sides on the table.ŽThis is best done throughsurvey methods,whether through interviews or questionnaires. This phaseof the process is one of the most helpful because it shows in no uncertainterms just how the two parties actually are:in many of their funda-mental interests,in their positive assumptions about themselves,and intheir negative assumptions about each other. Such data,if analyand reported candidly,are an immensely powerful catalyst for change.To illustrate,lets thoroughly examine the relationship we uncoveredbetween the IT function and its userŽdivisions in a large “nancial-services company. The reason for the study was expressed strong user dissatisfaction with internal IT functions. Complaints included errors,excessive costs,and especially attitude,Ža sense that many IT personnelwere indifferent to providing genuinely good service to its users. The sen-ior management of the company,which was largely sympathetic to theusers,asked us to determine,in essence,what was wrong with IT and howit could be “xed.In-depth interviews were conducted with all the managers in thoseunits and with samples of non-managerial personnel. What we found wasmore complex than originally thought:the villain was neither party indi-vidually,but the relationship between them. To start,each groupconsidered itself to be competent,committed toserving the interests of the company,and highly dedicated to doing its jobwell. Contrary to how they were viewed,IT employees felt themselves tobe dedicated to providing users with high quality,timely,and cost-effective work. ach side,however,saw the other as committed only to itssuccess (that is,unconcerned with either the company or the otherparty). The IT employees typically considered users to be unreasonablymployee demanding,continually changing their minds about what they wanted(disregarding the impact such mid-course changes had on IT and its abili-ty to do the job),and oblivious to costs (unless the costs were billed tothem,in which case they felt they had been overcharged). This was com-pounded by ITs view that many usersignorance of technology wasmatched only by their ignorance of their ignorance. It was further com-pounded by ITs conviction that users were unconcerned about ITs frustrations,especially the way that function was bombarded with thehighest priorityŽprojects,all of which required timely and error-free com-pletion that IT just didnt have the resources to provide.The user divisions had an equally jaundiced opinion of IT personnelscharacteristics. The IT department was typically seen as having little senseof urgency in doing the work (hence,the frequent lateness in delivery),failing to understand the usersobjectives (even though,according to theusers,these objectives were clearly spelled out),being resistant to userideas and suggestions,being frequently careless in the quality of theirwork,being unresponsive to the usersdaily needs (including not return-ing phone calls,which was a tremendous frustration),and grossly over-charging for their work. In parallel with the IT functions view,the userssaw IT as ignorant of (and quite unconcerned with) the companys main-line business and its changing demands.In essence,the views were mirror images of each other:each partysaw itself as dedicated and competent and the other as largely self-Although these perceptions might have had some degree of validity(for example,the users typically did not fully appreciate the pressures onthe IT function),they were,in essence,misperceptions because of theirassumptions of a basic incompatibility of interests and the other partysincompetence. There was an assumption of con”ict,for example,in theusersviews that IT made mistakes because it didnt care about servingderstandings as to what the users want. Also,there was an assumption ofincompetence in the view that users change the project speci“cations con-tinually because they really dont know what they want rather thanYou might be tempted to ask,Why dont these people grow up?Theyre acting like children,You did this to me,No,I didnt„you didthat to me.Why dont they just get down to business and stop the inces-sant bickering and blaming?ŽChapter 10Teamwork Through interviews,or a combination of interviews andquestionnaires,the organiations members are surveyed. The surveysyield in-depth pro“les of the views the members hold of themselves andthe other party; what they see as the key components,causes,and conse-quences of the lack of collaboration; the suggestions they might have toincrease collaboration; and what they deem to be the potential bene“ts ofincreased collaboration in terms of speci“c business problems andEstablish Workshop Ground Rulesollowing the diagnosis,a workshopis conducted that aims to establishthe basis for a productive and lasting partnership between the parties. Theworkshop normally lasts about three days and the participants are thosewhose work will signi“cantly bene“t from collaboration improvements.As long as the participants follow a number of ground rules,the work-shops almost invariably succeed. They basically succeed because the par-ticipants want them to succeed:they want to collaborate and they want thehigh levels of performance that teamwork can produce. The key workshopground rules,which are sustained throughout the workshop by the facilita-tor,are as follows:Unlike some team-building efforts,theprocess employed is clearly and directly business related. Thegoal is not to build relationships per se,but to build relationshipsthat promote business objectives. This type of workshop rarelyuses simulated exercises to get people to work together; they workcollaboratively on business issues and opportunities that are real,signi“cant,and best dealt with as a team. The human-relationshipissues are identi“ed and resolved within this business context and,as appropriate,the workshop takes the time needed to assess,dis-cuss,and resolve those issues.Open atmosphere.It is important that the workshop partici-pants feel free to express their views. This is aided immeasurablyby the diagnostic attitude data collected prior to the workshop thatassess the viewpoints people hold of themselves and the otherparty. At the beginning of the workshop,the facilitator presentsChapter 10Teamwork that,at least initially,the workshop participants might be reluctantto bring up themselves. The issues then become safeŽtopics forthe workshop.Constructive atmosphere.The open exchange of views shouldtake place in an atmosphere of mutual respect. Mutual respect isdemonstrated by a visible effort to appreciate the situation of theother party,showing an intention to work collaboratively on theissues,and demonstrating trust in the other partys intention to doso,and avoiding rude or abusive language.Action orientation with follow up.The outcome of the work-shop is a jointly developed action plan that involves close andcontinued collaboration between the parties and will contributesigni“cantly to achieving their mutual business objectives. Theplan includes mechanisms for following up to ensure that theagreed-upon actions are being taken and recommendations forstructural changes,such as changes in the reward system of thetotal organiation that reinforce inter-unit collaboration.Flexible approach.Although certain general principles governthe partnership-building efforts,the speci“cs are often modi“edas the workshop proceeds. The interactions in the workshop aredynamic and unpredictable in many respects,so it is vital thatIn summary,the keys to a productive workshop are timely preparation ofthe participants,an open and respectful expression of views,an unyieldingfocus on the business objective of what is transpiring,disciplined actionplanning,and a willingness to make adaptations to the agenda as the situ-ation warrants.ypical Workshop A1.Senior management and the facilitator review the objectives,agenda,and ground rules of the workshop.2.The participants present their views of the relationship betweenthe parties,covering key strengths and improvement needs andthe speci“c business activities that could bene“t from increasedmployee 3.The facilitator presents the “ndings from the diagnostic survey.on sensitive relationship issues.4.The participant presentations and the diagnostic “ndings are dis-cussed,starting with the human relationship concerns (for exam-ple,the misperceptions that cause friction in the relationship) andconcluding with the substantive business issues.5.The participants reach an agreement on a limited number of prior-ity business issues that will bene“t from collaboration. They thendecide how best to tackle the key issues in the workshop (forexample,those that need to be dealt with by the group as a whole6.The participants carefully de“ne the priority issues and develop7.The workshop concludes by establishing mechanisms for the following:€Reviewing,“naliing,and implementing the action plans.€Determining how the collaborative relationship between theparties can best be sustained. Unless this is addressed,it isalmost inevitable that,over time,the teamwork the workshopproduced will largely dissipate as the participants resumeIn addition to the business sessions of the workshop,various social activi-ties are scheduled (usually in the evenings) to provide an opportunity forrelaxed and informal interaction.Action Example:I and Its UsersWe previously described the contentious relationship between the IT func-tion and its users in a “nancial-services company. The following summa-es what they accomplished in their team-building workshop and infollow-up meetings.Chapter 10Teamwork The workshop participants decided on the following basic objectivefor their work:To help IT become a trulyuser-focused organiation,every userevery user must feel that IT is concerned about him or her indi-vidually; every user must be satis“ed with the services he or shereceives from IT. This will be accomplished both by changingto help them become more involved and informed consumers ofIT services so that IT can assist them more effectively.Here,in the participantsown words,are excerpts from their actions plans:stablishment of a company-wide IT-User Partnership Council toassure smooth working relationships; will meet monthly with an€Speci“c problems that have been encountered; Council willdecide how to resolve them.€Consideration of basic changes that still need to be made toassure a good working relationship.€Opportunities for additional collaborative undertakings€Review of the results,as they are available,from regularemployees.Individual user organiations may set up their own Partnership2.Individuals will be appointed by IT to serve as the interfaces witheach user organiation. These persons will be the primary„butnot sole„points of contact between IT and the user organitions. Through communications and coordination,these personswill work to assure that the usersexpectations of IT are satis“ed,including helping set realistic user expectations.mployee 3.Communication and involvement:€Within each user organiation,communication sessions will€The relevant aspects of the users business will be fullydescribed for IT.€The relevant IT processes will be fully described for theuser.€Guidelines will be presented for the kinds of behavior„on both sides„that constitute a cooperative working nough time will be allowed for questions and discussion,withach sessions agenda will bedeveloped jointly by IT and user representatives to assure clarityand relevance.€All projects will now begin with a full discussion between ITand the users of the projects objectives and requirements;requirements will be recorded,but as a working documentthat will likely change (versus a legalistic and static docu-ment); will be followed up with regular meetings reviewingproject status,changes,etc.; also,electronic noti“cation willbe provided to users regarding project status; no surprisesŽbilling:costs fully detailed and explained at beginning ofproject; when modi“ed,detailed explanation will be given touser with opportunity to question and negotiate.€IT projects that are not initiated by a user but will affect that€Telephone inquiries from users will be answered within two€Monthly newsletter will be published (electronic) for both ITand user personnel (accomplishments,new developments,Chapter 10Teamwork 4.Training to be scheduled:communication and customer-relationship skills. or IT personnel in new technologies (both on- and off-siteor user personnel in systems that have been developed for5.IT internal structure and processes:€Will reduce needless bureaucracy:a lengthy approval processapprovals required,especially in the applications develop-ment process; a destroyerŽtask force will review all paper-work and eliminate paperwork that is no longer useful.€Cross-functional communication mechanisms (meetings,etc.) will be strengthened within IT.€New and transparent prioritiation process will be developed(combination of time of request,urgency,and amount andavailability of resources).Action implementation began. A follow-up interview survey conductedeight months after the workshop revealed sharp gains in most respects incollaboration-related attitudes. Heres a typical comment from an inter-view with a user:Things have changed for the betterhere. Most of them (ITemployees) have a different attitude now. They actually return myphone calls and right away. Most seem to to help. A bigchange is how we now plan development projects together and wedont have to worry about dotting every iŽand crossing every tŽbecause we know that things will change anyway,and well haveto keep communicating and working together. Also,if things willbe late,they tell us; if they dont understand what we want,theyask us. The only real problem is with one small group of pro-grammers who are stuck in the past. Its their manager„hes stillthe same arrogant (expletive deleted). Also,I think their internalapproval process is still a little too bureaucratic and time-wasting.mployee This comment is taken from an IT employees interview:I enjoy my work more now„the haggling is much less now. Weunderstand each other much better now. I used to think they werenot so smart„thats the way I always thought about bankers:expensive suits,not much else. Theyre still not really up on tech-nology,but I see now a lot of dedication and business sense onthe part of most of them. Its great working together to solve theirproblems and Ive gotten more interested in the business. We stillhave problems with them wanting too much too soon,and theyget frustrated with us. But,the anger isnt there like before andthey now almost never go around us to top management to forceus to give in to their demands. One guy still does. We talk moreface-to-face about the problems and we work most of them out.We understand more the pressures on each of us.The partnership-building process does not result in Utopia. Certain issuesremain and must be dealt with and,given the forces in an organipull people and units apart,attention must be paid continually to the rela-tionship or serious problems will certainly recur. Therefore,it is a goodidea for the parties to periodically meet offsite for a day or so to examinefully and candidly the state of their relationship. This examination usuallychanges might be quite basic and some might be painful to individuals.or example,the parties might decide that structural modi“cations arein order,such as decentraliing segments of a staff function into the lineorganiation. Certain relationships might lend themselves to modi“ca-tions in compensation to make pay more re”ective of teamwork and notjust individual effort. Personnel changes might be needed,such as moving an employee to another job,or even “ring those individuals who,despite counseling and time to change their behavior,simply will not orcannot conform to the new collaborative norms. These measures makepartnership-building more than a passing fad or a temporary “x for a prob-lem. They serve to institutionalie and sustain a genuinely collaborativeChapter 10Teamwork This page intentionally left blank This page intentionally left blank The parties trust each others intentions.-term perspective.term relationship,one that survives short-term vicissitudes ofbusiness.themselves and for each other.The parties have con“dence in each others com-Joint decision-makinThe parties make key decisions jointlyon matters that affect each of them.each other.each other.butions.Day-to-day treatment.To the extent that the collaboration isdesigned to generate improved “nancial results,the parties shareThese criteria can be applied to any business relationship:betweenemployees and management,between work units,and even to relation-ships with other business entities,such as suppliers.Some might argue that the term partnershipŽdoes not “t the employ-or these people,the term implies a funda-mental equality between the parties that is rarely present in any practicalsense in the employee-management relationship. Applying it to that rela-tionship therefore might seem dishonest and manipulative„an attempt tosubtly convince employees that their power is more than what it is.However,that is neither the objective nor the point. Power inequalitiesexist in every organiation:almost everyone has a boss,even Cwho answer to boards of directors. But,bosses vary greatly in what theywith their authority,and those differences lead to hugely diverseChapter 11The Partnership Organi outcomes. In that sense,the use of power is a central concern of this book.So,although it is true that a large discrepancy in power between workersand management exists,it is also true that workers accept the legitimacyand the necessity of this. They are,in fact,disturbed when leaders dontlead,such as when they are unduly hesitant about making decisions. Butworkers do not accept the legitimacy of being treated as la(that is,unable or unwilling to signi“cantly contribute to the success of themployees respond well when authority isproperly exercised.Analogously,workers do not bridleat pay differentials. To some peo-ple,partnership might imply pay equality,but in our formulation,it is payequity. We have never heard workers objecting to senior managementbeingpaid more than them. They complain about senior management payonly when the gap with their pay is enormous,it appears to be unjusti“edby the performance of the organiation,and that performance has causedthe workerspay to suffer. These complaints are exacerbated when thattude. Otherwise,they think,Let the brass make as much as they can„Im doing well.ŽThe partnership organiorganiation types. As with all typologies,no organiation “ts any typeperfectly and all are,to one extent or another,mixtures. This is especiallyevident when organiing business conditions or the advent of a new top management bent onchanging the organiations operations and culture. Also,different strataof a workforce,such as salaried compared to hourly employees,might betreated differently,and individual managers and managements might actdifferently depending on the circumstances of the moment. Although wetherefore never “nd complete consistency,strikingly strong tendenciesallow us to identify most organiations,and the major units within them,as closer to one type or another (or,at least as moving from one type toIn addition to partnership,the major organitransac-,andadversarial. The following paragraphs describeThe last two decadesor so have witnessed the emer-gence of an explicitphilosophy and set of management practices whereinemployees are treated essentially as commodities that have a priceŽandare owed nothing but that price (that is,nothing beyond their paychecks).We discussed this management style earlier,especially in Chapter 3,Jobmployee Security,Žand depicted it as emerging in response to a more competitiveworld and as a reaction to thecosts and in”exibility of paternalism. Itsmost visible manifestations have been the downsiings,restructurings,re-engineerings,rightsiings,outsourcing,and offshoringof the last twodecades (all terms usually signify getting rid of workers). These haveoccurred most notably in companies that had previously been well-knownbulwarks of employment security,such as IBM,Kodak,Xerox,and Guse of temporary employees,independent contractors,and subcontractorswords that describe and ideologically justify a transactional approachto management. These terms are contrasted with an entitlement mentalityassumedly bred in employees by organiistically.As we have pointed out,to be treated as a faceless commodity„aninterchangeable part to be disposed of at the “rst whiff of less-than-sterling pro“tability„has consequences for employee morale and per-formance. The employee response is not so much anger as it is resignationand an indifferent attitude toward work and the company,such as This isthe way it is these days„company loyalty is dead,so why should I care?ŽTransactional management should not be confused with a cruelŽman-e every last dime and ounce of sweat from itsworkers. Transactional organiwage rate and,as far as workload is concerned,are not,by and large,throwbacks to the infamous era of sweatshops. ssentially,it is an ferentmanagement„indifferent to the value of people other than to per-form the speci“c tasks for which they are being paid. They dont expectmore than that from a worker and,if they get less,the worker can be “red.There is,in the purest form of transactional management,no other con-nection or obligation to the worker,not even a negative connection. Whyget aggravated and pressure the worker when he is not performing or isoften absent or late? A manager might talk with him once or twice,and ifthe worker doesnt improve,the manager just “res him.A transactional orientation is notlimited to the shop or factory ”oor; itmight occur as frequently in the executive suite. Chapter 9,Recognition,and Reward,Žrelates an anecdote about a corporation wherethe executives of the company felt themselves as being on a slipperyslope;Žtheir past performance seemed almost irrelevant to the CO:itwas,What have you done for me today?ŽIn interviews conducted withChapter 11The Partnership Organi senior management of a Midwest manufacturing company,the attitude ofO was described this way by an interviewee:Let me tell you something:he does not give a damn whether westay or leave. He thinks he is the reason for any success the com-pany has had and he can buy anybody to carry out his orders.Sure,when youre hired,you get a big sales job,youre a big herothen,we really need you,Žbut you go from hero to eroŽin justa few months. He just cant stand the competition from anyonewho works for him. Were like a commodity. Hes the only onewith value.All the other members of senior management expressed similar views.The turnover rate in this group was 80 percent,with only one executivehaving been with the company more than 18 months. They had all left vol-untarily and were,by all reports,highly competent executives.Paternalism.As the term connotes,thisis a relationship between acompany and its employees similar to that between caring parents andtheir children. In the U.S.,it dates largely from the late 19th and early 20thcenturies,the period that saw a great upsurge of industrial growth in theU.S. accompanied by a tide of labor-union activity,but had for the mostpart died out by the last decade of the 20th century. As we have indicated,it has been replaced,in large measure,by companies with a transactionalAbove all else,paternalistic organiations provided security for theiremployees in the form of protection against job loss and the provision ofbene“ts that freed employees from medical and retirement “nancial wor-ries. Additional amenities often included educational programs,recre-ational facilities,subsidied cafeterias,company loans,and,in its earliestdays in company towns,Žlow-cost housing.The great majority ofemployees joined such companies with the prospect of a lifetime careerfor themselves.Companies that were labeled paternalistic were not all alike,not by along shot. Most important was the difference between companies thatindeed treated their workers well and those in which paternalism was afaçade to conceal exploitative,even inhumane,management practices.The latter was especially characteristic of many company towns,Žwherethe company owned just about everything„housing,stores,schools„andemployees had little alternative but to rent lodging,buy goods,and so onfrom their employer. Pay was low and the company,in all its bene“cence,mployee would allow employees to draw a portion of their wages before payday inthe form of scrip. The scrip coupons,however,were redeemable only incompany-owned stores and once an employee began using scrip,it wasdif“cult for him to get out of debt to the company. A worker might owe 95percent of his check to the company.That kind of management must bedistinguished from the paternalismof other corporations whose practices were truly benevolent and madethese companies employers of choice for their workers,such as IBM,astman Kodak,Sears Roebuck,Corning,and Johnson & Johnson. Thesecompanies provided their workers with above-average wages,excellentfringe bene“ts,employee stock ownership or purchase plans,good work-ing conditions,and,of course,job security. But despite,or rather becauseof,their benevolence,these companies were also subject to sharp criticismWe already discussed one line of attack,namely,that paternalism istoo costly and too in”exible in a highly competitive and rapidly changingbusiness environment. This criticism comes from those who bemoanalmost any worker entitlementŽand any constraint on managementsability to manage for the highest ef“ciency.trum:the left,especially the labor movement that advocated checks onmanagement and argued that paternalism was but a ploy,an insidiousinstrument for maintaining control over workers.There is no question but that a major goal of paternalistic companieswas control,in two senses. Through paternalism,employers attempted toprevent unioniation of their workers and to govern their morals andsocial behavior.Regarding unioniation,paternalistic companies sought to provide fortheir employees at least as much as„and usually more than„they couldobtain by joining a union. That was the basic economic reckoning,but theeconomics gave birth to strong emotions as well:great trust in,and loyaltyto,the organiation. Two of the authors of this book worked for IBM„anon-union company„toward the end of its paternalistic era and can attestto the enormous loyalty that company was able to engender among thegreat majority of it employees.It could be argued that,on economic grounds alone,it made no sensefor these paternalistic organiations to “ght unions. After all,the thingsthey did for employees to avoid unioniation might have cost more„perhaps considerably more„than a union could have obtained for theChapter 11The Partnership Organi Another factor diluting the average ability levels in these organitions was their hesitation in facing up to poor employee performance. Inpart,this was a result of the fear of unioniation,but it also stemmed fromthe emphasis on loyalty rather than performance. There was much lessing„an employee who violatedone of the organiations moral codes. Despite the performance issuesinherent in paternalistic organiations,they survived well„some eventhrived„when they faced little signi“cant competition in their industriesor regions. Many were virtual monopolies. The onset of international anddomestic competition made this management style largely obsolete.Adversarial.The paternalisticpattern arose to a signi“cant extentto avoid unionidependency,conformity,and the manipulation of workers,the workersinthese companies„the benevolently paternalistic companies„thoughtthey were getting a terri“c deal. Although they often had complaints aboutmatters such as excruciatingly slow decision making by management,their own lack of involvement in decision making,and the criteria used toselect employees for advancement,lifetime employment,excellent fringebene“ts,and other amenities were powerful inducements to stay with thecompany until retirement and not make too many waves.Of course,many other companies had employees who did makewaves„big ones. These were companies whose employees fought toorganie into unions to improve what they considered to be deplorableemployment conditions. Once organied,they felt they had to continuebattling to maintain what they had achieved and to further improve theirconditions. This is the adversarial organiation where workers believe thattheir companys management gives them nothing unless theyre forced toand,if conditions are right,they organie into unions to get what they feelworkers need and deserve. Among workers in these organiations,there isa sense that they and management share no common objectives; they areThe win-loseŽview of workers in adversarial organiations invari-ably has its genesis in the beliefs and behavior of management. Workerswork to earn a living and get some sense of achievement from their jobsand satisfaction from their association with their co-workers. They cer-tainly dont come to work to “ght. The few who do are quickly marginal-ed by their co-workers if theres nothing to “ght about. However,if astrong sense of unjust treatment exists,those workers can become theleaders of an incensed workforce.Chapter 11The Partnership Organi percent)? Why has the dominant tendency in the U.S. been toward trans-actional relationships? A corollary question is why collaborative compa-nies have irst,the answer lies in theattractiveness among American executives of avoiding commitment toworkers because this allows management to shed workers with minimumcost and travail (to the company). And other aspects of commitment mightseem to be more trouble than what they are worth,such as the need tocommunicate and listen in meaningful ways to workers.often unattractive:many senior executivesstrong belief in the need forcontrol through top-down management. Partnership differs from all threeother models of management in its willing,in fact,deliberate,distributionof authority to the workforce. Although it is inaccurate to speak of equali-ty of power,in a collaborative setting the workers in”uence on the waythe job is performed and on the decisions made in the immediate workenvironment is much greater than within any of the other three models.or some executives,distributing authority to the non-management work-force is,at best,silly„after all,what can workers contribute?„and toothers,its frightening because they equate such decentraliorgani-faire management describedearlier). There is,of course,no evidence that most workers want authorityoutside of their work areas; they want a leader steering the ship,but aes that the day-to-day workings of the units of theship are best left to those most knowledgeable of the work in those units.the short-term orientation of many senior managers as they seek rapidgains in pro“ts and in the companys stock price. The collaborative modelperformance. The research evidence wepresent in this book about the positive impact of collaboration on businessourth,the attractiveness of transactional management is enhanced byits compatibility with an anti-entitlement ideology. As we have pointedout,collaboration is often confused with paternalism where performanceis,indeed,often secondary to entitlement as a criterion for rewards.Therefore,strong forces militate against a partnership approach,andthese are buttressed by the viewpoints of some union leaders who deeplydistrust any approach that is not adversarial. Unions are still a force to bereckoned with in certain industries and companies.Chapter 11The Partnership Organi It is an unfortunate reality that there are workers with whom it isimpossible to establish a collaborative relationship. Also,there are man-agers with whom this is impossible. The problem tends to be more one ofphilosophy:managers who simply do not accept the notions underlyingpartnership,the assumption,for example,that workers want to work orthat they are reasonable in what they expect in their employment condi-tions. Sometimes,this problem can be overcome by training and counsel-ing from experienced managers with a partnership approach,butsometimes it cannot. Organiations that have moved to a partnership cul-ture have always had to deal with managers who could not (or would not)change,and they have had to remove them from managerial positions.Otherwise,they create cross-currents damaging to the installation of aWe come now to senior management. The issue here is not whethersenior management expresses agreement with the partnership concept andmethods„if they dont,it wont happen„but whether they genuinelybelieve what they say. In many companies,senior management has initiat-ed (or,more precisely,allowed to be initiated) programs that sound goodbut have little substantial follow-through. To genuinely believe in partner-ship means more than just words,it means taking the that wevedescribed throughout this book and sticking with them. Changing an orga-ations culture in the direction of partnership should never be attempt-ed in a super“cial way,such as with slogans instead of deeds or withdaily lives of employees. These efforts,which usually soon disappear(programs of the monthŽ),do nothing but generate or reinforce workersskepticism about management and its intentions. If senior management,O,does not genuinely commit to partnership by demon-strating its willingness to take serious action,forget it! (We return to thiscrucial matter of senior management commitment later in this chapter.)We have not quali“ed the use of partnership by occupation or bynational culture. There is no evidence that the approach does not workwhen its applied to certain types of work or in certain cultures. Obvious-ly,adaptations must be made,but the fundamental concepts are,to ourknowledge,applicable everywhere. Is there an occupation where collabo-ration for the achievement of common ends is not desired? Is there a coun-try where that is not the case? We think not. Its time to shelve thestereotypical portrayals that we apply to large groups of workers,stereo-types that can,in part,function to allow blame for problems to be placedon the characterŽof workers instead of on the way they are managed. Asmployee Continental Airlines was just three weeks away from failing tomeet its payroll in 1994,losing about $55 million per month.Os in 10 years,the airline onlyThis was a crummy place to work. The culture at Continental,after years of layoffs and wage freees and wage cuts and brokenpromises,was one of backbiting,mistrust,fear and loathing,Žsays Bethune. People,to put it mildly,were not happy to cometo work. They were surly to customers,surly to each other,andashamed of their company. And you cant have a good productwithout people who like coming to work. It just cant be done.Ž:How important is company culture and morale to the turn-around of Continental Airlines?:Its everything. You cant quantify it. I mean,howimportant is your liver? There isnt going to be any success if youdont have the right culture and morale. It just doesnt work.:When you came to Continental,you concluded theemployees were basically a good group of people despite all the:All you had to do was walk around. If youve been inthis business,you could see there was nothing wrong with thesepeoples thinking; their tools were “ne,we had our stuff. But ifyoure running an airline,why would you run a late one? Youcant “gure out what time of day it is? You dont know how fastthe planes ”y? I mean,this is sixth-grade arithmetic were talkingabout here. The fact is,everybody kind of knew what to do,butnobody cared about doing it. If every time,for the last 10 years,no matter what you did you lost,then you quit trying.How were you able to gain employeestrust?You have to earn and develop trust. Its like dealing with abused children. They kind of like the way you talk and act,but every adult they ever met screwed them over„so theyregoing to be a little hesitant until you just patiently,with consistentbehavior,show them that youre not just a new deal from thehere for them to believe things really were different.mployee From orst to First,you talk about theimportance of dealing with employees honestly,of communicat-ing with them,of clarifying expectations and of removing a lot ofrules and policies. What else?Most importantly,we showed them concrete examplesof positive change for them. We became a no-smoking companythe “rst week. We took the locks off the executive suite doors. We went casual on ridays just to change our dress behavior. Westarted rewarding extra if we did our job better. When we did ourjob better quickly,their lives got better because when we were ontime,they were on time. They started getting home to pick uptheir kids from school or whatever mattered to them.Bethune goes on to describe the other changes he introduced,such as afocus on customer satisfaction,monthly bonuses for on-time perform-ance,and replacing the authoritarianŽemployee manual with a set ofguidelines that didnt box them into ridiculous procedures for every ele-ment of their work.ŽHe also felt that he had to replace a number of middleHeres Bethunes comment on the source of his ideas:Someoneasked meƒhow come I know so much about people? I said,I used to beone.So I think understanding your co-workers is kind of a prerequisite tosuccess. Youre not going to make it without their help,so you have tolearn how to talk to them and how to appreciate them.Žhe Action ProcessWe discussed partnership is,so now we come to duced and sustained. We dont have a cookbook recipe; you can bringabout culture change in many ways,and it is never a neat and entirely pre-dictable process. Nevertheless,certain approaches seem to work better thanothers (a series of steps is described later in this chapter),and knowingwhat they are should help an organiation take signi“cant steps forwardwith minimum downside risks (when adapted to individual circumstances).You might have one of four broad kinds of reactions to this book:thisis nonsense; this is what we already do; this sounds interesting,letsexplore further; or this is exactly on the mark,lets go! Of course,therecan be all sorts of intermediate responses,such as we do some of this andChapter 12Translating Partnership Theory into Partnership Practice the rest is nonsense,or too radical,Žbut lets stick to those four as a spring-If you feel that this is what your organiation already does,we ask youto hold on for a moment. You might be right,but you might not,or youmight be only partially right. Some executives believe that they run theirorganiations as a collaborative endeavor with employees because theycommunicate frequently to them,they have suggestion programs,theyhave an open door,Žthey call their employees associatesŽor teammembers,Žand so on. But,by using the diagnostic methods we suggest inthis chapter,these executives might learn that the reality is much different.employees reality,not seniormanagements.If you feel that the ideas and practices we have been espousing can beuseful to your organiation,you might be inclined to start implementingthem right away. We suggest,however,that the “rst step is not implemen-tation,but assessing just how ready the organimanagement and,most especially,the CO„is for partnership. This isat the senior level that help those executives confronthow they really feel about partnership concepts and policies. Later in this chapter,we explain using a readinessŽquestionnaire that senior man-agement completes to get these views on the tableŽso that the basicHere,then,is a process by which partnership can be considered andintroduced into an organiation. The recommended steps are largelydesigned to be applied to an organiation that wants to change itself in itsentirety (whether the organiation is a total company or a relatively self-contained business unit). It can be usefully applied to segments of organi-ations,such as individual departments,but often with less marked resultsbecause what goes on in those units is usually heavily in”uenced by theculture of the entire organiation in which it exists and by its relationshipsStep 1.What is our business goal?Step 2.Are we ready for this?Step 3.What,exactly,do we want?Step 4.Where are we now?mployee Step 5.What are the major aspects of the organichanged to get us from where we are to where we want to be?Step 6.How should the plan be communicated to the workforce?Step 7.How do we decide on the speci“c changes that need to be madeand how they should be implemented?Step 8.How should managers be trained for the implementation of Step 9.How do we assess how well we have done?These steps are abstracted from our ownexperience and that of manyother practitioners as to how this kind of culture change can most effec-tively be introduced. Although the steps appear neat and sequential,inpractice,considerable overlap will exist among them and you might moveback and forth as the situation dictates. Before we describe the steps,hereare four principles that should govern their application:ht of the business This chapter is largelydevoted to process in two ways:partnership itself is a processpeople can best work together in a businessorganiation; we now describe duced and sustained (in other words,another process). In all thisdiscussion about how things should be done,we might lose sightthey are being done. The effort can disintegrate into collaboration for the sake of collaboration,Žwhich is a parody ofthe concept. Such process-infatuation is not too different from the way a bureaucrat over-focuses on the means (the proceduresAlthough having a clear business goal for the effort does not guar-antee the success of partnership,neglecting this certainly assuresits failure. In a short time,the organibusiness objectives,and the means familiar to it for achievingthose,which will almost de“nitely not be partnership. Partnershipthen atrophies into a sideshow. e business goal must be an inte-gral part of tay an organization de“nes partnersip for itself,ill assess its value once introduced.Chapter 12Translating Partnership Theory into Partnership Practice Where partnership has worked best,the primary businessoal has almost invariably been improved products or ser-vices for the customer.Collaboration„up,down,and across„delight the customer. This goal works wonders because it is in thedirect service of the business and employees can really get enthu-siastic about achieving it.Introduce chan partnership principles.the effort (the partnership organiation),but should also governthat goal is reached. Inconsistency in ends and means opensthe credibility of the entire effort to question,Does managementreally believe this stuff?Žurthermore,change that is essentiallypositive and that affects many people is best achieved by workingcollaboratively. It doesnt have to be designed in secrecy andforced on workers. Just as people welcome partnership,they wel-come the opportunity to participate in its development and imple-mentation as long as they feel it is serious business and not justanother exercise. The basic structure of the process that we willsetting the overall objectives and rationale of the effort. That is arequirement of leadership,and employees want to know the basicobjectives come from the top. But the translation of that statementresponsibility of task forces composed of individuals fromthroughout the organior most issues,diagonal slicesŽ„people selected across levels and functions„are the best way toform the task forces. To help assure that they continue to receivethe support and attention they need,most task forces should bechaired by a senior-management member.If the organied,the unions active participationneeds to be sought. Labor-management cooperative efforts havealmost always been run by a joint labor-management steeringAvoid assumin that people naturally resist chanassumption about resistance to change is anotherpessimisticy. People resist changes thatmployee they see as harmful to them or the organiation,and they gladlywelcome changes that they see as helpful. When was the last timeanyone saw a worker turn down a salary increase? Or upsetbecause his new manager treated him more respectfully than hisprevious manager? Or complain about management adjusting thework pace to allow workers to turn out higher quality work? Thosearechanges and if workers naturally resisted change,they wouldresist those changes,too. The notion that people have a dif“culttime with change is a way to explain psychologicallyŽwhy work-ers often dont want to do what management wants them to. Theydont want to do those things because they consider them harmful!Does a worker resist a new technology that will replace himbecause he resists change?ŽIs he upset about a transfer to a lessact in counter-productive ways,such as secretly developing plansand springing them on workers at the last minute; not listening tothe genuine and speci“c concerns that people have about changes(after all,why listen,if theyre just resisting changeŽ?); needless-ly overselling changes to workers; and,not doing the necessaryplanning to buffer the ill effects that change might bring (theyllcomplain whatever we doŽ). Because of these behaviors,peopledo,indeed,act as if they resist change. Its the self-ful“llingprophecy at work again:employeesbehavior re”ects the waythey are treated. Therefore,our advice is to largely ignore theassumption of natural resistanceŽand,as we have said,assumethat most employees welcome the changes that partnership willbring. Proceed with its development and introduction in waysement attention and involve-We cannot emphasisenior-managementcommitment to the change process. Theveryone in an organiation wants to know what the top wants,especially in an effort as untraditional and innovative as the intro-duction of a partnership culture. The forces that tend to militateagainst partnership„the inevitable frustrations of the workplaceand the tendencies of organiChapter 12Translating Partnership Theory into Partnership Practice as they focus on their own objectives„make essential reinforce-ment of the importance of partnership from those in power. Thatsupport must be communicated in word,and especially in deed,including the way rewards and recognition are distributed. Ifrecognition is given irrespective of peoples performance as part-ners,the partnership values will begin to appear hollow.Here are the suggested key implementation steps to introduce partnershipinto an organiStep 1. What is our business nership is introduced in an organiation must be the achievement of keyand speci“c business objectives. It cant be just that things will be betterthis wayŽor employees will be happier.ŽAs we previously mentioned,the most successful partnership efforts that we have observed have beenthose where improved products and services for the customer has been theprimary goal. But whatever it is,the business objective must be an integralpart of the way the organiation thinks about partnershipand the way itwill evaluate its effects.Step 2. Are we ready for this?The decision to move to a partner-ship culture to achieve business objectives should be deliberate andthoughtful,with full understanding that culture change is a long anddemanding process; the biggest pitfall is the temptation to do it super“-cially. The easy way is to avoid grappling with basic issues and changesand transform the effort instead into a programŽwith catchy slogans,slick communications,and committees upon committees„all quite unre-lated to the mainstream of the business and what goes on in the daily worklives of employees.In this initial step,senior management requires two things:a goodunderstanding of what partnership is and what it does,and a good under-standing of themselves. The former is achieved through reading,and dis-cussions with experts in the “eld,with managers,and employees inorganiations that operate with a partnership culture. Visits to those organ-impacts„are especially useful. Our experience is that the greatest impacton executivesthinking comes from observable facts„seeing somethingactually working„and those facts explained and veri“ed by other execu-tives they respect and trust.Self-diagnosis should follow immediately; for this,we suggest using adiagnostic questionnaire to assess readiness (such as one provided inmployee ,The Readiness QuestionnaireŽ). The questionnaire shouldbe completed by all top management personnel,which usually consists ofthe chairman,the president,and their direct reports. It is critical,of course,that these people be asked to complete the questionnaires as they genuine-feel,not what they believe is the socially acceptable answer or whattheir bosses want them to say. Individual answers must be kept complete-ly con“dential,so it is best that the completed questionnaires be sent to anoutside party or some other trusted source for scoring. Appendix The results of this self-diagnosis need to be reviewed thoroughly andcritically by senior management. This is best done in an off-site settingwhere full and frank discussion is possible and encouraged. The question-naire results are not precise measures of readiness,but stimulate discus-sion so that a decision about whether to go forward,and in what respects,Step 3. What,exactly,do we want?The next step,preferably at thesame off-site meeting,is to formulate a clear,speci“c,and comprehensivestatement of what the organiation wants to do and why. It is best to inte-grate this with the organiations purposes and principlesŽor visionstatement (see Chapter 6),if one exists. It is that part of the statementdevoted to the kind of relationship the organiation wants to have with itsworkforce and should include the business rationale for partnership,thatis,how a partnership culture will help the organiation achieve its busi-ness goals. Tying it publicly to the business makes the statement„in fact,the entire process„more credible in employeeseyes,and credibility isfurther enhanced by being speci“c and avoiding platitudes. or example,it might include items such as we will pay a wage that is fully competi-tiveŽand we will organie into self-managing teams that will be delegat-ed the authority they require to get the jobs done effectively.ŽCredibilityis also enhanced by including limits on what the organito do,such as we cannot guarantee lifetime employmentŽ(but statingwhat it will do,such as handling workforce surpluses,to the extent possi-ble,with normal attrition and with the retraining and redeployment ofworkers).e statement be developed by senior managementorkforce as te product of senior managementsAt this stage,the statement will be in draft form and will be “naliand distributed in step 6.Chapter 12Translating Partnership Theory into Partnership Practice Step 4. Where are we now?Having decided on the basic direction,it is now necessary to get a good reading on the condition of the organisuf“cient to depend on senior managements views of this. Senior man-agers might think that they know where an organiation stands,but theyare often incorrect; the bias can be either positive or negative.The best way to “nd out wherean organition of subjective measures,such as how employees see their pay,andobjective measures,such as their actual salaries compared to other rele-vant companies. On certain issues,it is impossible to obtain data otherthan through an attitude survey,such as the respect with which employeesfeel they are treated. It could be argued that the employee survey measures are the mostimportant; if,for example,the salary survey data show that the companypays competitively,but large percentages of employees disagree,does itreally matter what the salary survey data show? Recall that our surveys donot con“rm the widely held view that workers will always be unhappywith their pay. When they are unhappy,but the salary survey data say theyshouldnt be,it is likely that the criteria employees use to judge the fair-ness of their pay differ from those used in the salary survey. mployeesmight be comparing their pay to that of workers in a different set of com-panies (perhaps nationwide instead of locally). At the least,a discrepancyshould cause management to investigate why it exists rather than,as isusually the case,relying solely on the objective information to measurewhere the organiation stands and then educateŽemployees as to whythey are wrong.The survey should also include items from the Readiness Question-naires so that views of partnership policies and practices can be assessed.This is especially helpful for middle- and lower-management populationswhere attitudes toward certain aspects of partnership might be unfavor-able. These views will need to be addressed in communications to themWe have been referring to organiation-wide results. But,a surveyshould be conducted so that information is generated not just on employeeviews overall,but for various units,occupations,and levels.This providesa veritable X-ray of the organiation,not only the views are,butere„enabling greater precision in the development and application ofaction. It may be,for example,that blue-collar workers feel much lessrespect is shown them than for professional workers; or employees in mployee departments than is true elsewhere in the organiation. Thus divided,thedata at a later stage of the process can provide individual managers withan assessment of how their ownemployees score on the various dimen-sions of partnership,including how they view their managers behavior.This is extremely useful for self-analysis and for the training and coachingof managers. The use of the survey questionnaire for individual managerfeedback is discussed more fully later in this chapter.The survey instrument,which is developed to provide direction at thebeginning of the process,is also a means„in conjunction with objectivedata„to assess the impact of the actions taken and,more generally,toevaluate the organiations progress over time toward a partnershiporganiStep 5. What are the major aspects of the oret it from where it is to where it wants to be?Hav-ing at least tentatively determined the kind of partnership the companywants and where the organiation stands now,senior managers are readyto be more de“nitive about the major changes that need to be introducedand the ordering of their introduction. These three principles can helpView partnership as a total system.Aspreviously noted,many elements of a partnership culture are interdependent:chang-impact of a change and even have negative consequences. Man-“nancial aspects of its relationship with workers without “rstattending to equity de“ciencies,if they exist (such as pay and jobThere is no way that the value of,say,informal recognition orfeel mistreated on the basic equity issues. And dont expectproductivity that results in surplus workers and the danger of lay-offs. It is not a matter of which element is more important,but visible fairly quickly.Despitemanagementsbest intentions,the early stages of the change process are likely tobe met with some skepticism by many employees. This is becausethey will probably have had prior experience with programs thatsounded great but went nowhere. Therefore,it is helpful if,afterChapter 12Translating Partnership Theory into Partnership Practice proper consideration of the way the different elements of partner-ship relate to each other,one or two signi“cant and highly visibleactions be decided upon and introduced. These are,in effect,expressions of managements good faith. The diagnostic surveydata can provide important clues as to what these steps might be.or example,one company learned from its survey that the executive ”oorŽwas a major obstacle to performance and timelydecision-making because it made interaction between employeesand the senior leaders of their units dif“cult. (In truth,manage-ment didnt need the survey to uncover this complaint; they hadheard it for years. The survey brought it to the surface and made itdif“cult to avoid this issue.) It was decided to relocate the man-agers to of“ces near their employees,which was a heartily wel-comed change by most of the managers themselves. It is a goodillustration of an action that is important,visible,consistent withthe partnership concept,and relatively easy to quickly implement.Another category of important changes where implementationcan be started fairly quickly are those concerned with inter-unitrelationships. Most surveys reveal damaging con”icts betweenspeci“c units that lend themselves to the type of partnership-building intervention described in Chapter 10,Teamwork.ŽGive the development and introduction of most of the chanthe time they deserve.ly,but most require considerable time to analyTake self-managed work teams,for example. That is a fundamen-that involves not just creating the teams themselves but also othersupporting actions,such as the training of managers and employ-ees to prepare them for it. Self-managed teams,and other suchmajor initiatives,are often best introduced on an experimentalbasis in one or two areas of an organiation; that way,they can becarefully observed and modi“ed as needed to get them right forthe business and the people in it. Although the introduction of anew culture is an undertaking that never really ends,a largeorganimate amount of time it needs to achieve what most everyone willcome to see as a genuinely participative culture.mployee Modify the action plan over time.just that:initial. It is meant to be a dynamic plan that will beadded to,subtracted from,and otherwise modi“ed as the effortproceeds. Some changes will be a result of oversights during theplanning phase,but others will be caused by changing businessconditions or new,creative insights that are gained with experi-ence. The evolutionary nature of the plan needs to be communi-cated to employees with encouragement,and a mechanism,fortheir participation in suggesting how the plan can continuallyimprove.Working with these principles,the statement of purpose and businessgoals,and the measures of where the organiation currently stands,seniormanagement identi“es the initial changes it wants to see undertaken. Atthis stage,the action plan should not be too detailed. Here are verbatimexcerpts of this kind of action plan from one company. The business goalof the effort in this company,which is a large “nancial-services companywith large numbers of clerical employees,was to dramatically improveActions to Achieve Partnership„Initial PlanJob security.Assure employeesthat no layoffs will occur as aresult of actions taken through this program; develop a system toe layoffs for any reason (explore rings of defense).Investigate and correctpay inequities wherethey exist in speci“c departments; study the impact of placing allemployees on salary. by customer.Investigatesetting up teams,where feasible and on an experimental basis,to service speci“cgroups of customers (by product and industry); organiments around these teams; consider team-based bonuses (but pre-vent inequities to rest of company); train managers in team andparticipative management and team members in working cooper-atively with each other; learn from the teams the obstacles in theway of providing the best possible service to customers.eam buildinInitiate team-buildingprogram between staff andline departments,especially between [several departments named].Chapter 12Translating Partnership Theory into Partnership Practice Formal communication.Initiate regularcommunication ofbusiness results (including customer service and satisfactionmeasurements) to entire workforce. committee [senior manaemployees.Develop schedule and method for all O.C. membersto visit and interact informally with employees at all the compa-nys facilities.Dress code.Institute informaldress code (with exceptions,asappropriate,for example,customer meetings).liminate reservedparking spaces forexecutives„make it “rst come,“rst served for all employees;eliminate separate dining facilities for of“cers.Physical workin conditions.[several departments named].Investigate meansfor giving special recognitionfor outstanding individual and team performance.mal dress code. These were what they felt would be important and visiblechanges that would build early credibility with the workforce.It is our experience that steps 1 through 4 of the action process wehave recommended can be accomplished in two off-site senior-managementmeetings of two to three days each. Obviously,a signi“cant amount ofsupporting staff work is required,such as preparing educational materials,speakers,and conducting and analying the survey.To this point,the program has pretty much been the province of thesenior management group. It is now appropriate to vet the ideas in meet-ings with other management levels,usually the next one or two levelsdown. The products of senior managements thinking are presented to themanagers„the action steps tentatively decided upon and the process bywhich the effort will be introduced„and their reactions are obtained. Atthis time,its especially important to address how the effort is likely toaffect e managers t(for example,the nature of their jobsunder a team approach and the training they will receive for it). Somemight feel resentment at some of the changes,such as the loss of the statussymbols that,as a manager in one of the meetings put it,Ive worked allmployee these years to achieve.ŽTheir role in the process,such as serving on thealso needs to be described. The way these matters are addressed can beguided,in part,by the results for this group of the questions in the attitudesurvey pertaining to management readiness.Žagement be af“rmed in these meetings. qually important is that,at thattime,the managers have an opportunity to voice their concerns,sugges-tions,and what they foresee their needs will be to make the program workin their areas. Senior management needs to listen and,as appropriate,acton what they hear. They will not act on suggestions that would signi“cant-ly weaken the effort (such as maintaining status distinctions) but the bulkof what will be suggested will be useful,and the plan should be modi“edaccordingly.Step 6. How should the plan be communicated?be fully communicated to all employees and,in that communication,a bal-ance must be struck between managements high hopes for the partnershipapproach and realism about the time and hard work that will be required forits success. In their eagerness to get employees on board,Žin their com-munications organiations tend to overplay the bene“ts of this kind ofeffort; they treat it as a sort of miracle drug and understate what is requiredover an extended period of time to make it happen and the possible snagsalong the way. There is no need to convince most employees that partner-ship is a good idea; the convincing they need is of managements sinceritycommunication are to let people know the rationale for a culture of part-nership,especially the impact expected on the success of the business andthe job satisfaction of employees; what its major components are; theinvolvement that will be required from employees throughout the organition to make it work; and its limitations and potential pitfalls. That is,man-agement must convey its excitement for the partnership approach,but do soin a way that is informative and realistic. Conviction and credibility„notsalesmanship„are the keys. After employees are informed,they donthave to be sold on anything except that management means it.The plan should be communicated both through the organiationsmanagers with their employees. To accomplish the latter,it is “rst neces-sary to meet with managers up and down the line to fully brief them onwhat is being planned and why,to answer their questions and concerns,and to prepare them for their meetings with employees.Chapter 12Translating Partnership Theory into Partnership Practice Step 7. How do we decide on the speci“c chanmade and how they should be implemented?mentdevelops the basic plan,its translation into speci“c action stepsshould,as we have said,in most cases be the province of task forces com-posed of representatives from throughout the organiation. The diagonalsliceŽmethod is useful for selecting task-force members:the members arechosen from across levels and across functions. We strongly suggest thateach of the task forces be led by a senior-management member. That typeof leadership structure will not be resented by employees; on the contrary,it is an additional signal of the seriousness with which the organiundertaking the effort. If a senior-management member does not have amanagement style or point of view thats appropriate for this kind ofleadership role,he should not be chosen for it,of course.The major exceptions to the task-forceapproach are those instanceswhere the issues are best discussed and decided upon by management,andusually senior management. Pay is a good example of that. Unless there isa union and a formal bargaining process,it is inappropriate and awkwardfor employees to be involved in decisions about their salary structure.They might have to be queried about their views of pay„for example,why they believe their pay is not competitive when a salary survey indi-cates that it is,or how they might view variable pay„but the recommen-dation about what to do should reside with management. The bene“tspackage is another example. Here,too,however,useful information canbe gained from employees regarding bene“t preferences and trade offs.After being fully oriented about its mission,each task force is respon-sible for the following:€De“ning the assigned issue thoroughly.€Learning all it needs to know about the issue,including the wayother organi€Developing a recommended action plan.€Delineating responsibilities,resources needed,timetables,and so€Suggesting how the effectiveness of what is being proposed canThe entire task force and implementation effort should be coordinated byan organiation-wide steering committee that,on average,will probablymployee meet about once a month and to which the task forces will regularly reporttheir progress. The committee will suggest modi“cations in the individualtask-force plans and will approve,or seek approval for,the actions that are“nally decided upon. The steering committee also serves as the mecha-emanating from the workforce as the change process proceeds. It is ourview that this steering committee be chaired by a high of“cial of theorganiation,preferably the CBy this point,you might feel that we demand a lot of senior manage-ments time. Youre right; a lot required of them. If this was just an-other program,Žlittle of their time would be taken,probably just toapprove the overall objectives and plan,to hear an occasional,formalprogress report,and to give an occasional speech. That is,it wouldnt beserious business. Here,we are talking here about a fundamental change inthe culture of an organiation. The Chimself or herself the Chief Change Of“cer (CCO). If that level of seri-ousness is not present,the organiation should reconsider whether it wantsto go forward.Step 8. How should manaers be trained for the implementationIn addition to the preparation managers receive in thebasic tenets ofpartnership and how to communicate the implementationplan to their employees (in step 6),they require training in the implica-tions of a partnership culture for their own behavior. In this book,we haverecommended policies and practices at the broad organiation level,suchwe have also discussed matters relating to individual managers,such ashow to treat employees respectfully and provide day-to-day recognitionfor good performance. These should help any manager that seeks toimprove the morale and performance of his employees,but they are espe-cially useful for managers working in a partnership organiorganian organiation profoundly impact employees,it is often dif“cult for indi-vidual managers to have nearly as much positive effect as they would likewhen working in a non-partnership environment. However,the reverse isalso true:a partnership culture will obviously not have nearly the desiredimpact on employees whose managers do not behave in conformity withA number of manager-training methods are available. One that is par-ticularly relevant and effective for our purposes is behavior modeling,ŽChapter 12Translating Partnership Theory into Partnership Practice good managerial behavior.Training must,of course,be adapted to thecircumstances and objectives of the organiand to the needs of individual managers. The adaptation can be governedin large measure by what the attitude survey results reveal about thestrengths and weaknesses of the organiations managers and their readi-ness for partnership. Broad issues might pertain to all managers,but thereare invariably differences between managers that are revealed by dividingthe survey data into an organiations units. The survey data thus providedirection for the content of the training that is needed and,when employ-ee attitudes are reported to a manager,they can be a powerful driver ofchange because they confront the manager with a mirror image of hisbehavior„the mirror being the views of his employees. The combinationof individual survey data feedback with behavior modeling training there-fore offers a particularly useful toolfor bringing managerial behavior intoline with an organiations partnership culture.Step 9. How do we assess how well we have done?its complexity,culture change is a long journey because it is never doneperfectly,even after a careful experimental introduction. After all,we aredealing with human beings,and they never fail to surprise. A manager of aself-managing team might,under pressure from his boss who is concernedabout serious and immediate business issues,revert to his prior autocraticstyle. A crucial support function can turn out to be uncooperative with theteam. A new pay system introduced to reward team performance mightprovoke questions about the validity of the measurements being used.These kinds of things happen in the real world and the organiregularly ask,How are we doing?,Žand be prepared to act on what it haslearned. Regular meetings need to be scheduled with employees that aredevoted to surfacing and dealing with these issues. We also advise thatemployees be formally surveyed periodically to obtain a quantitativemeasure of their views that can be tracked over time and reviewed in con-junction with performance results. After all,a major purpose of partner-ship is to enhance the employee morale that underlies performance; thatshould be measured as systematically as the performance. If the organition has indeed made signi“cant changes and has made them well,theimpact will be readily seen in surveys. Poorly conceived or implementedchanges show up as no change,or a decrement,in attitudes. This is trueboth at the organiation-wide and individual-manager levels.mployee Its ironic that among the most satisfying aspects of organiof life in general„are those that can be achieved only by hard work. Thisis especially true of attempts to change relationships:how people treat oneanother in their pursuit of earning a living. We refer both to the way dif-ferential power is used,which are the verticalŽrelationships,and the lat-eralŽrelationships among individuals and groups of relatively equalpower. A key theme of this book is that the overwhelming majority of peo-ple in organiations act in simple pursuit of equitable treatment,a sense ofachievement (for themselves and their organiation),and camaraderie.They dont want to do either the organiation or their colleagues harm,butit often appears that way or,at the least,that they dont care whether theorganiation or their colleagues succeed or the organiation improves.That occurs because of what happens to people when they join organitions,a combination of the daily on-the-job frustrations that cause peopleto act in ways not in their better nature,the way management treats themas sources of problems,costs,and resistance rather than as assets,and thebehavior of the tiny,often highly visible minority of employees that reallydoesnt care,or even does harm,and so reinforces managements pes-simistic view of the workforce.Partnership organiations emerge whensenior leadership„in mostcases,it has been the Cjust what is. This requires not only insight into human nature (especiallythat people want to do good for a good organiquence in communicating the partnership philosophy,but also persever-ance and hard work over a period of years to translate the philosophy intospeci“c policies and daily management practices„the kinds that we havedescribed in this book. It requires seeing and treating employees as gen-uine allies in achieving change.Chapter 12Translating Partnership Theory into Partnership Practice This page intentionally left blank This page intentionally left blank On average,the questionnaires consist of about 100 questions,andalmost all of them are multiple choice. About two to three questions areopen-ended (that is,the respondent answers the questions in his or herown words). The respondents are guaranteed complete con“dentiality fortheir answers; no one at the organiations in which they work can accessan individual employees responses.Sirota surveys are nearly always administered to all employees in anorganiof the survey is to provide individual department managers with data thatshows how their own employees respond to the survey. Although a sampleof,say,10 percent of the 20,000 employees of a company would be entire-ly adequate to provide a measure of the total population,10 percent wouldbe entirely inadequate for a manager of a 20-person department. Twoemployees (which is 10 percent of 20) tells the manager effectively noth-ing about the views of his or her 20 people. A premise of the Sirotaapproach to feedback is that action needs to take place at both the broadorganiational level and at the individual department levels. Data are,therefore,required for both levels.The average response rate for Sirota surveys is about 80 percent.Population CompositionTable A-1 shows the distributions of thesurveyed population by various Distributions of the 1994…2003 Surveyed Populationations237 otal Number of Respondents2,537,656 By Sector Computer related5% ducation/research3% inancial services/real estate14% Government/public sector5% Hospital/healthcare9% Manufacturing14%mployee Distributions of the 1994…2003 Surveyed Populationations237 otal Number of Respondents2,537,656 By Sector(Continued) Oil/gas/mining10%Other services (hospitality,6% placement,consulting,etc.) Pharmaceutical9% Print publishing5% Retail11% Transportation/communication/utilities9% By Size of Org 29% 1,000…4,99935% 5,000…9,99915% 10,000…24,9998% 25,000+13% By Sex emale53% Male47% By Race Caucasian74% Black12% Hispanic8% Asian6%Appendix ASurvey Administration and Population Composition Distributions of the 1994…2003 Surveyed Populationations237 otal Number of Respondents2,537,656 enure 0…2 years26% 2…5 years22% 5…10 years19% 10…20 years20% More than 20 years13% By Level Management13% Non-management87% By Reg North America78% urope14% Other8%is book are performed on subsets of te comparative correlational analyses ere e require tcal questions be asked in a number of different populations. Neverteless,te numbers of respon-ose analyses are in tese are te actual organizations surveyed. Te smaller ones are usually segments of larger organizations (divisions,business units,and so on).mployee In most of our surveys,we intentionally ask more than one questionabout the same subject area. This is not to trickŽthe respondents,but toget at the area from a number of angles. When we do this,we invariably“nd that these questions correlate highly with each other,signi“cantlymore so than they correlate with other questions on the questionnaire.Heres a small,typical example of what we mean:Table B-1 shows twopairs of questions from a survey; the two questions in each pair aredesigned to measure the same attitude area,more or less. The areas are theattitude toward the work itself and the attitude toward the immediatesupervisor. Table B-1 contains the correlations among all four questions.Notice that the correlations within each of the pairs are all high (coef“-cients in the .60s to .70s range)„demonstrating high reliability„and,asexpected,considerably higher than the questions in one pair are with ques-tions in the other pair (coef“cients in the .40s range). Supervisorrust MyAccomplishment Is HonestSupervisoron the Job Trust Supervisor.78Sense of Accomplishment.44.45 on the Job Use of Skills on the Job.45.44.66The reason that the questions acrossthe two attitude areas still correlatesigni“cantly with each other„albeit lower than within the attitudeareas„is that they are not completely independent. or example,a super-visor who employees trust is also likely to give them latitude to use theirskills and abilities on the job (that might be one reason employees trusthim). When more independent attitude areas are related,we “nd low cor-or example,the correlations between attitudes toward the workitself and attitudes toward pay fall between .10 and .25,those between payand equipment are .05 to .15,and so on.Of course,we never “nd perfect correlations,even between questionsor one thing,thequestions tap somewhat different aspects of that area. Second,there ismployee always measurement error,Žsuch as an employee misinterpreting a ques-tion or making a mistake in the marking of her answer.We once made a mistake in designing a questionnaire. We inadver-tently asked two identical questions on the same very long questionnaire,once at the beginning of the questionnaire and once toward the end. Thismistake turned out to be fortuitous in that it provides us with a terri“cadditional test of reliability,namely,test-retestŽreliability,which meas-ures whether individuals provide consistent responses when they answerthe very same questions after a short time interval. The correlationbetween the two was .92,which is just about as high as correlations in ourwork get. This clearly demonstrates that people do not answer questionsardly.ValidityValidity is a measure of the extent to which the questionnaire measuresor example,attitudes toward pay might beconsistent (reliable),but they might not be actually measuring attitudestoward pay (just as a thermometer might always give the same reading,butWe have innumerable tests of the validity of our data. Heres a smallLets not start with attitude questions,but withwhat are termed demographics. In almost all of our surveys,weask respondents for their length of service,sex,race,and so on.We do this so we can divide the data by these variables and deter-mine whether any attitudinal differences exist between the groups(such as between men and women). These are actually very sensi-tive questions to ask in an anonymousŽsurvey because employ-them. But,in every case where we have achieved a high responserate (more than 80 percent),the distributions we obtain on the sur-veys are almost identical to the actual demographic distributionsprovided to us by the organiation. Apparently,the employees,despite their misgivings about identi“cation,tell us the truth.Table B-2 shows an example fromone company.Appendix BReliability and Validity of the Data Demographic Distributions:Survey Responses Versus ActualPercentae of Actual Percenta Respondents in Surveyin Workforce Classi“cation ull-time92%91% Part-time6%7% Per diem2%2% Sex Male53%55% emale47%45% enure 0…2 years23%21% 2…5 years11%10% 5…10 years21%23% 10…20 years28%27% More than 20 years18%19%We usually survey very large populations.Individuals might have all sorts of quirks„an employee may,forexample,be happy with his pay when,by all objective standards,his pay is low„but these quirks should not make a big differencewhen surveying large numbers of employees. If pay questions arevalid,they should,on average,re”ect actual compensation in theway compensation is normally evaluated (for example,whatemployees are paid compared to what they might earn in similarjobs in other companies). Therefore,if pay is signi“cantly raisedfor a workforce and the answers to our questions on pay do not,on average,show increased satisfaction,we would doubt thevalidity of those questions. But,the fact is that when employeepay is signi“cantly raised,their attitude toward pay move upmarkedly.mployee or example,in a company with “ve plants,the employees in one plantŽ) expressed much less satisfaction with their pay on a survey than didthe employees in the other four plants. The reason was that the companydid not differentiate in its pay scales between areas of the country and was in a much higher wage and cost-of-living area than were the otherfour plants. This policy of no area differentialsŽwas changed as a resultof the survey,which led to an average wage increase of about 15 percentover the next two years for Žemployees. In the other plants,the wagesincreased an average of 7 percent. Table B-3 shows the satisfaction withpay data from the “ve plants in two time periods. Percent Satis“ed with Pay in ive Plants in Two Time PeriodsDifference ime 2( A45%46%+1 B53%54%+1 C53%51%…2 D43%46%+3 32%49%+17Satisfaction with pay increased markedly in Plant and only marginally,if at all,in the other four plants. You might ask,What is so surprising„what would you expect?ŽThat is precisely the point:these common-sensetests„nothing esoteric,nothing psychologicalŽ„applied to attituderesults give us great con“dence in their validity.The pay data bring us to a broader point:our surveys are performed so; they are not for academic interest. When,forwhatever reason,no action occurs after a survey,anges in employeeattitudes are seen in te next survey. The data are remarkably stablebecause it takes action to change them. urthermore,if action is taken inone respect,it shows up on the questions relating to that change,but not inother respects. Table B-4 shows the attitudes toward the work itself in thesame “ve plants. These attitudes hardly changed at all.Appendix BReliability and Validity of the Data Percent Satis“ed with the Work Itself in ive Plants in Two Time Difference ime 2( A68%67%…1% B74%74%0 C73%72%…1 D66%69%+3 76%77%+1mployees carefully differentiate between the various attitude areas:Plant markedly increased on attitudes regarding pay,but hardly at all regard-ing the work itself. This phenomenon of differentiation underlies the pre-viously mentioned small correlation between attitudes toward pay andattitudes toward the job itself. Most employees “ll out the questionnairesthoughtfully and carefully,noting what theyre pleased with and whattheyre not.Take another example of the impact of management action on surveydata:an energy company laid off a large number of employees in twoconsecutive years,even though it promised after the “rst layoff that therewould be no more. We conducted surveys after the “rst layoff and afterthe second layoff. We have no data about attitudes before the “rst layoff,but the results of our “rst survey indicated,as would be expected,thatemployees were unfavorable about their job security (31 percent belowour norm). After the second layoff,the results,which were already verylow,got even worse:now 51 percent below the norm. Table B-5 shows Satisfaction with Job Security (After First Layoff)(After Second Layoff)Norm 29% favorable9% favorable60% favorableJob security was the largest declining itemin the second survey. Interest-ingly,with the loss of so many people and the subsequent demands placedmployee on those who remained,several items showed sharp improvements,espe-cially job challenge and intra-department teamwork. This makes sensebecause the work became more challenging and the employees had torally around each other to accomplish what needed to be done. Again,wesee evidence of the sharp differentiation employees on surveys makebetween different aspects of work situations.Take a third example of the impact of change as a test of the validityof the survey data:a particularly poor CO (by everyones standards,suchas the board of directors,his direct reports,and the general workforce)was removed and replaced by a CO strongly committed to improvingperformance and raising morale. Table B-6 shows the before and after sur-vey results regarding the companys leadership after just one year with thenew C Impact of New CO on Attitudes Toward Company Leadership % FavorableUnderUnderDifference Previous CEONew CEO(1 Year Later) Leadership Question Sense of direction44%86%+42% ffective leadership42%80%+38% Listening to employees37%72%+35%Overall job being done by senior management50%84%+34%Interest in employee well-being52%81%+29%As you can see,the attitudechanges were huge.Relationships with performance measures.important tests of validity is the way employee attitudes predictperformance (just as many ability tests are supposed to predictacademic achievement). Chapter 2,mployee Business Success,Ždetails the strong positive relationships weand others “nd between employee morale and organiAppendix BReliability and Validity of the Data performance. We can provide numerous other examples of therelationship between attitudes of various kinds and performance.Here is just one more:the relationship we almost invariably “ndbetween the perceived customer focus of an organiured by employee surveys) and customer satisfaction (measuredindependently by customer-satisfaction surveys). We consistently“nd that,across various industries,the more employees say a com-pany is customer-focused,the greater customer satisfaction is.Again,you might ask,What else would you expect?ŽAgain,thatis precisely the point:what common sense tells us should be foundis found,thus reinforcing con“dence in the validity of the survey.No,we didnt need a survey to tell most managers how critical it isfor employees to see their organiations as customer-focused toachieve customer satisfaction. The survey serves to inform man-agement just how customer-focused its organiTable B-7 shows the correlations between customer focus and customersatisfaction in companies in various industries.Correlations Between Perceived Customer Satisfaction Customer Focus Questionype of Company CorrelationThe company strives for excellence in customer serviceRetail.57 satisfactionTelecommunication.63Makes exceeding customer expectations a priorityHospitality.64 patient well beingHospital.56 on measuring customer satisfactionAutomotive.68mployee Responses,by Demographic,Occupational,and Regional Groups,to the Question:How Would You Rate Your Satisfaction with the Job Itself„the Kind of Work You Do?Ž Favorable NeutralUnfavorable By Sex emale76%16%8% Male75%18%7% By Race/Ethnicity Caucasian76%16%8% Black76%15%9% Hispanic79%14%7% Asian75%16%9% Native American75%14%11% By Level Management83%12%5% Senior88%8%4% Middle85%11%4% irst-level80%14%6% Non-Management74%17%9% Salaried76%16%8% Hourly72%19%9% By Reg North America77%16%8% urope68%23%9%mployee Responses,by Demographic,Occupational,and Regional Groups,to the Question:How Would You Rate Your Satisfaction with the Job Itself„the Kind of Work You Do?Ž Favorable NeutralUnfavorable By Selected Industry Sectors Healthcare79%15%6% Retail78%16%6% inancial services77%15%8% Manufacturing76%17%7% Oil/gas/mining71%22%8% By Size of Org 77%16%7% 1,000…4,99977%15%8% 5,000…9,99976%15%9% 10,000…24,99978%15%7% 25,000+71%19%10%Appendix CJob Satisfaction This page intentionally left blank Many employee attitude surveys are conducted,but the data from them arealmost always proprietary. We have access,from time to time,to theresults of surveys conducted by others,and while we cannot publish those,we can attest to the great similarity between their results and ours. A for-tunate exception to the proprietary nature of normative data is found in theederal Human Capital Survey 2002,which reports the results of a 2002survey of the attitudes of more than 100,000 employees randomly selectedfrom the 24 agencies represented on the Presidents Management Council.These agencies comprise 93 percent of the executive branch workforce.*The U.S. Of“ce of Personnel Management,the organiing the survey,was provided with a set of private-industry norms drawnfrom an average of survey data from large,primarily U.S. corporations.ŽWe are familiar with those norms and can vouch for the care with whichthose data have been collected and compiled. Table D-1 shows the resultsat Do Federal Employees Say? esults from te 2002 Federal Human Capital Survey.e U.S. Of“ce of Personnel Management (.opm.gov). for nine questions that are similar enough in wording to allow reasonablecomparison. We point out,however,that even slight differences in word-ing can result in signi“cant swings in the data,as we explain in the discus-sion that follows the table. Comparisons of Sirota Normative Data with Private Sector Norms on Similarly Worded Questions Federal Study Norms Sirota NormPublic SectorPrivate Sector Job itself76%68%67% Teamwork within work unit73%80%79% Bene“ts65%63%63% Information to do job62%71%67% Opportunity to improve skills59%57%59% Training57%53%58%Company communications on 52%45%54% important matters Recognition 51%46%48% Amount of pay46%56%44%Considering the differences in a number of question wordings and in thetypes of organiations included (e.g.,the exclusively large,well-knowncompanies in the federal surveys private sector norms),the data areremarkably similar. We have ordered the questions by the percentagefavorable in our norms and the orderings are close. The rank-order corre-lations between the sets of norms are as follows:between our norms andthe federal private sector norms,.95; between our norms and the federalpublic sector norms,.80; between the federal public and private sectornorms,.83. The norms we have seen from elsewhere„often using identi-even closer to ours.Among the larger discrepancies we see are satisfaction with the joband with pay. The Sirota job satisfaction norm is higher than either of themployee other two (the latter are still 2/3 favorable),but we attribute the discrepan-cy almost entirely to a wording difference:we ask very speci“cally aboutyour job„the kind of work you do,Žwhile the other surveys ask therespondents:Considering everything,how satis“ed are you with yourjob?ŽWe have found that many respondents tend to include attributes inaddition to the work itself when the question is worded in terms of jobsatisfaction,Žespecially considering everything.ŽSupport for our asser-federal survey that is worded more similarly to ours:I like the kind ofwork I do.ŽThe positive response to this question is 82 percent! Unfortu-nately,this wording was not used for the private sector norm. In contrast,our question on pay is worded almost identically in bothother surveys. Our data are very close to the private sector results,but bothare signi“cantly below the satisfaction with pay expressed by public sec-tor employees. We believe this to be a real difference. Appendix DComparisons with Other Norms This page intentionally left blank he Readiness QuestionnaireThis questionnaire is designed to measure your basic views of employeerelations. The results of the survey will be thoroughly discussed by themanagement team to determine whether,and in what respects,the organi-ation is ready to move ahead in modifying its approach to managing peo-ple. The results will be reported in a way that will make it impossible toidentify individual answers. Here are a few guidelines and instructions for€The questions ask about employee relations. In answering thequestions,think of the people who constitute the bulk of theemployees in your organiation. We want to know what you feelpolicies and practices for these employees should be.€Obviously,some of the answers are more socially acceptableŽthan others,and you might be inclined to answer that way. Try toanswer the way you genuinely feel. The only rightŽanswer is theone that expresses your views. As previously mentioned,you arethe only one in your organiation who will see your individualach question will be answered on a 7-point scale,and the end-or example,take question 1:Question 1. If you had your way,would it be your policy or prac-what you have to, even if itsIf you are the type of manager who wants to pay rock-bottom wages,youwould likely circle 1.ŽIf it is„or would be„your practice to pay asmuch as you possibly can,even if that means your employees would earnconsiderably more than what they could get elsewhere for similar work,you would likely circle 7.ŽIf you are somewhere between those poles,you would circle a number in between 1Žand 7,Ždepending on whereyou felt your attitude fell. The midpoint of this scale is 4.Žmployee afford, even if its consider- Lets begin. Remember to keep in mind the employees who consti-tute the bulk of your workforce and policies and practices for them general. Please answer as you genuinely feel,not what might be social-ly acceptable.ŽIf you had your way,would it be your policy or practice to:1.Pay employees no moreeven if its below what2.Provide no more in theto, even if its less than3.Provide safety conditionsrequired by law.4.Lay off employees as5.Do no more for laid-off6.Insist that employees afford, even if its consider- afford, even if its more Provide the utmost in safetyconditions. other jobs in the company, Do as much for laid-offafford. Not be at all concerned 7.Have employees„even ifsupervised closely.8.Make extensive use of9.To the extent possible,10.Invest in the best possi-11.Provide developmentfor higher-level 12.Communicate to employ-13.Insist that communica-mployee Have experienced employ-ees supervised only gener-1234567 Recognize only those1234567 EnlargeŽ or enrichŽ work1234567 Do the bare minimum in thisrespect. Do little or nothing in thisrespect. Communicate as much as1234567 Not be at all concerned that 14.Insist that employees atpay, or better bene“ts,15.Insist that employees not16.Insist that employees17.Provide as pleasant18.Make sure that employ-19.Assure that, if employees20.Insist that, when busi- Not be at all concerned thatthey share “nancially in business. Not be at all concerned1234567 Get as much work as you1234567 Provide no more than what1234567 Allow this only in the mostemergency). Not be at all concerned1234567 Not be at all concerned 21.Work cooperatively with22.Eliminate status distinc-23.Stimulate an atmosphere24.Stimulate competition25.For promotions, give26.Insist that senior-27.Discourage employeesmployee Fight the union everypossible. Fully preserve status distinctions. Not be at all concerned1234567 Not do this at all.1234567 Give no such preference.1234567 Do little or nothing in thisrespect. Not be at all concerned After you complete the questionnaire,make a copy to keep for yourselfand send the original to {insert the scorers name}. When the group meetsto discuss the group results,bring your copy with you so you can compareInstructions for the Scorer of the Questionnairequestions,1 is the highest partnership score while for others,it is 7. Whichis which is indicated on the scoring sheet (see the next section,ScoringSheetŽ),although for most questions,it should be obvious (nothing is hid-den or tricky).You will obtain average scores for the group surveyed on each ques-tion and for combinations of questions. To get these averages„where wealways want 7 to be the highest average partnership score„you need toconvert the questions where 1 is the highest partnership score. To do this,“rst calculate the average for each question,which is done by taking thesum of the answers given by all respondents to the question divided by thetotal number of respondents to the question. Then,subtract from 8 theaverages for the questions where 1 is the highest partnership score.or example,here are the answers for a group of 12 people on ques-tion 10,where 1 is Invest in the best possible training for employees to dotheir jobs (perhaps even somewhat more they might need),Žand 7 is Dothe bare minimum in this respect.Žgiving each answer. 2431200Do the bare minimum in thisrespect. Calculate the average by multiplying the number of respondents giving1,4 2,3 3,etc.),adding thoseproducts (2 + 8 + 9,etc.) and dividing that sum (33) by the number ofrespondents (12). In this example,doing this yields an average of 2.75.Because question 10 has 1 as its highest partnership score,it must be sub-tracted from 8. The average that will be used,then,is 5.25 (8.00 … 2.75).(Remember:You would not subtract from 8 the averages to those ques-You now have calculated usable averages for each question. those averages on the scoring sheet. That form also contains lines for thefollowing averages of averages:Žotal partnership score.This is the average of all of the ques-tions:simply add up all of the averages and divide by the numberEquity score.This is the average of all of the questions relatingto equity.Achievement score.This is the average of the questions relat-ing to achievement.Camaraderie score.This is the average of the questions relat-The scores can easily be graphed (as bar graphs with the vertical axisranging from 1 to 7). Two pages of graphs are desirable. One page wouldshow the total partnership,equity,achievement,and camaraderie aver-ages. The other page would show each questions average,ordered byequity,achievement,and camaraderie.The maximum possible score is 7,and the group discussion shouldfocus on how far its scores on the various questions and averages are fromthat maximum. There is no precise criterion as to what constitutes a scorethat should be considered farŽfrom the maximum. A rule of thumb is adifference of 2.00 or more (i.e.,an average score of 5 or below).mployee Sheet Equity QuestionsAveraeUsable Avera 1 2 3 4 5 6* 13* 14* 15* 16* 17* 18* 19* 20* 21* 22 otal Equity Score (Sum of the Usable AveraEquity Avera Equity Score Divided by 17)For t asterisks,te usable average is 8.00 minus te average. For tquestions,te usable average e average. Achievement QuestionsAveraeUsable Avera 7 8* 9 10* 11* 12 otal Achievement Score (Sum of the Usable AveraAchievement Avera Achievement Score Divided by 7)For t asterisks,te usable average is 8.00 minus te average. For tquestions,te usable average e average. Camaraderie QuestionsAveraeUsable Avera 23* 24 otal Camaraderie Score (Sum of the Usable AveraCamaraderie Avera Camaraderie Score Divided by 3) otal Partnership Score (Sum of All 27 Usable AveraPartnership Avera Partnership Score Divided by 27)mployee For t asterisks,te usable average is 8.00 minus te average. For tquestions,te usable average e average. 3.OToole. J.,et. al. ork in America:eport of a Special Task Forcee Secretary of Healt,Education,and elfare.ŽCambridge,USA:MIT Press,1973,pp. xv…xvi.4.Herberg,.,Mausner,B.,and Snyderman,B. . New York:Wiley,1959.5.Rothschild,. GM in More Trouble.Ž York evie of BooksMarch 23,1972. ,no. 5,p. 19.quity has been studied by one group of organiunder the designation organiation justice.ŽThe researchers make ahost of “ne distinctions between different forms of justice„muchmore than we feel important for our argument or managerspracticaluse„but their basic conclusions are the same as ours:a feeling ofbeing treated fairly is extremely important for workers and for theircontribution to the organior an overview of the research,seeColquitt,J. A.,Conlon,D..,Wesson,M. J.,Porter,C.,and Yee Ng,K. Justice at the Millennium:A Meta-Analytic Review of 25 Years ofOrganiational Justice Research.ŽJournal of Applied Psycology.862001,pp. 425…445.7.The correlations with camaraderie tend to be lower than that withachievement largely because of a technical reason,namely,the signi“-cantly smaller variance in response to the camaraderie question.1.Pfeffer,J. and Sutton,R. .ŽBoston:Harvard2.Goleman,D. Emotional Intelligence. New York:BantamBooks. 1998,pp. 118…119.3.Wylie,A. How You Can Unleash the Power of Storytelling.Žeb. 2000; found at http://debate.uvm.edu/Nrostrumlib/WylieStorytelling4.Pfeffer,J. ŽBoston:Harvard Business SchoolPress. 1998,pp. 31…56. 5.This “nding is from a thus far unpublished analysis of the relationshipbetween employee satisfaction and defect rates in 182 units of theCredit and Risk Group of a large “nancial institution surveyed by6.Rucci,A. J.,Kirn,S. P.,and Quinn,R.T. The employee-customer-pro“t chain at Sears.ŽHarvard Business evie1998,pp. 82…97.7.Smith,S.B.,Del Duco,S.M.,and Mischkind,L.A. The impact ofsocial/cultural factors on tornado warning performance.ŽPresented atmployee 7.Sharplin,A. D. The Lincoln lectric Company.ŽNortheast LouisianaUniversity,Lake Charles,Louisiana. 1981,p. 4. 8.Iverson,K. How Nucor Works.Ž Steel. November 1997 (newsteel.com),excerpted from Iverson,K. and Varian,T. Plain Talk:Lessons from a Business Maverick.ŽNew York:John Wiley & Sons,Inc.,1997. 9.Levering,R. and Moskowit,M. Best Companies to Work or:TheBest in the Worst of Times.ŽFortune.145,no. 3,ebruary 4,2002,10.Business for Social Responsibility (www.bsr.org). Issue Brief:Downsiing:Layoffs/Closings (last updated October 2001).11.As reported on WKPRC. See Click2Houston.com. Thousands loughed at Continental Airlines„International Layoffs Still to Come.ŽPosted:1:13 P.M. CDT,September 21,2001. Updated:6:44 P.M.CDT,September 21,2001.1.Levine,D. I. Can Wage Increases Pay for Themselves? Tests with aunction.ŽEconomic Journal. Royal conomic Society.,1992,pp. 1102…1115.2.Pfeffer,J. . Boston:Harvard Business SchoolPress. 1998,p. 200.3.Abowd,J.,Kramar.,and Moreau,A. Product Quality and WorkerQuality.ŽNBR Working Paper # w5077,4/95; Policy Brief„Prevailing Wage Laws. January 7,2000; found at www.lbo.state.oh.us. 4.Near,J. W. Wendys Successful Mop Bucket Attitude.ŽStreet Journal. April 27,1992,p. A16.5.Lawler,Strategic Pay:Aligning Organizational Strategiesand Pay Systems.ŽSan rancisco:Jossey-Bass. 1990,p. 57.6.Whyte,W. Money and Motivation:An Analysis of Incentives in. New York:Harper and Row. 1955,pp. 41…44.7.Our norm for attitudes on the fairness and accuracy of appraisals is 8.Lawler,dward e Ultimate AdvantageJossey-Bass. 1992,p. 177.9.Lawler,.,III. Strategic Pay:Aligning Organizational Strategiesand Pay Systems.rancisco:Jossey-Bass. 1990,p. 125. mployee 1.Kilborn,P.T. Strikers at American Airlines Say the Objective IsRespect.Ž York Times. November 22,1993,A1,A8.2.Witness,for example,the characteriMarch,2001 Texas MontŽcolumn,:Crandallwas the hot tempered,cutthroat CO who built ort Worth…basedpetitive thirst for blood. Nicknames like ang and Darth Vader stuckfor good reason.Ž3.American Airlines is reported to have recently begun a major initiativein its relationship with its employees,seeking a true partnershipŽ„rather than adversarial„relationship with them. A Pro“le:AmericanAirlines changes its business operation to move on workersideas.ŽNational Public Radio,All Things Considered. September 13,2004.or a comprehensive description of Nordstrom policies and practices,see Spector,R. and McCarthy,P. D. e Nordstrom ay:TStory of Americas #1 Customer Service Company.New York:JohnWiley and Sons,2000. Also see Peters,T. J. NewYork:Knopf,1987,pp. 378…379. 5.Peters,T. J. and Austin,N. A Passion for Excellence. New York:Warner Books,1985,p. 207.6.Caudron,S. The New Status Symbols.Ž,no. 12,June 21,1999,p. 44.7.Peters,T. J. . New York:Knopf,1987,p. 381. 8.We say typically,Žbecause there are numerous variations on these practices for salaried employees. or example,in some organitions,a salaried employee can lose pay if he is absent beyond an allotted number of sickŽor personalŽdays. Also,certain salariedemployees„those whose work resembles that of hourly workers„arenot exempted from the legal requirement to be paid overtime. more,we do not address the legal distinction between exemptŽandnon-exemptŽworkers. Although the U.S. fair labor laws tend to speakto the same kind of status distinction that we describe,the laws pur-pose is to protect workers from owners who might otherwise imposenitions. Here,we are concerned with the effect of maintaining wagethe employment environment and,hence,on worker enthusiasm.9.Public mployees ),Presidents message (Roger Benson). November 1999; found at www.thecommunicator.org/comnovember1999/pre 10.Taken from the Sirota Consulting 11.Muoio,A. The Truth Is,The Truth Hurts.ŽFast Company MagazineApril 1998,Issue 14,p. 98.12.A full treatment of Stacks philosophy can be found in:Stack,J. andBurlingham,B. e Great Game of Business. New York:Doubledayand Company. 1994.13.Peters,T. J. and Waterman,R. H. Jr. In Searc of ExcellenceRow,New York. 1982,pp. 121…134. 14.Sherman,S. Stability:Donald Grahams Washington Post.ŽJournalism evie. Sept./Oct. 2002,p. 42.Part III1.The correlations range from .389 (pride in ef“ciency) to as much asor years,Merck has been a highly respected company,known for itsintegrity,generosity,and professionalism. George Mercks commit-ment to medicine for people not pro“tsis in pointed contrast to othercompanies that focus primarily on share price. In the 1980s,Merckachieved the number-one spot on Fortuneslist of Most AdmiredCompanies for seven straight years. No company is even close to thator example,Merck is credited with saving millions of peopleannually from the debilitating disease of river blindness by donatingan to tropical nations. Do recent events,however,spellthe end of an era for Merck„have priorities shifted so markedly toshort-term pro“tability as to seriously damage the companys reputa-tion for integrity and its long-term business prospects? We refer to thewithdrawal of Mercks drug Vioxx from the market amid allegationsthat information about serious side effects of the drug on the heartwere suppressed by the company.3.Collins,J.C. and Porras,J. I. New York:Harper 4.In their calculation,all dividends were reinvested and appropriateadjustments were made when the companies became available on thestock exchange.5.Collins,J.C. and Porras,J. I. . New York:Harper Business Books. 1997,p. 55.6.Ibid.,(p. 57).mployee 7.Ibid.,(p. 57).8.Waddock,S.A. and Graves,S.B. The corporate social performance-“nancial performance link.ŽStrategic Management Journal,no. 4,1997,pp. 303…319.9.Cited in Business for Social Responsibility Web site,White Paper,www.bsr.org/BSRResources/index.cfm.rooman,J. Socially Irresponsible and Illegal Behavior and Share-holder Wealth.Ž,no. 3,September 1997,11.Wayne,L. Designee Takes a Deft Touch and a irm Will to Trea-sury.Ž York Times ast Coast)). New York,NY:Jan. 16,2001,p. A1. 12.Vogel,D. Recycling Corporate Responsibility.Žall Street Journal. August 29,2002 (in Managers Journal),p. B2.13.Schult,H.,Yang D.J.,and Conger,Pour Your Heart into It:HoStarbucks Built a Company One Cup at a Time.ŽNew York:Hyperion.14.Kahaner,L. How Their Mission Statement Helped Johnson &Johnson Survive the Tylenol CrisisŽ; found at www.kahaner.com,excerpted from Jones,P. and Kahaner,L. Say It & Live It:50 Corpo-rate Mission Statements Tdition. CurrencyBooks. May 1,1995. 15.The Malcolm Baldrige National Quality Award was created by PublicLaw 100-107,signed into law on August 20,1987. The Award Pro-gram,which is responsive to the purposes of Public Law 100-107,ledto the creation of a new public-private partnership. Principal supportNational Quality Award,which was established in 1988.16.Hude,H. Quality in the Service Sector,Proceedings of the 1991ffective in Schools of Business (MSMSB).ŽThe Wharton School,Univ. of Penn.,1991; See also Smith,tomer Satisfaction:A Job Thats Never Really Done.ŽJ. D. Power &Associates Customer Service Conference. Santa Monica,California.November 13,2003. 17.Baldrige IndexOutperforms S&P 500 by Almost 5 to 1.ŽNationalInstitute of Science and Technology (NIST) press release. 25,2000. 2.Keep in mind that we are discussing satisfaction,not overall satisfaction. These two terms are easily confused. The latter is theglobal concept:how,in general,people feel about their employmentsituation„their morale,Žas it were. Overall satisfaction is the prod-uct of a number of speci“c factors,such as attitudes toward job securi-ty,pay,leadership,ability to get the job done,and the work itself. Thelast of these„attitudes toward the work itself„is job satisfactionŽand is just one of the speci“c factors that go into overall satisfaction. It is distinguishable from those factors,as in,I wish I could stay herebecause I really love the kind of work I do,but I cant live on whatthey pay me.Ž3.As described in Peters,T. J. e Nature of . May 7,1993;found at www.tompeters.com. mployees also prefer managers who stress quality. The correlationsbetween managers being seen as stressing quality and satisfaction withthose managers are in the .70s. The correlations between managersstressing quantity and satisfaction with them are slightly negative.5.Sirota,D. and Greenwood,J. M. Understand Your Overseas Workorce.ŽHarvard Business evie. 1971,pp. 53…60.or an overview of the research,see Hellervik,L.W.,Haucha,J.Schneider,R.J. ange:Models,Metods,and evie ofDunnette,M. D. Hough,L. M. and Organizational Psycology,second edition,Palo Alto,California:Consulting Psychologists Press,1990,pp. 823…895.mployees who are inordinately sensitive to criticism need a lot ofattention,praise,and reassurance. The guidelines we propose shouldbe followed quite literally with them to keep a dif“cult situation psy-chologically from getting even worse.3.Lepsinger,R. and Lucia,A. D. e Art and Science of 360°Feedback.rancisco:Jossey-Bass,1997; Sederburg,M. . and Rogelberg,S. G. Informed Decisions:Research-Based Practice Notes. 360Degree eedback:Methodological Advice from Multiple Sources.Že Industrial-Organizational Psycologist,1998,,pp. 67…76.4.See,for example,Smith,G. P. People Need to found at www.businessknowhow.com/manage/appreciate.htm. Seealso,Smith,G. P. Here Today,Here Tomorro:Transforming Yourorkforce from Hig-Turnover to Hig. Chicago:DearbornPublishing. November 2001. Smith prescribes praise over cash when it comes to retaining the best and brightest.ŽPeople have a basichuman need to feel appreciated,and recognition programs help meetmployee that need,Žnotes Smith. Money might attract people to the front door,but something else has to keep them from going out the back.ŽAlso,see Bob Nelson,writing in the Quality Digest:Salary raises andbonuses are nice,but they seldom motivate people to do their best onthe job on an ongoing basisƒHaving learned that employees are moti-vated by intangible rewards,companies would be wise to consider thepower and possibilities of no-cost job recognition when trying to moti-vate employees to do their best.Ž(Secrets of Successful mployeeRecognition.ŽQuality Digest,QCI International,2004; published atwww.qualitydigest.com.)5.Collins,J.C. and Porras,J. I. ,New York:Harper BusinessBooks. 1997,pp. 173…176.Part IV1.Among the more interesting explorations of social capitalŽand itsimportance is Don Cohens and Laurence Prusaks,ny:Ho Social Capital Makes Organizations Boston:Harvard2.Mayo,e Social Problems of an Industrial Civilization. NewHampshire:Ayer. 1945,p. 111.3.See Hill,G.W. Group Versus Individual Performance:Are N+1ological Bulletin. May 1982,p. 535.See also Morgan,J. and Blinder,A. Are Two Heads Better than One:An xperimental Analysis of Individual Versus Group DecisionMaking.ŽNational Bureau of Economic esearcPart V1.Ross,A. Boarding Houses.ŽJournal of Antiques and CollectiblesMarch. 2003; found at www.journalofantiques.com/Mar03/2.U.S. Department of Labor,Bureau of Labor Statistics,Mass LayoffStatistics (MLS); found at www.bls.gov/mls/home.htm.arber,H. and Krueger,A. Union Membership in the United States:The Decline Continues.ŽWorking Paper No. 4216,National Bureau ofconomic Research,1992. These conclusions were reached on thebasis of an analysis that controlled for the effects of structural changesin the economy,such as the increasing proportion of service workers. mployee4.The improvement in employment conditions is by no means universal.In fact,there is evidence that,for certain segments of the workforce,there might be a return to earlier sweatshop-like conditions. example,in 1996,the U.S. Department of Labor estimated that out of22,000 U.S. garment shops,at least half were in serious violation ofwage and safety laws.5.Kat,H. C.,Kochan,T. A.,and Weber,M. A. Assessing the ffectsffort to Improve the Quality of Working Life on Organiffectiveness.Žagement Journal. 28,1985,p. 519; Ichniowski,C. The ffects ofGrievance Activity on Productivity.Ževie,1986,pp. 75…89.6.See,for example,Adler,P. S. The Learning Bureaucracy:NewUnited Motor Manufacturing,Inc.Žesearc in Organizational ,1992,p. 120; Bohlander,G. W. and Campbell,M. H.Problem-Solving Bargaining and Work Redesign:Magma CoppersLabor-Management Partnership.ŽNational Productivity evieno. 4. 1993,pp. 519-533; ckel R.,ckel,P. .,and Herman,A. Lean Manufacturing,Worker mpowerment and Labor-Managementord Cleveland www.fmcs.gov (search on ord Cleveland 7.Gittell,J. H.. ay:Using te Poips to Acieve Hig Performance. New York:McGraw-Hill.2003,p 165. 8.Ibid.,(p. 165).9.A Pro“le:American Airlines changes its business operation to moveon workersideas.ŽNational Public Radio,All Things Considered.September 13,2004.10.Gittell,J. H. ay:Using te Poips to Acieve Hig Performance. New York:McGraw-Hill.2003,p. 183.1.At Continental,Morale Is verything.ŽHuman Capital:Strategies; found at www.octanner.com/news/HumanCapital.2.Goldstein,A. P. and Sorcher,M. New York:Pergamon Press. 1974.3.The 360Žtechnique described in Chapter 9 is also an effective way toprovide feedback to managers on their own behavior. Here,managersreceive data from a number of sources,not just their employees. cognitive feedback techniques,collaboration,288. comments,write-in,use of,35-37constrained,131-136downsiing,72-76Agilent Technologies,67Alcoa,150American Airlines,41,115Cisco,66downsiing,74job security,66relationships,283Crescent Realty Trust,42Dart Group,147Dayton Hudson Corporation,147aton Corporation,182dward Jones,66xpress,41job security,65partnerships,283quality policies,164Fortune Magazine,45For,66Agilent story,67lectric,145Lordstown strike,6physical working conditions,124SMTs,188Herman Miller,41IndexHewlett-Packard,145IBM,145Intuit,39-43Johnson & Johnson,146nd,158-159lectric,65Merck,159Motorola,146,59respect for employees,and Porras),146Nucor,185job security,65relationships,283Post,T(New York),135pride in,140-143performance,143-147principles,149-150purpose,148-149Rubbermaid,63Sony,146job security,65partnership creation,278,283Spring“eld RemanufacturingCorporation,64Tennant Company,182Toyota,188Walt Disney,146ington Post,T,135Xerox,59-60compensation,77employee stock ownership,employee view of,77-81establishment of partnerships,295 as feedback,225gainsharing,103-107levels of,81-87merit pay,92-95pay-for-performance systems,piecework,88-92pro“t-sharing plans,101-102status,125-127ULCs (unit labor costs),86components,People PerformanceModel,48conduct,standards of,130con“dence in management,38con”ict management,251. teamworkconsistency,internal,309-310constrained communication,131-136contentious workgroups,246-250downsiing,74job security,66relationships,283contingency theory,181cooperation,244. ation; teamworkcosts,reduction of labor,69Crandall,Robert,116-117of management,12of organiations,80Crescent Realty Trust,42cultures,levels of morale,34establishment of partnerships,295satisfaction,316IndexDart Group,147day-to-day courtesies,134. Dayton Hudson Corporation,147ation,186in”uences),171job satisfaction,317-319validity,311reliability,309-310validity,311-316dignity,114. direction as feedback,208downsiing,62,269. avoiding,67communication,72-75ing negative impact of,positive steps for,72voluntary,71dress codes,296aton Corporation,182dward Jones (job security),66effective feedback techniques,effectiveness (job enablement in”uences),167-173 layers of management,183-185participative management,view of bureaucracies,173-178elements of pride,140-143performance,143-147principles,149-150purpose,148-149emergency conditions (participativemanagement),180employee stock ownership,99-101mployee Value Proposition,40employeescompensation,77employee stock ownership,gainsharing,103-107levels of,81-87merit pay,92-95pay-for-performance systems,piecework,88-92pro“t-sharing plans,101-102view of,77ethical treatment of,150-153motivationachievement,14-16camaraderie,17-20equity,10-13goals,8-9push-pull forces,198-206repetitive tasks,195-197sense of accomplishment,169surpluses,69view of bureaucracies,171-178needed improvement,36tasks,193-195Indexemployersattitudes,315autocratic style of,175compensation,77employee stock ownership,employee view of,77-81gainsharing,103-107levels of,81-87merit pay,92-95pay-for-performance systems,88,96-98piecework,88-92pro“t-sharing plans,101-102con“dence in,38con”ict,251. teamworkfeedback,207-209advancement as,231cognitive feedback techniques,effective feedback techniques,evaluation as,223-224guidance as,209-211recognition as,223-224rewards as,223-224unsatisfactory performance,hiring from outside,232human-relations skills,172individual differences,28-31job security,59. and principles),155-156-faire,176 new generation of workers,4surveys,7-8achievement,14-16camaraderie,17-20equity,10-13goals,8-9actor Theory,26-27vacations,22motivator-hygiene theory,6Motorola,visionary companies(Collins and Porras),146multiple choice questions,responsesto,35-37need to know communication practices,131neutrality as level of morale,34,59non-emergency conditions,participative management,180equity,109non-labor expenses,reduction on,69respect for employees,120-121Porras),146Nucor,185job security,65relationships,283ONeill,Paul,150occupational groups,job satisfaction,offshoring,269. downsiIndexof partnerships),296organiational bureaucracies,organiof principles,149-150of purpose,148-149ethical treatment of employees,impact on performance,143-147pride in companies,140-143translating into practice,154,outplacement assistance,72outsourcing,269. downsioverall satisfaction (in relationship tojob satisfaction),197Parker,James .,65participative management,179-182partnership,employment relation-ship as,265-268action process,283-293,295-301adversarial organibuilding,250-251paternalism,270-272Readiness Questionnaire,325-334supplier relationships,279transactional organipaternalism,270-272pay. compensation; money;pay-for-performance systems,88, People Performance Model,47-52perceived importance of employeesjob,15performance,15compensation,77employee stock ownership,employee view of,77-81gainsharing,103-107levels of,81-87merit pay,92-95pay-for-performance systems,88,96-98piecework,88-92pro“t-sharing plans,101-102feedback,207-209advancement as,231cognitive feedback techniques,effective feedback techniques,evaluation as,223-224guidance as,209-211recognition as,223-224rewards as,223-224unsatisfactory performance,job autonomy,127-131job challenges,191-192employee views of tasks,push-pull forces,198-206repetitive tasks,195-197Indexas an issue of justice,58-68policies and practices,68-76layers of management,183-185participative management,stock-market,45Perot,Ross,124Peters,Tom,134,182Pfeffer,Jeffrey,44,182purpose),157-160physical working conditions,establishment of partnerships,296status distinctions,123-127piecework,88-92job security,68-76Intuit survey,39-43measurement of,33-34performance and,44-47write-in comments,35-37Readiness Questionnaire,325-334population composition,surveys,Porras,146positive steps to downsiing,72Post,T,135in companies,15,140-143 de“nition of purpose,148-149push-pull forces,201ethical treatment of employees,partnerships,288pride in companies,140-143de“nition of purpose,148-149top-down management,177translating into practice,154,productivity (impact of compensation levels),85pro“t-sharing plans,101-102impact of compensation levels,85indifferent treatment of employees,119promotions,225-232ethical treatment of employees,pride in companies,140-143de“nition of purpose,148-149translating into practice,154,push-pull forces,job challenge,Index325-326,331-334reliability of,309-310validity of,311-316re-engineerings,269Readiness Questionnaire,325-326,reciprocity,85recognition,15as feedback,223-224establishment of partnerships,296regional groups (job satisfaction),morale and performance,44-47partnerships,265-268action process,283-293,adversarial organipaternalism,270-272suppliers,279transactional organitypes,268-269reliability,testing,309-310repetitive tasks,195-197of partnerships),288respect,109-111action of,120-121equality,112-113humiliation,113-115indifferent treatment,115-119job autonomy,127-131 motivation,12physical working conditions,status distinctions,123-127questions,35-37restructuring,269retention (push-pull forces),198-206rewards as feedback,208,223-225ings,269roles of managers,184. routine nature of tasks,195Rubbermaid,63Rucker Plan,103Rusli,Agus,124safety (motivation for),12salaries,77concerns,37employee stock ownership,employee view of,77-81gainsharing,103-107levels of compensation,81-87merit pay,92-95pay-for-performance systems,88,piecework,88-92pro“t-sharing plans,101-102satisfaction,317-319customer,316Intuit survey,39-43job challenges,191-192employee views of tasks,push-pull forces,198-206Indexrepetitive tasks,195-197job enablement,167-173teams,186-189participative management,view of bureaucracies,job security,314as level of morale,34with pay,313performance,44-47pride in companies,140-148performance,143-147principles,149-150purpose,149relationship to overall satisfaction,197Scanlon Plan,103Schmitt,Wolfgang,63security. self-esteem,201self-image (companys affect on),39289,301and principles),155-156Service Quality Index (SQI),164shirking,85signi“cance,work of,203