The Economic Benefits of Culture in M&A

A very interesting paper out of Harvard Business School applies economic theory to the culture clash in mergers and acquisitions – what’s the cost and benefit? How do most effectively merge cultures? Defining culture as “the degree to which members have similar beliefs about the best way of doing things,” the model used found that:

“Shared beliefs lead to more delegation, less monitoring, higher utility (or satisfaction), higher execution effort (or motivation), less information collection, less experimentation, faster coordination, less influence activities and less biased communication.”

Think of it this way – culture clash often manifests years after a merger when employees “still refer to a colleague’s pre-merger origin firm as an explanation for his or her behavior.”

So how do you more quickly overcome these “us v. them” tendencies to achieve the benefits of shared beliefs? Acknowledge these differences in culture and the expected outcomes at the outset and plan immediately how to address and potentially overcome them, even prior to the merger finalization.

As I’ve written in more detail here, these five steps will help merger your cultures as well as your business:

1) Merge the two companies’ vision and values into a new statement that is meaningful to employees from both organizations. Then use the strategic recognition program as a positive communication tool of the vision and values to all employees.
2) As with any strategic program, secure executive sponsorship of the recognition program, but be sure to include key senior leadership from both companies in the initial roll-out.
3) Measure: In the special case of M&A, specific goals should be included to track the progress of the merger of the two cultures into one of appreciation across the global workforce.
4) Survey employees prior to program launch and periodically afterwards to determine its effectiveness in achieving culture goals post merger.
5) Launch the program soon after the M&A is announced to engage all employees in this new culture of appreciation, help them understand their continued value to the merged organization, and unite all employees behind the new vision and values.

What other steps do you recommend to smooth the merger process and achieve a unified culture?

Studies Prove Rude, Egotistical Bosses Lower Productivity

A recent study found the effects of rudeness in the workplace, especially superior to subordinate, have immediate and long reaching impacts. Even “second-hand rudeness” – observing rude behavior happening to others – significantly diminished performance. Cited by Human Resources Executive, the study found:

“Simply observing discourteous behavior can erode the ability of fellow employees to think creatively, solve problems and act as team players. Victims of rudeness were negatively affected by the behavior with severe effects on creativity and the ability to solve problems. Even if they just imagined rude behavior, the results were the same and affected their memory.”

A Bnet report of a study on narcissistic, self-centered bosses is just as damning:

According to the researchers, employees working under self-centered bosses reportedly:
• Had lower levels of job satisfaction
• Saw their stress levels increase over the previous year
• Were less appreciative of their work and organization
• Had lower levels of effort and performance
• Were more prone to sadness and frustration at work

What’s the solution? I think the co-author of the rudeness study, Amir Erez offers a start:

“HR leaders need to change the atmosphere in the organization, and create the climate that this behavior is just not acceptable. Managers may be concerned about long-term effects, but here we see that just one incident affects productivity.”

It’s more than “creating a climate” – it’s changing the culture into one where rude, selfish behavior is not accepted and instead appreciation and recognition of effort is the norm. Creating these cultures of recognition must start at the top with the CEO setting the tone and the example for his/her direct reports to follow.

What’s the culture in your organization? Is it given to rude and selfish behavior? How high up does that tone rise? Or is it more appreciative? Do you see your CEO and senior executives demonstrating those desired attributes of a positive culture?

Talent Management for the Global Imperative

Strategy+Business recently published an excellent article on the “Talent Innovation Imperative”, dissecting the old approach to talent and how to apply new strategies to greater effect in today’s far more demographically and gender diverse workforce. The authors cite startling statistics on the “urgency of the talent problem:”

“Surveys conducted by the Center for Work–Life Policy (CWLP) show that between June 2007 and December 2008, the number of employees expressing loyalty to employers plunged from 95 percent to 39 percent. The number trusting their employers fell just as dramatically, from 79 percent to 22 percent over the same time period.”

What’s the solution? Quoting the authors’ four key steps:
1) Stem the leakage of the highest-quality people even as they reduce overhead.
2) Reinspire employees and reinvigorate morale.
3) Realign the company’s talent practices with its strategic priorities
4) Revamp their talent model to reflect changing demographic trends

The new 21st century talent model is for a global, diverse workforce and offers these benefits (again, quoting):
1) Allows a much broader group of people to assume positions of responsibility
2) Promotes innovation, growth, and breakthrough performance by integrating the needs of the business with those of individuals
3) When aligned with a clear and focused corporate strategy, allows top management to optimize compensation, training, and other expenses; maximize the productivity and performance of the workforce; and gain competitive advantage

The results of a “talent culture” are broad, but one I’d like to focus on is engagement. The authors highlight the primary factor of engagement as “employees who feel respected, valued and recognized” – a feat many companies failed to achieve under the old model and have little hope of achieving in the far more globally diverse, but team integrated company cultures of today. Success in meeting this critical factor of engagement relies on understanding what defines appropriate respect, validation and recognition in every culture, empowering employees anywhere to show that respect and give that recognition to their colleagues across the boundaries of culture and geography, and then making it personally meaningful and memorable for every individual.

If this is the talent engagement model you are embracing in the 21st century, our white paper “The New Era of Strategic Recognition: Engaging Multi-Generational and Multicultural Teams in the 21st Century Global Workforce” (available for download here) offers guidelines for success. Our market research on “Engaging the Global Workforce: Bridging the Gap between Finance and Talent Management" (available for download here) offers insight into global HR and Finance leader perspectives.

Realigning Your Workforce with Your Priorities

Layoffs, mergers, acquisitions, restructuring, reorganizing – all outfall of the recession in the majority of companies to some extent and all creating the greatest challenge facing organizations in 2010 – alignment. The massive organizational upheavals leave so many employees floundering in what to prioritize and what really matters. In the midst of these organizational changes, many companies also changed or adjusted their strategic objectives to align with the new priorities, but in doing so neglected to tell the employees how their work and specific tasks should also change to achieve those revised objectives.

Towers Perrin found in a June 2009 report:

“A company’s success depends on its people. But their collective power stems, in part, from an organization’s ability to point them in the same direction and importantly, in a direction that is aligned to the organization’s business strategy. When an organization’s leadership, workforce and culture are aligned with its strategic priorities, people can be a major source of sustainable competitive advantage.”

Chief Operating Officers and their teams are responsible for making their organizations run smoothly and efficiently. Communicating revised company goals and the important role each employee plays in delivering against those objectives is critical to achieving that objective. Human Resources is a key partner in creating and implementing the solution effectively across all units, all divisions, all employees. Together, the COO and HR can bring employees into alignment with the company’s objectives.

One of the most effective and positive methods for creating alignment is through strategic recognition. These highly structured programs encourage employees to notice, acknowledge and praise the exceptional efforts and behaviors of colleagues that reflect the company values in achievement of the strategic objectives. In this way employees are not only reminded of the values and objectives with every recognition they receive, but it also becomes very real to them how they are helping to achieve those objectives in their daily tasks. Simple tracking and reporting mechanisms allow leaders to review dashboards showing where employees may be lagging in their understanding. These analysis tools then enable targeted intervention where additional training may be needed.

How aligned is your organization today? What steps are you taking to get your employees aligned with your priorities within their new organizational structure?

Preparing for a Post Recession Workforce

Towers Perrin just issued a report showing largely ambivalence on the part of employees on the impact of layoffs on employee performance, organizational efficiency and sustainability post recession:

“With promising signs of improving economic fortunes, companies face a stark reality check. Did they improve efficiency? And, if so, was it a temporary response to crisis – or is it sustainable? Based on views from people doing the work, the jury is still out on both questions.”

In the US, Workforce Management reported a Kronos Workforce Institute study that found:

“Of respondents who said productivity had been negatively affected by layoffs, 66% said that morale had suffered and that workers were less motivated, and 36% said they are concerned that as the economy picks up, they won’t have the right resources to meet demand.”

In the UK, HR Review reported large percentages of employees are working additional hours for no pay with “employers benefiting from £1.5 billion of unpaid labour every week.” The article draws the conclusion:

“Motivation in the UK workplace may be hampered after it was revealed that the average employee is working for four hours a week without pay.”

What’s the connection? Just this – don’t rely on studies or news reports alone to understand what your employees think, how they are reacting to the recession, and what that means for productivity and performance in your organization. The data in the UK study in no way supports the conclusion that motivation is hampered. Perhaps employees are more engaged in their work and willingly giving extra effort – or at least some percentage are. here is not enough evidence either way. The other two reports seem to contradict each other.

The bottom line is this – you know (or you should know) how this lingering recession and the actions your company may have taken as a result is affecting your employees. You also know the best solution for addressing these problems. Of course, recognizing and appreciating their efforts that have kept your running through the recession is a critical component to their engagement, efficiency and morale. What other steps are you or have you taken to truly understand the state of mind of your employee and then react appropriately?

Evaluating Performance Appraisals

For those on an annual cycle of performance reviews, it’s that time of year – time to start preparing for the new cycle of performance evaluations. Kenexa recently came out with new research on the importance of the appraisal, especially on worker perception of managers and the organization:

“Across the 12 largest economies in the world, about 60 percent of employees report having received an appraisal within the past 12 months. Receiving an evaluation has a significant influence on an employee’s engagement level and views of their immediate manager and organizations. Employees who are given a performance appraisal are more engaged and are more satisfied with their job and the company overall. The research indicates that receiving a performance appraisal has a significant, favorable impact on how employees rate their pride in the organization and their willingness to recommend it as a place to work. Furthermore, those employees who receive a performance appraisal are more likely to say they intend to stay relative to those who have not received a performance appraisal.”

I agree a formal appraisal is important for both the positive feedback and the discussion of areas needing improvement. However, the appraisal process is limited by several factors, not least of which are:

1) Because of their infrequency, appraisals are usually a source of anxiety for both the appraiser and the employee.
2) Standard appraisals primarily offer the viewpoint of one person with no real benchmark beyond the immediate team.
3) Appraisals give an imprecise picture of division performance.

Strategic employee recognition solutions dramatically enhance the appraisal process, overcoming these challenges and the needs so clearly stated in the Kenexa research – the need for feedback and recognition of effort. Strategic recognition encourages peers and managers to frequently and, critically, in a timely way acknowledge efforts and achievements that demonstrate the company values in contribution to company objectives.

These “recognition assessments” and kudos can then be used during the annual performance review as an additional data point on the strengths (John has been recognized repeatedly for innovation) and even weaknesses (but John has been recognized only once for teamwork) as potential areas of improvement. This presents a much more rounded view of an employee’s contributions of which managers may not even be aware. Moreover, since such a strategic recognition program is deployed company-wide, data can be gathered and used to benchmark an individual’s performance and demonstration of values in their work against direct peers, team members, the division and even the company as a whole.

As you prepare for performance appraisal season, how would you evaluate the appraisal process? What would you like to change in approach and outcomes?

Rerouting Collaboration with Cisco

I’ve read about John Chambers’ “management experiment” in many sources during the last few months. From The New York Times, to the McKinsey Quarterly, to various blog sites, the CEO and Chairman of Cisco Systems, has explained his change from a command-and-control master to a promoter of teamwork and collaboration. The twist? Unlike the many other stories I’ve read over the years on the same topic, Mr. Chambers left his comfort zone as a command-and-control manager to actually restructure the entire company into councils, boards and working groups that truly work in a collaborative, team-based fashion.

Why did Cisco pursue this approach? Simple – to stay ahead of the curve. Chambers and his team saw the writing on the wall. In Chambers words, they moved the company from doing internet “plumbing” to true intelligence providers as trusted business advisors to top companies and even governments.

How did they do this? Chambers is clear that “you couldn’t do that without different organization structures.” His answer: “collaboration and teamwork, with a structured process behind it.” That process is the 12 councils, 47 boards and numerous working groups. Chambers says of the structure:

“This is an organization structure that I think is built for the future and is much more built upon, ‘How do you gain the power of the human network to really move on decisions and directions?’”

Making a team structure truly productive and effective requires team members to develop deep trust and appreciation for their colleagues. I would ask Mr. Chambers how his overall company culture is changing due to this new management style and his new Web 2.0 communication approach. Is he creating opportunities for people in these teams to notice and appreciate – meaningfully and personally – the efforts of their colleagues that make this new way a success? How is this a reality across these globally distributed teams?

What do you think of Cisco’s approach? How would such a management style play out in your organization?

Learning from the Corner Office * Yum Brands and Ford Motor

I enjoy reading The New York Times’ Corner Office column. I always gain insight from the lessons and perspectives of CEOs who are profiled in it. David C. Novack, chairman, chief executive of Yum brands had these interesting observations in a July column:

“Our [Yum Brands’] culture is based on the fact that people have an innate need for well-deserved recognition. Using recognition is the best way to build a high-energy, fun culture and reinforce the behaviors that drive results.

“One, it [recognition] needs to be deserved. And, two, it needs to come from the heart. So I think what leaders have to do is recognize the people who are getting it done. For the people who are getting it done, it can’t be done too much. Why be selfish on the thing that matters most to people?

“People leave companies for two reasons. One, they don’t feel appreciated. And, two, they don’t get along with their boss. We try to recognize the people who are really getting it done any time they happen to get it done, and we try to develop coaches instead of bosses. To me, with recognition, if you’ve got to err on the side of anything, recognize more than you should.”

Alan R. Mullaly, president and chief executive of Ford Motor, spoke of the four things he, as CEO, focuses on in a September column. One of those four he described as:

“I really focus on the values and the standards of the organization. What are the expected behaviors? How do we want to treat each other? How do we want to act? What do we want to do about transparency? How can we have a safe environment where we really know what’s going on?”

Between them, Mr. Novack and Mr. Mullaly hit three of our five tenets for strategic recognition in an organization:

1) Executive sponsorship with defined goals – the CEO must set the tone for the culture of the organization, encouraging and demonstrating the action he wants to see.

2) Opportunity for all to participate – recognize the majority of your people every time they do something worthy of appreciation. Recognition does not become less meaningful the more it happens. Rather, frequent recognition shows your people you care enough to pay attention to what they are doing and value their efforts.

3) Aligned with company values and strategic objectives – recognition is a powerful tool to make your values and objectives come alive for every employee in their everyday tasks. Tie every recognition to a value demonstrated or objective contributed to and you can begin to analyze understanding of the values and objectives by person, by team, by division.

What nuggets do you take away from these leaders?

Recognizing Fairmont

Workspan magazine, the member publication of WorldatWork, recently published an excellent case study on Fairmont Hotels & Resorts’ Strategic Employee Recognition Program. A few highlights from the article:

In the hospitality industry, service is directly tied to the bottom line, so innovative companies must create an employee engagement strategy that is motivating and meaningful to all employees. Toronto-based Fairmont Hotels & Resorts has done just that with its Serviceplus Colleague Recognition Program. The one-of-a-kind strategic program embraces and communicates the company’s core values while helping create an engaged culture where its 30,000 employees — also called “colleagues” — deliver on the company’s mission and are fully committed to their day-to-day work, team, management and organization.

Since launching the program in May 2007, Fairmont has seen impressive improvement regarding employee recognition. In fact, according to the company’s most recent employee engagement survey, the following survey items have shown significant increases:
• I’m recognized for a job well done.
• The best performers receive the greatest recognition.
• I’m recognized in ways that have special meaning to me.

In addition, since the program’s launch, employee surveys and qualitative feedback have shown that employee engagement at Fairmont Hotels & Resorts has increased significantly.

Of note from the employer perspective: In a recent BusinessWeek and J.D. Power & Associates survey, Fairmont scored third place overall out of the 50 best providers of customer service across a variety of industries in the Customer Service Champions survey. And Maclean’s magazine has rated Fairmont as one of Canada’s top 100 employers for eight years running.

Fairmont continues to see vast increases in the use of Serviceplus, and the engagement factor of employees continues to rise. Serviceplus has helped Fairmont extend its global presence beyond Canadian borders and encourages employees worldwide to celebrate the exceptional work their colleagues do every day, whether it’s given right on the spot, weekly, monthly or annually.

We’re pleased to be in partnership with Fairmont and wish them continued success.

Want Engagement? Hold Your Managers Accountable!

In a recent article in BusinessWeek, Michelle Conlin wrote well on the link between employee engagement and the bottom line, citing examples from Campbell Soup, Best Buy and JC Penney.

But it’s her final point, based on an example from Stryker, a medical technology company, that is critical yet rarely raised in discussing how to create an environment in which employees can become engaged.

At Stryker, pay and promotions are based in part on the engagement scores of a manager's direct reports. That, in essence, forces the bosses to double as optimism ministers. Says Rude: "People get jobs and lose jobs because of their ability to engage teams."

The debate continues to rage on who is responsible for employee engagement – the company or the employee. I believe the company is responsible for creating an environment in which an employee wants to and can engage. Stryker has achieved a nice balance and clearly understands that managers are the front line for creating an “engaging environment.” Our strategic recognition approach strongly advises managers be held accountable through KPIs or MBOs to ensure they are actively, continually and appropriately recognizing employees for the behaviors and actions that demonstrate the company values in achievement of the strategic objectives. Managers should also be held accountable for encouraging their employees to recognize peers as well.

By fostering a culture of appreciation, companies also create environments in which employees understand the importance and value of their everyday efforts in the company’s success. What could be more engaging than that?

The Reality of Recognition in a Recession

We’re often asked, “What can I do to encourage, motivate and engage my employees in this recession when my budgets are being cut?” Our CEO, Eric Mosley, answered this question well in “Hands Off the R&R Programs!” in last month’s issue of Human Resource Executive.

Some companies are also downsizing their rewards, migrating from big-ticket items to lower-priced rewards, but rewarding more employees.

Eric Mosley says, "Five years ago, the average reward value in recognition programs was about $1,000 and their penetration was 10 percent to 20 percent of the workforce. Now, the average is $100 and strategic companies, progressive companies, want 80 percent to 90 percent penetration in their workforce."

According to Mosley, large companies can't change employee behaviors or attitudes by touching only 10 percent of their staff. They need to touch at least 90 percent and frequently, which is causing a general trend toward the development of reward and recognition programs that cost less to launch, yet engage the majority of the employee base.

"Ten years ago, HR would have been very uneducated about the science behind this," he says. "We've just seen an awakening of what it actually takes to change a culture. Sometimes a recession or slowdown can accelerate this movement."

As Eric says, actually changing a culture requires recognizing far more employees – what Watson Wyatt calls “investing in the core” and Jack Welch refers to as “rewarding the middle 70%.”

What changes are you making to your reward and recognition structure in this recession? What’s the business benefit behind your programs? How are you measuring that? Are you seeing your recognition program change your company culture or are you simply reinforcing the elitist ethos of the same 10 percent continually recognized with high rewards?

Science PROVES Carrots Are Rotten and Sticks Are Broken

I just watched a terrific presentation by Dan Pink, author of A Whole New Mind, The Adventures of Johnny Bunko and Free Agent Nation (and coming in December, Drive: The Surprising Truth about What Motivates Us. Succinctly and humorously, Dan dissects the “mismatch between what science knows and what business does.”



Dan discusses, as I’ve written before, about how incentives actually stop creativity in its tracks by focusing people too strongly on the reward – “If you do this, then you get that.” As Dan says:

“There is a mismatch between what science knows and what business does. Our business operating systems (how we motivate people, how we apply our human resources) are built around these extrinsic motivators – around these carrots and sticks. For 21st century tasks, that mechanistic reward and punishment approach doesn’t work, and often does harm.”

“If/then rewards work really well for tasks where there is a simple set of rules and a defined destination to get to. However, in much of the world, white collar workers are doing much less work that is routine, left-brained rule-based work. So what really matters are the more right-brained, creative, conceptual kind of abilities. For complex problems of any kind in any field, those if/then reward – the things around which we’ve built so many of our businesses – don’t work! This is a FACT.”

Dan also cites the Dan Ariely research I’ve written about here in which study participants are offered small, medium and large rewards, proving these reward structures only work for tasks involving mechanical skills. Those tasks requiring even “rudimentary” cognitive skill, a larger reward led to poorer performance.

“Too many organizations are making their decisions – their policies on talent and their people – based on assumptions that are outdated, unexamined and rooted more in folklore than in science. If you really want high performance on those definitional tasks of the 21st century, the solution is not to do more of the wrong things – to entice people with a sweeter carrot or threaten them with a sharper stick.”

What does he suggest as a new approach? “The scientists who have been studying motivation built more around intrinsic motivation, around the desire to do things because they matter, because they like it, because they’re interesting, out of a desire to do something important that is larger than ourselves.”

I agree completely. The problem, however, lies in the average company’s ability to communicate to employees how their efforts matter, how they are making a difference and why what they do is important both to the company and to what the company is trying to achieve in the world. That’s where strategic recognition comes in.

As Dan points out, companies lack the structures and systems necessary for motivating 21st century creative workers. Unlike extrinsic incentive awards that are known before the task is completed, strategic recognition is given spontaneously after the behavior or action being recognized occurs. Done properly to feed employee needs for intrinsic motivation, strategic recognition affirms for employees how their efforts matter to the group, team, company or customer achieving their goals and why those efforts are important within a much larger context of the company’s strategic objectives and the values that are important to them.

The spontaneity and sincerity of such recognition is what motivates employees to keep doing those things that bring personal fulfillment as well as company success. Building such an intrinsic motivational system on a platform that is also measurable and governable also gives company leaders the bottom-line proof they need of the value of these systems.

Preparing for the Post-Recession Employee

Are you ready for the employee of the future – the one that has been burned by the workplace, with zero loyalty to “the company” and preference for striking out on their own? Don’t know what I’m talking about? Jack and Suzy Welch explained it this way:

This recession has left a deep scar on the psyche of working people. Previous recessions came on more slowly, their layoffs occurred more gradually. And previous recessions didn't leave most people blaming business, especially Big Business, for what went wrong. Something fundamental in our society has changed, and it will show in how people choose their next jobs. … We can't be precise about when this terrible recession will be over. All we know is that it eventually will be. And when it is, a brave new type of employee will rule the day. And only brave new companies will be able to entice them back.

Need more proof? In one of their global workforce indices, Kelly Services reported:

• 51 percent of Gen Y are prepared to accept a lower wage or a lesser role if their work contributes to something more important or meaningful.
• 62 percent of Gen X plan to look for a new job within a year.
• 46 percent of baby boomers say their career goals are not being advanced in their current job.

Note these are Kelly’s global findings, showing the same trend across all workplace generations – general dissatisfaction with their current position and a desire to look elsewhere. What are you doing or planning to do to counteract this talent drain?

Clearly, you need to feed your employees’ needs for psychic income – the need for social acceptance, self esteem and self realization that can never be met through compensation. Strategic recognition is a powerful tool for positively reinforcing employees for those actions that reflect the company values while achieving the strategic objectives. This approach ensures employees understand the importance of their efforts within the bigger picture and helps communicate the value they hold within the organization.

What other solutions do you suggest for reversing this expected trend that will see your best employees head to your competitors?