How to Maintain Focus in the Midst of Change

Concluding my theme on change management and rewards begun on Monday, Knowledge@Wharton published another article in which DuPont’s CEO Ellen Kullman dissected the need for change in her organization to maintain its success as an innovation powerhouse, even during the recession. But the main difficulty in the process lay, in Kullman’s words, in “understanding the dynamic relationship between what should not change and what has to change – and having absolute clarity about that.”

Isn’t that the struggle of every business leader as it fights to gain market share or maintain its position, or change direction in the face of a changing world and customer needs to avoid becoming obsolete?

But once you figure this out, as DuPont did, what do you do to make the change real? Kullman implemented four leadership principles:

1) Focus on what you can control
2) Adopt a new trajectory by rethinking your business model
3) Communicate
4) Maintain pride around the company’s mission

These four principles reinforce her point of knowing what should change and what should not. The economy is out of your control, but this recession may be forcing you to acknowledge truths in your organization, your industry or your market that will require a new business model. What steps are you taking to chart that model, communicate it to employees and follow though on the change to achieve success? In the midst of that change, how are you helping employees maintain pride in the company and its mission so they will remain engaged in their work and committed to their role?

Are You a Change Addict?

Building on the theme of change management and rewards from my last post, Knowledge@Wharton has been running a series on business leader reaction to change and the recession. In one article, BP executive Fiona MacLeod called the corporate world out for its “addiction to serial change management programs that consume massive resources but ultimately fail to solve the problems they aim to address.”

Why does this addiction develop? Because new leaders often want the “big splash” of the initiative, but have no plan for the follow-through, employees do not understand why the change is needed, and ownership of the process is given to external consultants and not internal leaders.

MacLeod’s steps to overcome this “addiction to change and fully engage leaders and employees in the process of creating change and sustaining it over time” are:

• Tell a good story so employees understand the case for change, including what the future will look like after the change is complete and why that is better than today
• Set clear steps to implement the change, follow through on each and measure the results
• Get leaders committed and involved by putting written contracts in performance reviews – KPIs or MBOs
• Change the company culture to reward the desired behavior

It’s this last point that is most critical for true, long-term change. As MacLeod notes:

“Changing the culture to reward the desired behavior is critical to success. Make heroes of day-to-day deliverers, not those who make the biggest splash. You reward people on how they treat the customer, how they make decisions, how they simplify the business..... And crucially, all of this has to be done in the spirit of open communication and respect.... If [people are] uncertain and they don't feel respected, the change will never stick. Celebrating success, recognizing achievement and making people feel good about the business were important tools for sustaining momentum. Importantly, it's as much -- if not more -- about the recognition of your peers than it is about financial rewards."

I offered these five steps to effective positive behavioral and culture change. What have you tried in change management that has worked for you? Or are you a “change addict” in love with the big slash but without the wherewithal to own the process and follow through on the steps to success?

Measuring Reward Systems * Driving Change through Recognition

I am recently enamored of Steve Kerr’s new book Reward Systems: Does Yours Measure Up? Steve is currently the Chief Learning Officer at Goldman Sachs and served previously in the same position at General Electric under Jack Welch. You may be more familiar with his oft-cited article on recognition rewards: “The Folly of Rewarding A While Hoping for B.”

Steve’s “definition-measurement-reward” process is based on the principle that “effective reward systems induce organization members to pursue organizational goals for that most reliable of reasons: each person’s conviction that he or she will benefit by doing so.”

The process is simple – define your goal, find a way to measure it, then reward successful performance against that metric. Measurement is essential because:

“If something isn’t measured, you can’t give people feedback about it, so they can’t improve. You can’t reward the people who are doing it well, and you can’t improve or admonish people who do it poorly. Measurement also signals that something is important; if no one is tracking it, it will take a backseat to things that are being scrutinized. … Things that aren’t measured can’t be rewarded and they very likely won’t get done.”

If there is no metric for recognition, employees will believe that you don’t care about it and don’t value it. This builds into the irony of scarcity. The funds for benefits and compensation, for example, are scarce and so are doled out carefully. Recognition, however, is not scare. The irony is, because recognition is not scarce, it gets ignored.

Aligning rewards strategy with desired operational performance goals (as defined by your values, mission and strategies) will ensure you achieve your goals. Different types of rewards include compensation and incentives, prestige awards (special, infrequent awards such as a President’s Club that are limited to a few), and content awards such as recognition, feedback, and management attention.

Which system is best for your needs? Steve offers this test of a good rewards system (all of which are achieved through content awards):
• Everyone is eligible to participate – “When you make people ineligible for a reward, you take away their motivation to strive for it.”
• High visibility – to encourage others to want to achieve
• Performance contingent – and not on seniority, titles, etc.
• Timely – soon after the action being rewarded occurs
• Reversible – doesn’t build up entitlement

Take a look at your own organization. Have you defined a metric to measure every behavior you need to succeed? Have you then rewarded successful achievement of those metrics? If not, you are leaving cash on the table in the form of lost employee productivity and engagement.

Self-Esteem, Sabotage and Psychic Income

As I wrote the title to this post, I knew many of my readers would dismiss it as nothing more than psychobabble. Recent research out of Singapore Management University (SMU), however, shows “deviant behaviours, or behaviours initiated by employees that contravene organisational norms, can collectively cost organisations billions of dollars per year.” Think Enron or, at the industry level, the recent mortgage debacle that sparked this latest recession.

Why do some choose such deviant behavior that can ultimately destroy their own livelihood? I would suggest extreme self interest, corruptibility and a lack of concern the company and all it supports (other employees, customers, partners, shareholders, etc.). The SMU research suggests another reason – a person’s self-esteem. The gist of the research is:

“If an individual’s self-esteem is contingent upon being a competent employee – what they refer to as having workplace-contingent self-esteem – then regardless of whether self-esteem is low or high, they will be less likely to engage in deviant behaviours. But when an employee’s self-esteem was low on its own and not contingent on the workplace, more deviance was reported. However, there may be special conditions where workplace-contingent self-esteem might bring about a different kind of deviance. Accounting fraud, polluting the environment to cut costs and cheating customers to close a sale, for instance, represent forms of workplace deviance which can be construed to benefit the organisation.”

What does all this mean? Some employees – those with low self-esteem not contingent on the workplace – must be rooted out and helped to find a new situation before their behavior can significantly impact productivity, morale and even workplace culture. For the others whose self-esteem is contingent on the company, feed their psychic income needs for social acceptance, self-esteem and self realization through strategic recognition.

Please do not misunderstand. This is where the “strategic” component of recognition becomes critical or you could end up with the “different kind of deviance” described above. You must positively reinforce employees only for those actions that reflect the company values while achieving the strategic objectives. This approach ensures employees who, for example, increase productivity but do so by harming the environment will not be rewarded for their efforts. Values-based recognition is the key to ensuring employees display the right behaviors in achieving the company goals.

Are your psychic income needs met at work? Too many companies only focus on meeting compensation needs (and even less on that in today’s economy). The recession provides only greater reason to bridge the gap in employee needs through strategic recognition.

“War for Talent” Still a Reality * Are You Ready?

Continuing on the theme preparing for the upturn, are you ready to meet the talent shortage that will come in the upturn? Many would dismiss this concern out of hand, believing the high unemployment rates today will fill the void tomorrow. But many of those unemployed are not trained or skilled in the areas most desperate for employees today or those likely to recover the fastest in the upturn. Moreover, those of the boomer generation will retire, and the younger generation is not prepared to keep up. I was shocked by this statistic:

“As the economy rebounds, the shortages will become more pronounced. A very high percentage of the new jobs created today (some estimates run as high as 75% of all new jobs in the U.S.) require some level of post-high school education or experience. Yet our education patterns have not shifted to keep pace (in the U.S., less than 30% of Gen Y's graduate from college and over 20% do not even graduate from high school!).”

Need more proof? The Economist Intelligence Unit issued this report on the struggle for tomorrow’s workforce mirroring many of the same findings.

To George Colony, CEO of Forrester Research, understanding this talent gap and how to find, keep and inspire the best marks “post-Gateway” CEOs – those who will survive and thrive on the other side of this “Gateway Recession”:

The war for people will be intense. It’s a counterintuitive thought at this moment of high worldwide unemployment, but the post-Gateway era will be distinguished by a pitched battle for good people. CEOs will fight for people on three fronts: 1) Attracting and winning the best and the brightest takes world-class offices and factories, the best internal technology, and truly compelling corporate purpose and values; 2) retaining the best workers takes a great corporate strategy, excellent leadership, and inspiring management; and finally 3) getting productivity from the limited workforce you have — again, this loops back to nailing the technology imperative.

George cuts straight to the heart of the matter. Let me ask you:
• Are your corporate purpose and company values truly compelling? How do you know?
• Are your employees engaged in your strategy and delivering against it in their daily jobs? Do they even know how?
• Can your leaders inspire the productivity achievements you need? Based on what?

Share your thoughts in comments.

What Next? A Leader’s 5-Step Action List to Prepare for the Upturn

The economic upturn is coming. We are already beginning to see signs of improvement in the wider market and among our own customer base of some of the world’s largest organizations. But even as we see these positive indicators, we are reminded that employment numbers are a lagging indicator and not likely to recover for a quarter or two after general economic rebound.

So how do you face down your challenges and keep your employees engaged to ensure you are well positioned to gain market share in the upturn? Gallup recently issued “What Leaders Must Do Next” from which I’ve gleaned the following action list:

1) Empathize – “Leaders need to remind everyone that they're all in it together”
2) Give a sense of purpose – "You need to encourage a spirit of sharing and of a common purpose so that folks can move forward."
3) Tell the “future” story – “Articulate a consistent and pervasive message that the changes the organization is going through will bring long-term growth and viability."
4) Partner with your staff – “To align employees with leadership's vision and get to the outcomes you want - all while fostering engagement - leaders must make workers partners in the strategy.”
5) Be optimistic – “"A good way to prove your optimism is to double down on people and products. Under these conditions, think how to best use the bandwidth you have to prepare for the future. It will give you a payoff when the economy comes back. It will show your people today that you believe in the future of the company -- and that you're ready to meet it when it arrives."

In its June issue, HRFocus offered an additional three tips that prepare for the upturn – refocus your strategy, continue to address culture and become resilient – all of which fit into the five actions above.

Every company that expects to grow and thrive has a one, three and five year strategic plan. Unfortunately, events like the current recession often cause those plans to be thrown out the window as unexpected actions such as layoffs or product realignments become urgent. But now is the time to retrieve those plans, create the story of the future, share it with your teams, partner with them to make it reality and, most importantly, show them you believe in the future and in them. Tell them you appreciate their efforts.

What else is on your action list? Tell me in comments.

Employee Engagement * What Do You Want to Know?

I was honored to see Globoforce included as the only recognition provider in the Aberdeen Group’s Research Preview – Employee Engagement: Strategies to Drive Operational Excellence.

I am greatly anticipating this report, due out this month, that promises the “how” of employee engagement. As the preview says:

“Our research will provide clear actions that organizations can pursue to drive engagement, and the tools available to help them engage (and therefore attract, retain, and improve the performance of) their key employees. It will also look at the enabling technologies that can be used throughout the employee lifecycle and in planning for succession and future workforce needs to target and engage the right individuals for the right roles to achieve business results.”

Company leaders are crying out for such practical steps. Indeed, one leader anticipating the Macleod review of employee engagement commented: “We want practical, tangible ways of helping businesses. If the review can help organisations attract the best people and retain and engage them, then that’s great.”

I’m sure strategic employee recognition will be one of those clear actions as it is a practical, tangible and, critically, measurable and reportable way of motivating, retaining and engaging employees.

What would you hope to see in this study? What questions do you have about employee engagement that are still unanswered?

Employee Engagement as Stock Market Indicator

Quantum Workplace issued an interesting press release last month showing a strong correlation between their employee engagement index (“measured by the ability and willingness of individuals to exert effort for the benefit of the company, speak highly of the organization, and intent to remain”) and the directional movement of the Dow Jones Industrial Average (a primary stock market indicator in the U.S.). Quantum’s index accurately predicted up or down movements of the Dow in 10 out 12 months.

Loosely translated, this means the better engaged employees are, the better the company will perform and, extrapolating, the better the economy will perform. Stay with me here. This makes good sense to me. Without employees, no company would exist. Without good, committed, hardworking employees, no company can become the top of its industry. Now, if more employees (as measured by this or other engagement tools) are reporting higher engagement levels, then they are working harder on achieving strategic objectives, making the company more successful. The more successful our companies are, the more stable the economy.

Let’s look at other Quantum research that shows employee engagement declining in 66% of organizations studied in 2008 over 2007. What would be the state of our economy if only 15% of those employees were more engaged? Keep in mind, these are currently employed staffers – they just aren’t working to capacity. Granted, there are many reasons why they may not be as engaged – stress, overwork, concern for their future.

But what are you doing to help them reengage, to boost their morale and productivity? Are you communicating with them more and recognizing their efforts that help achieve your objectives?

Why Bother with Employee Engagement?

Why should you bother with employee engagement – especially now when so many other concerns fill your plate? In this Forbes article, Douglas Conant, CEO of Campbell Soup put it simply and well:

“I saw that of all the measurable elements related to culture building, engagement correlates closest to shareholder returns. We can use engagement as a tool to measure our progress in building a high-performance culture and to set higher standards for our leaders. To win in the marketplace, we believe you must first win in the workplace. I'm obsessed with keeping employee engagement front and center and keeping up energy around it."

Conant’s approach is in line with Towers Perrin’s as outlined in Closing the Engagement Gap as well as the results we’ve seen with our own customers -- frequent, timely, personal and (importantly) accountable recognition and appreciation of employee efforts leads to improved market and financial performance.

As Conant continues:

“I understood that Campbell as an organization needed to demonstrate its commitment to its people before they could be expected to demonstrate their own extraordinary commitment to it and its success. Learning to celebrate success is a key component of learning how to win in the market. On a personal level, I send out about 20 thank-you notes a day to staffers, on all levels.”

Conant reflects what many are anticipating from the MacLeod review of employee engagement, due out anytime now. As Greg Aitken, head of human capital strategy at the Royal Bank of Scotland, said in anticipation of this study:

“If an organisation wants to come out of the recession and attract the best staff, then employee engagement has to be a factor they focus on. It’s a strategic imperative. Employee engagement directly affects customer service, financial performance and the future well-being of the organisation.”

Are you on board with the financial and organizational benefits of employee engagement? Is engagement a strategic initiative in your organization, relegated to an annual employee survey with no measurable actions, or ignored entirely? In any of those scenarios, what do you think the impact is on employee morale, productivity and behavior?

Undercover Lessons * Over-communicate to Engage

Has anyone watched Undercover Boss? It aired last month in the UK and my American colleagues tell me a U.S. version is slated for sometime this year. The premise has a high-level company director going undercover to film a “documentary” as an average worker in various roles in the company. In the 25 June episode, Stephen Martin, CEO of the Clugston Group, took on the role of “Martin Walker,” an office worker wanting to learn the ropes of physical labour in various capacities throughout the construction company.

While the episode was interesting, I have to admit I was more intrigued by Mr. Martin’s insights in this Financial Times article on his experience:

"What lessons has he learnt? 'Our key messages were just not getting through to people,' Mr Martin says. 'People working a shift on a large site do not have time to read newsletters or log on to websites. You have to communicate with people on their terms, and it is different for every location. One size does not fit all.'

"Leaders may know exactly what they want to see happening. They send out messages down the management line. Employees ought to understand. But between the top table and the shop-floor something goes wrong. And right now there is a bigger, more urgent point. In a recession it is even harder to have an effective, open dialogue with an anxious workforce. Mr Martin shared what he had learnt with his team of managers after filming was over. It provoked a (frequently repeated) response: 'They’ve never told us that!'

"Mr Martin feels he needs to 'over-communicate' to reassure staff who have seen big redundancies in recent months. 'If you don’t pass on enough information, even if it is bad news, they will fill the gap with something else, probably worse than the truth.' "

This aligns with findings from our own recent market research showing that while 77% percent of HR leaders and employees agree that more communication about company strategy and company values would be effective ways to counteract the negative effects of layoffs and reductions, employees are in the dark about some of the good news, such as increases in budget funding or stability of the company in this economy.

In the fearful environment created by this economy, communication, appreciation and recognition are a cheap and very effective means to reconnect your employees with your objectives and engage them in the work at hand. What are you doing to open the lines of communication with your team?

Are You Watering Your Culture Tree?

I’m a fan of Wally Bock’s Three Star Leadership blog. A couple of recent posts focused on company culture and how easily it can be destroyed to the detriment of company success.

In Home Depot at 30: A Lesson in Corporate Culture, Wally tells the story of how the founders created a company based on trust of its employees, especially knowledgeable salespeople easily found and approached on the warehouse floor and store managers with a great deal of local autonomy. Then one founder retired and Bob Nardelli came in as the new CEO, cutting those knowledgeable salespeople to the bone and replacing 98 percent of executives. As Wally says, rebuilding the culture under a new CEO will be difficult as “the old, experienced people took the old culture with them. It’s not likely that many will come back.”

In Lessons from the Rise and Fall of Delta Airlines, Wally describes an airline so beloved by its employees that they banded together to buy the company it’s first Boeing 767. And business travelers extolled Delta’s great service far and wide as it became the premier airline for business travelers. Then Ron Allen came in as the new CEO, instituting cost-cutting measures and leading acquisitions that decimated the company and its culture.

In each post, Wally offers a few nuggets of wisdom – his “Boss’s Bottom Lines.” These two in particular rang true with me:

“Culture is a slow growing tree. In the beginning it needs protection. But after a couple of decades the culture will be stronger than you are. You need to work with it, not against it.”

“Culture is a powerful but fragile thing. If you burn down the culture tree, it takes a long time to grow another one.”

What is your company culture today? Is it the same culture as always – decades in the making and strong – or a sapling that is just beginning to grow, perhaps after the old culture was burned down? Many of our clients have been able to manipulate their social architecture to change their culture into one of appreciation. Is your culture one that needs to be destroyed and replaced with one of appreciation? Be sure to take our weekly poll (upper left corner, or email subscribers click through).

Overcoming 'Survivor Syndrome' after Layoffs

Has your organization, like so many others, had to conduct layoffs due to this recession? What’s your take on those actions? Do you believe they were truly necessary for the company to survive and that the company handled the process well with frequent, honest communications? Or were you perhaps the victim of a ham-handed redundancy exercise that used the recession as an excuse to cut headcount?

The Conference Board recently issued a report (press release available here. The full report is available to members.) that looks at precisely these issues – how company communications around layoffs drive employee perceptions and reactions to the situation. This in turn affects how well “survivors” perform and re-engage with the company.

Overcoming survivor syndrome – “the low morale, reduced commitment, and lack of loyalty and trust suffered by those remaining employed at downsized companies” – is critical for a company wishing to remain competitive today and able to lead in the upturn. One way to do this during a down economy is by feeding employee needs for psychic income – social acceptance, increased self-esteem and self realization that can never be met through compensation.

The most effective way to do this is through frequent recognition of employee efforts to assist their teams and the company in succeeding. Acknowledging the pressure and fear they may feel while appreciating their efforts to continue to perform at a high level helps employees overcome the equally devastating psychological recession many are currently experiencing as well.

What's your "survivor" status?

Readers Speak * Trends in Employee Engagement, Recognition and Attitudes

As regular readers of the Globoblog know, I’ve been posting a weekly poll on the blog home page (upper left corner) for nearly a year now. While the weekly results have been sometimes interesting, sometimes perplexing and often confirmatory of what industry research shows, I thought I’d take a look at to see if any themes have developed since last August. Here are the trends I see through these highly unscientific poll results:

The recession is causing people to focus on doing a good job in their own roles while helping each other and thanking their colleagues for what they do. However, managers have not really changed their approach since the economic downturn took hold, and communication and recognition is particularly lacking, happening ad-hoc and with little ultimate understanding. Interestingly, readers reported the attitude in their office was tied between mean/rude and sweet last August, but by October (when the downturn was becoming pronounced) attitudes were becomingly significantly more negative. And by April, employees knew they were no longer a priority.

While managers think they are recognizing their staff, employees disagree, which makes sense as the majority report recognition in their organizations is ad-hoc and dependent on the manager. The vast majority also agree the worst recognition they could get is no recognition at all, although trinkets and trash are considered worthless (though the thought is appreciated). Most also agree they want to be recognized for their efforts, skills and talents in a way that is meaningful to them and can be shared with friends and family. I’m particularly pleased to see recognition programs in place are reinforcing company objectives and values, but disappointed that recognition still seems to be strongly tied to the annual performance review.

While poll respondents overwhelmingly agree manager appreciation of efforts is the most important contributor to engagement at work, there is a nearly equal split between highly engaged, somewhat engaged and disengaged employees and the same split between how employees feel engagement has changed since the downturn. However, the recession has not impacted the importance of engagement efforts – half say engagement is important while half disagree, which remained the same from October to May.

I’m looking forward to comparing these results in a few months with post-upturn polls. Want to have your voice heard? Be sure to take the weekly polls.

Are You Fostering a Culture of Appreciation or Competition

As I said in my last post, courageous and thoughtful leadership is critical during this time of fear among the workforce. I’m encouraged that so many company leaders I speak with regularly are continuing and even increasing their investment in employee recognition programs as a way to replace fear with appreciation, focus and determination (results born out in our recent market research study).

However, you must be cautious in how you manage a recognition program. Yes, you want to broadly acknowledge those people deserving of recognition, but you cannot do so in a way that allows any one employee to brag about their “recognition achievements” or in any other way turn recognition into some kind of competition. As I’ve said before, recognition is about driving behavior change at the individual level to achieve corporate success. It’s not at all about pitting one employee against another to see who can get more recognition.

Competition has its place, such as in a sales incentives initiative or similar. Otherwise, you should be using recognition to encourage and motivate every employee to his or her top level of performance, regardless of the achievements of their colleagues.

What’s your company culture? Appreciation or competition? Which kind of environment inspires you to better performance? Be sure to take our weekly poll (upper left corner of the blog).