Turning Your Employees Into Owners
Phone: 314.283.1589

Leadership

Our people are our most valuable asset. How do we identify, attract, empower, and keep them?

We’ve already talked a lot about nurturing our employees and developing strong working relationships with our team members. We’ve also talked a lot about good communication and how to transfer business savvy to the next team.

The common element in all this is interaction, but the challenge is how to make time to really get to know your colleagues. The key is to find opportunities throughout the work-day to involve future leaders so you can teach by example and foster the kind of communication that makes a business successful.

Lunch

We all have to eat lunch. I like to say never go to lunch alone. Always take a junior colleague or a peer with you to share the issues affecting you today, developing that common understanding of what’s going on in the organization.

Meetings

When you bring new, up-and-coming team members to senior level meetings, you’re introducing them industry leaders and making them a visible part of your brand. This is critically important, not only as a learning opportunity for junior colleagues, but also as a way to transfer the respect and credibility of your organization to the next leadership team.

Business trips

I’ve found shared business trips an excellent way to develop strong working relationships with new or promising team members.  Traveling together means spending a lot of time in airports and restaurants, as well as preparing for meetings. Those hours are not just an opportunity to get to know each other, but also a chance for you to demonstrate a solid work ethic and the other values and expectations of your company. You get to teach by example. You also get to observe how your protégé handles changing circumstances, such as flights being cancelled and things going wrong. You get to see how he or she performs under stress.

The Bottom line

By spending time with your colleagues, especially new candidates for future leadership positions, at lunch, in meetings, and while traveling, you can lay the foundation of strong working relationships that can last for many years.

 

I want to tell you a story. Sometimes our roll as business leaders includes really taking care of our employees and not just looking at the bottom dollar and getting product out the door.

On a fall day about thirteen years ago, I was in a business meeting when I got a call from my wife. She knew I’d be in a meeting and not taking calls, but we had a pre-arranged single for emergencies—she would call and let it ring twice, so I’d feel the vibration and call her back. That morning, I got the signal.

I excused myself and stepped out of the room. When I got out and called her back, she asked me if I’d seen a TV and I said no. Well, I was at a hotel where I could go and look at a TV, so I went and looked and it was 9/11 and I saw the second plane hit the building. Then I went back into the meeting, told my friends what had gone on, and we adjourned and went back to our offices.

The first thing we were trying to do was make sure everybody was safe—we had a number of people out on the road. We allowed employees to rent cars and bring them home, whatever they needed to do. It was like all bets were off. I think any business leader would make those same kinds of decisions in order to make sure their people were safe. But we also felt we had an obligation to take care of our extended corporate family, our employees’ spouses and kids as well.  And we realized we didn’t really have an organized way to do that.

So, after the crisis was over, we all got together and sat down and said what if we shared our information with each other? Our spouses’ and parents’ names and phone numbers, our kids’ schools, their babysitters and their phone numbers, all of that. And we created an elective database for our team members where they could put all the information we would need so that if they were unreachable for whatever reason we would be able to step in and make sure their families were taken care of.

I’ve been thinking about this again lately with the attacks in France being in the news so much. I think as business leaders we have a responsibility, a moral responsibility, not just for our employees—our corporate family—but also our extended family, their spouses and children. Recognizing this can only improve your company culture.

We really need to recognize that our team members are not just our employees, but also their families. It is appropriate, I think it is appropriate, that if our employees want to share that kind of information with us—and not all of them do—that we make ourselves available to help them out.

 

We talk a lot of about how important it is to be able to get out of our comfort zones. Getting out of the comfort zone is how we grow, it’s how we learn, it’s how we discover new things, both personally and professionally. If we’re only ever willing to do what’s comfortable, we can coast along, just paying attention to the daily minutia of our businesses, and then wake up five years later to discover we’re no longer relevant in our industry.

But what’s outside of the comfort zone? If you go too far outside of the comfort zone you get into what my friend Vince Langley calls the sheer terror zone.

The sheer terror zone is where whatever’s going on is too much and we just stop. It might not even be a conscious decision—when you find yourself just forgetting to take certain steps, or maybe there’s never any time to try something new because you’re too busy dealing with day-to-day issues, what I call playing Wack-a-Mole, to take a step back and look at the big picture—that might be the terror zone at work.

Different things do it for different people. Some people are afraid of heights. Other people are afraid of looking like fools. Whatever it is, you get too close to that terror and you jump back automatically. It’s like touching a hot stove. It’s important to stay away from the sheer terror zone, because we don’t have time to stop. We can’t afford to not take risks.

So, what can we do? How do we learn to tolerate discomfort so that we can push ourselves and grow?

The question applies not just to us as CEOs, but also to our colleagues and employees. It’s our job to build their capacity to handle discomfort as well, so they can grow and our companies can thrive. Just ordering people to do things they can’t stand to do won’t work, just like willing ourselves to quit being terrified won’t work.

Instead, we have to look at potential costs vs. benefits. If someone is stuck because a task is so far outside of their comfort zone that they’re just panicking, we can get them moving by either reducing the perceived cost or by increasing the potential benefit. If I ask you to climb up the cables of the George Washington Bridge and you’re afraid of heights, you’ll probably say no. If I say there’s ten thousand dollars waiting for you up at the top, maybe you’ll try it. If your kid is stuck up there, you’ll climb up to save your kid. Or, maybe we can reduce the perceived risk by giving you a safety harness and maybe a mask so you can’t see how high up you are.

As CEOs, we have to find ways to do both, increase perceived benefit and decrease perceived risk—and we have to do it in ways that are meaningful to the person facing the challenge, because different people have different fears and look for different rewards.

Maybe that means being more transparent about why the company needs to take certain steps or adjusting compensation packages so people have a greater stake in the outcome. Maybe it means breaking up a project into manageable tasks and letting multiple people work together as a team. A big part of it is helping the people we work with find ways of accomplishing necessary goals in ways that work for them. For example, let’s say you have a colleague who is painfully, just intolerably shy, and you need this person to make a couple of cold calls for you. It’s not going to happen—that phone might as well weigh three thousand pounds. But if you let him or her make the contacts via email, that could work.

The take-away here is that sometimes in order to get ourselves—or our employees and colleagues—out of our comfort zones we need to make challenges seem a little less scary and a little more worthwhile. Given the choice between comfort and sheer terror, we all choose comfort every time. But if we can make a little space between those two extremes, then we can go ahead and take the risk. And every time we take risks, we get a little better at it.

We become more able to face the sheer terror zone.

In today’s WSJ there was an article titled “Amid Crackdown, Some Firms Rethink ESOP Sales Practices” which relates to owners rethinking how to sell to employee-stock-ownership-plans (ESOP) following a crackdown by the Labor Department.  It seems to me we are missing a piece of important information in the ESOP relationship that allows the new owners to make an informed decision.

The Basics:  When a founder or majority shareholder wants to liquidate their closely controlled shares to their employees, one option is an ESOP.  In this scenario, a trust is created that will hold the company shares.  The value of these shares is determined by an outside appraiser.  The purchase of these shares may be funded by the employees’ retirement savings account.  In my view, the premise of this structure is that the employee is not capable of making an informed decision.  A trustee is hired (often an outsider and, with the recent crackdown, a likely choice to protect the business owner) to protect the workers’ interests and a third party valuation firm is hired to determine a value.  It seems to me that if employees have a working knowledge of the organization that includes the institutional knowledge and business savvy, they are qualified to make their own decisions.  If they don’t, are they really qualified to be an owner?

What If:  I would submit that an employee team that has the information necessary to make an informed decision regarding the purchase of their company results in a better outcome for both the current owner and the future owners.  An ownership group that is informed will be equipped to capitalize on the historical successes and lead the firm well into the future.  This means today’s owners need to invest time and resources in the future owners by passing on the institutional knowledge and business savvy to the next generation of leaders.  By institutionalizing this knowledge and getting it out of the leader or founder’s head, it will make the company more valuable not only in the owner’s eyes but in those around them.

The WSJ suggests that the Labor Department has observed that the value of a firm may be set to meet some predetermined expectation on the part of existing owners.  This could be viewed as a one-sided negotiation that a willing participant would never accept when buying a car or home.  Why should we consider it when buying a business?

The ESOP is to be used as a financial and legal tool to facilitate the completion of a business relationship between competent, knowledgeable parties.  It should not be used as a tool to manipulate terms and conditions based on a lack of knowledge or transparency.  As business leaders it is our duty to pay it forward by developing a team of leaders and owners that have a sustainable financial foundation to lead the company into the future.  It should not be our priority to squeeze every cent out of the transaction by taking advantage of our position.

As the CEO of an engineering firm in the a creative market segment, I felt one of my primary roles was to find the best possible people, provide the best possible tools and get out of the way.  The traditional business practice made this challenging.  For example, a qualified candidate for a leadership position would often have an advanced degree and a professional license to practice in the design industry. When we would bring them into the typical engineering firm, we would ask them to clock in and clock out and account for every moment of their day.  The reality was we were treating these highly trained industry professionals like a teenager at their first job with a fast food chain.

I submit this arcane legacy of micromanaging the best of the best has little or no benefit and may be actually driving away your best talent.

One morning I traveled to an architect’s office to prepare for an interview later that day.  When I went into the CEO’s office, it looked like a ticker tape parade had just passed through.  Paper was all over the place. I commented on what appeared to be a significant research project that was underway.  The response was “no.  I am doing my time sheet.  It is more of an art than science.”

Given this feedback, I often asked other firm leaders if they do timesheets and why.  The vast majority required detailed timesheets and most admitted to fixing the numbers to make them work.  Is there anything more demoralizing than asking a highly educated and trained individual to report back like a small child while supporting a culture that requires fixing the numbers to achieve a desired outcome?

Daniel Pink, author of Drive, observes that a financial reward system only works in jobs where mechanical skills are critical.  When cognitive skill are required, high financial rewards lead to poorer performance.  For these roles he recommends paying people enough so money is not an issue.  Once the basic financial need is met, the professional will be attracted to a firm that provides autonomy, mastery and purpose.

So what did we do…we did not do time sheets unless absolutely necessary for a specific project.  We created a shared fate reward system where the entire team succeeded or failed together.  We invested heavily in tools that provided timely and accurate information to the team members (autonomous and mastery) so they could support their clients.

As business leaders, our role is to be educators, nurtures and observers.  By being predictable leaders, the team was able to focus on the customer and the business.  This culture of empowerment attracted the best of the best and gave them the freedom to do their best work.

 

2013 – 2014 surveys provide the following picture of today’s workforce.

  • 70% of employees say they are motivated to do their very best1
  • 57% would recommend their organization to others as a good place to work1
  • 27% intend to seek employment elsewhere1
  • 50% report that the organization values employee recognition1
  • 40% report sufficient opportunities for advancement1

How is your organization measuring up?

Team members are increasingly becoming more important for US business.  In the 1930’s, 76% of GDP was outside the service sector.  A majority of business was focused in manufacturing where the deliverable was often a product of a machine.  These machines delivered the same result day in and day out.  When they broke we fixed them and they continued on.

Today, 68% of the U.S. GDP or 4 out of 5 jobs is from the service sector2.  These services are generated by human beings that have the power to think.  The 1950’s management style of “When I want your opinion, I will tell you what it is” will no longer work.  Hence, the results of the above survey where we find an alarming number of our team members turn off their brains when they come to work.  As leaders, it is our job to nurture, educate, and provide opportunity to expand their horizons.  Investing in the team is the only way to grow and expand our companies and success.  Change can be scary, but a requirement for survival.

As business leaders we are often distracted from our primary task of working on our business by the constant firefighting of today’s emergencies.  However, we must focus on the important and not just the urgent.  To get more out of our team members, we must:

  • Replace short term reaction with long term planning.
  • Focus not on how many we make, but how well we make them.
  • Institute a culture of leadership and not supervision. Leadership focuses on process, supervision focuses on targets.
  • Sharpen the saw – institute education and self-improvement for everyone.
  • Convert individual knowledge and experiences into institutional knowledge. The worst place to store business information is in the human brain.

Edward Deming’s work found that 94% of all problems in the workplace are problems not with the workers, not with performance, but with the system.  By focusing on the processes and systems that deliver repeatable outcomes, we are able to continually sharpen the saw with a passion for continuous improvement that results in an engaged team, corporate growth and individual success.

 

 

1   American Psychological Association, Psychologically Healthy Workplace Program; APA’s 2014 Work & Well-Being Survey; U.S. Department of Labor, Bureau of Labor Statistics.

2   Office of the United States Trade Representative

In the latest Be Human Salon hosted by Bigwidesky, David Grey author of The Connected Company shares his observations of the divided company and the connected company.  The divided company responded to the needs of the industrial age, creating a division of labor, Interchangeable parts and mass production.  They made on thing, very well and a lot of them.  However, in today’s world change is happening at an increasing rate.  What worked yesterday does not work today.  The connected company is responding to this need for change.  These organizations are flexible, morph, and respond quickly to change.  Unlike the divided company, these companies structure facilitate cross communication and support from different areas.

The challenge for business leaders is should and / or how should culture be changed.  Mr. Grey defines culture at habits that your form as a group over time.  As small portion of the culture is observable, however a majority is under the surface.  What are the levers or incentives to drive behavior?  What do we value?  Do we say we have an open door policy, but cringe when someone takes us up on it?  What are our belief regarding our outcomes that drive the organization.  There are startups constantly challenging the status quo in our beliefs.  Are book stores the only way to get a book?  Are music stores the only way to get music?  Are grocery stores the only place to get groceries?  Is film the only way to keep memories?

So as a business leader it is your job to manage change.  There are opportunities for a divided company to continue being very successful, however, it is critical to no be something you are not.  Mr. Grey uses the example of Nokia that was a great phone manufacture but tried to be an Apple type company of creating its own operating system.  Samsung on the other hand focused on phone manufactures and commands a significant market share today.  In Louis Gerstner, Jr’s book Who Says Elephants Can’t Dance?  He observes that changing the culture is a last resort but can be done.

Watch David Grey’s insightful conversation.

 

Communication is a pillar for Ardent.  As business leaders, communication nurtures and develops our team to think and act like owners.  When we are owners we put ourselves out there for all to see.  We may be imperfect but we are worthy of sharing connections that are authentic.  In Dr. Brown’s TEDX presentation, she suggests these connections are not based on a hierarchical business expectation but on being vulnerable.

Dr. Brown states that in order to connect we need to have the courage to be imperfect, to be kind to ourselves and others and the ability to be our self.  We have to learn to be comfortable with being uncomfortable.  This could be entering into a business, relationship, or conversation where there are no guarantees.  As owners we need to embrace space where failure is an option.

Vulnerability is not a weakness but a measure of courage.  Vulnerability unlocks the door to innovation, creativity and change.  If we are not willing to be vulnerable we avoid.  Avoidance may manifest itself by ignoring the obvious, being dictatorial or micromanaging.  By being vulnerable it gives owners the ability to work through the tough decisions (hire/fire, new markets, turnaround, new products, define culture, succession planning, financial performance).  By having the tough conversations we foster growth and maximize success for the organization, team and ourselves.

I encourage you to watch Dr. Brown’s Presentations

The Power of Vulnerability

Listening To Shame

“Vulnerability sounds like truth and feels like courage.  Truth and courage aren’t always comfortable, but they’re never weakness”.  Brené Brown

You Earn It!

Culture cannot be mandated.  Engineered vision, mission, values and principle statements are meaningless if they fly in the face of observed behaviors.

I would suggest corporate culture is much like a marriage.  The participants are continually building it up or taking away from it based on their actions.  Every action by a team member has an intended and likely an unintended outcome.  A team member might be willing to spend some cultural capital to achieve his or her desired outcome.  A short term individual gain can have a long term charge to collective organizational cultural capital.  When the organization members are able to align goals, achieve transparency, and share in the collective fate top to bottom, a strong foundation is laid on which to build.

As leaders we can create a big wake that dramatically affects others.  Our actions or inactions can trump months of work to build up cultural capital.  Are you walking the walk and talking the talk?  Are you tolerating others toxic behavior that suck the cultural life out of the organization?

Productivity can drop 50% when an organization takes a major hit to culture.  Tangible measures such as service levels, safety, turnover, and absenteeism may all take a turn for the worse.  If survivable, these may be the short term costs and don’t quantify the true cost to the organization.

A healthy culture is willing to be vulnerable.  Vulnerability and trust are the foundation for innovation, creativity and change.  Team members embracing vulnerability is a measure of organizational courage.  A company without these attributes is static and dying a slow death likely driven by a dictatorial, micromanaging culture.

In the short term, nurturing a positive culture will require giving more than you get or faking it until you make it.  A positive corporate culture cannot be built overnight, but it is the only way to build a sustainable organization.  Turning your employees into owners requires continued investment in your culture through actions until the collective team has “Earned It”.

Attracting top talent is getting harder and harder.  Last week, I shared tools to help identify key attributes in candidates.  The fact of the matter is exceptional team members are in great demand and to get them, your bus has to be better than the rest.

For starters, the hiring process needs to be personal and reflect the type of communication they would experience when at the firm.  Avoid a faceless electronic communication process.  Each contact point is an opportunity for you to share your bus’ culture.  Use the job posting to help sell the position.  Avoid just the typical narrative of skills. Talk about your “why” as outlined in Simon Sinek’s TED Talk. (Ardent Dec 4, 2013).

Stay in touch.  Not communicating is still communicating.  If you aren’t ready to move forward, be communicative about what is going on.  Even if the bus has a bumpy ride, building trust will serve you well in standing out from the others.

If it is your goal to have a long term working relationship and not a transactional one, the hiring process must reflect the same.