March 15, 2010
The first time I heard the concept of “fewer, better people” was in an executive education session taught by my colleague and mentor Earl Sasser several years ago. I have been captivated by the idea ever since, the idea of building an organization that cultivates and rewards excellence in its employees — and makes it sustainable by minimizing the size of the team. I have rarely seen the fewer/better HR strategy in practice, however. In a recent NYT interview, Kip Tindall, CEO of the Container Store described his version of it:
…one great person could easily be as productive as three good people. One great is equal to three good. If you really believe that, a lot of things happen. We try to pay 50 to 100 percent above industry average. That’s good for the employee, and that’s good for the customer, but it’s good for the company, too, because you get three times the productivity at only two times the labor cost.
A significant obstacle to enacting this strategy is that you need a great deal of confidence in your ability to tell the difference between good and great employees. And then you need the discipline to say no to the good ones, which can be particularly difficult in a growth context. But the merely good can destroy a culture of great. Finally, you need to design an environment where great people can work effectively.
None of these steps is easy. Take the average fast food restaurant as an example. Now try to redesign the restaurant to require a third of the people, each making twice the current wage. The current selection and training processes would have to be scratched. Jobs and incentives would have to be thoughtfully reconsidered. Where to begin? Start with this workforce in mind, and pull out a clean sheet of paper. How could their work be done differently?
The answers aren’t obvious, but what’s the potential payoff? Employees, customers and owners who all love interacting with your business.
June 17, 2009
British Airways has asked its employees to work for free for a month. As CNN reported, the airline sent an e-mail out to its staff that “offered workers between one and four weeks of unpaid leave — but with the option to work during this period.”
How would this e-mail go over in your company? What kind of relationship do you need to have with your employees for this message to be taken seriously? In my experience, organizations spend a lot of time trying to measure the unmeasurable, trying to value concepts like culture and goodwill. We know that these things often make or break the deal with customers and employees, but they don’t fit easily into a spreadsheet. I would suggest that the organizational uptake on management’s offer to let people work for free is a very good measure of employee goodwill.
Employee goodwill matters in the best of times, particularly for service businesses. As Heskett, Sasser, and Schlesinger argue in the Service Profit Chain, it is difficult to create value without employees, and so it helps to take great care of them. But employee goodwill may matter even more in the worst of times, as the British Airways experience illustrates. The more that employees feel an organization is devoted to them, the more likely they’ll be to share the pain of adversity. Strong relationships with your employees may help to buffer you against an unforgiving competitive environment.
On the flip side, antagonistic relationships between employees and organizations are never a good idea, but they may be disproportionately costly when the environment turns ugly. This dynamic is playing out around us with the widespread rise in layoffs and salary cuts. Some of these wrenching decisions are being made a context of mutual trust and mutual regret. And some are happening in an environment of fear and anger, with untold costs to everyone involved, including customers.
We don’t yet know how the British Airways story will end, but I have a prediction. I think we’ll be able to confirm what we suspect, that employee goodwill makes an enormous competitive difference, particularly in hard times. And we may finally have a way to measure the size of that difference. In the spirit of what-you-measure-is-what-you-get, this may increase the chance of its occurrence.
February 1, 2009
I’m often asked to provide a reading list on how to compete on service excellence. There are some great public sources out there. Below is a first cut (if you want more focused recommendations, please let me know), and I will plan to update this post on a regular basis.
Harvard Business Review Articles
- The Four Things a Service Business Must Get Right – if you’ll indulge me, I’ll start with my own article on how to design for service excellence.
- The Contribution Revolution – Scott Cook on how to more heavily involve customers in performing a company’s work.
- Companies and the Customers Who Hate Them – Gail McGovern and Youngme Moon on how companies can avoid antagonizing their customers.
- Why Incentive Plans Cannot Work – Alfie Kohn’s somewhat controversial argument on why monetary incentives send the wrong signal in a corporation.
- The Ownership Quotient – A book about getting employees and customers to behave like owners from the authors of The Service Profit Chain (which revolutionized service management).
- Customer Mania – A book about building a customer-focused company by Ken Blanchard and co-authors.
- Competing on Analytics – A book about using the ever-increasing data accumulating in firms in smart and creative ways from Tom Davenport and Jeanne Harris.