Disengaged Workforce? Maybe your CEO’s pay has something to do with it!

EmpProppingUpExecutive_“It’s a very personal, a very important thing. Hell, it’s a family motto. Are you ready, Jerry?

I’m ready.

I wanna make sure you’re ready, brother. Here it is: Show me the money. Oh-ho-ho! SHOW! ME! THE! MONEY! A-ha-ha! Jerry, doesn’t it make you feel good just to say that! Say it with me one time, Jerry. ” (Jerry Macquire, 1996)

You might be forgiven for assuming the dialogue I picked up from the movie Jerry Macquire was a conversation between a CEO candidate and the board member sounding him or her out. The increasing disparity in compensation packages commanded by CEOs to that of, the average employee has been a source of much debate and frustration.

Ben & Jerry’s Ice-Cream Company made a social pact with their employees when the company was founded. The company put a cap on the pay ratio between the top paid executive to the lowest-earning worker at 5:1. They held on to that ratio for 16 years. Then when it was time for Ben Cohen (the Ben in Ben and Jerry’s) to retire, they went hunting for a successor. They couldn’t find a single executive willing to accept the cap. The cap was raised to 7:1. Nada. The cap continued to be raised till it reached 17:1 over the next six years. Finally the company was acquired by Unilever USA in 2000 and nothing more was heard. The shroud of corporate secrecy descended on compensation details.

All that is about to change.

A few days back the Securities and Exchange Commission finally voted (with a narrow majority) to bring into effect a rule that will require companies to state their CEO pay as a ratio of the average worker’s pay. The hotly debated Dodd-Frank Wall Street Reform and Consumer Protection Act, is making a lot of senior executives very uncomfortable. Under the section, “Investor Protections and Improvements to the Regulation of Securities”, subtitle E refers to “Accountability and Executive Compensation.” The clause in question is as follows:

Shareholders must be informed of the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions as well as:

  • the median of the annual total compensation of all employees of the issuer, except the chief executive officer (or any equivalent position)
  • the annual total compensation of the chief executive officer, or any equivalent position
  • the ratio of the amount of the median of the annual total with the total CEO compensation

India is a bit ahead on the curve on this one. Under the new Companies Act 2013, the provision which had been incorporated by SEBI, for Listed Companies already requires them to start disclosing this information. Reporting on this, BusinessLine states that “Under the Companies Act, 2013, every listed company shall disclose in the board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed.”

So, why have governments decided to wake up and start tracking compensation paid to top executives? The financial collapse of 2008 and the subsequent fallout did seem to have a lot of influence on getting governments to finally act. The ‘Occupy Wall Street’ movement with its emphasis on the remaining ‘99%’ forced lawmakers to sit up and take notice. The increasing disparity in compensation between a select few and the vast majority seemed to be boiling over into a social flashpoint – any government’s nightmare!

So, how exactly do the numbers really stack up?

To get a sense of how good or bad the compensation ratio is currently; let us first try to understand what an ideal ratio in people’s minds is. The late Peter Drucker, believed that the ratio should be 20:1 (a downgrade from his earlier number of 25:1). During the time of the Dodd-Frank Law debate, Rick Wartzman wrote to the then SEC Chairperson Schapiro. He pointed out Peter Drucker’s opinion on the issue:

“I have often advised managers that a 20 to1 salary ratio is the limit beyond which they can not go if they don’t want resentment and falling morale to hit their companies,”

In a 2004 interview, Drucker elaborated further: “I’m not talking about the bitter feelings of the people on the plant floor… It’s the mid level management that is incredibly disillusioned” by king-size CEO compensation.

 At the World Economic Forum, in 2010, UNI Global Union General Secretary Philip Jennings warned of ‘gathering storms’ if the CEO gravy trains are not derailed. He said that the bloated pay packets are a source of ‘systemic risk’ and added that he supported the ‘Drucker Principle’ of 20:1 pay ratio.

In this context, let us take a look at what reality is.

In their paper titled “How Much (More) Should CEO’s Make? A Universal Desire for More Equal Pay”, Kiatpongsan and Norton state that their references point that the ratio of CEO compensation to that of the average employee increased from 20:1 in 1965 to a whopping 354:1 in 2012! The ILO has a ‘slightly’ different number they arrived at from studying the ratio in the largest firms. They say that the ratio was 508:1. The corresponding ratios in Germany – the European business powerhouse was 190:1 and 150:1 in Hong Kong, China.

Actual, Estimated and Ideal pay ratios of CEOs to unskilled workers in 16 countries (Source: How much (more) should CEOs make? A Universal Desire for More Equal Pay)
Actual, Estimated and Ideal pay ratios of CEOs to unskilled workers in 16 countries (Source: How much (more) should CEOs make? A Universal Desire for More Equal Pay)

Closer home, global management consultancy, Hay Group released the ‘Top Executive Compensation Report 2013-2014,’ which analyzed 2524 jobs across 176 organizations and found that CEO’s in India earn around 78 times the salary of an entry-level professional. And as companies show an increased preference to recruit CEO’s from outside the internal senior management pool; this number seems bound to rise even further.

But if you pay peanuts you get monkeys!

 But do you really?

Writing in the New Yorker, James Surowiecki states that, executive compensation rose 876% or nearly 9 times between 1978 and 2011 in the US. By extension one would assume that, it is 9 times more difficult to do business now than it was four decades ago!

Then, what could possibly explain this exorbitant rise in pay? According to Surowiecki it’s a combination of factors. The first is a shocking side-effect of increase transparency. With increased transparency required by law and amplified by the business press, boards at companies fall for ‘peer-benchmarking’ to determine executive compensation. And boards which are too ‘cozy’ with the CEOs, are reduced to being rubber stamps who approve pretty much anything the CEO tells them – including the justification for an outrageous compensation package. To make matters worse, this system gets played by the ‘leapfroggers’ – the CEO’s who are either extraordinarily brilliant or just plain lucky to earn huge salaries. These, then become the benchmark for others and the spiral just goes on growing!

Just how bad can it get? Roger Martin, former dean of University of Toronto’s Rotman School of Management, in an interview to Bloomberg said “When CEOs switched from asking the question of ‘how much is enough’ to ‘how much can I get,’ investor capital and executive talent started scrapping like hyenas for every morsel. It’s not that either hates labor, or wants to crush their lives. They just don’t care.”

Hmm..How’s that for employee engagement?


But CEO’s also increase investor wealth! Surely they deserve the cut?

If the financial collapse and the bonuses handed out to top executives in ‘too-big-to-fail’ is anything to go by, the assumption that bonuses and pay are necessarily linked to performance is not true. Studies published in the Economist and by others state that there is no clear correlation between CEO pay and company performance. Quite a few studies seem to have concluded that the correlation is in-fact negative!

A paper by Bebchuk, Cremers and Peyer, in the Journal of Financial Economics, titled ‘The CEO Pay Slice’, analysed the performance of companies, in relation to the proportion of what the CEO took, as a ratio of the total pay of the top five executives. It seems that the more the CEO took compared to the executives pay, the worse the company did!

In the report by Hay Group, they found that MD/CEO’s in India take close to 3 times the pay of those in Business Enabler Roles (HR Head, CIO, R&D Head etc) and Business Core Roles (Head – Sales & Marketing, Head – Manufacturing/Operations, BU heads etc)

Just when you think things couldn’t look worse, here is one final data point. It seems CEO pay is in fact strongly correlated with one metric – the number of people they fire!


Long Term vs Short Term!

 SEBI in the discussion paper on CEO compensation had stated “… on an average, the remuneration paid to CEOs in certain Indian companies is far higher than the remuneration received by their foreign counterparts and there is no justification available to that effect,”

In addition to the quantum of payment, there has been much discussion around the way executive pay is structured. The incentive structure holds the key to actions taken by CEOs. Organizations in mature markets are increasingly moving away from basic incentives like, stock options and restricted stocks to performance-linked long term incentives like performance equity, performance-based restricted stock among others.

The Hay Group finds that, Indian companies unfortunately lag far behind their global peers in this aspect. The chart below on CEO Compensation mix points out the stark difference in the structuring of pay in India versus their peers in US or Europe. (The mix is fractionally better than, that for Asia on average)

CEO Compensation Mix Across Geographies (Source: Hay Group)
CEO Compensation Mix Across Geographies (Source: Hay Group)

With companies being now required by law to state compensation for top executives, and the ratio of that compensation to the average pay, the fallout on engagement levels will depend on how responsible (or otherwise) the top management is.

CEO’s who have taken over 100% pay increases in years where they have given zero or minimal pay increase to the average employee who is battling runaway inflation at home and increased pressure at work (because the company has not met its performance targets!) will find it increasingly difficult to justify their stand.

There is enough research (an visible social backlash) to clearly establish that there is widespread consensus that, the gap between the top executive pay and entry level pay in an organization has to reduce – substantially so, if the current trends are to be believed. Compensation forms an important component of the need for ‘Safety’ in Maslow’s Hierarchy of Needs but, it should not become the ultimate goal.

As Jack Ma, puts it succinctly – “We only eat three meals a day, we only sleep on one bed, how can you spend money? Where’s the opportunity?”

So if you are wondering why your team is looking despondent despite of all the effort you put into motivating them, the answer just might lie buried in your company’s annual report.


References and Acknowledgements:

Image in beginning of post courtesy of FreeDigitalPhotos.net.

Graphs data/image sourced from sources mentioned against the images.

  • A Sweet Solution to the Sticky Wage Disparity Problem, Aug. 10, 2013, Mitchell Weiss, ABC News
  • What Jack Ma plans to do with his Alibaba billions, Svati Kristen Narula, September 23, 2014, Quartz India
  • UNI: In Davos, UNI warns of risks from Private Equity, CEO pay, 28 Jan 2010, ITUC CSI IGB
  • Dodd–Frank Wall Street Reform and Consumer Protection Act, Wikipedia
  • Executive Excess 2010: CEO Pay and the Great Recession, By Kevin Shih, Sam Pizzigati, Chuck Collins and Sarah Anderson, September 1, 2010, Institute for Policy Studies.
  • What’s the best way to set CEO pay?, 03 June 2013, ILO
  • Study: Tech CEO Pay Doesn’t Match Performance, Baseline, 17 Jul 2006
  •  Executive pay and performance, Feb 7th 2012, Economist
  • Open Season, James Surowiecki, October 21, 2013 Issue New Yorker,
  • CEO Pay 1,795-to-1 Multiple of Wages Skirts U.S. Law, By Elliot Blair Smith and Phil Kuntz, Apr 30, 2013, Bloomberg
  • Why CEO Pay Will Keep Rising to Even More Insanely Unjustified Levels While Ordinary Workers Get Squeezed, October 14, 2013, Yves Smith, Naked Capitalism
  • Top Executive Compensation Report 2013-2014, global management consultancy, Hay Group
  • US follows India on disclosure of CEO-staff pay ratio, Sept 19, 2014, BusinessLine
  • CEOs in India earn ’78 times the salary of an entry-level professional’, January 27, 2014, NDTV Profit
  • What’s the right ratio for CEO-to-worker pay?, By Jena McGregor September 19, 2013, Washington Post
  • The CEO pay slice, Lucian A. Bebchuk,J. Martijn Cremers, Urs C. Peyer, Journal of Financial Economics, Volume 102, Issue 1, October 2011

Rise of ERGs as an Employee Engagement Initiative.

ERGJoseph Wilson is an unlikely name to be associated with Employee Engagement. Yet the founder of the Xerox Corporation is often credited with having founded the first Employee Resource Group (of sorts).

Back in 1968, when violent race riots were tearing apart parts of America, Wilson wrote a letter to his managers, calling for an increased hiring of African-Americans. This move, which led to the establishment of BABE (Bay Area Black Employees), was a ground breaking approach towards addressing the issue of discrimination and achieving equality in the workforce. You can imagine how inspired people would have been to work at Xerox after this!

While ERGs were an excellent tool to help employees find a voice in large organizations, they were often seen as threatening by managers. Over time with changing demographics and the evolution of technology used in the workplace, ERGs (also known as affinity groups or employee networks) seem to be undergoing a resurrection of sorts.

So what’s with the renewed interest in ERGs?

ERGs require commitment of both time and money of the workforce to be successful, in addition to being aligned with the overall company goals. A study by Mercer in 2011, states that companies are spending well into six figures every year, not including the cost of the technology that enables collaboration between employees across the organization, including those in remote locations.

Research, surveys and studies attribute the renewed interest in ERGs to a combination of factors.

  • The investment in technology and communication (and the rise of social networking): Considerable investment in the technology and platforms to enable collaboration between the members of ERGs and the increased acceptance of social networks in the enterprise has improved communication and reach of ERGs. Coupled with dedicated efforts of HR team to make new recruits and teams aware of ERGs over the years , the workforce is now more aware of ERGs and this has contributed to increased memberships.
  • Changing Demographics in the Global Workforce: With Gen-Y now becoming a substantial component of the workforce distribution; their work choices and preferences are contributing to the success of ERGs. Unlike the generations that preceded them, Gen-Y is digitally native and are comfortable working collaboratively and using social media tools – both of which are critical to the success of employee networks.
  • Evolution in the focus and activities of ERGs: Over the years, ERGs have evolved from just being groups focussing on mutual support for members to those making substantial contribution to the bottom line of the organization. ERG’s are now providing insights into the market place, teaching employees located in the remote locations nuances of doing business, acting as brand ambassadors for the organization and improving the company’s reputation through community contribution.


The 3P’s of ERGs

People: ERGs provide organizations with access to talent that is relevant and more engaged. For talent acquisition, evolved organizations put their ERGs to good use by consulting with them to recruit new hires. When ERG members connect with their alma-maters, provide testimonials and use their network, talk about the culture and prospects at the company, it helps to attract high quality talent. ERGs thus can be used for extremely targeted recruitment to hire like minded and high quality candidates who will be a good fit for the organization. In a survey conducted by Software Advice in the US, among the respondents, almost 70 percent of 18- to 24-year-olds noted that ERGs would positively impact their decision to apply, while over half (52 percent) of 25- to 34-year-olds said the same. The substantial difference between this age group and the others is an indication of the shifting winds in priorities of the future managers and leaders.

Likelihood to Apply at a Company With an ERG Program by Age
Likelihood to Apply at a Company With an ERG Program by Age

From talent retention stand-point, affinity networks provide a powerful medium to help employees stay connected, and overcome gaps by providing mentorship and guidance – lack of which is a key reason why employees leave organizations.

Likelihood to Stay at a Company With an ERG Program by Age
Likelihood to Stay at a Company With an ERG Program by Age

In the same survey, the data showed that well over half of respondents under the age of 44 noted they would be more likely to stay at a company offering ERGs.

Productivity: ERGs are an excellent way to keep employees engaged. By connecting people who share the same concerns, passions, and interests, ERGs help form employee networks that span the silos usually get created with the departmental hierarchy.

ERG Program’s Impact on Employee Engagement Levels
ERG Program’s Impact on Employee Engagement Levels

ERGs formed around topics/domains, help provide training and provide access to mentors to their members – an invaluable means of engaging and motivating employees who might otherwise find navigating the complex fabric of organizational hierarchy for information and advice, a daunting task. ERGs can also act as great tools for HR to help spot the ‘right’ talent required for various positions. For example, Air Products and Chemicals’ Asian American group developed the Building Bridges program to help Asian colleagues expatriated to the US make the transition and become more productive.

ERG Program’s Impact on Employee Engagement by Age
ERG Program’s Impact on Employee Engagement by Age

By providing members an alternative to the formal hierarchical system, ERGs can help employees to understand business nuances, organizational culture, provide mentoring to perform better at current tasks and also help prepare members to move up the corporate ladder to other roles – a matter understandably of substantial interest to the Gen-Y constituent of the workforce.

All of these advantages go a long way to help address engagement challenges and increase motivation and productivity of the members.

Profitability: At many organizations, resource groups have an important role as focus groups and innovators in understanding the market-place dynamics and providing insights which help the company launch new and successful products. Mattel used their African-American ERG to conceptualize and advice their product and marketing teams to launch a line of dolls specifically designed for African-American girls. Pharma major Merck created global-constituency groups in 2008 to connect with their local markets. McDonalds’s women leadership network had a major influence on the introduction of healthy menus in their restaurants.


ERGs ahoy then, is it?

Not quite. While ERGs do clearly have the potential to engage and motivate your workforce, it isn’t for everybody. Companies that are working with or planning to recruit and engage a younger workforce will find ERGs useful, not so much organizations that are formal, hierarchical and have an overwhelmingly older work force.

Companies with the most dynamic and successful ERGs attribute their success aligning the mission of the ERGs with the interests of employees and the executives. In addition these organizations are sensitive to the need for new ERGs that address multigenerational, multicultural, and other constituencies and work hard to actively market the ERGs to their employees and new hires.

ERGs succeed when they are adequately funded and held responsible for those funds. The leaders of these groups need to receive training and other support to manage the groups in a professional manner.

Glenn Llopis (subject matter expert and chairman of the Glenn Lopis group) underlines the importance of supporting an ERG in the company by having a senior executive who is fully invested in its success of the mission, lead the group.

Llopis goes on to say that the success of the ERG depends on a clear articulation of the mission:

“Our objective is to help our organization to best understand and leverage the unique talent, gender and/or cultural insights we bring to increase recruitment efforts by [X] percent, talent retention by [Y] percent and our employee community’s overall workplace engagement by [Z] percent.”

If clear and measurable objectives aren’t defined, Llopis says, the ERG “just becomes a social gathering that doesn’t add real value and makes it difficult to sustain participation.”

And it also depends where in the world you are:

Mercer in its study found that there are differences in the practices of ERGs depending on the location of the company. Companies located in or having its headquarters in the US tend to have a higher probability of having ERGs, while it’s a very new/non-existent practice in Asian countries.

The proliferation of social networks and other collaborative platforms in the enterprise environment coupled with the increase in presence of Gen-Y in the workforce will no doubt change the way ERGs communicate and recruit new members.

The best ERGs are those that create a safe environment where employees can discuss challenges, voice concerns and work on self improvement, career progression and self-actualization through community contribution. ERG’s are now evolving to help attract, empower, motivate and engage a diverse and younger workforce from diverse backgrounds and cultures, which has a direct and quantifiable impact on the bottom line in the increasingly global arena where boundaries are blurred and geographical locations are starting to hold lesser and lesser significance.

As Lopis says, “It’s about embracing the special skills and characteristics that may be attributed to one’s culture or to one’s ethnicity or to one’s gender that a company could be much more mindful of [while utilizing the] special intelligence … that particular group can deliver to the company’s overall strategy or business model.”

Acknowledgements and References for this post:

Image courtesy of FreeDigitalPhotos.net, Graphs courtesy of HR & talent management technology resource Software Advice.

ERGs Come of Age:The Evolution of Employee Resource Groups, Mercer; Employee Resource Groups, Joseph C. Wilson, Wikipedia; Who Made America, Joseph Wilson, pbs.org, The business benefits of Resource Groups, Diversity Inc; Your Secret Weapon: Employee Resource Groups, Linkage Leadership Blog, Xerox diversity timeline, Xerox.com; Survey: Employee Resource Groups help engage Gen-Y Workers, (Erin Osterhaus), New Talent Times.


Let’s get rid of all the managers! But then again…

Examination of a Witch (1853), You drag it around like a ball and chain/  You wallow in the guilt/ you wallow in the pain/ You wave it like a flag / You wear it like a crown/ …The more I think about it/ Old Billy was right /Let’s kill all the lawyers managers / kill ’em tonight : Get Over It, Eagles.

 ‘Get Over It’ was a song that Don Henley, lead singer of the Eagles wrote to vent his frustration over people blaming their failures, frustrations, mental breakdowns and financial problems on others, and believing that the world owes them a favour.  (Trivia: The song references Shakespeare’s Henry VI, Part II. And the line that  I used with creative freedom  “Old Billy was right: let’s kill all the lawyers – kill ’em tonight”, echoes Shakespeare’s line “The first thing we do, let’s kill all the lawyers”.)

If you read most of the popular literature on how to engage employees, you would most likely be tempted to conclude that managers seem to be the cause of all the employee engagement problems in organizations. It would almost seem the world is full of leaders who know what they want and depend on managers to communicate it down to the teams (read workers and engineers depending on which industry you are in), and then there are employees who know how to do things, but depend on managers to tell them what the leaders want them to do. Therefore there has to be a problem with the middle layer called managers, who are incompetent in bridging the gap between the leaders vision and employee action. As the foul tempered character from Alice in Wonderland, the Queen of Hearts is fond of saying: “Off with their heads!”

 And it’s not that companies haven’t tried or aren’t trying. Google is – as one of the engineers puts it – “a company built by engineers for engineers.” So understandably, the definition of “real” work in the organization focuses more on designing products and writing code rather than effective communication and supervising others. In 2002, Page and Brin actually experimented with a flat org-structure. They just got rid of all the engineering managers. Goodbye bureaucratic fools, hello perfect giant company that works like a start-up. Erm..not really. That experiment apparently lasted a few months and once Page was inundated with questions on expense reports, interpersonal conflicts and all those things that used to be taken care of auto-magically, the managers were brought right back in!

Managers typically act as bridges between the teams and the rest of the organization. Since the days of the Hawthorne studies, where Elton Mayo stated that the “industrial world at the beginning of the twentieth century was more technologically advanced than ever before while being more socially incompetent than ever (Bendix & Fisher, 1949)”, interpersonal relations and group structure have been a matter of much debate, study and now in the twenty-first century a matter of concern. Mayo noticed in his studies that managers who had an understanding of social factors like group solidarity among the workers, had a greater ability to control and influence worker behaviour.

“In God we trust: All others bring data!”

William Edwards Deming.

Google, being Google, had the ability and the inclination to use data to decide what works best for the company. The company set up a people analytics team to tackle questions on employee well-being and productivity. One question stood out among all the others – “Do Managers matter?”

Enter Project Oxygen ,a multiyear research initiative to find answers to the questions that Google was asking itself. Instead of ending up being the usual MIS spewing team, the researchers in project Oxygen were “hypothesis-driven and wanted to help solve the company’s problems and questions with data”. The team was looking for evidence that better management mattered when all managers seemed so similar. The solution, arrived at using sophisticated multivariate analysis, showed that even “the smallest incremental increases in manager quality were quite powerful”.

High-scoring managers in the organization in 2008, saw less attrition than the others. The retention was strongly related to manager-quality than seniority, performance, tenure or promotions. The data also seemed to suggest a strong correlation between manager quality and workers happiness. Employees, whose bosses scored high on the ranking, consistently reported greater satisfaction in areas like innovation, work-life balance and career development.

So what’s the “happily ever-after” story?

 They boiled down all the data and research into eight key behaviours demonstrated by Google’s most effective managers.

A good (Google) manager:

    1.  Is a good coach
    2. Empowers the team and does not micromanage
    3. Expresses interest in and concern for team members’ success and personal well-being
    4. Is productive and results-oriented
    5. Is a good communicator—listens and shares information
    6. Helps with career development
    7. Has a clear vision and strategy for the team
    8. Has key technical skills that help him or her advice the team

Remember these are managers who have to deal with extremely smart engineers who are out to change the world – not an easy task. The interesting part is that, the data corroborated “the obvious”. When one looks at the list there is a bit of disappointment, a “duh!” moment. All that data, research, advanced stats and this is it? No magical formula or maybe an insight that the most effective managers are, only the ones who attended Ivy League B-schools in the US?

Well, thank God for Occam’s Razor. Good managers who have to manage complex projects with smart team members have to achieve a balance between managing the day-to-day operations and supporting them with their personal needs, professional development and career planning (All areas of major concern when employee engagement surveys come in). It might be an overkill (or practically impossible) for most organizations to devote time and resources to do the kind of advanced research that Google has done but there is nothing to prevent them from taking advantage of the results and improving the quality of their managers.

Of course in lots of organizations, the appointment of managers is based on their excellent performance in other domains (brilliant engineer, star salesman, great accountant) – a recipe for disaster. This often leads to the rise of frustration and informal networks form, which bypasses the formal hierarchy in order to get things done.  There is considerable existing and evolving research in (Social) Network Analysis that studies this phenomenon. The key takeaway from studies like project Oxygen is that, managers can be trained to be better at their jobs and it’s not rocket science.

And then there is Zappos

Obviously not everyone agrees. Zappos, that customer-service and employee focussed company, which works very hard to keep both customers and employees happy is also doing it. The company, in Jan of 2014, decided to do away with the traditional managers and will “replace the traditional corporate with a series of overlapping, self-governing ‘circles.’” The reorganization is based on the concept of ‘holacracy’, developed by management consultant Brian Robertson.

 But the organization is careful to note that “while a holacracy may get rid of traditional managers there is still structure and employees’ work is still watched. Poor performers, Robertson says, stand out when they don’t have enough “roles” to fill their time, or when a group of employees charged with monitoring the company’s culture decide they’re not a good fit.””

Elizabeth Kampf, a consultant at Gallup has weighed in with her opinion on the topic that, Zappos might be better off replacing bad managers with great ones. (In the article, she does mention that Gallup hasn’t studied the holacracy model specifically)  The article mentions that “Only about one in 10 people naturally have the traits to be a truly great manager … contributing about 48% higher profits to his or her company than average managers do. Great managers create a substantial business advantage for their companies — one that Zappos and other like-minded businesses stand to lose, if they drastically cut back on the ranks of their managers instead of focusing on hiring and developing the right people for the job.”

Zappos’ John Bunch, the person leading the transition to the new way of working says “says that while people have latched on to the idea that Zappos is getting rid of managers, what the company is actually doing is “decoupling the professional development side of the business from the technical getting-the-work-done side.””

Whatever is the real modus operandi, the fact remains that Zappos is the largest organization that has attempted something as drastic as this (but then Zappos has always done things differently) and the world will be watching with much interest on what happens – indeed the future of how organizations perceive the value of managers, depends on it.

References for the post:

Zappos says goodbye to bosses, Jena McGregor, Washington Post; How Google sold its managers on management, David A. Garvin, Harvard Business Review; Google’s quest to build a better boss, Adam Bryant, The New York Times, Can you really manage engagement without managers?, Elizabeth Kampf, Gallup Business Journal; “Get Over It”, Trivia – source Wikipedia.

Image Acknowledgement:

 Examination of a Witch (1853), by T.H.Matteson, inspired by the Salem Trials, source: Wikimedia Commons. 

[Video] The Lying Org-Chart

We have a new video up on the kwenchEngage! YouTube channel called “The Lying Org-Chart”.  Take a look.

A quick introduction to the power of Social Networks within organizations and how it can be unleashed to achieve better collaboration and also increase employee engagement.

References for content used in the video:

“How Org Charts Lie”, HBS Working Knowledge Series, “The Hidden Power of Social Networks: Understanding how  work really gets done in organizations”, HBS Press Book.

Time, Love and Tenderness at the workplace.

TLT_So you say that you can’t go on / Love Work left you cryin’/ And you say all your hope is gone/And what’s the use in tryin’/What you need is to have some faith/Shake off those sad blues/Get yourself a new view (Time,Love and Tenderness; Michael Bolton)

I took some liberties with Bolton’s lyrics and plugged work instead of love in there, but it would seem he knew much more about employee engagement, that one would have given him credit for.

Sigal Barsade, a professor at Wharton, believes that “compassionate love” at the workplace is key factor to boosting employee morale, teamwork and customer satisfaction.

So what exactly is compassionate love you ask? According to professor Barsade, it is when “Colleagues who are together day in and day out, ask and care about each other’s work and even non-work issues. They are careful of each other’s feelings. They show compassion when things don’t go well. And they also show affection and caring — and that can be about bringing somebody a cup of coffee when you go get your own, or just listening when a co-worker needs to talk.”

The first data collection that Barsade and her co-author Olivia O’Neill did was through a 16 month longitudinal study at a long-term health care facility covering 185 employees, 108 patients and 42 of the patient’s family members. The aim of the study was to, measure the effect of compassionate love on:

  • the emotional and behavioural outcomes of employees
  • the health of the patients
  • the satisfaction of the family members.

A very significant finding was that a culture of compassion reduces employees’ withdrawal from work. To further check if the findings held good in other industries, they performed another study – this one involving over 3000 employees in seven different industries. The results again showed a positive correlation of compassionate love with job satisfaction, commitment to the company and accountability for performance.

So what are the potential benefits from creating a culture that supports ‘compassionate love’?

(1)  Decreased Absenteeism (and Presenteeism):  When executives and management focus on creating a culture where employees are encouraged to listen to their co-workers and show empathy to problems the other person is facing (at work or maybe an illness in the family which is in turn affecting work performance) they create a workplace, which employees look forward to. When employees feel more comfortable and appreciated, they tend to give their best to the task on hand.

(2)  Decreased Stress levels: An additional study by O’Neill and Nancy Rothbard of Wharton involved fire-fighters. It turns out that the high stress of their job results in higher levels of work-family conflict and the study determined that compassionate love helps to buffer the effect of  job stress on other outcomes.

(3)   Increased Customer Satisfaction: The last thing a customer wants to hear is “I have passed this on to XYZ team, they will look into it” – and this is typically the response that a stressed out employee who couldn’t care less about what happens to the customer or his employer, would give. A vast majority of customer problems require coordination between employees to solve quickly and effectively. In a culture buttressed by compassionate love that coordination will happen easier than it would in a stressful, competitive or angry one.

The research does raise some points for management to think about. As Barsade puts it

“Management can do something about this. They should be thinking about the emotional culture. It starts with how they are treating their own employees when they see them. Are they showing these kinds of emotions? And it informs what kind of policies they put into place. This is something that can definitely be very purposeful — not just something that rises organically.”

References and Acknowledgements:

Image courtesy of FreeDigitalPhotos.net

(a) Why Fostering a Culture of Compassion in the Workplace Matters, Knowledge@Wharton

Flow ~ Just go with it!

ID-100224553Remember those days when you are just so immersed in work that you forget about everything – the irritating co-worker who is constantly talking on the phone (loudly!), the drone of the air-conditioner, even your lunch? Those are the days you were in what psychologists now refer to as a state of ‘flow’. Artists, composers are most often seen referring to a state of flow – at times when they have created some of their best work. Of course the years of practice to gain the required expertise for the task is a given. Its an almost universally accepted rule of thumb that about 10 years of deep immersion in a domain/subject is required before one can achieve the required expertise to make a significant contribution or improvement.

But even if you aren’t a maestro writing a new symphony there are moments when you just do brilliant work and write a piece of code, or make an outstanding creative for the marketing campaign. ‘Flow’ is where we would all like to be when we are doing our work – in an enlightened state, churning out the very best we are capable of creating!

So how would you know if you are in ‘in the flow’?  There are six factors that scientists identify as contributing to the state of flow (I am sure you will recognize that you feel all or most of them):

  1. intense and focused concentration on the present moment
  2. merging of action and awareness
  3. a loss of reflective self-consciousness
  4. a sense of personal control or agency over the situation or activity
  5. a distortion of temporal experience, one’s subjective experience of time is altered
  6. experience of the activity as intrinsically rewarding

And in case you think all this reminds you of the state after five hours of binge TV watching on Sunday, that’s not flow! Passive activities don’t put you in a state of flow. In fact research has shown that people can process only about 126 bits of information per second. Having a conversation takes ~40bits/second so when you are watching a movie on TV, a large part of your processing power is already gone. (So much for the myth of multitasking.)

Mihaly Csikszentmihalyi (last name pronounced Chick-sent-me-high-ee”) is widely recognized as the ‘architect of the notion of “flow”‘ and he refers to the notion of flow as:

Being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you’re using your skills to the utmost.

So how does one create the environment that promotes the state of flow?

Flow theory postulates three conditions that have to be met to achieve a flow state:

(1) One must be involved in an activity with a clear set of goals and progress. This adds direction and structure to the task

(2) The task at hand must have clear and immediate feedback. This helps the person negotiate any changing demands and allows him or her to adjust his or her performance to maintain the flow state.

(3) One must have a good balance between the perceived challenges of the task at hand and his or her own perceived skills. One must have confidence that he or she is capable to do the task at hand.

300px-Challenge_vs_skill.svgMihaly published a graph in 1997 which depicts the relationship between the perceived challenges of a task and the perception one has of one’s skills. The state of flow is more likely to occur when  the task to be done is a higher-than-average challenge and the individual has above-average skills. That is where the manager has to play to her role in clearly defining goals and matching the tasks to the strengths (actual and perceived) of her team members.

In 2013, Owen Schaffer broke down the prerequisites for entering a state of flow in the white-paper titled ‘Crafting Fun User Experiences: A Method to Facilitate Flow’ as follows:

  1. Knowing what to do: Goals are set clearly and communicated clearly to the employee.
  2. Knowing how to do it: The tasks allocated are matched with the competency of the employee to whom the task is allocated.
  3. Knowing how well you are doing: Frequent feedback on the progress against the expected outcomes of the tasks gives a sense of progress and keeps up the motivation levels.
  4. High perceived challenges: A feeling of a fairly high (but not impossibly high) challenge motivates the employee to put in extra effort to achieve the goal since it gives a sense of achievement – of having done something worthwhile.
  5. High perceived skills: The feeling that skills required to perform the task are perceived as high (not ordinarily available) gives an impetus to the employee.
  6. Freedom from distractions: This is where the manager contributes by ensuring that the employee can focus fully on the task allocated without constantly being distracted with lots of other activities/responsibilities.

And saving the best for the last: Here’s Mihaly Csikszentmihalyi himself, giving a talk about the notion of flow at TED.

References and Acknowledgements for this post:

Flow (psychology), Wikipedia, Mihaly Csikszentmihalyi: Positive psychologist, TED profile, Mihaly Csikszentmihalyi: Flow, the secret to happiness, TED Talks, Go with the Flow, Wired, 

Image 1, Image courtesy of FreeDigitalPhotos.net, Image 2: Source: Wikipedia