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First, Break All the Rules: What the World's Greatest Managers Do Differentlyby Marcus Buckingham and Curt Coffman
The Measuring Stick
* A Disaster Off the Scilly Isles
* The Measuring Stick
* Putting the Twelve to the Test
* A Case in Point
* Mountain Climbing
A Disaster Off the Scilly Isles
"What do we know to be important but are unable to measure?"
In the dense fog of a dark night in October 1707, Great Britain lost nearly an entire fleet of ships. There was no pitched battle at sea. The admiral, Clowdisley Shovell, simply miscalculated his position in the Atlantic and his flagship smashed into the rocks of the Scilly Isles, a tail of islands off the southwest coast of England. The rest of the fleet, following blindly behind, went aground and piled onto the rocks, one after another. Four warships and two thousand lives were lost.
For such a proud nation of seafarers, this tragic loss was distinctly embarrassing. But to be fair to the memory of Clowdisley Shovell, it was not altogether surprising. The concept of latitude and longitude had been around since the first century B.C. But by 1700 we still hadn't managed to devise an accurate way to measure longitude — nobody ever knew for sure how far east or west they had traveled. Professional seamen like Clowdisley Shovell had to estimate their progress either by guessing their average speed or by dropping a log over the side of the boat and timing how long it took to float from bow to stem. Forced to rely on such crude measurements, the admiral can be forgiven his massive misjudgment.
What caused the disaster was not the admiral's ignorance, but his inability to measure something that he already knew to be critically important — in this case longitude.
A similar drama is playing out in today's business world: many companies know that their ability to find and keep talented employees is vital to their sustained success, but they have no way of knowing whether or not they are effective at doing this.
In their book The Service Profit Chain, James Heskett, W. Earl Sasser, and Leonard Schlesinger make the case that no matter what your business, the only way to generate enduring profits is to begin by building the kind of work environment that attracts, focuses, and keeps talented employees. It is a convincing case. But the manager on the street probably didn't need convincing. Over the last twenty years most managers have come to realize their competitiveness depends upon being able to find and keep top talent in every role This is why, in tight labor markets, companies seem prepared to go to almost any lengths to prevent employees' eyes from wandering. If you work for GE, you may be one of the twenty-three thousand employees who are now granted stock options in the company. Employees of AlliedSignal and Starbucks can make use of the company concierge service when they forget that their mothers need flowers and their dachshunds need walking. And at Eddie Bauer, in-chair massages are available for all those aching backs hunched over computer terminals.
But do any of these caring carrots really work? Do they really attract and keep only the most productive employees? Or are they simply a catch-all, netting both productive employees and ROAD warriors — the army's pithy phrase for those sleepy folk who are happy to "retire on active duty"?
The truth is, no one really knows. Why? Because even though every great manager and every great company realizes how important it is, they still haven't devised an accurate way to measure a manager's or a company's ability to find, focus, and keep talented people. The few measurements that are available — such as employee retention figures or number of days to fill openings or lengthy employee opinion surveys — lack precision. They are the modern-day equivalent of dropping a log over the side of the boat.
Companies and managers know they need help. What they are asking for is a simple and accurate measuring stick that can tell them how well one company or one manager is doing as compared with others, in terms of finding and keeping talented people. Without this measuring stick, many companies and many managers know they may find themselves high and dry — sure of where they want to go but lacking the right people to get there.
And now there is a powerful new faction on the scene, demanding this simple measuring stick: institutional investors.
Institutional investors — like the Council of Institutional Investors (CII), which manages over $1 trillion worth of stocks, and the California Public Employees Retirement System (CalPERS), which oversees a healthy $260 billion — define the agenda for the business world. Where they lead, everyone else follows.
Institutional investors have always been the ultimate numbers guys, representing the cold voice of massed shareholders, demanding efficiency and profitability. Traditionally they focused on hard results, like return on assets and economic value added. Most of them didn't concern themselves with "soft" issues like "culture." In their minds a company's culture held the same status as public opinion polls did in Soviet Russia: superficially interesting but fundamentally irrelevant.
At least that's the way it used to be. In a recent about-face, they have started to pay much closer attention to how companies treat their people. In fact, the CII and CalPERS both met in Washington to discuss "good workplace practices...and how they can encourage the companies they invest in to value employee loyalty as an aid to productivity."
Why this newfound interest? They have started to realize that whether software designer or delivery truck driver, accountant or hotel housekeeper, the most valuable aspects of jobs are now, as Thomas Stewart describes in Intellectual Capital, "the most essentially human tasks: sensing, judging, creating, and building relationships." This means that a great deal of a company's value now lies "between the ears of its employees." And this means that when someone leaves a company, he takes his value with him — more often than not, straight to the competition.
Today more than ever before, if a company is bleeding people, it is bleeding value. Investors are frequently stunned by this discovery. They know that their current measuring sticks do a very poor job of capturing all sources of a company's value. For example, according to Baruch Lev, professor of finance and accounting at New York University's Stern School of Business, the assets and liabilities listed on a company's balance sheet now account for only 60 percent of its real market value. And this inaccuracy is increasing. In the 1970s and 1980s, 25 percent of the changes in a company's market value could be accounted for by fluctuations in its profits. Today, according to Professor Lev, that number has shrunk to 10 percent.
The sources of a company's true value have broadened beyond rough measures of profit or fixed assets, and bean counters everywhere are scurrying to catch up. Steve Wallman, former commissioner of the Securities and Exchange Commission, describes what they are looking for:
If we start to get further afield so that the financial statements...are measuring less and less of what is truly valuable in a company, then we start to lower the relevance of that scorecard. What we need are ways to measure the intangibles, R&D, customer satisfaction, employee satisfaction. (italics ours)
Companies, managers, institutional investors, even the commissioner of the SEC — everywhere you look, people are demanding a simple and accurate measuring stick for comparing the strength of one workplace to another. The Gallup Organization set out to build one.
The Measuring Stick
"How can you measure human capital?"
What does a strong, vibrant workplace look like?
When you walk into the building at Lankford-Sysco a few miles up the road from Ocean City, Maryland, it doesn't initially strike you as a special place. In fact, it seems slightly odd. There's the unfamiliar smell: a combination of raw food and machine oil. There's the decor: row upon row of shelving piled high to the triple ceilings, interspersed with the occasional loading dock or conveyor belt. Glimpses of figures bundled up in arctic wear, lugging mysterious crates in and out of deep freezers, only add to your disquiet.
But you press on, and gradually you begin to feel more at ease. The employees you run into are focused and cheerful. On the way to reception you pass a huge mural that seems to depict the history of the place: "There's Stanley E. Lankford Jr. hiring the first employee. There's the original office building before we added the warehouse...." In the reception area you face a wall festooned with pictures of individual, smiling faces. There are dozens of them, each with an inscription underneath that lists their length of service with the company and then another number.
"They are our delivery associates," explains Fred Lankford, the president. "We put their picture up so that we can all feel close to them, even though they're out with our customers every day. The number you see under each picture represents the amount of miles that each one drove last year. We like to publicize each person's performance."
Stanley Lankford and his three sons (Tom, Fred, and Jim) founded the Lankford operation, a family-owned food preparation and distribution company, in 1964. In 1981 they merged with Sysco, the $15 billion food distribution giant. An important proviso was that Tom, Fred, and Jim would be allowed to stay on as general managers Sysco agreed, and today all parties couldn't be happier with the decision.
The Lankford-Sysco facility is in the top 25 percent of all Sysco facilities in growth, sales per employee, profit per employee, and market penetration. They have single-digit turnover, absenteeism is at an all-company low, and shrinkage is virtually nonexistent. Most important, the Lankford-Sysco facility consistently tops the customer satisfaction charts.
"How do you do it?" you ask Fred.
He says there is not much to it. He is pleased with his pay-for-performance schemes — everything is measured; every measurement is posted; and every measurement has some kind of compensation attached. But he doesn't offer that up as his secret. He says it is just daily work. Talk about the customer. Highlight the right heroes. Treat people with respect. Listen.
His voice trails off because he sees he is not giving you the secret recipe you seem to be looking for.
Whatever he's doing, it clearly works for his employees. Forklift operators tell you about their personal best in terms of "most packages picked" and "fewest breakages." Drivers regale you with their stories of rushing out an emergency delivery of tomato sauce to a restaurant caught short. Everywhere you turn employees are talking about how their little part of the world is critical to giving the customer the quality that is now expected from Lankford-Sysco.
Here are 840 employees, all of whom seem to thrill to the challenge of their work. Whatever measurements you care to use, the Lankford-Sysco facility in Pocomoke, Maryland, is a great place to work.
You will have your own examples of a work environment that seems to be firing on all cylinders. It will be a place where performance levels are consistently high, where turnover levels are low, and where a growing number of loyal customers join the fold every day.
With your real-life example in mind, the question you have to ask yourself is, "What lies at the heart of this great workplace? Which elements will attract only talented employees and keep them, and which elements are appealing to every employee, the best, the rest, and the ROAD warriors?"
Do talented employees really care how empowered they are, as long as they are paid on performance, such as at Lankford-Sysco? Perhaps the opposite is true; once their most basic financial needs have been met, perhaps talented employees care less about pay and benefits than they do about being trusted by their manager. Are companies wasting their money by investing in spiffier work spaces and brighter cafeterias? Or do talented employees value a clean and safe physical environment above all else?
To build our measuring stick, we had to answer these questions.
Over the last twenty-five years the Gallup Organization has interviewed more than a million employees. We have asked each of them hundreds of different questions, on every conceivable aspect of the workplace. As you can imagine, one hundred million questions is a towering haystack of data. Now, we had to sift through it, straw by straw, and find the needle. We had to pick out those few questions that were truly measuring the core of a strong workplace.
This wasn't easy. If you have a statistical mind, you can probably hazard a pretty good guess as to how we approached it — a combination of focus groups, factor analysis, regression analysis, concurrent validity studies, and follow-up interviews. (Our research approach is described in detail in the appendix.)
However, if you think statistics are the mental equivalent of drawing your fingernails across a chalkboard, the following image may help you envision what we were trying to do.
In 1666 Isaac Newton closed the blinds of his house in Cambridge and sat in a darkened room. Outside, the sun shone brightly. Inside, Isaac cut a small hole in one of the blinds and placed a glass prism at the entrance. As the sun streamed through the hole, it hit the prism and a beautiful rainbow fanned out on the wall in front of him. Watching the perfect spectrum of colors playing on his wall, Isaac realized that the prism had pried apart the white light, refracting the colors to different degrees. He discovered that white light was, in fact, a mixture of all the other colors in the visible spectrum, from dark red to deepest purple; and that the only way to create white light was to draw all of these different colors together into a single beam.
We wanted our statistical analyses to perform the same trick as Isaac's prism. We wanted them to pry apart strong workplaces to reveal the core. We could then say to managers and companies, "If you can bring all of these core elements together in a single place, then you will have created the kind of workplace that can attract, focus, and keep the most talented employees."
So we took our mountain of data and we searched for patterns. Which questions were simply different ways of measuring the same factor? Which were the best questions to measure each factor? We weren't particularly interested in those questions, that yielded a unanimous, "Yes, I strongly agree? Nor were we swayed by those questions where everyone said, "No, I strongly disagree." Rather, we were searching for those special questions where the most engaged employees — those who were loyal and productive — answered positively, and everyone else — the average performers and the ROAD warriors — answered neutrally or negatively.
Questions that we thought were a shoo-in — like those dealing with pay, and benefits — fell under the analytical knife. At the same time, innocuous little questions — such as "Do I know what is expected of me at work?" — forced their way to the forefront. We cut and we culled. We rejigged and reworked, digging deeper and deeper to find the core of a great workplace.
When the dust finally settled, we made a discovery: Measuring the strength of a workplace can be simplified to twelve questions. These twelve questions don't capture everything you may want to know about your workplace, but they do capture the most information and the most important information. They measure the core elements needed to attract, focus, and keep the most talented employees.
Here they are:
These twelve questions are the simplest and most accurate way to measure the strength of a workplace.
When we started this research we didn't know we were going to land on these twelve questions. But after running a hundred million questions through our "prism," these exact questions were revealed as the most powerful. If you can create the kind of environment where employees answer positively to all twelve questions, then you will have built a great place to work.
While at first glance these questions seem rather straightforward, the more you look at them, the more intriguing they become.
First, you probably noticed that many of the questions contain an extreme. "I have a best friend at work" or "At work I have the opportunity to do what I do best every day." When the questions are phrased like this, it is much more difficult to say "Strongly Agree," or "5" on a scale of 1 to 5. But this is exactly what we wanted. We wanted to find questions that would discriminate between the most productive departments and the rest. We discovered that if you removed the extreme language, the question lost much of its power to discriminate. Everyone said "Strongly Agree" — the best, the rest, and everyone in between. A question where everyone always answers "Strongly Agree" is a weak question.
Much of the power of this measuring stick, then, lies in the wording of the questions. The issues themselves aren't a big surprise. Most people knew, for example, that strong relationships and frequent praise were vital ingredients of a healthy workplace. However, they didn't know how to measure whether or not these ingredients were present, and if so, to what extent. Gallup has discovered the best questions to do just that.
Second, you may be wondering why there are no questions dealing with pay, benefits, senior management, or organizational structure. There were initially, but they disappeared during the analysis. This doesn't mean they are unimportant. It simply means they are equally important to every employee, good, bad, and mediocre. Yes, if you are paying 20 percent below the market average, you may have difficulty attracting people. But bringing your pay and benefits package up to market levels, while a sensible first step, will not take you very far. These kinds of issues are like tickets to the ballpark — they can get you into the game, but they can't help you win.
Putting the Twelve to the Test
"Does the measuring stick link to business outcomes?"
Gallup had set out to dense a way to measure strong workplaces: workplaces that would attract and retain the most productive employees and scare away the ROAD warriors. If these questions were in truth the best questions, then employees who answered them positively would presumably work in higher-performing departments. That was our goal when we designed the measuring stick. Would it prove to be true in practice?
Throughout the spring and summer of 1998 Gallup launched a massive investigation to find out.
We asked twenty-four different companies, representing a cross section of twelve distinct industries, to provide us with scores measuring four different kinds of business outcome: productivity, profitability, employee retention, and customer satisfaction. Some companies had difficulty gathering this data, but in the end we managed to include over 2,500 business units in our study. The definition of a "business unit" varied by industry: for banking it was the branch; for hospitality it was the restaurant or the hotel; for manufacturing it was the factory; and so on.
We then interviewed the employees who worked in these branches, restaurants, hotels, factories, and departments, asking them to respond to each of the twelve questions on a scale of 1 to 5, "1" being strongly disagree, "5" being strongly agree. One hundred and five thousand employees took part.
Armed with all this data, we were set to go. We knew the productivity, the profitability, the retention levels, and the customer ratings of these different business units. And we knew how the employees of the business units had answered the twelve questions. We could now see, finally, whether or not engaged employees did indeed drive positive business outcomes, across 2,500 business units and 24 companies.
We were optimistic that the links would surface, but, truth be told, it was entirely possible that we wouldn't find them. The links between employee opinion and business unit performance seem inevitable — after all, most of us have probably heard ourselves rattle off such cliches as "Happy employees are more productive" or "If you treat your people right, they wilt treat your customers fight." Yet in their attempts to prove these statements, researchers have frequently come up empty-handed. In fact, in most studies, if you test one hundred employee o inion questions, you will be lucky to find five or six that show a strong relationship to any business outcome. Disappointingly, if you repeat the study, you often find that a different set of five or six questions pop up the second time around.
We also knew that no one had ever undertaken this kind of study before, across many different companies. Since each of these four business outcomes — productivity, profit, retention, and customer service — is vitally important to every company, and since the easiest lever for a manager to pull is the employee lever, you would have thought the air would be thick with research examining the links between employee opinion and these four business outcomes. It isn't. You can track down research examining these links within a particular company — with decidedly mixed results — but never across companies and industries. Surprisingly, the Gallup research was the first cross-industry study to investigate the links between employee opinion and business unit performance.
Why does this research vacuum exist? More than likely it's because each company has different ways of measuring the same thing. Blockbuster Video might measure productivity by sales per square foot. Lankford-Sysco might use packages shipped and number of breakages. The Walt Disney Company might include only full-time employees in their retention figures. Marriott might include full-time and part-time. It is frustratingly difficult to pick up on linkages between employee opinion and business performance, when every company insists on measuring performance differently.
Fortunately we had discovered a solution: meta-analysis. A detailed explanation can put even the most ardent number cruncher to sleep, so let's just say that it is a statistical technique that cuts through the different performance measures used by different companies and allows you to zero in on the real links between employee opinion and business unit performance.
So, having entered the performance data from over 2,500 business units and punched in the opinion data from over 105,000 employees, we programmed the meta-analysis formulas, pressed Run, and held our breath.
This is what we found. First, we saw that those employees who responded more positively to the twelve questions also worked in business units with higher levels of productivity, profit, retention, and customer satisfaction. This demonstrated, for the first time, the link between employee opinion and business unit performance, across many different companies.
Second, the meta-analysis revealed that employees rated the questions differently depending on which business unit they worked for rather than which company. This meant that, for the most part, these twelve opinions were being formed by the employees' immediate manager rather than by the policies or procedures of the overall company. We had discovered that the manager — not pay, benefits, perks, or a charismatic corporate leader — was the critical player in building a strong workplace. The manager was the key. We will discuss this finding in more detail later in the chapter. For now let's concentrate on our first discovery, the link between employee opinion and business unit performance.
THE LINKS BETWEEN EMPLOYEE OPINION AND BUSINESS UNIT PERFORMANCE
If you are so inclined, you can find in the appendix a detailed description of all our discoveries and the methodology behind them. This is the top line.
* Every one of the twelve questions was linked to at least one of the four business outcomes: productivity, profitability, retention, and customer satisfaction. Most of the questions revealed links to two or more business outcomes. The twelve questions were indeed capturing those few, vital employee opinions that related to top performance, whether in a bank, a restaurant, a hotel, a factory, or any other kind of business unit. The measuring stick had withstood its most rigorous test.
* As you might have expected, the most consistent links (ten of the twelve questions) were to the "productivity" measure. People have always believed there is a direct link between an employee's opinion and his work group's productivity. Nonetheless, it was good to see the numbers jibe with the theory.
* Eight of the twelve questions showed a link to the "profitability" measure. That means employees who answered these eight questions more positively than other employees also worked in more profitable banks, restaurants, hotels, factories, or departments. To some people this might seem a little surprising. After all, many believe that profit is a function of factors that lie far beyond the control of individual employees: factors like pricing, competitive positioning, or variable-cost management. But the more you think about it, the more understandable this link becomes. There are so many things one employee can do to affect profit — everything from turning off more lights, to negotiating harder on price, to avoiding the temptations of the till. Simply put, these will happen more often when each employee feels truly engaged.
* What about employee retention? Strangely enough, only five of the twelve questions revealed a link to retention:
* Of the twelve, the most powerful questions are those with a combination of the strongest links to the most business outcomes. Armed with this perspective, we now know that the following six are the most powerful questions:
As a manager, if you want to know what you should do to build a strong and productive workplace, securing 5's to these six questions would be an excellent place to start. We will return to these questions in a moment.
MANAGERS TRUMP COMPANIES
Once a year a study is published entitled "The Hundred Best Companies to Work For." The criteria for selection are such factors as Does the company have an on-site day care facility? How much vacation does the company provide? Does the company offer any kind of profit sharing? Is the company committed to employee training? Companies are examined, and the list of the top one hundred is compiled.
Our research suggests that these criteria miss the mark. It's not that these employee-focused initiatives are unimportant. It's just that your immediate manager is more important. She defines and pervades your work environment. If she sets clear expectations, knows you, trusts you, and invests in you, then you can forgive the company its lack of a profit-sharing program. But if your relationship with your manager is fractured, then no amount of in-chair massaging or company-sponsored dog walking will persuade you to stay and perform. It is better to work for a great manager in an old-fashioned company than for a terrible manager in a company offering an enlightened, employee-focused culture.
Sharon F., a graduate of Stanford and Harvard, left American Express a little over a year ago. She wanted to get into the world of publishing, so she joined one of the media-entertainment giants in the marketing department of one of their many magazines. She was responsible for devising loyalty programs to ensure that subscription holders would renew. She loved the work, excelled at it, and caught the eye of senior management. Sharon is a very small cog in this giant machine, but according to the chairman of this giant, employees like her — bright, talented, ambitious employees — are "the fuel for our future."
Unfortunately for this giant, the fuel is leaking. After only a year Sharon is leaving the company. She is joining a restaurant start-up as head of marketing and business development. Her boss, it appears, drove her away.
"He's not a bad man," she admits. "He's just not a manager. He's insecure, and I don't think you can be insecure and a good manager. It makes him compete with his own people. It makes him boast about his high-style living; when he should be listening to us. And he plays these silly little power games to show us who's the boss. Like last week he didn't show up for a ten A.M. interview with a candidate who had made a two-hour commute just to see him, because he had stayed out much too late the night before. He called me at nine fifty-five A.M., asked me to break the news to her, and tried to make it seem like he was giving me some kind of compliment, that he could really trust me to cover for him. I can't stand behavior like that."
Listening to Sharon, you might wonder if it is just a personality clash or even whether it is she who is somehow causing the problems. So you ask her, "Does anyone else on the team feel the same way?"
"I'm not sure," she confesses. "I don't like to bad-mouth my boss, so I haven't really talked about it with anyone at work. But I do know this: When I came here there were thirteen of us on his team. Now, a year later, every single one of them has left, except me."
Sharon's company does many things very well, both in terms of its overall business performance and its employee-friendly culture. But deep within this giant, unseen by the senior executives or Wall Street, one individual is draining the company of power and value. As Sharon says, he is not a bad man, but he is a bad manager. Woefully miscast, he now spends his days chasing away one talented employee after another.
Perhaps he is an exception. Or perhaps the giant makes a habit of promoting people into manager roles who are talented individual achievers but poor managers. The giant would certainly hope for the former. But Sharon doesn't care one way or the other. When she told her company that she was considering leaving, they offered her more money and a bigger title, to try to coax her back. But they didn't offer her what she wanted most: a new manager. So she left.
An employee may join Disney or GE or Time Warner because she is lured by their generous benefits package and their reputation for valuing employees. But it is her relationship with her immediate manager that will determine how long she stays and how productive she is while she is there. Michael Eisner, Jack Welch, Gerald Levin, and all the goodwill in the world can do only so much. In the end these questions tell us that, from the employee's perspective, managers trump companies.
Unlike Wall Street and the business press, employees don't put their faith in the myth of "great companies" or "great leaders." For employees, there are only managers: great ones, poor ones, and many in between. Perhaps the best thing any leader can do to drive the whole company toward greatness is, first, to hold each manager accountable for what his employees say to these twelve questions, and, second, to help each manager know what actions to take to deserve "Strongly Agree" responses from his employees.
The following chapters describe the actions taken by the world's great managers.
But first, a case in point: What do all these discoveries mean for a specific company or a specific manager?
A Case in Point
"What do these discoveries mean for one particular company?"
In the winter of 1997 Gallup was asked by an extremely successful retailer to measure the strength of their work environment. They employed thirty-seven thousand people spread across three hundred stores — about one hundred employees per store. Each one of these stores was designed and built to provide the customer with a consistent shopping experience. The building, the layout, the product positioning, the colors, every detail was honed so that the store in Atlanta would have the same distinctive brand identity as the store in Phoenix.
We asked each employee the twelve questions — over 75 percent of all employees chose to participate for a total of twenty-eight thousand. We then looked at the scores for each store. The following table offers an example of what we found: two Stores at opposite ends of the measuring stick. (We asked the questions on a 1-5 scale, where "1" equals strongly disagree and "5" equals strongly agree. The numbers in the columns are the percentage of employees who responded "5" to each question.)
These are startling differences. Whatever the company was trying to do for its employees from the center, at the store level, these initiatives were being communicated and implemented in radically different ways. For the employees, Store A must have offered a much more engaging work experience than Store B.
Look at the different levels of relationship, for example. In Store A, 51 percent of employees said they felt cared about as a person. In Store B, that number sank to 17 percent. Given the pace of change in today's business world, one of the most valuable commodities a company can possess is the employees' "benefit of the doubt." If employees are willing to offer their company the benefit of the doubt, they will give every new initiative a fighting chance, no matter how sensitive or controversial it might be. Store A possesses this precious commodity. Here the employees will tolerate ambiguity, trusting that, as events play out, their manager will be there to support them. Store B doesn't have that luxury. Lacking genuine bonds between manager and employee, any new initiative, no matter how well intended; will be greeted with suspicion.
How about individual performance? In Store A, 55 percent of employees said that they had a chance to do what they do best every day. In Store B, only 19 percent responded "5." What a difference that must make in terms of per person productivity, retention, and workers' compensation claims.
Wherever you look, the differences leap out at you.
"Do your opinions count. Store A, 36 percent. Store B? A quarter of that, 9 percent.
"Do you have a best friend at work?" Store A, 33 percent. Store B, only 10 percent.
Perhaps the most bizarre discrepancy can be found in the second question. In Store A, 45 percent of employees strongly agreed that they had the materials and equipment they needed to do their work right. In Store B, only 11 percent said "5." The truly odd thing about this is that Store A and Store B had the same materials and equipment; yet the employees' perception of them was utterly different. Everything, even the physical environment, was colored by the store manager.
This company didn't have one culture. It had as many cultures as it did managers. No matter what the company's intent, each store's culture was a unique creation of the managers and supervisors in the field. Some cultures were fragile, bedeviled with mistrust and suspicion. Others were strong, able to attract and keep talented employees.
For this company's leaders, the wide variation in results was actually very good news. Yes, looking only at the negative, it meant there was a limit to what they could control from the center. The challenge of building a strong all-company culture had suddenly turned into a challenge of multiplication.
On the brighter side, however, these results revealed that this company was blessed with some truly exemplary managers. These managers had built productive businesses by engaging the talents and passions of their people. In their quest to attract productive employees, this company could now stop hunting for the magical central fix. Instead they could find out what their newly highlighted cadre of brilliant managers was doing and then build their company culture around this blueprint. They could try to hire more like their best. They could take the ideas of their best and multiply them companywide. They could redesign training programs based upon the practices of their best. To build a stronger culture, this company wouldn't have to borrow ideas from the likes of "best practice" companies like Disney, Southwest Airlines, or Ritz-Carlton. All they would have to do is learn from their own best.
"So what if they do learn from their best?" some might ask. "Do more 5's on the twelve questions necessarily translate to higher levels of real performance? Does Store A actually outperform Store B on any of the more traditional performance measures like sales, profit, or retention.
Of course, our general discoveries would say yes, workplaces where many employees can answer positively to the twelve questions will indeed be more productive workplaces. But this is too general. Like you, we wanted to know the specifics. So we asked the company to supply us with the raw performance data that they would normally use to measure the productivity of a store. We punched in these scores and then compared them with each store's scores on the twelve questions. This is what we found:
* Stores scoring in the top 25 percent on the employee opinion survey were, on average, 4.56 percent over their sales budget for the year, while those scoring in the bottom 25 percent were 0.84 percent below budget. In real numbers this is a difference of $104 million of sales per year between the two groups. If realized, this figure would represent a 2.6 percent increase in the company's total sales.
* Profit/loss comparisons told an even more dramatic story. The top 25 percent of stores on the survey ended the year almost 14 percent over their profit budget. Those stores in the bottom group missed their profit goals by a full 30 percent.
* Employee turnover levels were also vastly different. Each store in the top group retained, on average, twelve more employees per year than each store in the bottom group. Across both groups this means that the top 95 percent scoring stores on the survey retained one thousand more employees per year than the bottom group of stores. If you estimate that the wage of the average store employee is $18,000 and that the cost Of finding, hiring, and training each new employee is 1.5 times his salary, then the total cost to the company for the different levels of retention between the two groups is $18,000 x 1.5 x 1,000 = $27,000,000. And that's just the hard cost. The drain of experienced employees who have developed valuable relationships with their customers and their colleagues is harder to measure but is just as significant a loss.
These results are compelling. In this company the business units were measurably more productive where the employees answered positively to the twelve questions. Excellent front-line managers had engaged their employees and these engaged employees had provided the foundation for top performance.
Any measuring stick worth its salt not only tells you where you stand, it also helps you decide what to do next. So what can a manager, any manager, do to secure 5's to these twelve questions and so engage his employees?
First you have to know where to start. Gallup's research revealed that some questions were more powerful than others. This implies that you, the manager, should address these twelve questions in the right order. There is little point attacking the lesser questions if you have ignored the most powerful. In fact, as many managers discover to their detriment, addressing the twelve questions in the wrong order is both very tempting and actively dangerous.
We will show you why, and by way of contrast, we will describe where the world's great managers start laying the foundations for a truly productive workplace.
"Why is there an order to the twelve questions?"
To help us describe the order of these twelve questions, we ask you to picture, in your mind's eye, a mountain. At first it is hard to make out its full shape and color, shifting from blue to gray to green as you approach. But now, standing at the base, you sense its presence. You know there is a climb ahead. You know the climb will vary, sometimes steep, sometimes gradual. You know there will be gullies to negotiate, terrain that will force you to descend before you can resume your climb. You know the dangers, too, the cold, the clouds, and the most pressing danger of all, your own fragile will. But then you think of the summit and how you will feel, so you start to climb.
You know this mountain. We all do. It is the psychological climb you make from the moment you take on a new role to the moment you feel fully engaged in that role. At the base of the mountain, perhaps you are joining a new company. Perhaps you have just been promoted to a new role within the same company. Either way you are at the start of a long climb.
At the summit of this mountain you are still in the same role — the mountain doesn't represent a career climb — but you are loyal and productive in this role. You are the machinist who bothers to write down all the little hints and tips you have picked up so that you can present them as an informal manual to apprentice machinists just learning their craft. You are the grocery store clerk who tells the customer that the grapefruit are in aisle five but who then walks her to aisle five, explaining that the grapefruit are always stocked from the back to the front. "If you like your grapefruit really firm," you say, "pick one from the front." You are the manager who so loves your work that you get tears in your eyes when asked to describe how you helped so many of your people succeed.
Whatever your role, at the summit of this mountain you are good at what you do, you know the fundamental purpose of your work, and you are always looking for better ways to fulfill that mission. You are fully engaged.
How did you get there?
If a manager can answer this, he will know how to guide other employees. He will be able to help more and more individuals reach the summit. The more individuals he can help move up the mountain, one by one, the stronger the workplace. So how did you get there? How did you make the climb?
Put on your employee hat for a moment. This may be a psychological mountain, but as with an actual mountain, you have to climb it in stages. Read in the right order, the twelve questions can tell you which stage is which and exactly what needs must be met before you can continue your climb up to the next stage.
Before we describe the stages on the climb, think back to the needs you had when you were first starting your current role. What did you want from the role? What needs were foremost in your mind at that time? Then, as time passed and you settled in, how did your needs change? And currently, what are your priorities? What do you need from your role today?
You may want to keep these thoughts in mind as we describe the stages on the climb.
Base Camp: "What do I get?"
When you first start a new role, your needs are pretty basic. You want to know what is going to be expected of you. How much are you going to earn? How long will your commute be? Will you have an office, a desk, even a phone? At this stage you are asking, "What do I get?" from this role.
Of the twelve, these two fundamental questions measure Base Camp:
Camp 1: "What do I give?"
You climb a little higher. Your perspective changes. You start asking different questions. You want to know whether you are any good at the job. Are you in a role where you can excel? Do other people think you are excelling? If not, what do they think about you? Will they help you? At this stage your questions center around "What do I give?" You are focused on your individual contribution and other people's perceptions of it.
These four questions measure Camp 1:
Each of these questions helps you know not only if you feel you are doing well in the role (Q3), but also if other people value your individual performance (Q4), if they value you as a person (Q5), and if they are prepared to invest in your growth (Q6.) These questions all address the issue of your individual self-esteem and worth. As we will see, if these questions remain unanswered, all of your yearnings to belong, to become part of a team, to learn and to innovate, will be undermined.
Camp 2: "Do I belong here?"
You keep climbing. By now you've asked some difficult questions, of yourself and of others, and the answers have, hopefully, given you strength. Your perspective widens. You look around and ask, "Do I belong here?" You may be extremely customer service oriented — is everyone else as customer driven as you? Or perhaps you define yourself by your creativity — are you surrounded by people who push the envelope, as you do? Whatever your basic value system happens to be, at this stage of the climb you really want to know if you fit.
These four questions measure Camp 2:
Camp 3: "How can we all grow?"
This is the most advanced stage of the climb. At this stage you are impatient for everyone to improve, asking, "How can we all grow?" You want to make things better, to learn, to grow, to innovate. This stage tells us that only after you have climbed up and through the earlier three stages can you innovate effectively. Why? Because there is a difference between "invention" and "innovation." invention is mere novelty — like most of us, you might have devised seventeen new ways of doing things a few weeks after starting in your new role. But these ideas didn't carry any weight. By contrast, innovation is novelty that can be applied. And you can innovate, you can apply your new ideas, only if you are focused on the right expectations (Base Camp), if you have confidence in your own expertise (Camp 1), and if you are aware of how your new ideas will be accepted or rejected by the people around you (Camp 2). If you cannot answer positively to all these earlier questions, then you will find it almost impossible to apply all your new ideas.
These two questions measure Camp 3:
If you can answer positively to all of these twelve questions, then you have reached the summit. Your focus is dear. You feel a recurring sense of achievement, as though the best of you is being called upon and the best of you responds every single day. You look around and see others who also seem to thrill to the challenge of their work. Buoyed by your mutual understanding and your shared purpose, you climbers look out and forward to the challenges marching over the horizon. It is not easy to remain at the summit for long, with the ground shifting beneath your feet and the strong winds buffeting you this way and that. But while you are there, it is quite a feeling.
If this is the psychological climb you made (or failed to make) from the moment you began your current role to the moment you felt fully engaged in this role, then where are you?
Camp 1? Camp 3? The summit?
Ask yourself those twelve questions. Your answers can give you a read on where you are on the mountain. Perhaps your company is going through times of change and you find yourself languishing down at Base Camp. Change can do that to a person — you genuinely want to commit, but the uncertainty keeps pushing you down and down. ("Quit telling me how great the future is going to be. Just tell me what is expected of me today.")
Perhaps you have just been promoted — you felt as though you were at the summit in your previous role, but now you find yourself right back down at Camp 1, with new expectations and a new manager. ("I wonder what he thinks of me. I wonder how he will define success.") Yes, even when good things happen you can quickly find yourself at the base of a new mountain, with a long climb ahead.
Of course, the climb toward the summit is more complicated than this picture. Not only will people trade one stage off against another, but each individual will also place a slightly different value on each stage of the climb. For example, you might have taken your current role simply because it offered you the chance to learn and grow — in a sense, you fiery straight in to Camp 3. And if these higher-level needs are being met, then you will probably be a little more patient in waiting for your manager to make his expectations crystal clear (Base Camp). Similarly, if you feel very connected to your team members (Camp 2), then you may be prepared to stick this out for a while longer, even though you feel that your role on the team doesn't allow you to use your true talents (Camp 1).
However, these kinds of individual trade-offs don't deny the basic truth of the mountain — regardless of how positively you answer the questions at Camp 2 or Camp 3, the longer your lower-level needs remain unmet, the more likely it is that you will burn out, become unproductive, and leave.
In fact, if you do find yourself answering positively to Camps 2 and 3, but negatively to the questions lower down, be very careful. You are in an extremely precarious position. On the surface everything seems fine — you like your team members (Camp 2), you are learning and growing (Camp 3) — but deep down you are disengaged. Not only are you less productive than you could be, but you would jump ship at the first good offer.
We can give this condition a name: mountain sickness.
In the physical world, mountain sickness is brought on by the lack of oxygen at high altitudes. Starved of oxygen, your heart starts pounding. You feel breathless and disoriented. If you don't climb down to lower altitudes, your lungs will fill with fluid and you will die. There is no way to cheat mountain sickness. There is no vaccine, no antidote. The only way to beat it is to climb down and give your body time to acclimatize.
Inexperienced climbers might suggest that if you have lots of money and not much time, you could helicopter in to Camp 3 and race to the summit. Experienced guides know that you would never make it. Mountain sickness would sap your energy and slow your progress to a crawl. These guides will tell you that to reach the summit you have to pay your dues. During your ascent you have to spend a great deal of time between Base Camp and Camp 1. The more time you spend at these lower reaches, the more stamina you will have in the thin air near the summit.
In the psychological world, their advice still applies. Base Camp and Camp 1 are the foundation. Spend time focusing on these needs, find a manager who can meet these needs, and you will have the strength necessary for the long climb ahead. Ignore these-needs and you are much more likely to psychologically disengage.
AN EPIDEMIC OF MOUNTAIN SICKNESS
Now put your manager's hat back on.
This metaphorical mountain reveals that the key to building a strong, vibrant workplace lies in meeting employees' needs at Base Camp and Camp 1. This is where you should focus your time and energy. If your employees' lower-level needs remain unaddressed, then everything you do for them further along the journey is almost irrelevant. But if you can meet these needs successfully, then the rest — the team building and the innovating — is so much easier.
It almost sounds obvious. But over the last fifteen years most managers have been encouraged to focus much higher up the mountain. Mission statements, diversity training, self-directed work teams — all try to help employees feel they belong (Camp 2). Total quality management, reengineering, continuous improvement, learning organizations — all address the need for employees to innovate, to challenge cozy assumptions and rebuild them afresh, every day (Camp 3).
All of these initiatives were very well conceived. Many of them were well executed. But almost all of them have withered. Five years ago the Baldrige Award for Quality was the most coveted business award in America — today only a few companies bother to enter. Diversity experts now bicker over the proper definition of "diversity." Process reengineering gurus try to squeeze people back into process. And many of us snort at mission statements.
When you think about it, it is rather sad. An important kernel of truth lay at the heart of all of these initiatives, but none of them lasted,
Why? An epidemic of mountain sickness. They aimed too high, too fast.
Managers were encouraged to focus on complex initiatives like reengineering or learning organizations, without spending time on the basics. The stages on the mountain reveal that if the employee doesn't know what is expected of him as an individual (Base Camp), then you shouldn't ask him to get excited about playing on a team (Camp 2). If he feels as though he is in the wrong role (Camp 1), don't pander to him by telling him how important his innovative ideas are to the company's reengineering efforts (Camp 3). If he doesn't know what his manager thinks of him as an individual (Camp 1), don't confuse him by challenging him to become part of the new "learning organization" (Camp 3).
Don't helicopter in at seventeen thousand feet, because sooner or later you and your people will die on the mountain.
THE FOCUS OF GREAT MANAGERS
Great managers take aim at Base Camp and Camp 1. They know that the core of a strong and vibrant workplace can be found in the first six questions:
Securing 5's to these questions is one of your most important responsibilities. And as many managers discover, getting all 5'S from your employees is far from easy. For example, the manager who tries to curry favor with his people by telling them that they should all be promoted may receive 5's on the question "Is there someone at work who encourages my development?" However, because all his employees now feel they are in the wrong role, he will get l's on the question "At work, do I have the opportunity to do what I do best every day?"
Similarly, the manager who tries to control his employees' behavior by writing a thick policies and procedures manual will receive 5's to the question "Do I know what is expected of me at work?" But because of his rigid, policing management style, he will probably receive l's to the question "Does my supervisor, or someone at work, seem to care about me?"
To secure 5's to all of these questions you have to reconcile responsibilities that, at first sight, appear contradictory. You have to be able to set consistent expectations for all your people yet at the same time treat each person differently. You have to be able to make each person feel as though he is in a role that uses his talents, while simultaneously challenging him to grow. You have to care about each person, praise each person, and, if necessary, terminate a person you have cared about and praised.
F. Scott Fitzgerald believed that "the test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time, and still maintain the ability to function." In this sense, great managers possess a unique intelligence. In the following chapters we will describe this intelligence. We will help you look through the eyes of the world's great managers and see how they balance their conflicting responsibilities. We will show you how they find, focus, and develop so many talented employees, so effectively.
Copyright © 1999 by The Gallup Organization
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