Monday, January 12, 2009
Wednesday, January 7, 2009
Summary of Stephen R. Covey's The 7 Habits of Highly Effective People
In his #1 bestseller, Stephen R. Covey presented a framework for personal effectiveness. The following is a summary of the first part of his book, concluding with a list of the seven habits.
Inside-Out: The Change Starts from Within
While working on his doctorate in the 1970's, Stephen R. Covey reviewed 200 years of literature on success. He noticed that since the 1920's, success writings have focused on solutions to specific problems. In some cases such tactical advice may have been effective, but only for immediate issues and not for the long-term, underlying ones. The success literature of the last half of the 20th century largely attributed success to personality traits, skills, techniques, maintaining a positive attitude, etc. This philosophy can be referred to as the Personality Ethic.
However, during the 150 years or so that preceded that period, the literature on success was more character oriented. It emphasized the deeper principles and foundations of success. This philosophy is known as the Character Ethic, under which success is attributed more to underlying characteristics such as integrity, courage, justice, patience, etc.
The elements of the Character Ethic are primary traits while those of the Personality Ethic are secondary. While secondary traits may help one to play the game to succeed in some specific circumstances, for long-term success both are necessary. One's character is what is most visible in long-term relationships. Ralph Waldo Emerson once said, "What you are shouts so loudly in my ears I cannot hear what you say."
To illustrate the difference between primary and secondary traits, Covey offers the following example. Suppose you are in Chicago and are using a map to find a particular destination in the city. You may have excellent secondary skills in map reading and navigation, but will never find your destination if you are using a map of Detroit. In this example, getting the right map is a necessary primary element before your secondary skills can be used effectively.
The problem with relying on the Personality Ethic is that unless the basic underlying paradigms are right, simply changing outward behavior is not effective. We see the world based on our perspective, which can have a dramatic impact on the way we perceive things. For example, many experiments have been conducted in which two groups of people are shown two different drawings. One group is shown, for instance, a drawing of a young, beautiful woman and the other group is shown a drawing of an old, frail woman. After the initial exposure to the pictures, both groups are shown one picture of a more abstract drawing. This drawing actually contains the elements of both the young and the old woman. Almost invariably, everybody in the group that was first shown the young woman sees a young woman in the abstract drawing, and those who were shown the old woman see an old woman. Each group was convinced that it had objectively evaluated the drawing. The point is that we see things not as they are, but as we are conditioned to see them. Once we understand the importance of our past conditioning, we can experience a paradigm shift in the way we see things. To make large changes in our lives, we must work on the basic paradigms through which we see the world.
The Character Ethic assumes that there are some absolute principles that exist in all human beings. Some examples of such principles are fairness, honesty, integrity, human dignity, quality, potential, and growth. Principles contrast with practices in that practices are for specific situations whereas principles have universal application.
The Seven Habits of Highly Effective People presents an "inside-out" approach to effectiveness that is centered on principles and character. Inside-out means that the change starts within oneself. For many people, this approach represents a paradigm shift away from the Personality Ethic and toward the Character Ethic.
The Seven Habits - An Overview
Our character is a collection of our habits, and habits have a powerful role in our lives. Habits consist of knowledge, skill, and desire. Knowledge allows us to know what to do, skill gives us the ability to know how to do it, and desire is the motivation to do it.
The Seven Habits move us through the following stages:
1. Dependence: the paradigm under which we are born, relying upon others to take care of us.
2. Independence: the paradigm under which we can make our own decisions and take care of ourselves.
3. Interdependence: the paradigm under which we cooperate to achieve something that cannot be achieved independently.
Much of the success literature today tends to value independence, encouraging people to become liberated and do their own thing. The reality is that we are interdependent, and the independent model is not optimal for use in an interdependent environment that requires leaders and team players.
To make the choice to become interdependent, one first must be independent, since dependent people have not yet developed the character for interdependence. Therefore, the first three habits focus on self-mastery, that is, achieving the private victories required to move from dependence to independence. The first three habits are:
* Habit 1: Be Proactive
* Habit 2: Begin with the End in Mind
* Habit 3: Put First Things First
Habits 4, 5, and 6 then address interdependence:
* Habit 4: Think Win/Win
* Habit 5: Seek First to Understand, Then to Be Understood
* Habit 6: Synergize
Finally, the seventh habit is one of renewal and continual improvement, that is, of building one's personal production capability. To be effective, one must find the proper balance between actually producing and improving one's capability to produce. Covey illustrates this point with the fable of the goose and the golden egg.
In the fable, a poor farmer's goose began laying a solid gold egg every day, and the farmer soon became rich. He also became greedy and figured that the goose must have many golden eggs within her. In order to obtain all of the eggs immediately, he killed the goose. Upon cutting it open he discovered that it was not full of golden eggs. The lesson is that if one attempts to maximize immediate production with no regard to the production capability, the capability will be lost. Effectiveness is a function of both production and the capacity to produce.
The need for balance between production and production capability applies to physical, financial, and human assets. For example, in an organization the person in charge of a particular machine may increase the machine's immediate production by postponing scheduled maintenance. As a result of the increased output, this person may be rewarded with a promotion. However, the increased immediate output comes at the expense of future production since more maintenance will have to be performed on the machine later. The person who inherits the mess may even be blamed for the inevitable downtime and high maintenance expense.
Customer loyalty also is an asset to which the production and production capability balance applies. A restaurant may have a reputation for serving great food, but the owner may decide to cut costs and lower the quality of the food. Immediately, profits will soar, but soon the restaurant's reputation will be tarnished, the customer's trust will be lost, and profits will decline.
This does not mean that only production capacity is important. If one builds capacity but never uses it, there will be no production. There is a balance between building production capacity and actually producing. Finding the right tradeoff is central to one's effectiveness.
The above has been an introduction and overview of the 7 Habits. The following introduces the first habit in Covey's framework.
FROM DEPENDENCE TO INDEPENDENCE
Habit 1: Be Proactive
A unique ability that sets humans apart from animals is self-awareness and the ability to choose how we respond to any stimulus. While conditioning can have a strong impact on our lives, we are not determined by it. There are three widely accepted theories of determinism: genetic, psychic, and environmental. Genetic determinism says that our nature is coded into our DNA, and that our personality traits are inherited from our grandparents. Psychic determinism says that our upbringing determines our personal tendencies, and that emotional pain that we felt at a young age is remembered and affects the way we behave today. Environmental determinism states that factors in our present environment are responsible for our situation, such as relatives, the national economy, etc. These theories of determinism each assume a model in which the stimulus determines the response.
Viktor Frankl was a Jewish psychiatrist who survived the death camps of Nazi Germany. While in the death camps, Frankl realized that he alone had the power to determine his response to the horror of the situation. He exercised the only freedom he had in that environment by envisioning himself teaching students after his release. He became an inspiration for others around him. He realized that in the middle of the stimulus-response model, humans have the freedom to choose.
Animals do not have this independent will. They respond to a stimulus like a computer responds to its program. They are not aware of their programming and do not have the ability to change it. The model of determinism was developed based on experiments with animals and neurotic people. Such a model neglects our ability to choose how we will respond to stimuli.
We can choose to be reactive to our environment. For example, if the weather is good, we will be happy. If the weather is bad, we will be unhappy. If people treat us well, we will feel well; if they don't, we will feel bad and become defensive. We also can choose to be proactive and not let our situation determine how we will feel. Reactive behavior can be a self-fulfilling prophecy. By accepting that there is nothing we can do about our situation, we in fact become passive and do nothing.
The first habit of highly effective people is proactivity. Proactive people are driven by values that are independent of the weather or how people treat them. Gandhi said, "They cannot take away our self respect if we do not give it to them." Our response to what happened to us affects us more than what actually happened. We can choose to use difficult situations to build our character and develop the ability to better handle such situations in the future.
Proactive people use their resourcefulness and initiative to find solutions rather than just reporting problems and waiting for other people to solve them.
Being proactive means assessing the situation and developing a positive response for it. Organizations can be proactive rather than be at the mercy of their environment. For example, a company operating in an industry that is experiencing a downturn can develop a plan to cut costs and actually use the downturn to increase market share.
Once we decide to be proactive, exactly where we focus our efforts becomes important. There are many concerns in our lives, but we do not always have control over them. One can draw a circle that represents areas of concern, and a smaller circle within the first that represents areas of control. Proactive people focus their efforts on the things over which they have influence, and in the process often expand their area of influence. Reactive people often focus their efforts on areas of concern over which they have no control. Their complaining and negative energy tend to shrink their circle of influence.
In our area of concern, we may have direct control, indirect control, or no control at all. We have direct control over problems caused by our own behavior. We can solve these problems by changing our habits. We have indirect control over problems related to other people's behavior. We can solve these problems by using various methods of human influence, such as empathy, confrontation, example, and persuasion. Many people have only a few basic methods such as fight or flight. For problems over which we have no control, first we must recognize that we have no control, and then gracefully accept that fact and make the best of the situation.
SUMMARY OF THE SEVEN HABITS
Habit 1: Be Proactive
Change starts from within, and highly effective people make the decision to improve their lives through the things that they can influence rather than by simply reacting to external forces.
Habit 2: Begin with the End in Mind
Develop a principle-centered personal mission statement. Extend the mission statement into long-term goals based on personal principles.
Habit 3: Put First Things First
Spend time doing what fits into your personal mission, observing the proper balance between production and building production capacity. Identify the key roles that you take on in life, and make time for each of them.
Habit 4: Think Win/Win
Seek agreements and relationships that are mutually beneficial. In cases where a "win/win" deal cannot be achieved, accept the fact that agreeing to make "no deal" may be the best alternative. In developing an organizational culture, be sure to reward win/win behavior among employees and avoid inadvertantly rewarding win/lose behavior.
Habit 5: Seek First to Understand, Then to Be Understood
First seek to understand the other person, and only then try to be understood. Stephen Covey presents this habit as the most important principle of interpersonal relations. Effective listening is not simply echoing what the other person has said through the lens of one's own experience. Rather, it is putting oneself in the perspective of the other person, listening empathically for both feeling and meaning.
Habit 6: Synergize
Through trustful communication, find ways to leverage individual differences to create a whole that is greater than the sum of the parts. Through mutual trust and understanding, one often can solve conflicts and find a better solution than would have been obtained through either person's own solution.
Habit 7: Sharpen the Saw
Take time out from production to build production capacity through personal renewal of the physical, mental, social/emotional, and spiritual dimensions. Maintain a balance among these dimensions.
Recommended Reading
Covey, Stephen R., The 7 Habits of Highly Effective People
Inside-Out: The Change Starts from Within
While working on his doctorate in the 1970's, Stephen R. Covey reviewed 200 years of literature on success. He noticed that since the 1920's, success writings have focused on solutions to specific problems. In some cases such tactical advice may have been effective, but only for immediate issues and not for the long-term, underlying ones. The success literature of the last half of the 20th century largely attributed success to personality traits, skills, techniques, maintaining a positive attitude, etc. This philosophy can be referred to as the Personality Ethic.
However, during the 150 years or so that preceded that period, the literature on success was more character oriented. It emphasized the deeper principles and foundations of success. This philosophy is known as the Character Ethic, under which success is attributed more to underlying characteristics such as integrity, courage, justice, patience, etc.
The elements of the Character Ethic are primary traits while those of the Personality Ethic are secondary. While secondary traits may help one to play the game to succeed in some specific circumstances, for long-term success both are necessary. One's character is what is most visible in long-term relationships. Ralph Waldo Emerson once said, "What you are shouts so loudly in my ears I cannot hear what you say."
To illustrate the difference between primary and secondary traits, Covey offers the following example. Suppose you are in Chicago and are using a map to find a particular destination in the city. You may have excellent secondary skills in map reading and navigation, but will never find your destination if you are using a map of Detroit. In this example, getting the right map is a necessary primary element before your secondary skills can be used effectively.
The problem with relying on the Personality Ethic is that unless the basic underlying paradigms are right, simply changing outward behavior is not effective. We see the world based on our perspective, which can have a dramatic impact on the way we perceive things. For example, many experiments have been conducted in which two groups of people are shown two different drawings. One group is shown, for instance, a drawing of a young, beautiful woman and the other group is shown a drawing of an old, frail woman. After the initial exposure to the pictures, both groups are shown one picture of a more abstract drawing. This drawing actually contains the elements of both the young and the old woman. Almost invariably, everybody in the group that was first shown the young woman sees a young woman in the abstract drawing, and those who were shown the old woman see an old woman. Each group was convinced that it had objectively evaluated the drawing. The point is that we see things not as they are, but as we are conditioned to see them. Once we understand the importance of our past conditioning, we can experience a paradigm shift in the way we see things. To make large changes in our lives, we must work on the basic paradigms through which we see the world.
The Character Ethic assumes that there are some absolute principles that exist in all human beings. Some examples of such principles are fairness, honesty, integrity, human dignity, quality, potential, and growth. Principles contrast with practices in that practices are for specific situations whereas principles have universal application.
The Seven Habits of Highly Effective People presents an "inside-out" approach to effectiveness that is centered on principles and character. Inside-out means that the change starts within oneself. For many people, this approach represents a paradigm shift away from the Personality Ethic and toward the Character Ethic.
The Seven Habits - An Overview
Our character is a collection of our habits, and habits have a powerful role in our lives. Habits consist of knowledge, skill, and desire. Knowledge allows us to know what to do, skill gives us the ability to know how to do it, and desire is the motivation to do it.
The Seven Habits move us through the following stages:
1. Dependence: the paradigm under which we are born, relying upon others to take care of us.
2. Independence: the paradigm under which we can make our own decisions and take care of ourselves.
3. Interdependence: the paradigm under which we cooperate to achieve something that cannot be achieved independently.
Much of the success literature today tends to value independence, encouraging people to become liberated and do their own thing. The reality is that we are interdependent, and the independent model is not optimal for use in an interdependent environment that requires leaders and team players.
To make the choice to become interdependent, one first must be independent, since dependent people have not yet developed the character for interdependence. Therefore, the first three habits focus on self-mastery, that is, achieving the private victories required to move from dependence to independence. The first three habits are:
* Habit 1: Be Proactive
* Habit 2: Begin with the End in Mind
* Habit 3: Put First Things First
Habits 4, 5, and 6 then address interdependence:
* Habit 4: Think Win/Win
* Habit 5: Seek First to Understand, Then to Be Understood
* Habit 6: Synergize
Finally, the seventh habit is one of renewal and continual improvement, that is, of building one's personal production capability. To be effective, one must find the proper balance between actually producing and improving one's capability to produce. Covey illustrates this point with the fable of the goose and the golden egg.
In the fable, a poor farmer's goose began laying a solid gold egg every day, and the farmer soon became rich. He also became greedy and figured that the goose must have many golden eggs within her. In order to obtain all of the eggs immediately, he killed the goose. Upon cutting it open he discovered that it was not full of golden eggs. The lesson is that if one attempts to maximize immediate production with no regard to the production capability, the capability will be lost. Effectiveness is a function of both production and the capacity to produce.
The need for balance between production and production capability applies to physical, financial, and human assets. For example, in an organization the person in charge of a particular machine may increase the machine's immediate production by postponing scheduled maintenance. As a result of the increased output, this person may be rewarded with a promotion. However, the increased immediate output comes at the expense of future production since more maintenance will have to be performed on the machine later. The person who inherits the mess may even be blamed for the inevitable downtime and high maintenance expense.
Customer loyalty also is an asset to which the production and production capability balance applies. A restaurant may have a reputation for serving great food, but the owner may decide to cut costs and lower the quality of the food. Immediately, profits will soar, but soon the restaurant's reputation will be tarnished, the customer's trust will be lost, and profits will decline.
This does not mean that only production capacity is important. If one builds capacity but never uses it, there will be no production. There is a balance between building production capacity and actually producing. Finding the right tradeoff is central to one's effectiveness.
The above has been an introduction and overview of the 7 Habits. The following introduces the first habit in Covey's framework.
FROM DEPENDENCE TO INDEPENDENCE
Habit 1: Be Proactive
A unique ability that sets humans apart from animals is self-awareness and the ability to choose how we respond to any stimulus. While conditioning can have a strong impact on our lives, we are not determined by it. There are three widely accepted theories of determinism: genetic, psychic, and environmental. Genetic determinism says that our nature is coded into our DNA, and that our personality traits are inherited from our grandparents. Psychic determinism says that our upbringing determines our personal tendencies, and that emotional pain that we felt at a young age is remembered and affects the way we behave today. Environmental determinism states that factors in our present environment are responsible for our situation, such as relatives, the national economy, etc. These theories of determinism each assume a model in which the stimulus determines the response.
Viktor Frankl was a Jewish psychiatrist who survived the death camps of Nazi Germany. While in the death camps, Frankl realized that he alone had the power to determine his response to the horror of the situation. He exercised the only freedom he had in that environment by envisioning himself teaching students after his release. He became an inspiration for others around him. He realized that in the middle of the stimulus-response model, humans have the freedom to choose.
Animals do not have this independent will. They respond to a stimulus like a computer responds to its program. They are not aware of their programming and do not have the ability to change it. The model of determinism was developed based on experiments with animals and neurotic people. Such a model neglects our ability to choose how we will respond to stimuli.
We can choose to be reactive to our environment. For example, if the weather is good, we will be happy. If the weather is bad, we will be unhappy. If people treat us well, we will feel well; if they don't, we will feel bad and become defensive. We also can choose to be proactive and not let our situation determine how we will feel. Reactive behavior can be a self-fulfilling prophecy. By accepting that there is nothing we can do about our situation, we in fact become passive and do nothing.
The first habit of highly effective people is proactivity. Proactive people are driven by values that are independent of the weather or how people treat them. Gandhi said, "They cannot take away our self respect if we do not give it to them." Our response to what happened to us affects us more than what actually happened. We can choose to use difficult situations to build our character and develop the ability to better handle such situations in the future.
Proactive people use their resourcefulness and initiative to find solutions rather than just reporting problems and waiting for other people to solve them.
Being proactive means assessing the situation and developing a positive response for it. Organizations can be proactive rather than be at the mercy of their environment. For example, a company operating in an industry that is experiencing a downturn can develop a plan to cut costs and actually use the downturn to increase market share.
Once we decide to be proactive, exactly where we focus our efforts becomes important. There are many concerns in our lives, but we do not always have control over them. One can draw a circle that represents areas of concern, and a smaller circle within the first that represents areas of control. Proactive people focus their efforts on the things over which they have influence, and in the process often expand their area of influence. Reactive people often focus their efforts on areas of concern over which they have no control. Their complaining and negative energy tend to shrink their circle of influence.
In our area of concern, we may have direct control, indirect control, or no control at all. We have direct control over problems caused by our own behavior. We can solve these problems by changing our habits. We have indirect control over problems related to other people's behavior. We can solve these problems by using various methods of human influence, such as empathy, confrontation, example, and persuasion. Many people have only a few basic methods such as fight or flight. For problems over which we have no control, first we must recognize that we have no control, and then gracefully accept that fact and make the best of the situation.
SUMMARY OF THE SEVEN HABITS
Habit 1: Be Proactive
Change starts from within, and highly effective people make the decision to improve their lives through the things that they can influence rather than by simply reacting to external forces.
Habit 2: Begin with the End in Mind
Develop a principle-centered personal mission statement. Extend the mission statement into long-term goals based on personal principles.
Habit 3: Put First Things First
Spend time doing what fits into your personal mission, observing the proper balance between production and building production capacity. Identify the key roles that you take on in life, and make time for each of them.
Habit 4: Think Win/Win
Seek agreements and relationships that are mutually beneficial. In cases where a "win/win" deal cannot be achieved, accept the fact that agreeing to make "no deal" may be the best alternative. In developing an organizational culture, be sure to reward win/win behavior among employees and avoid inadvertantly rewarding win/lose behavior.
Habit 5: Seek First to Understand, Then to Be Understood
First seek to understand the other person, and only then try to be understood. Stephen Covey presents this habit as the most important principle of interpersonal relations. Effective listening is not simply echoing what the other person has said through the lens of one's own experience. Rather, it is putting oneself in the perspective of the other person, listening empathically for both feeling and meaning.
Habit 6: Synergize
Through trustful communication, find ways to leverage individual differences to create a whole that is greater than the sum of the parts. Through mutual trust and understanding, one often can solve conflicts and find a better solution than would have been obtained through either person's own solution.
Habit 7: Sharpen the Saw
Take time out from production to build production capacity through personal renewal of the physical, mental, social/emotional, and spiritual dimensions. Maintain a balance among these dimensions.
Recommended Reading
Covey, Stephen R., The 7 Habits of Highly Effective People
Monday, October 20, 2008
The Trusted Leader
Trust is a vital ingredient in organizations since they represent a type of ongoing relationship. In their book The Trusted Leader, Robert Galford and Anne Seibold Drapeau analyze this important aspect of leadership and offer models for understanding trust and how to build it.
Galford and Drapeau identified three categories of trust within an organization:
* Strategic trust - trust in the organization's mission, strategy, and ability to succeed.
* Organizational trust - trust that the organization's policies will be fairly administered and implemented as stated.
* Personal trust - trust that subordinates place in their manager to be fair and to look out for their interests.
In The Trusted Leader, Galford and Drapeau focus primarily on building personal and organizational trust.
Trust reduces unproductive rumors and second guessing that distracts employees from their work. It motivates, stimulates creativity, and helps the organization to attract and retain great employees.
Modeling Trust
Galford and Drapeau offer the following equation to model trust:
Trustworthin = (C + R + I )/ S
where
C = credibility
R = reliability
I = intimacy
S = self-orientation
These characteristics are described as follows:
* Credibility is earned by expertise, by the ability to obtain the required expertise, and by being up-front about one's limitations.
* Reliability is consistency and dependability. Reliable leaders provide a sense of comfort to their subordinates.
* Intimacy is not about revealing personal details, but rather, making the business of the organization personal and understanding the sensitivities of others.
* Self-orientation is the degree to which one focuses on one's own concerns when interacting with others. Self-orientation decreases trustworthiness. Those who are motivated by duty or achievement tend to be more self-oriented than those motivated by meaning or who gain pleasure from the work itself.
Enemies of Trust
While the above formula provides some insight, building trust is not an endeavor performed in isolation. Rather, building trust is an effort of defending trust from its enemies. A lone trusted leader cannot succeed in an untrustworthy environment because such a leader will become a target and eventually be brought down.
Galford and Drapeau identified 22 enemies of trust, each of which can be classified in one of the following categories:
* Inadequate communication
* Misbehavior
* Unremedied situations
Building Personal Trust
To build personal trust, Galford and Drapeau present a five stage process:
1. Engaging - finding common ground and relating to other people, for example, by appreciating the key challenges that employees face in their jobs.
2. Listening - builds trust by showing that one cares enough to invest the time to listen. Asking thoughtful questions, getting clarification when necessary, and giving one's complete attention to the conversation all send the message that one cares about the other person.
3. Framing - making sure that one understands the core of what the other person is conveying, and letting him or her know it.
4. Envisioning - looking to the future and identifying an optimistic and achievable outcome, and helping the other person to visualize the benefits of that outcome.
5. Committing - both parties agree and commit to moving toward the envisioned future.
Building Organizational Trust
Organizational trust is based on belief in the way things are done in the organization. While organizational trust requires personal trust in the organization's leaders on an aggregate basis, it is possible to have an untrustworthy supervisor and still believe in the organization.
Galford and Drapeau identified five variables on which organizational trust depends, as shown in the following equation:
Organizational Trustworthiness = ((A1 + A2 + A3) x (A4 + A5)) / R
here
A1 = Aspirations
A2 = Abilities
A3 = Actions
A4 = Alignment
A5 = Articulation
R = Resistance
These variables are described as follows:
* Aspirations - aspirations provide the incentive for people in the organization to want to trust each other. Aspirations is another term for business vision.
* Abilities - are the resources and capabilities required to fulfill the aspirations.
* Actions - actually getting to the task and doing what is needed to reach the organizational goals rather than losing focus to the distractions that inevitably will arise.
* Alignment - having consistency between aspirations, abilities, and actions.
* Articulation - communicating the aspirations, abilities, actions, and alignment so that everybody in the organization knows them and is able to articulate them.
* Resistance - building a trusting organization is likely to be met with resistance in the form of skepticism, fear, frustration, and a "we-they" mindset.
In the organizational trust formula, resistance is unique because it stands alone in the denominator; thus it is crucial to minimize it. Galford and Drapeau propose that resistance is best conquered by long-term action designed to directly address the issues behind the resistance.
Recommended Reading
Robert Galford and Anne Seibold Drapeau, The Trusted Leader
The book on which this article is based, The Trusted Leader covers the subject of trusted leadership in-depth with plenty of examples that bring theory to life.
After introducing the theory, the book presents practical advice for situations frequently encountered by senior leaders.
Table of Contents
Part One: An Overview of Trusted Leadership
1. What is trusted leadership?
2. The Trusted Leader Self-Assessment
3. The Characteristics and Competencies of the Trusted Leader
4. The Enemies of Trusted Leadership
Part Two: Identifying and Applying the Tools of Trusted Leaders
5. The Tools of Building Personal Trust
6. The Tools of Building Organizational Trust
Part Three: How Trusted Leaders Work
7. From the Top
8. Inside Teams, Departments, Offices
9. Across Teams, Departments, Offices
Part Four: Defining Moments
10. In Times of Change
11. When People Leave
12. In Times of Crisis
Part Five: Building Trust in Perspective
13. Trust Lost, Trust Rebuilt
14. When You Leave: The Legacy of Trust
Afterword: The Trusted Leader Continues
Notes and References
About the Authors
Index
Galford and Drapeau identified three categories of trust within an organization:
* Strategic trust - trust in the organization's mission, strategy, and ability to succeed.
* Organizational trust - trust that the organization's policies will be fairly administered and implemented as stated.
* Personal trust - trust that subordinates place in their manager to be fair and to look out for their interests.
In The Trusted Leader, Galford and Drapeau focus primarily on building personal and organizational trust.
Trust reduces unproductive rumors and second guessing that distracts employees from their work. It motivates, stimulates creativity, and helps the organization to attract and retain great employees.
Modeling Trust
Galford and Drapeau offer the following equation to model trust:
Trustworthin = (C + R + I )/ S
where
C = credibility
R = reliability
I = intimacy
S = self-orientation
These characteristics are described as follows:
* Credibility is earned by expertise, by the ability to obtain the required expertise, and by being up-front about one's limitations.
* Reliability is consistency and dependability. Reliable leaders provide a sense of comfort to their subordinates.
* Intimacy is not about revealing personal details, but rather, making the business of the organization personal and understanding the sensitivities of others.
* Self-orientation is the degree to which one focuses on one's own concerns when interacting with others. Self-orientation decreases trustworthiness. Those who are motivated by duty or achievement tend to be more self-oriented than those motivated by meaning or who gain pleasure from the work itself.
Enemies of Trust
While the above formula provides some insight, building trust is not an endeavor performed in isolation. Rather, building trust is an effort of defending trust from its enemies. A lone trusted leader cannot succeed in an untrustworthy environment because such a leader will become a target and eventually be brought down.
Galford and Drapeau identified 22 enemies of trust, each of which can be classified in one of the following categories:
* Inadequate communication
* Misbehavior
* Unremedied situations
Building Personal Trust
To build personal trust, Galford and Drapeau present a five stage process:
1. Engaging - finding common ground and relating to other people, for example, by appreciating the key challenges that employees face in their jobs.
2. Listening - builds trust by showing that one cares enough to invest the time to listen. Asking thoughtful questions, getting clarification when necessary, and giving one's complete attention to the conversation all send the message that one cares about the other person.
3. Framing - making sure that one understands the core of what the other person is conveying, and letting him or her know it.
4. Envisioning - looking to the future and identifying an optimistic and achievable outcome, and helping the other person to visualize the benefits of that outcome.
5. Committing - both parties agree and commit to moving toward the envisioned future.
Building Organizational Trust
Organizational trust is based on belief in the way things are done in the organization. While organizational trust requires personal trust in the organization's leaders on an aggregate basis, it is possible to have an untrustworthy supervisor and still believe in the organization.
Galford and Drapeau identified five variables on which organizational trust depends, as shown in the following equation:
Organizational Trustworthiness = ((A1 + A2 + A3) x (A4 + A5)) / R
here
A1 = Aspirations
A2 = Abilities
A3 = Actions
A4 = Alignment
A5 = Articulation
R = Resistance
These variables are described as follows:
* Aspirations - aspirations provide the incentive for people in the organization to want to trust each other. Aspirations is another term for business vision.
* Abilities - are the resources and capabilities required to fulfill the aspirations.
* Actions - actually getting to the task and doing what is needed to reach the organizational goals rather than losing focus to the distractions that inevitably will arise.
* Alignment - having consistency between aspirations, abilities, and actions.
* Articulation - communicating the aspirations, abilities, actions, and alignment so that everybody in the organization knows them and is able to articulate them.
* Resistance - building a trusting organization is likely to be met with resistance in the form of skepticism, fear, frustration, and a "we-they" mindset.
In the organizational trust formula, resistance is unique because it stands alone in the denominator; thus it is crucial to minimize it. Galford and Drapeau propose that resistance is best conquered by long-term action designed to directly address the issues behind the resistance.
Recommended Reading
Robert Galford and Anne Seibold Drapeau, The Trusted Leader
The book on which this article is based, The Trusted Leader covers the subject of trusted leadership in-depth with plenty of examples that bring theory to life.
After introducing the theory, the book presents practical advice for situations frequently encountered by senior leaders.
Table of Contents
Part One: An Overview of Trusted Leadership
1. What is trusted leadership?
2. The Trusted Leader Self-Assessment
3. The Characteristics and Competencies of the Trusted Leader
4. The Enemies of Trusted Leadership
Part Two: Identifying and Applying the Tools of Trusted Leaders
5. The Tools of Building Personal Trust
6. The Tools of Building Organizational Trust
Part Three: How Trusted Leaders Work
7. From the Top
8. Inside Teams, Departments, Offices
9. Across Teams, Departments, Offices
Part Four: Defining Moments
10. In Times of Change
11. When People Leave
12. In Times of Crisis
Part Five: Building Trust in Perspective
13. Trust Lost, Trust Rebuilt
14. When You Leave: The Legacy of Trust
Afterword: The Trusted Leader Continues
Notes and References
About the Authors
Index
Leadership and innovation
How to Manage Your Team in a Downturn (and Come Out on Top)
by Lindsay Blakely
Layoffs have truncated staff; cost-cutting measures are threatening projects, and morale is in the toilet. From the manager’s perspective, getting the most out of employees in this kind of environment can seem like a Sisyphean task. In fact, it’s a perfect opportunity to rejigger processes and fix what’s broken — and managers are uniquely positioned to do just that. Here’s how being candid with your employees, rewarding them in creative ways, and enlisting them to help make hard decisions can not only keep your team motivated but pull your company out of its slump.
Things you will need:
* Any additional cash that can be set aside to reward the top-performing members on your team.
* Constant attention. It’s your sole task right now to improve the mood in the office so that everyone can get back to work.
* Informal Meetings: Give employees frequent opportunities to openly discuss — and ask questions about — the business situation the company is facing.
* Employee Buy-In: Now is the time to leverage the expertise of your team. Motivate and engage employees by including them in the problem-solving process.
* Transparency: The middle manager plays a crucial role in communicating messages from senior leadership. Maintain loyalty from direct reports by giving them what they deserve: honest explanations for what went wrong and how the company plans to move forward.
Set the Tone
Goal: Lower the anxiety level in the office by being candid about the challenges — and opportunities — ahead.
It’s easy to blame the economy for all the reasons a company is suffering: Customers are cutting back on their expenses, advertisers are trimming their budgets, and stock prices are sliding. These problems may, in fact, be attributable in part to the downturn, but going with the “It’s the economy, stupid” defense sends a subtle but potentially dangerous message to employees: It implies that the situation is totally out of the company's hands and left in large part to fate. This is exactly the kind of attitude that raises anxiety levels in the office and disrupts employees’ focus on the problem at hand: turning business around.
“Have the confidence to not completely blame the economy,” says Stanford business professor Bob Sutton. “If employees believe that leadership can break things, they’ll believe that leadership can fix things, too.”
Don’t just rely on the CEO’s message. An e-mail from the top explaining why the company is in the red can’t tell employees much, which means mid-level managers need to be the interpreters. Speak to employees in small groups and be as candid as possible about where the company stands. This is also a good time to suss out any rumors. “Organize quick events to ask what people have heard and to answer any questions they have,” says Dave Logan, a senior partner at Los Angeles-based consulting firm Culture Sync.
Open the books. Giving employees the numbers behind company performance clarifies where the business needs to change and how their jobs connect to the bigger picture. But be warned: “If you’re going to be transparent, take the necessary time to teach employees about how the business works,” says Rich Armstrong, general manager of the Great Game of Business, a coaching firm that teaches open-book management. He advises managers to start with what employees probably already understand, like operational numbers, and then connect the dots with how those numbers increase gross margin and generate cash flow. Above all, keep finance jargon to a minimum.
Focus on the future. There’s no need to sugarcoat it: Pulling the company through the downturn isn’t going to be easy, but emphasizing the challenge can have its benefits. “It’s a great time for [your employees] to realize that they can play a role in discovering opportunities for the company,” says Vince Thompson, a former manager at AOL and author of the book Ignited.
Hot Tip
The You in Team
If a company is going to stay resilient, the staff’s collective commitment and collaboration are essential. In this environment, simply making an effort to be more visible and available to employees can spark productivity and bring the team together.
For example, if you normally work within the confines of a walled office while your team toils away in the cube farm, grab your laptop and set up shop in a cubicle near them — even if it’s only a couple of times a week. Start showing up to the smaller meetings that you usually skip, or rearrange your travel schedule to cut down how much time you spend out of the office. In short, don’t wait for employees to take advantage of an open-door policy. Go to them first, and ask how their work is going. This isn’t about micromanaging — it’s about knowing firsthand what they need.
Enlist the Team to Fix What’s Broken
Goal: Motivate employees and find out how and where the business needs to change.
Traditionally, the top execs decide the strategy and let it trickle down. The problem with this tactic is that it rarely makes the emotional case needed to mobilize employees around a common goal, says Paul Bromfield, a principal at Katzenbach Partners, which has advised companies like Aetna, Credit Suisse, and Pfizer. “This is about problem-solving and discipline, and that’s where employees come in,” he says. “Companies should be harnessing employees in the effort to identify where to cut costs and how.”
Not only will utilizing workers’ expertise make them more invested in the company’s success, it also gives management a more honest look at what’s not working. Senior leadership tends to focus on just one area of cost-cutting, Bromfield says, like products, headcount, or moving operations off-shore. Employees, on the other hand, can use their collective wisdom to eliminate clumsy (and costly) procedures across divisions.
Here are four guidelines for involving staff in the process:
1. Identify key influencers. “If you’re really going to mobilize people, you can’t do it from the top,” Bromfield says. Find the key employees who hold sway in their departments and get them to embrace and spread the change effort. These are the people who know how things really work (not just the way they’re supposed to work) and have a way of bringing together the right people to get things done.
2. Let teams do the problem solving. Form groups around the influencers and motivate (rather than mandate) employees to identify what’s slowing down business. Often the best place to start is to look for processes and bureaucracies that annoy the team. Set a basic timeframe to achieve cost savings, but let each group work at its own pace.
3. Make it a conversation. Schedule brown-bag lunches or other informal venues to talk to employees about their findings and where they might be hitting roadblocks. In the early 1990s, Bromfield’s former client Texas Commerce Bank held focus groups with thousands of its employees to find out what procedures most frustrated bankers and customers. Using the feedback, the company nearly doubled its $50 million cost-savings goal.
4. Follow through. Many cost-savings programs fail because management implements the initiative only halfway or lets inefficiencies creep back after meeting short-term goals, which won’t sit well with employees. Adopt the changes wholesale or not at all.
Big Idea
Keep Top Performers Moving
In an ideal world, the upside of a downturn is that recruiting qualified employees becomes easier. With more candidates in the job market, now could be the time to find new talent if your company has the resources to continue hiring. But managers shouldn’t forget about the top performers already on staff, say Monster executives Steve Pogorzelski, Dr. Jesse Harriott, and Doug Hardy, authors of a recent paper on how companies should invest in employees when business slows down.
When the economy’s bad, it’s easy to think that employees are grateful to have jobs at all. But layoffs and budget cuts may cause good workers to look for better opportunities. Give them a reason to stay by making room for them to keep advancing their careers. “Keep critical talent moving — not necessarily up, but growing in experience, responsibility, money, or other tangible and intangible ways,” say the authors of the study. If promotions or raises aren’t possible, give good workers the chance to make a lateral move or to take on a struggling department.
Get Back to the Work That Matters
Goal: Make sure your team is tuned in to growth opportunities.
The problem with a downturn is that while cost cutting is absolutely necessary, it can make everyone gun-shy about pursuing new initiatives and opportunities for investment. However, if your department, and in turn the company, is going to emerge from the slump in a competitive position, there are a few key investments you can’t afford not to fight for now:
Customers
Learn about the customers of your weakest competitors, writes Michael Roberto, a blogger for Harvard Business Publishing and management professor at Bryant University. While competitors are busy shoring up their relationships with large, established clients, it could be the perfect time to swoop in and court their smaller customers.
Research and Development
Take a cue from Apple’s Steve Jobs. When asked by Fortune magazine recently about Apple’s strategy for the downturn, Jobs pointed to how the company survived the 2001 tech bust by upping its R&D budget. “It worked, and that’s exactly what we’ll do this time,” he told the magazine.
Separate the value-added activities from the wheel-spinning exercises, Thompson suggests in Ignited. Instead of giving up on new projects in a downturn, shift focus so that the team is investing time in identifying and prioritizing the projects that will generate the most benefit for the company. Even if the final product will have to wait until more resources are available, doing the legwork now means the product will go to market faster when the time is right — and employees will stay engaged in the meantime.
Vendors/Partners
“There are two ways to run a business,” says Fred Mossler, senior vice president of merchandising for online shoe retailer Zappos, “adversarily or as a partnership.” Considering that the company relies on about 1,500 partners to provide its customers with a diverse selection of shoes, Zappos has chosen the latter option. To that end, the company built an extranet, so that every partner can see how its brand is performing. “They get to see everything our buyers see,” Mossler says. “This way we have about 1,500 other sets of eyes looking at our business and helping to improve it.”
Case Study
How Zappos Survived the Tech Bust
The idea for Zappos was born in 1999, when the economy was booming. But the shoe retailer still was unprofitable and struggling to grow revenue two years later, when the recession hit. “It was impossible for us to get any additional funding,” Mossler says. To make matters worse, the company was learning that its original business plan, which made Zappos a middleman, wasn’t working as planned: Vendors didn’t always have every shoe in stock, and customers — who sometimes had to wait weeks for their orders to arrive — often ended up with the wrong orders.
Though the times might have called for belt-tightening, the company had to make a couple of very expensive decisions, both of which put long-term strategy before short-term cost cutting. First, management realized that it needed total control over the merchandise in order to give the best customer service — a decision that meant sacrificing 25 percent of company revenue. Second, to make sure customers knew exactly what they were getting, the company hired photographers to take pictures of every pair of shoes it stocked. The site now has photos of its more than 3 million items, mostly shoes, from up to eight different angles. “Most companies look at customer service as an expense, but we look at it as a long-term investment,” says Mossler. The moves paid off: Less than 10 years after its founding, Zappos is on track to bring in more than $1 billion in sales this year.
Acknowledge and Reward Deserving Employees
Goal: Recognize achievement, even if resources are scarce.
Employee bonuses and raises are among some of the first expenses that upper management cuts during a downturn. But even if extra compensation isn’t in the budget, that doesn’t excuse managers from rewarding employees. “Lack of recognition — both financially and verbally — is one of the things that does the most damage,” says David Sirota, founder of the management-consulting firm Sirota Survey Intelligence. “I worked with an investment bank some years back where bankers were earning bonuses from $100,000 to $1 million a year,” he says. “You know what they complained about? They didn’t know if the chairman thought they were actually doing a good job, because he never spoke to them about it.”
One easy, no-cost way of recognizing valuable employees is to improve their quality of life. “The best reward you can give people is autonomy over how they spend their time,” says Jody Thompson, a former Best Buy human resources manager who, along with Cali Ressler, helped create the company’s Results-Only Work Environment program. That means giving employees your trust and the flexibility to work at home (or wherever suits them) whenever they want to — without any judgments. This gives workers more control over their time, and sometimes even a little extra cash. Sun Microsystems has found that employees who worked an average of 2.5 days at home each week saved $1,700 a year in gas and vehicle wear-and-tear.
Danger! Danger! Danger!
Save Rewards for the Worthy
Keeping your employees engaged doesn’t mean rewarding them just for doing their jobs. The most effective rewards are significant but well deserved. Libby Sartain became head of Yahoo’s human resources department in 2001, just as the company received a hard knock from the dot-com bust. She decided that instead of quietly giving large bonuses to overachievers, which wasn’t providing much bang for the buck, Yahoo needed to regularly single out the top 15 to 20 stellar individuals and teams — not only to reward them, but to help the rest of the company understand what made these employees outstanding.
The following year, the company gave its first Superstar Awards. Candidates were nominated by their peers for significant achievements and awarded cash prizes ranging from $5,000 to $50,000. The Yahoo Superstar Awards program is now in its seventh year and has honored employees for contributions like creating the Panama advertising system, inventing a way to advertise on instant messages, and fixing a troublesome accounting problem. “This isn’t egalitarian, this is a meritocracy,” Sartain says, acknowledging that some managers resisted the idea at first. “When people saw the winners, they understood why they won, and it took hold and became part of the culture.”
by Lindsay Blakely
Layoffs have truncated staff; cost-cutting measures are threatening projects, and morale is in the toilet. From the manager’s perspective, getting the most out of employees in this kind of environment can seem like a Sisyphean task. In fact, it’s a perfect opportunity to rejigger processes and fix what’s broken — and managers are uniquely positioned to do just that. Here’s how being candid with your employees, rewarding them in creative ways, and enlisting them to help make hard decisions can not only keep your team motivated but pull your company out of its slump.
Things you will need:
* Any additional cash that can be set aside to reward the top-performing members on your team.
* Constant attention. It’s your sole task right now to improve the mood in the office so that everyone can get back to work.
* Informal Meetings: Give employees frequent opportunities to openly discuss — and ask questions about — the business situation the company is facing.
* Employee Buy-In: Now is the time to leverage the expertise of your team. Motivate and engage employees by including them in the problem-solving process.
* Transparency: The middle manager plays a crucial role in communicating messages from senior leadership. Maintain loyalty from direct reports by giving them what they deserve: honest explanations for what went wrong and how the company plans to move forward.
Set the Tone
Goal: Lower the anxiety level in the office by being candid about the challenges — and opportunities — ahead.
It’s easy to blame the economy for all the reasons a company is suffering: Customers are cutting back on their expenses, advertisers are trimming their budgets, and stock prices are sliding. These problems may, in fact, be attributable in part to the downturn, but going with the “It’s the economy, stupid” defense sends a subtle but potentially dangerous message to employees: It implies that the situation is totally out of the company's hands and left in large part to fate. This is exactly the kind of attitude that raises anxiety levels in the office and disrupts employees’ focus on the problem at hand: turning business around.
“Have the confidence to not completely blame the economy,” says Stanford business professor Bob Sutton. “If employees believe that leadership can break things, they’ll believe that leadership can fix things, too.”
Don’t just rely on the CEO’s message. An e-mail from the top explaining why the company is in the red can’t tell employees much, which means mid-level managers need to be the interpreters. Speak to employees in small groups and be as candid as possible about where the company stands. This is also a good time to suss out any rumors. “Organize quick events to ask what people have heard and to answer any questions they have,” says Dave Logan, a senior partner at Los Angeles-based consulting firm Culture Sync.
Open the books. Giving employees the numbers behind company performance clarifies where the business needs to change and how their jobs connect to the bigger picture. But be warned: “If you’re going to be transparent, take the necessary time to teach employees about how the business works,” says Rich Armstrong, general manager of the Great Game of Business, a coaching firm that teaches open-book management. He advises managers to start with what employees probably already understand, like operational numbers, and then connect the dots with how those numbers increase gross margin and generate cash flow. Above all, keep finance jargon to a minimum.
Focus on the future. There’s no need to sugarcoat it: Pulling the company through the downturn isn’t going to be easy, but emphasizing the challenge can have its benefits. “It’s a great time for [your employees] to realize that they can play a role in discovering opportunities for the company,” says Vince Thompson, a former manager at AOL and author of the book Ignited.
Hot Tip
The You in Team
If a company is going to stay resilient, the staff’s collective commitment and collaboration are essential. In this environment, simply making an effort to be more visible and available to employees can spark productivity and bring the team together.
For example, if you normally work within the confines of a walled office while your team toils away in the cube farm, grab your laptop and set up shop in a cubicle near them — even if it’s only a couple of times a week. Start showing up to the smaller meetings that you usually skip, or rearrange your travel schedule to cut down how much time you spend out of the office. In short, don’t wait for employees to take advantage of an open-door policy. Go to them first, and ask how their work is going. This isn’t about micromanaging — it’s about knowing firsthand what they need.
Enlist the Team to Fix What’s Broken
Goal: Motivate employees and find out how and where the business needs to change.
Traditionally, the top execs decide the strategy and let it trickle down. The problem with this tactic is that it rarely makes the emotional case needed to mobilize employees around a common goal, says Paul Bromfield, a principal at Katzenbach Partners, which has advised companies like Aetna, Credit Suisse, and Pfizer. “This is about problem-solving and discipline, and that’s where employees come in,” he says. “Companies should be harnessing employees in the effort to identify where to cut costs and how.”
Not only will utilizing workers’ expertise make them more invested in the company’s success, it also gives management a more honest look at what’s not working. Senior leadership tends to focus on just one area of cost-cutting, Bromfield says, like products, headcount, or moving operations off-shore. Employees, on the other hand, can use their collective wisdom to eliminate clumsy (and costly) procedures across divisions.
Here are four guidelines for involving staff in the process:
1. Identify key influencers. “If you’re really going to mobilize people, you can’t do it from the top,” Bromfield says. Find the key employees who hold sway in their departments and get them to embrace and spread the change effort. These are the people who know how things really work (not just the way they’re supposed to work) and have a way of bringing together the right people to get things done.
2. Let teams do the problem solving. Form groups around the influencers and motivate (rather than mandate) employees to identify what’s slowing down business. Often the best place to start is to look for processes and bureaucracies that annoy the team. Set a basic timeframe to achieve cost savings, but let each group work at its own pace.
3. Make it a conversation. Schedule brown-bag lunches or other informal venues to talk to employees about their findings and where they might be hitting roadblocks. In the early 1990s, Bromfield’s former client Texas Commerce Bank held focus groups with thousands of its employees to find out what procedures most frustrated bankers and customers. Using the feedback, the company nearly doubled its $50 million cost-savings goal.
4. Follow through. Many cost-savings programs fail because management implements the initiative only halfway or lets inefficiencies creep back after meeting short-term goals, which won’t sit well with employees. Adopt the changes wholesale or not at all.
Big Idea
Keep Top Performers Moving
In an ideal world, the upside of a downturn is that recruiting qualified employees becomes easier. With more candidates in the job market, now could be the time to find new talent if your company has the resources to continue hiring. But managers shouldn’t forget about the top performers already on staff, say Monster executives Steve Pogorzelski, Dr. Jesse Harriott, and Doug Hardy, authors of a recent paper on how companies should invest in employees when business slows down.
When the economy’s bad, it’s easy to think that employees are grateful to have jobs at all. But layoffs and budget cuts may cause good workers to look for better opportunities. Give them a reason to stay by making room for them to keep advancing their careers. “Keep critical talent moving — not necessarily up, but growing in experience, responsibility, money, or other tangible and intangible ways,” say the authors of the study. If promotions or raises aren’t possible, give good workers the chance to make a lateral move or to take on a struggling department.
Get Back to the Work That Matters
Goal: Make sure your team is tuned in to growth opportunities.
The problem with a downturn is that while cost cutting is absolutely necessary, it can make everyone gun-shy about pursuing new initiatives and opportunities for investment. However, if your department, and in turn the company, is going to emerge from the slump in a competitive position, there are a few key investments you can’t afford not to fight for now:
Customers
Learn about the customers of your weakest competitors, writes Michael Roberto, a blogger for Harvard Business Publishing and management professor at Bryant University. While competitors are busy shoring up their relationships with large, established clients, it could be the perfect time to swoop in and court their smaller customers.
Research and Development
Take a cue from Apple’s Steve Jobs. When asked by Fortune magazine recently about Apple’s strategy for the downturn, Jobs pointed to how the company survived the 2001 tech bust by upping its R&D budget. “It worked, and that’s exactly what we’ll do this time,” he told the magazine.
Separate the value-added activities from the wheel-spinning exercises, Thompson suggests in Ignited. Instead of giving up on new projects in a downturn, shift focus so that the team is investing time in identifying and prioritizing the projects that will generate the most benefit for the company. Even if the final product will have to wait until more resources are available, doing the legwork now means the product will go to market faster when the time is right — and employees will stay engaged in the meantime.
Vendors/Partners
“There are two ways to run a business,” says Fred Mossler, senior vice president of merchandising for online shoe retailer Zappos, “adversarily or as a partnership.” Considering that the company relies on about 1,500 partners to provide its customers with a diverse selection of shoes, Zappos has chosen the latter option. To that end, the company built an extranet, so that every partner can see how its brand is performing. “They get to see everything our buyers see,” Mossler says. “This way we have about 1,500 other sets of eyes looking at our business and helping to improve it.”
Case Study
How Zappos Survived the Tech Bust
The idea for Zappos was born in 1999, when the economy was booming. But the shoe retailer still was unprofitable and struggling to grow revenue two years later, when the recession hit. “It was impossible for us to get any additional funding,” Mossler says. To make matters worse, the company was learning that its original business plan, which made Zappos a middleman, wasn’t working as planned: Vendors didn’t always have every shoe in stock, and customers — who sometimes had to wait weeks for their orders to arrive — often ended up with the wrong orders.
Though the times might have called for belt-tightening, the company had to make a couple of very expensive decisions, both of which put long-term strategy before short-term cost cutting. First, management realized that it needed total control over the merchandise in order to give the best customer service — a decision that meant sacrificing 25 percent of company revenue. Second, to make sure customers knew exactly what they were getting, the company hired photographers to take pictures of every pair of shoes it stocked. The site now has photos of its more than 3 million items, mostly shoes, from up to eight different angles. “Most companies look at customer service as an expense, but we look at it as a long-term investment,” says Mossler. The moves paid off: Less than 10 years after its founding, Zappos is on track to bring in more than $1 billion in sales this year.
Acknowledge and Reward Deserving Employees
Goal: Recognize achievement, even if resources are scarce.
Employee bonuses and raises are among some of the first expenses that upper management cuts during a downturn. But even if extra compensation isn’t in the budget, that doesn’t excuse managers from rewarding employees. “Lack of recognition — both financially and verbally — is one of the things that does the most damage,” says David Sirota, founder of the management-consulting firm Sirota Survey Intelligence. “I worked with an investment bank some years back where bankers were earning bonuses from $100,000 to $1 million a year,” he says. “You know what they complained about? They didn’t know if the chairman thought they were actually doing a good job, because he never spoke to them about it.”
One easy, no-cost way of recognizing valuable employees is to improve their quality of life. “The best reward you can give people is autonomy over how they spend their time,” says Jody Thompson, a former Best Buy human resources manager who, along with Cali Ressler, helped create the company’s Results-Only Work Environment program. That means giving employees your trust and the flexibility to work at home (or wherever suits them) whenever they want to — without any judgments. This gives workers more control over their time, and sometimes even a little extra cash. Sun Microsystems has found that employees who worked an average of 2.5 days at home each week saved $1,700 a year in gas and vehicle wear-and-tear.
Danger! Danger! Danger!
Save Rewards for the Worthy
Keeping your employees engaged doesn’t mean rewarding them just for doing their jobs. The most effective rewards are significant but well deserved. Libby Sartain became head of Yahoo’s human resources department in 2001, just as the company received a hard knock from the dot-com bust. She decided that instead of quietly giving large bonuses to overachievers, which wasn’t providing much bang for the buck, Yahoo needed to regularly single out the top 15 to 20 stellar individuals and teams — not only to reward them, but to help the rest of the company understand what made these employees outstanding.
The following year, the company gave its first Superstar Awards. Candidates were nominated by their peers for significant achievements and awarded cash prizes ranging from $5,000 to $50,000. The Yahoo Superstar Awards program is now in its seventh year and has honored employees for contributions like creating the Panama advertising system, inventing a way to advertise on instant messages, and fixing a troublesome accounting problem. “This isn’t egalitarian, this is a meritocracy,” Sartain says, acknowledging that some managers resisted the idea at first. “When people saw the winners, they understood why they won, and it took hold and became part of the culture.”
Wednesday, April 9, 2008
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Rather late, some would say ....new business and projects blog, hope not too boring, not too detailed but to the point.
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