“So much of what we call management consists in making it difficult for people to work.”
Peter Drucker
As many of you know, I recently had the opportunity to interview Dr. Jim Goodnight, CEO of the analytics software giant, SAS Institute.
I spent a day at the company’s North Carolina headquarters, and then returned home to write an article that described many of the key reasons the firm recently was named the “Best Company To Work For” – in the world.
But here I am, less than two weeks later, wanting to tell you more about SAS – and a masterful leadership insight I picked up from Goodnight that many of the greatest minds in business routinely overlook:
If your objective is to build extreme employee engagement, and to inspire your people to contribute to your firm as if they owned it, you must first create – and then vigilantly sustain – a culture of trust.
Said another way, the reason SAS experiences less than three percent annual turnover, and has had 37 consecutive years of record earnings, is because its management fully understands that by giving people its trust, they earn a profound payback. When employees know they are trusted, they take initiative; they put their hearts into their work. They more willingly take the risks that lead to breakthrough innovation.
But here’s the rub. Plenty of otherwise intelligent leaders in business come from an entirely different perspective and believe that employee productivity is better driven by strict rules and internal competition. As you’ll soon see in the following three real-world examples, in the absence of trust, neither employees nor organizations can ever fully flourish:
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When James Corcoran was hired as the President of Retail Banking at Washington Mutual Bank (now owned by Chase), he quickly determined that the firm needed greater discipline in how it evaluated business decisions.
Corcoran soon introduced a tool he called a “four square,” and informed his staff that any time they sought his approval on a proposal going forward, they were required to present their business case on a single sheet of paper – delineated into four equally sized boxes.
Corcoran was very clear. Each box on the “four square” had a specific purpose and he expected his rules to be followed. A summary of the proposal always went into the top left corner box, and the financial analysis always in the bottom right. Everything had its place.
But where things went awry was when Corcoran was displeased with the content provided in a “four square.” He very often sent managers away, without rendering a decision, until they returned with a more satisfactory presentation. He did this even when he had sufficient data to make his call.
To be clear, Corcoran cannot be faulted for instituting a more formal and consistent decision making methodology at WaMu. This decision proved to serve him and the organization well. But by insisting on absolute perfection in every form he reviewed, people began spending disproportionate time producing faultless “four squares.” And in order to avoid hearing Corcoran harshly voice his rejection, some employees grew to fear bringing him new ideas and proposals altogether.
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As recently reported in Bloomberg Businessweek Magazine, Dish Network founder and Chairman, Charlie Ergan, may be the single worst executive in America when it comes to establishing and nurturing organizational trust. According to writer, Caleb Hannan, the list of trust-destroying practices Ergan employs is virtually endless. Here are just a few.
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To ensure people arrive for work on time, he installed fingerprint readers at every entrance. Now, any time a worker comes in after 9:00 am, an e-mail is sent to both Human Resources and the person’s supervisor. Sometimes, Ergan himself is copied.
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Up until very recently, every check coming out of the company’s headquarters had to be signed by Ergan. Even today, trusting none of his senior managers to act in the best interests of the organization, he still signs all checks over $100,000.
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Despite having over 100 full-time employees paid to research “reams of customer data” and decide how much to charge for satellite service, Ergan recently dismissed their endless hours of collective work, and unilaterally chose the final price by himself.
According to Breen, current and past Dish Network employees describe an Ergen-created culture as one of “condescension and distrust.” Turnover at the firm is predictably high.
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An August 2012, Vanity Fair Magazine article titled “Microsoft’s Lost Decade,” revealed that CEO, Steve Ballmer, effectively destroyed organizational trust when he introduced an employee evaluation process called “stack ranking.”
According to writer, Kurt Eichenwald, Ballmer launched a review system predicated on the idea that only a small number of employees should ever be graded highly.
Imagine you’re a Microsoft worker assigned to a team of nine other highly talented and qualified people. In Ballmer’s bell-curve methodology, only two members on your team could ever receive a great evaluation – no matter how well you and your colleagues perform.
The system required that seven employees would always receive a mediocre review, and one person a terrible one. People on the bottom often lost their jobs as a result.
It’s stunning to think that one of the world’s largest companies, one with extreme competition for talent from the likes of Apple and Google, wouldn’t seek to design an evaluation process that inspired every employee to excel and share in the firm’s success. Instead, here are the predictable, albeit unintended, consequences the firm inevitably suffered:
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Top employees did everything they could to avoid working with other superstars out of fear of getting hurt in the rankings.
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While employees sought to do a good job, they worked equally hard to sabotage the performance of colleagues. This all but crippled cooperation and collaboration.
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Because reviews occurred every six months, people focused on short-term performance rather than the long-term innovation that would greatly benefit of the firm.
Conclusion:
I’ve come to be certain that no organization can fully succeed and thrive in the 21st Century without first displaying the highest regard and affection for all of its employees. Human engagement is greatest, therefore, when people feel valued, important and trusted.
Because of this, it’s time we all agreed to push the human race forward and change how we manage people in the workplace. Our ambition now as leaders must be to improve lives, mitigate fears and make people feel strong. Anything less diminishes us all.
Building a culture of trust remains the road less traveled in business today. But organizations like SAS are proving it’s the superhighway to organizational excellence.
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PPS: If you haven’t already read my Fast Company Magazine article about SAS and would like to, here’s the link: http://buff.ly/YlC3Vo
