Within the past two days, news stories about General Motors have signaled a major shift in thinking about the way workers are compensated. These stories indicate to me a huge change in corporate culture. The first story is about a shift the company is taking by moving salaried workers from defined benefit pensions to defined contribution pension systems. The second is about profits, and the fact that many workers will receive $7,000 profit-sharing checks.
The connection between these stories tells me that the company is moving its employee motivation toward a greater risk and reward strategy. The company is saying that employees should take more risk, but get a greater reward in their pensions. When the market increases they gain, and when the market goes down, their pensions suffer. That is what some of the most successful organizations have been saying for years. At the same time, the company is rewarding the employees with profit sharing when the company makes more money.
For years, successful organizations have increased the risk/reward systems for their employees, and it has worked. It’s great that GM is getting on the bandwagon.
I see the joining of two completely different and unique trends that may quickly represent a very important change for society. The trends are on-line education and telecommuting.
For several months I’ve been enjoying a daily blog, https://people.uis.edu/rschr1/onlinelearning/
From this, we can clearly see that the traditional educational establishments, both in k-12 and higher education, are loosing their monopolistic grips, and on-line education is providing many more choices to the person wanting to teach or learn from home. The other clear trend from business is that more companies are allowing flexible work arrangements. We can add to that the clear trend of there being more opportunities to own and operate businesses from home.
When we combine these trends we see an unbelievable opportunity for parents to stay home and supervise education from home. No longer will a parent have to know many or most school subjects to teach Billy or Suzy from home. Now the person only has to tune to the free Kahn Academy, (https://www.khanacademy.org/) and point the student to a video in math, physics, finance, accounting, or history. That’s only one source. There are more, and many of them completely free, being developed every day.
Yes, you say, but the child needs socialization that only the school can offer. Oh? 40 years ago we received most of our socialization from school, but today many of the children are receiving huge amounts of socialization from Facebook, texting, and other non-school groups like church, hobbies, and other outlets.
I was just thinking that if Carroll and I were a lot younger and had children just starting out, we would probably be thinking strategically completely differently. We might say, one of us will have to go to work in a more traditional job to have the normal fringe benefits, and the other will want to have a business that can be run from home. At home we will help direct the educational lives of our children as they learn from the on-line environment.
I had to comment on the recent American Airlines announcement of getting rid of 13,000 employees. In Dallas, Texas there are two well known airline companies. One is in hemorrhaging money, is in bankruptcy, gives (in my opinion) horrible customer service, and is now getting rid of a bunch of employees. The other one makes lots of money, gives great customer service, has never had a layoff, and is expanding. Do we wonder what is the difference between Southwest Airlines and American? Does anyone think that the executives might want to look to the other side of town and find out what Southwest is doing right?
I can tell you from having been a Gold member on American and now a high-level frequent flyer on Southwest. It's all about culture. In this person's opinion, the culture at American stinks and the culture at Southwest is second to none. I have had the privilege of meeting with Southwest executives and talking about the organization's culture. It's all about culture.
The other day I was talking to a department head about the concept of collaborative decision making. He felt that he, as department head, should make the decision. I suggested that he should bring the entire department into the decision-making process. My reasoning was simple. Yes, he might be the smartest in the department, and be in the best position to make the decision. But, did he really think that he was smarter than the other five department members combined?
When we bring others into the decision we gain the knowledge of the entire group which, hopefully, is greater than just the knowledge and wisdom of the department head. In autocratic and bureaucratic cultures, the department head makes the decision. In collaborative cultures, the decision making is shared. Is there any wonder why collaborative cultures are more successful?
Reading a recent news article caused me to reflect on how risk and cultures are related. More importantly, they are critical to the success of a business or organization. Here is a very quick clip from the news article.
"The City of Portland, Oregon just drained off some 8 million gallons of its fresh water supply. Why? Because some kid decided to take a leak while hiking with some friends."
What's behind the story is probably a lot more important. Clearly the city water department didn't want to take any risk. Despite the dilution factor, as well as the fact that wild animals pass waste, die, and decompose in the water supply, a spokesperson for the department said that they decided to get rid of 8 million gallons of treated water because of public perception.
I say it was because people in bureaucratic organizations refuse to take risk. When you are spending other people's money, it's easy to waste it. There is no incentive to conserve money or spend wisely. After all, an employee is crucified for failing, but seldom rewarded for taking a chance that handsomely pays off.
If you want to have a successful organization you have to reward people for taking chances and being creative about solutions. You have to set up a culture that rewards reasonable risk and does not become so risk adverse as to cause people to become overly fearful of taking chances. No organization will ever serve the customer well and do it efficiently if it is unwilling to take reasonable risk.
One of the reasons why our organizations need more emphasis on policies and less on rules is that rules so often force the organization into difficult or impossible situations.
This week there has been some news discussion about new rules the Department of Education is proposing on college student aid. The government wants to crack down on “unscrupulous” for-profit colleges that get a lot of money from student loans and then leave the graduate with a lot of debt and no job. The idea is good, but then comes the rule setting.
The rules proposed say that for-profit schools that have low repayment rates and high levels of debt for students, will not be able to get more student loan assistance for the students. What? For profit only? Doesn’t the same rule apply to non-profit schools like state universities? The answer is no.
The problem is that when we start making rules we fall into the trap of one of two evils – we either structure the regulations to cover everyone equally, or we fall into the other trap of making decisions that would have some benefit or be panelized more than others. In other words, the rules would start to pick winners and losers. The Education Department regulations obviously pick non-profit schools over for-profit schools without regard to many other factors.
It’s easy to say that the rules should cover everyone, but then we quickly fall into the trap of policies like the “no tolerance” weapons policy at schools that would have students suspended for accidently having a dinner knife locked in a car in the school parking lot.
The answer to the problem is empowerment. A bureaucratic culture organization will tend toward the rules. They are safer and there is less risk that executives will be criticized. The collaborative culture organization will spend more time dealing with the policy and then allow employees the flexibility to apply the policy in a flexible manner.
A couple of days ago in a seminar I was teaching, I asked a particular question of a group of about 20 financial professionals. The question was, “if one of your employees had a great idea to significantly improve the efficiency of the department, but the idea could mean that their own job might be eliminated or significantly reduced, would the person give you the idea?
At first, nobody raised a hand. And, by the way, it was far enough into the seminar where everyone felt comfortable voting on certain questions. Finally, one young lady slowly raised her hand and said, “I think so, but I’m not really sure.”
What does that tell us about culture? If our organizations are going to serve customers well and do it efficiently, then we have to establish a culture where people are willing to be creative for the benefit of efficiency. We have to discuss the issue, promise people, and then follow up on our commitments to reward people who are creative and come up with better ways to accomplish tasks. In fact, we need to make it clear to our people that we might eliminate a job for efficiency, but if that person has been a creative one, we will be sure to place him or her in another and better position. Only if someone has been unwilling to be creative, should there be a cause for dismissal.
The bottom line is that we need to reward and promote creative people and weed out the ones who are just hanging on, doing the minimum, and being obedient. While we don’t want disobedient people, we want people who are both obedient and creative. Creativity should win!
Recently I heard a member of Congress bemoaning the fact that technological advances kill jobs. In fact, he pointed to the iPad as an example of a culprit. You know, he is right! Every day someone comes up with a better and cheaper way to do something, and often a job is lost. That may be true of automation, out-sourcing, or using an Excel spreadsheet or the Internet to do what used to be done by a person.
Since technology does kill jobs, the key is on which side do we want to align ourselves. Do we want to be on the side of creating ways to do things that serve the customers better and do it more efficiently? Or, do we want to sit on our hands and complain on how the jobs are drying up or going overseas?
Creative people and organizations figure ways to create new and different jobs as part of the evolutionary process. Yes, they understand that some jobs will go, but others will be created and the economy will move forward. After all, there aren't nearly as many people manufacturing buggy whips now that the automobile is around. It's our choice. Do we sit around and try and protect the buggy whip jobs, or do we embrace technology and join the creative culture? I know that I'm going for the creative way.
One of the most important differences between the old style organization and the new one is the ability to structure jobs and duties. We say that we want to pay people to do work, but we actually pay them to put in time and hope that they work while putting in the time. In fact, the most bureaucratic cultures even hire "supervisors" and "managers" to watch over the people and make sure they work.
The modern way is to organize jobs around tasks and projects measuring progress with good metrics. For example, you can pay a collector to sit and make calls. Or, you can pay her to keep a past due rate in a particular region down to a particular percentage. If you use the past-due metric, and reward her on that basis, then you can leave her alone and let her work from anyplace. After all, you don't care how she does it, (as long as it is within ethical guidelines,) or from where she works, as long as she meets the objective of the past-due rate.
This can be done with many different jobs. Reward people for working and results, rather than for putting in time. This technique releases employees for flexible hours, flexible places to work, working from home, and many other modern techniques. Those techniques cause happier and empowered employees who generally get better results.
Of course, you the manager have to trust them which is a key of a good culture.
Everything that I'm reading these days points to an adaptation of the old but true concept of the "Golden Rule." That is, that when give away things you freely receive. Modern marketing, especially on the Internet, says to give out free valuable content to people, and they will visit your place of business. People don't want to be sold, they want to have a favorable experience.
Yesterday, I participated in the first annual, Ace Hardware Guys Who Grill competition in Wickenburg. We had about 400 people paying $10 to sample wonderful food prepared by grilling teams. The people had a great feast, the teams had a lot of fun and promoted themselves and their businesses, and the sponsors saw great benefit from being involved. Another organization to benefit was the Webb Center for the Performing Arts and especially its programs for kids. Everyone gave a little, and everyone got a lot.
This is a key for any business or organization. When we develop an organizational culture to give, we benefit from getting both a good response and monetary benefits from the public.