Episode Transcript
Speaker 1 00:00:09 Hey everyone. Today I want to talk about the productivity paranoia, which is a really interesting phrase that came outta some research Microsoft did last week. And here's the research. They surveyed several thousand or so employees, and they found that 87% of surveyed workers believe they're productive at work. But only 12% of leaders believe that they are fully confident that their employees are productive. By the way, add to that, the more recent research by Mercer, that 81% of employees believe they are burned out. So of the 87% who are productive, only 6% are not burned out, which is really, really shocking. So what this basically says is there's a huge disparity between what CEOs believe is going on and what employees believe is going on. And there's a whole bunch of reasons why this is a problem. Let me talk a little bit about what we're gonna do about it.
Speaker 1 00:01:04 It's very interesting that this is all happening, right? When I'm introducing my new book, Irresistible, which is basically all about this. Now, first of all, the reason companies are worried about productivity is because we're in such an uncertain business environment. In fact, I've never seen so much uncertainty. It keeps getting piled on. We've had the pandemic, we have inflation supply chain, the war in Europe, global warming. We just had a hurricane in the United States. Political instability elections, high interest rates, threats of recession, stock market crash. I don't know, I can't think of anything else at the moment, but that's a lot. So everything that's going on in the outside world affects businesses and companies are responding and reacting as fast as they can. And if you read our gwi research, which is really, really going well, we can identify exactly the industry disruptions that are going on industry by industry.
Speaker 1 00:01:58 So of course, CEOs and CFOs are saying, Hey, we need to ratchet down. We need to tighten the screws. We need to look at our numbers. Our stock just dropped by 30, 40, 50%. The investors want us to be more profitable. Everybody wants cash at the moment. Whoa, you employees, you're not productive enough. Makes perfect sense. However, what they don't realize is that this is not a problem of desire. It is not a problem of effort. It is a problem of design. Productivity in companies is not the responsibility of each individual employee, it's the responsibility of the organization as a whole. We have to design and continuously redesign our companies and our human capital practices in our management practices to continuously improve productivity. Now, you can measure productivity as revenue per employee, revenue per hour, worked revenue and profit per customer, whatever you want. Many different ways to measure it.
Speaker 1 00:02:56 In fact, there's no right or wrong way. But the bottom line is the CEOs are responsible for this problem. Let me point out a really good example. One of the most interesting news articles that came out last week, right before the Microsoft announcement, Wass PCA's discussion about Google, and he made a public statement, It went public. I don't think it was intended to be that Google was becoming unproductive. There was too much bureaucracy. People needed to spend more time at work and less time on vacation. And that there was gonna start a simplicity sprint to eliminate bureaucracy at Google. Now, you know, in some sense that's the right message, but in some sense it's not he and Fiona, the C H o and others really need to take responsibility for this. They can't push it down to individual employees. I know companies like Google have a lot of bureaucratic practices have been built up over the years, too many levels.
Speaker 1 00:03:53 They're just redoing their performance management process. They're learning and development and career development, all sorts of things that very mature companies have done. Google never really had to do because they were just growing and growing and growing. And so now they're realizing they have to re-engineer and what we call design for being irresistible. And my book, which I'm gonna keep talking about, is really all about the human capital practices, the management practices that increase productivity and create a sense of growth in the organization regardless of the economic conditions. Cuz this is not the first time we've had it slow down, it'll happen again. And every company has their issues on why they can't grow or the competitive threats or the disruptions in their industry. So that's the first point. The second point on this idea of productivity paranoia is looking at the data. Now, I spent 7, 8, 9 years looking at data on many, many HR practices and pouring through the Glassdoor database to write my book.
Speaker 1 00:04:53 And what I found is cross many industries, virtually every industry, every geography, every company size segment I could analyze, there's a bell curve of what you might call employee engagement or Glassdoor ratings. And the Glassdoor survey is very interesting because there's a whole series of questions. There's a question on whether you would recommend your company to your friends and peers, your rating of the ceo, your career opportunities, your pay, your level of work, et cetera. And what you find is that in the aggregate Glassdoor ratings, there's a bell curve. About 10 to 15% of companies are at the top that usually rating at the very high threes or four or above 4.1, 4.2, and about 80 to 90% or somewhere in the remaining of the bell curve. And there's always a significant number of companies at the bottom. We're doing a terrible job of managing their workforce always year after year after year.
Speaker 1 00:05:50 It looks like this. So what that tells me when I see the same thing in every industry, in every company's size and every growth rate, is that this is fundamentally a problem of management. It is not a problem of paying people enough. It is not a problem of giving people more benefits. It is a problem of a whole constellation of things you do to empower, engage, support, develop, and align your people. Now, one of my most fascinating associates I've met in my career as an analyst is Don Soul, who's a professor at mit. And Don and his son have built just this amazing database of cultural information they call Culture X. And Don just wrote a really in depth report on the MIT management review about a toxic workplace. And what Don points out, first of all, is that about 10% of employees have a toxic experience at work.
Speaker 1 00:06:47 That's obviously the worst thing that can happen. And among the many, many things that contribute to these toxic experiences or negative experiences at work, several are very important. The most important of all is management. And that gets back to the issue of leadership and the ceo. If the CEO is not aware of or sensitive to the people issues in the company, he or she might push people a little too hard and not understand the design issues that might be at play. I think a really good example of this that I really admire is Howard Schultz's comeback at Starbucks. If you've been reading the Wall Street Journal, they've been doing a great job of chronicling this. He came back to Starbucks earlier this year, looked at the problem of unions in the stores, went out and visited a lot of stores and came to the conclusion that we've got a human capital problem and we've got a mental health and employee burnout problem.
Speaker 1 00:07:46 But we've also got a design problem because when they went under the covers and they looked at what's really going on in the Starbucks stores and how things have evolved during the pandemic, there are now 170,000 options on Starbucks drinks and food. So of course, 5, 6, 7 baristas working in the store can't possibly deal with 170,000 food options when they have a line of people in the store, they have phone orders, they have mobile orders, they have drive-through orders, they have maybe somebody who's homeless comes wandering into the store, people with guns, et cetera, et cetera, cetera. It's very, very difficult on the employees. And so the employees are speaking up or have been and basically threatened to go union. And Howard Schultz figured out through his own experience at the beginning that this isn't just an employee issue, this is really a companywide strategy design issue.
Speaker 1 00:08:40 And they're going through a process of redesigning the services, the products, the blenders, the way they make food, how you package it, et cetera, to simplify it for us as customers and for their employees. And that is not something where you sit around and say, you guys aren't productive enough, go out there and quote unquote eliminate bureaucracy. And, and that's, that's really my message to CEOs. The second thing that comes out from Don's research and much of the research that I've done is this enormous value of employee growth. Now I've been writing about and proselytizing, I guess that's the word, employee training and development. Sincerely, two thousands. In fact, I started my career in HR as a, as a training geek more or less. And I never really appreciated in the beginnings of this, the massive impact that employee development has as a business strategy.
Speaker 1 00:09:34 When you look at the Glassdoor data and you correlate the Glassdoor rankings against the other questions, the most highly correlated factor is the rating of the ceo. The second most highly correlated factor is employee growth and career growth. And you find that companies, even companies that are not growing fast, by the way, are still rated pretty much dependent on whether their employees are growing. Now, uh, obviously when a company's not growing, it's hard to make the employee opportunities quite competitive with somebody else. But you can still do a lot. And the reason employee growth is so important is because something I talked about last week, it is really hard to hire people and it's gonna get harder. And I don't care, even if there's a recession, it's gonna get harder. The labor market is flat, people aren't having children, people are delaying getting married. Every major economy in the world short, the United States is expected to be reducing the size of its population.
Speaker 1 00:10:32 People are living longer and working longer, but there's fewer of them entering the workforce. And so if you're not developing people and giving them an opportunity to take on new responsibilities and learn new roles, you're probably not gonna be able to grow your company at all. And that gets into the four Rs. Recruit, retain, reskill, redesign, reskilling, developing people, giving them training opportunities is absolutely critical to being irresistible. And it will improve productivity. Nothing improves productivity like stopping, giving people some slack time, which we've written about a lot, not making them work harder, giving them actually a little bit less to do and letting them basically sharpen their saw and get better at the work they're doing through development, through talking to others, through sharing stories, through after action reviews, et cetera. So that's number two. Number three, as Don's research and correlations also point out is this issue of management and workload.
Speaker 1 00:11:31 You know, there's this funny relationship between workload and productivity. You would think that if we pile more work on people, they'll get more work done. That is not true <laugh>, it's actually the opposite. There's a diminishing returns on workload and at a point in time, somewhere around 80 to 90% of your expected productivity, you become less productive. The more you have to do, You start making mistakes, you start having to redo things, you start losing energy, you start getting less sleep, you start worrying about things and pretty soon you're not getting that much done. You're just dealing with the incoming stuff as fast as you can. And the not to say nothing of the quality of your work. And I've actually studied this, I've looked at this in manufacturing plants. There's all sorts of studies that were done in Germany. And you know the Good Jobs book by Zen up, Tom talks about it when you give people a little bit less to do, but you're really clear on what they're accountable for.
Speaker 1 00:12:28 Which by the way is another problem with employee engagement and productivity. They actually do more work because they can focus and they can be better at their work. And this issue of overwork and clear responsibilities is a management issue. It is not something an individual employee can do. I often tell people in our company, and we're growing really fast and we've got way too many things to do in our company. I often tell people, You know what, let's not do that. Let's put that off until next year or next quarter cuz we're just too busy right now. We're not gonna throw it away, but we'll do it later in this problem of sequencing activities, giving people the opportunity to say no, telling them what's not important, assigning clarity of accountability. And by the way, this is not a small issue. Who is responsible for the new HR strategy?
Speaker 1 00:13:21 Who is responsible for selecting this new tool? Who is responsible for making sure this customer is taken care of? Those are not easy questions to answer. And managers management must make that clear. And that is why this third area of management is so important. Now, relative to a big company that's thinking about this productivity paranoia issue, what do you do about management? Well, first of all, as you all know, management is a never ending challenge. People are always getting promoted into management roles. And as soon as they get that new responsibility, they discover that it's a lot harder than they thought. Not only is the job very different than being an individual contributor, but you have to pay attention to people. You have to understand people, you have to give people feedback. You need to have a continuous performance management process. At some point you have to evaluate them, you have to decide who gets promoted and who doesn't.
Speaker 1 00:14:16 It's really, really tough. And not only do you need to train managers and allow them to talk to each other and learn from each other, you have to have a bit of management principles. You need to have a really clear set of management capabilities or competencies so everybody knows what they should be working on and you need to have a performance management process. And so let me talk a little bit about that. Performance management has been around a long time. I've probably done six or seven major industry studies on this topic. And back in the early two thousands, late 1990s when we were all admiring GE Performance Management was a top down cascading goal once a year thing. And everybody thought that that would be the nirvana. And I talked to companies during that period of time who really said to me, the key to success of our performance management is to get everybody to enter their goals into the system by the end of February.
Speaker 1 00:15:14 Because if we do that, we know that by the end of the year we'll all be on track. Well, you know, as they found out in March, april, May, June, oh, all those goals didn't make sense anymore. People got paid for bonuses for things we didn't care about by the end of the year that the goal system was getting in the way of us moving around or reorganizing or changing the way we go to market, et cetera, et cetera, et cetera. So we came up with this new idea, which we called continuous performance management. And I give Donna Morris, who's now the C H O at Walmart, the credit for really pioneering this when she was at Adobe. Adobe at the time said, You know, we got a lot of engineers are getting promoted into management. They don't really know how to talk to their people, they're not used to it.
Speaker 1 00:15:55 So we're gonna give them a formally designed checkin and we're gonna force them to have a check in every week. And so this idea of managers regularly talking to their employees, being a formal process started in the mid two thousands. So that grows, companies grow, the economy grows, we have the digital revolution, gets hard to hire people, we tighten the screws a little bit, we turn it into performance enablement. And a lot of the performance management that was very draconian and very top down and very forced ranking in the 1990s and eighties turned into very much of a development process. And we spend a lot of time focus on not just results and goals, but behaviors. How do you get things done? Not what do you get done? Are you embracing the behaviors and the teamwork and the collaboration and the innovation that we wanna drive in our company?
Speaker 1 00:16:48 Are you embracing the entire organization as you get things done? And we had features like people having performance management based on team goals, not just individual goals and using a smaller, more simplistic level of evaluation where we have far exceeds performance, meets performance or under performance instead of five or six levels of performance. And all of that was going reasonably well. And it wasn't really a big issue until the pandemic came along. And during the pandemic, what I discovered in most of the companies we talked to is they stopped doing it entirely. Many, many companies, including Pepsi, we wrote a case study on them and many others had built this very, very complicated bureaucratic process with lots of talent reviews and calibration meetings. And in some companies, the entire month of December was basically wasted for managers to sit through management review meetings to try to figure out who's gonna get what rating.
Speaker 1 00:17:42 We certainly went through that at Deloitte and didn't really add any value at all. So during the pandemic companies said, Oh my God, this is entire process is just getting in our way. Let's stop it for a while. Let's just ignore it for a year or two while we get through this and we'll figure it out later. So here we are, 2022, 2023, coming out of the pandemic, dealing with an economic slowdown. And everybody wants to tighten the screws on performance management again. Well, let me tell you a little clue here. It's changed and we've done a lot of work on this and I'm doing a lot of work with Better Works and other companies. The new world of performance management is what I would call the best name I can think of it at the moment is performance management and the flow of work.
Speaker 1 00:18:25 In other words, great managers don't manage performance once a quarter or once a year. They manage it all the time. They're always thinking about what we can do to make this person more productive, to help this person become better aligned or better perform in their job, to give this person some feedback so they can stop doing something that's getting in their way and to give the entire organization growth development, exposure to other people, new experiences, developmental assignments, so they continuously can improve. And that is not even close to the old Jack Welch performance management process. It's completely different. And so there's a new breed of tools, This is why I'm kind of into better works at the moment, including some of the new tools coming from Microsoft that allow you to do this online. In fact, you know, one of the companies that actually really got involved in this in a very creative way was Cisco.
Speaker 1 00:19:21 Cisco. And one of our friends, Ashley Goodall, who at the time was at Deloitte, went to Cisco, I think he's left, went to Cisco entirely with the goal of creating team based performance tools and systems for Cisco. And when he went to Cisco, what he discovered was even those a hierarchy and all sorts of job levels and job titles, that there were more than 5,000 teams at Cisco doing different things. Client teams, product teams, service teams, finance teams and so forth that were not reflected in any of the HR systems. They were not written down. And that's the way it is in most companies. We're working on projects and teams and initiatives and solutions that really aren't part of the formal HR process at all. And so what's emerging, but they did at Cisco basically is they bought a tool and they tried to build a system to manage teams where people could check in with each other online on the teams and collaborate much more quickly.
Speaker 1 00:20:16 And they found that once people had a tool that allowed them to collaborate more efficiently and they didn't have to schedule a one-on-one to talk to their manager cuz their manager was in meetings all day, actually things really got done a lot faster. And so as I talk a lot about in my book, this idea of a company being a network of teams requires some operational expertise for managers, including performance management to make that happen. So that third area of productivity of helping managers, teaching managers, putting together programs and systems for managers is huge. Now the final thing I just wanna mention as I wrap this up is that
Speaker 1 00:21:04 Let, let me, the final thing I wanna say as I wrap this up is this big topic of culture and Don Soul's research talks a lot about this. Many, many studies have been done on the role of corporate culture. Edgar Shine, who I had a chance to spend a lot of time with, has done some amazing research. And if you're really worried about productivity and you're worried about employee engagement and you're worried about whether you're really managing the company well, you have to think about culture. So let me just take a minute on that and then I'll wrap up. I'm not gonna try to define what culture is, but as you know, culture is the water in which you swim. It's hard to see it, but you do know that it's there, you can feel it. And what Don talks about in his article and what a lot of our research shows is that cultures are very, very hard to change.
Speaker 1 00:21:53 Cultures are usually created by the founders. They last for decades and times, hundreds of years in companies. And they're built on the behaviors and belief systems and reward systems that made the company successful. So it's hard to change a culture. The owner of the culture is the ceo. You could a anoint the C H O as the head of people and you could ask this person to lead the culture. But in reality, the culture is manifested through the behaviors, the day to day activities and the rewards that take place at work. If, for example, the CEO shows up late to meetings, doesn't know anybody's name and constantly talks about the numbers, you're gonna create a culture, you're gonna probably create a somewhat inhumane culture. And that may be the culture that the company's had from the beginning. And if the company has an amazingly fantastic product and everybody wants to buy it, that culture might just work fine.
Speaker 1 00:22:49 And many employees might be happy with it because they want to be part of a growing company. But that particular kind of culture won't work if you're a healthcare company, if you're a company going through a transformation, if you've had a competitor just stomp all over your market, if your customers suddenly went in another direction, that kind of culture is probably not gonna help you. So the final thing about productivity is to do a sober look at your culture. The best way to understand your culture is not to go into the corporate board room and write it on the wall. It's to go out and have a series of meetings with employees and let them talk about what are the behaviors and values in your company that they like, and what are the behaviors and values that they don't like. And what you'll find is that in every company that I've ever visited or been a part of, there are all sorts of things about your culture that are fantastic.
Speaker 1 00:23:42 And these are things that have been around a long time and people reward them and they love them and that's the reason they work there. And then there's things that creep in for a variety of reasons that just are in the way. And if you are not explicit about what these cultural obstacles are, you'll completely miss them. One example that I think has been well chronicled in his book is Satya Nadal's Journey it into Microsoft. Microsoft many of you know, was a very combative, competitive, difficult company to work in in the 1980s. Very competitive in the market, very successful financially, but they weren't a learning company, they were a telling company. They were telling people what to do because they felt they were smarter than everybody else. And that really kind of came from Gates and Bomber at the time. Well, they missed the mobile computing market, they missed the internet, they missed the ad market, they missed all sorts of things.
Speaker 1 00:24:35 Long comes such in Adela and says, we're not operating the right way. We need to be listeners, not tellers. We need to have a growth mindset. We need to stop stepping on each other's conversations. We need to develop people. And sure enough, of course, as I've talked about many time that company turned itself around, I've seen this exact situation happen at Target. I've seen this happen at ibm, Chevron, some of the best companies in the world are very explicit and very clear about their culture. Google has this idea of goos and it's interesting that it's, it's got some very, very important values in it about teamwork and collaboration and peer to peer respect. Things that result in a feeling of safety and innovation and growth in the company. And they create productivity because they give you a ground to stand on. The reason it's important to be explicit with your culture is that when you're not explicit with your culture, each manager, each employee, each director has to make their own decisions on what to do and how to manage their teams to get the best possible outcome.
Speaker 1 00:25:40 And you know, they have to make that up or they have to use the experiences they've had from wherever they've worked before. But if the culture is crystal clear and the behaviors that you value in your company are also clear and you can't have a hundred of them, by the way, I'm talking about five to 10 things at the most, they will use that information and make decisions and you will be able to optimize and improve your performance over time. And cultures do need to be investigated and examine periodically because they, they tend to stagnate. And sometimes the world changes and the culture that was really valuable or the cultural manifesto when you were small isn't as valuable as when you get big. So anyway, lots and lots of content. I know I've been talking for almost half an hour here, but I really think this topic of the productivity paranoia, the mismatch between the belief systems of employees and CEOs is a real wake up call for us, particularly those of us in hr because we're really in the middle between the leadership desires and the individual employees' needs and aspirations. And we have to translate this productivity paranoia into action. And so that's really what this is all about. I look forward to telling you more about my book as we go a little further along here, but please come back to me with any of questions and feedback and I hope this was a helpful conversation for a very, very busy time in the world. Thank you him.
