Updated: Jan 2, 2021
If you ask any working professional today, are you happy with your work ? What do you think will be your chance to hear a positive answer. Surveys and data shows that you have over 70% employees working around the world are disengaged and not happy. If you ask the same question to Employers on how happy you are with your current workforce and current state of business, your chances of getting a positive response is again very low. You hardly will hear any CEO ( with some exceptions though) who will sound relaxed, confident and in control of current state of business, these CEOs and leaders sounds very similar. They will either sound very arrogant and over confident or they will talk about the need to transform their current model. Lot of them will talk about being leader in something, transformation, restructuring and their strategy for 2 years or 5 years , customer centricity , embracing automation and being cost effective etc. however you will hear the few who will talk about what they stand for and what they expect to happen in the future world after 20 or 50 years. I remember watching an interview of CO-founder and ex CEO of Costco , Mr. James Senegal where he was asked about the criticism of Costco by Wall street analyst that Costco can make more money if it pays less wages to it’s staff and to that he replied back without any hesitation that “Wall Street is in the business of making money between now and next Thursday. We are in the business of building an organization that we hope to be here in fifty years from now.”
He also quoted in the same interview that “ “Our view is that you can reward the shareholders in the short term by not paying attention to one of those aspects (law, customers, employees, suppliers), but you can’t do it in a long term. You are either going to have labour problems, or you are going to break the law, or your customers are going to be turned off, or the suppliers are not going to want to do any business with you. Sooner or later you are going to stumble very badly.”
Now you might think, does that business model work even now in the age of digital revolution & cost optimization, let me show you how Costco fared compared to it’s competitor Walmart & traditional wisdom.
I just gave one example, you will hear the same tone and language from Leaders like Herb Kelleher, Steve Jobs, Richard Branson, Tim Cook, Jeff Bezos, Ratan Tata etc The numbers are few though and that’s why the average Lifespan of organization have reduced to 18 years compared to 90 years in 1935 ( Listed organization data for S&P 500) .
My research shows that the downfall of organizations superficially seems to be happening due to cost factor, disruptive technology , high employee turnover, employee disengagement, lack of innovation, start ups, lack of cost efficiency etc however all the books and articles and leaders who produces these reasons as an RCA are forgetting the fact that these are all at a tactical level. Longevity of business depends more on vision and strategy and then it comes down to how to implement your strategy and deploy sound tactics. Our leaders are now talking tactics thinking that they are talking strategy. We have an output model now vs an input model of the past. An output model talks about shareholder value & quarter on quarter P&L and an input model talks about employees , customers and staying in business for generation after generation.
THE OUT OF THE BOX MODEL
In order to understand this problem I need to introduce you to my “The Out of the Box Model”. As per me there are 4 categories of organization as per their strategy and every organization is boxed up in their respective model for years , their longevity is directly proportional to their ability to think out of the box and move to the next category.
The first Category of organization is “D” and their strategy is shown below.
If you look closely then each one of these represents more of tactical level achievements and are output parameter. So if you try to meet these outputs without having a input driven strategy you might experience blissful quarters or years but your death is inevitable. For example, you might do layoffs or manipulate numbers or compromise in quality etc to be profitable, you might break your company or irate your employees and customers just to please shareholders , you might put your workforce under stress for delivering performance, you might try to bribe or do window dressing to look good on quality, you might try to buy off talent spending out of your budget or lower your price or invest in automation for the sake of it to gain competitive advantage, you might spend millions in hosting dinner parties and off sites to make customers happy repeatedly since they are might not be happy with your staff or service. No one would want to work for such a horrible company right , certainly not our millennials and centennials. Sadly these kind of organizations exist and good luck to them till they last or gets eaten up by a big fish. They can only survive longer if they think out of the box and position themselves in the next category.
The 2nd category of organizations brings more light and hope. - “C”
The “C” organizations have identified few inputs parameters which they think are their strategy to achieve the desired results or output. So they think that in order to achieve Profitability they must focus on cost optimization and efficiency, to achieve performance they must focus on talent retention or employee motivation, to achieve quality they must go for standardization, to achieve competitive advantage you need to focus on talent retention and innovation, to achieve customer satisfaction you must focus on standardization, motivated and talented employees and efficiency. There is no doubt that these organizations performs better than “D” however the longevity and sustained success of “C” still remains uncertain since what they consider as an input parameter works as an output parameter as well. Let’s say if you want to target talent retention then you might have to focus on motivating them by money or quality of work but that’s not enough and that’s not what every talent wants. Also we need to remember that money is addictive and the happiness it provides is short lived as its controlled by chemical Dopamine in our brain. Dopamine is also the same chemical responsible for addictions like smoking , drinking, gambling, social media , messaging etc . The moment your company have one bad year and you are unable to feed your talent with their demand they will instantly jump ship and go to your competitors since you have invested your time and energy to keep your talent happy with money, promotions but failed to focus on trust and loyalty, it’s a failed relation. Similarly if you want to achieve efficiency and cost optimization you will have to cut corners and try to achieve more with less. Thereby you will put immense pressure and stress on yourself, your customers and your staff and that will act as counter effective force to talent retention and employee motivation. Standardization should be more of an organic on demand process but without proper direction and strategy you will blindly follow Toyota model and implement Lean, six sigma etc ( just to look good). You cannot drive efficiency and innovation at same time since both are poles apart and constantly countering each other. Efficient organizations will talk about lowering human error, will punish people for doing mistakes, work on reporting and clear visibility of everything, high utilization of resources, stress on following processes and methods to reduce errors, avoid last minute surprises, centralized decision making etc. Innovative organizations will talk about surprises so they can learn from it, venturing in unknown , taking risks, encourage people to try again post any errors detected, will intentionally avoid over utilization at the cost of incurring losses so they can trigger the brain activities of right side which is primarily responsible for creativity and innovation. I would encourage you to read the HBR article “ digital-transformation-is-not-about-technology” posted in reference section which says 70% of Digital transformation initiatives have failed and in 2018 Of the $1.3 trillion that was spent on DT , it was estimated that $900 billion went to waste. Unless you align your tactics as per your larger strategy you will keep on wasting time, energy and your money. So the “C” type have to explore out of the box to enter into “B” zone where you get better input strategy to work on.
This brings us to the 3rd category of organizations – “B”
The “B” organizations are the ones who considers the input metrics of “C” as their output metrics and understands very well that if they strategize on their inputs they will be able to achieve their final output as shown under “D”. They understand that in order to be innovative you need healthy minds, inspired workforce ( not only motivated ) and the need to make employees feel safe. They target talent retention by not only feeding them with more money but focusing on culture building, work life balance, trust building, giving them meaningful work. They understand that if you have a strong collaborative culture with de-centralized leadership style and skilled workforce you will get enough good ideas coming in from all quarters on how to be cost effective or how to standardize things, in case their vision demands efficiency then they will not expect innovation from their core delivery group where efficiency is needed and they will put the onus of innovation on the R&D group as they understand the biology of innovative minds. These organizations serves as key players in their respective domains and can stay on top for many years due to their long term strategy, Mostly you will find these organizations being innovative and they understand that unless you make your people feel very safe and foster a culture where ideas will win over hierarchy you cannot build a collaborative , trusting and innovative team. You will find them moving away from Bell curve system of appraisals or any such system which contributes to internal power struggle to be higher up in the rank. They will simply not invest in new technology or new domain unless their vision is aligned with that. For example if a organization’s vision is “ To make the most delicious ice cream” they should focus on quality, taste and may think about innovating new forms or textures and attract talented chefs but if they invest in digital boards or automated machines to increase ice cream production with high efficiency and zero waste then they are swaying away from their vision and focusing on more sales. Similarly if you are Domino’s and your vision statement is “sell more pizza , have more fun” then of course it makes sense for Domino’s to invest in digital transformation, come up with Pizza tracker and hit the numbers by improving customer experience that way and let me tell you that they are doing extremely well, but if you ask a random customer which pizza taste better you will find a divide among Domino’s and Pizza Hut so your purpose matters.
Take Microsoft as a recent example, till the time they invested in culture, innovation and went after their vision they were at the top of things and till 2000 they were starting to rise and even they saved Apple from bankruptcy, it was a force to reckon with and was a talent magnet, the moment leadership changed to Ballmer, culture changed, hierarchy started dominating , they started competing with Apple and Google rather than focusing on their own mission, Ego clashes all around the company and they were failing , in 2014 when Ballmer left Microsoft to Satya Nadella it was a broken company, not so inspirational anymore, Microsoft had lost it’s cause. It took 5 years for Nadella to turn things around just by focusing on the soul of Microsoft, breaking the autocratic leadership style, fostering culture of innovation and brotherhood, building trust, customer and employee centricity , taking the right decisions on investments and acquisitions based on vision of Microsoft. (Please read his letter as CEO to all Microsoft employees in the reference section)
The Tale of Microsoft
So is the “B” organizations doing everything correctly and that should be treated as the secret recipe of sustaining success ? The answer is “No”. There is still room to go out of the box.
That brings us to the last and final category of organization which treats what “ B” is doing as their immediate output and what “D” is doing as their final output.
The 4th Category of Organizations – “A” .
The “A” types are the truly inspiring, innovating, leading and game changers. People want to work for them but not everyone get a chance. Customers buys from them with blind trust even if there are better products available at lower cost in the market. They have a cult like following, customer who own their product or services takes immense pride in it and flaunts it. When they take a new direction, entire industry starts following them. Shareholders might not be so happy with them but employees and customers rejoices their association with them. Yes you are right, I am talking about the apples, Southwest airlines, Costco, TATA group, Microsoft, Harley Davidson, Google, Amazon, Nike, adobe, Four Seasons etc. Now these are high turnover organizations and that’s why you quickly recognize them but there are smaller organizations like Barry -wehmiller, Godrej, Zappos, square space , Lemon Tree Hotel etc which are also working as magnets for employees and customers. Any professional army whether it s of USA or India or Israel or UK and others falls under the same category, lot of people wants to join army but not all can make it and the few that makes it will not leave it even if you offer more money or comfort.
A worthy reason to exist ( VISION) - Many organizations have a vision statement, few of them actually believes in it , far less of them follow it, then there are the B categories which follows it. However very few have a worthy vision, a noble or an inspiring cause which is life changing. These visions will not sound like “ being a leader in something..” however might sound like “ to build a place where people can come to find and discover anything they might want to buy online “ or “ to help individuals and businesses realize their full potential. “ or “ We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self- honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well” and we can go on.
Every decision / deals / strategy is formulated based on vision - There is no compromise to vision, the moment you compromise to gain some scale or profit or fame you will fail to inspire customers and employees. So Leaders in “A” will be seen to take tough unconventional decision to not reduce price or scuttle a good deal since it is not aligned to vision and strategy or refuse to go public or refuse to lower wages or refuse to be efficient or refuse to do business with a customer or refuse to hire highly skilled employee since they didn’t match their values ec. They always take decision at every level thinking about the cause they are in it together.
Employee Health, security & safety - This is something common between “A’ and “B” as they both realize the importance of this in order to be productive and innovative in long run. You cannot incentivize innovation nor efficiency. You cannot just give a deadline to someone and ask him to innovate. You cannot reduce Human errors to a zero via carrot and stick method. You might experience inconsistent success but its not a sustainable strategy and is very stressful everyday and we know what stress does to our health. The A types do comprehensive study on creating great talents. They will promote exercise even during working hours, create big campuses so that employees can walk around or do cycling or invest in Gym.
When you exercise not only you get rid of stress but also it releases endorphins which makes you feel fulfilled and relaxed, this in turn makes employees more productive and creative. In his book “ The power of full engagement” Tony Schwartz and renowned performance psychologist Dr. Jim Loehr talks extensively about how some people or organizations keeps outperforming others every time, they talk about the importance of high & positive energy at workplace rather than low & negative energy and exercise or yoga or meditation combined with frequent short breaks allows people to recover lost energy. Time is non-renewable but energy is renewable so instead of time management Dr. Loehr focuses on energy management. For example you can be physically present at a meeting right on time till it ends but while you were there you kept thinking about what went wrong at home or previous day, you did time management well but due to bad energy management your presence in the meeting did not make any difference. The “A” type will always invest in health monitoring, not focus on “ do more with less” approach with people an make sure their employees are healthy and energized to take on next projects. They will stock up their cafeteria and canteen with healthy food options and promote that. These are all strategies to create innovative and creative minds. They make people feel safe inside organization just like “B” does , that is also a contributing factor for them to be consistently innovative. Innovation requires you to take risks , do trials and fail multiple times till you succeed. So it is like that unless you know that you have parachute tied up will you gather the courage to jump of a plane. The cushion of safety is critical for taking risks and innovate.
Leaders with high EQ & Trust quotient - You cannot become a “A” type without great leadership. A lot of execs term themselves as leaders since they forget that unlike management which is a position you hold in an office , leadership is not position or designation but it has more to do with capability to influence others to follow your direction. Broadly we can define leadership in 2 categories, IQ based and EQ based. The IQ based leaders will always talk about expansion, scaling up, acquisitions, talk mainly on tactical terms , takes decision based in his position in market or thinking about monetary gains. The EQ based leaders will always talk about vision and mission, talk generously about his employees and customers everytime, through their talks and action they will always leave an impact on you emotionally, in every talk or interview or townhall they will practice empathy and some shows extreme humility as well. In his book “Emotional Intelligence “renowned psychologist Daniel Goleman mentioned how emotional intelligence dominates even IQ. He also did extensive research on this subject to conclude in an Harvard article the following and I quote ,
“ The most effective leaders are all alike in one crucial way: they all have a high degree of what has come to be known as emotional intelligence. It’s not that IQ and technical skills are irrelevant. They do matter, but…they are the entry-level requirements for executive positions. My research, along with other recent studies, clearly shows that emotional intelligence is the sine qua non of leadership. Without it, a person can have the best training in the world, an incisive, analytical mind, and an endless supply of smart ideas, but he still won’t make a great leader “
The “A” type will always select it’s CEO with high EQ and they will invest heavily on succession planning and leadership trainings to make sure the fire keeps burning.
All employees with shared values - You might have noticed that the “B” type focuses on fostering great culture and so does the “A” type rather the “A” types actually believes in the famous saying “ Culture eats strategy for breakfast”. The difference is “B” always have to channelize their energy on fostering culture and sometimes becomes very stressful as a daily activity but “A” relishes a great culture without much effort by selecting the right leaders and employees. You must have heard of long interviews at Apple, Google, Southwest etc Unless they are confident that a person has shared ambition and can be a collaborative guy within the house they keep rejecting people even if they meet the skill criterion. Having a group of people who are diverse Globally or gender wise however all are bound together with shared value or vision is a recipe for a great culture.
Long term strategy & People over numbers - This is again linked very closely to great leadership. The “A” type understands that its not about becoming a Trillion dollar company one year and then come down crashing next year and again go up and fall down to be finally dead. They understand that money will keep coming if they keep running the business for years and centuries and to keep it going they need the right people and right ideas at the right time. So they will exhibit high existential flexibility to adapt to changes and uncertainties of market. So an apple can make computers and also can make watch and now into live streaming , Microsoft could make OS, then laptops, then phone , now they are in cloud service , linked in and in future they can make shoes as well if they feel challenged and their vision allows them, Amazon can sell everything online and also become a cloud giant and so on. The “A” types always will be assessing the world 10 years or 20 years ahead and try to find new ways to get closer to their vision, they will not hesitate to suffer losses for few years in order to exist for another 50 years. They will also stay away from frequent layoff tactics or bell curve systems to rank and yank people just to make sure that they develop that trust and loyalty among employees and customers so that during crisis they get support from all and they live to do business another day while their competitors run out of steam and gives up. Humans invented numbers not the other way around so the priorities should be aligned as per that. The “A” types also puts immense focus on learning and behavior of an individual rather than only focusing on performance since that is key to develop great leaders and great culture.