A quick survey of the literature concerning Exit Planning reveals almost universal agreement that what accounting systems can measure constitutes only a fraction of the enterprise value of a business. As Chris Snider wrote in Walking to Destiny, “Today, wealth is created by your ability to create, transfer, assemble, integrate, protect, and exploit knowledge assets. These are intangible assets.” Snider divides these assets into four categories: Human, Customer, Structural, and Social. Together they are the Four Capitals, or the Four C’s. This article about Human Capital is the first in a series exploring the Four C’s within the framework of the Go Beyond Exit.
Get The Right People On The Bus
In researching the factors that causes some companies to make the leap to being great while similar companies remain merely good, Jim Collins discovered the principle of First Who Then What, which he described in his book Good to Great. “If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.”
Certainly, building a winning team requires selecting people with excellent technical skills. However, for overall performance and contribution to the goals of the business, character is of much greater significance. Over the years, I have found that if I hire for skills alone, all too often I end up letting a person go because of character problems. Collins observed that the people whom truly great companies invited to join their teams had one special character trait in common: self-discipline. Collins wrote, “first get self-disciplined people who engage in very rigorous thinking, who then take disciplined action within the framework of a consistent system….” Hiring “A players” whenever and wherever you find them, even without a specific job in mind, will result in a strong team that rigorously and passionately debates and then takes unified, disciplined action to accomplish the goals of the business.
In the context of the Go Beyond Exit, which borrows heavily from concepts such as Servant Leadership, we suggest that organizations add whether a candidate is likely to become servant leader to their hiring criteria. Businesses that practice Servant Leadership focus on treating employees — who constitute and create the preponderant value of the enterprise — with love and respect, which results in trust and teamwork to achieve shared goals. These companies know that employees will let that love and respect flow into their interactions with customers, leading to superior results. But a culture based on servanthood can be a tragically bad fit for some people. Regardless of how intelligent or talented they are, if love, respect, and servanthood are antithetical to their make up as people, employee brought into a servant leadership environment will become confused, disoriented, and unhappy. Usually, they will leave after only a short time. But sometimes they stay, creating a vortex of negativity that can be disruptive and damaging to the success of the organization.
When interviewing, my favorite interview questions to uncover fit for a servant leader organization include:
Do you think most people want to do a good job? If the candidate answers No, end the interview as quickly as politely possible. A low view of human nature is not usually fit well in a servant leader culture.
Do you think most people will do a good job if given a chance? And, what does it mean to give them a chance? The second part of this question draws out their thinking about equipping, developing, and empowering employees.
When you find yourself in charge of a group of people, do you usually act like a manager or a team leader? To your mind, what’s the difference between the two? A person whose default mode is “manager” tends to sit back, give orders, and monitor progress. A person who natural gravitates toward being a team leader doesn’t shrink from pulling up their sleeves, sharing in the work, and engaging the team in problem solves. Good leaders know how to manage, but not all managers know how to lead.
I ask these three questions first, and then delve into more routine interview questions. But near the end of the interview, I ask them to write their own epitaph. “In as few words as possible because they need to fit on a headstone, encapsulate your legacy.” Responses reveal much about a candidate’s thinking about life and death, priorities, self-image, hopes and dreams. I’ve had candidates gasp, cry, launch into long monologues. The epitaph I used to share was, “Father, son, husband, friend, servant of the one True God.” I’ve boiled it down even more to, “He loved us.”
The Next Big Challenge: Retaining Top Talent
After you have attracted, selected, and hired the right people for your team, the next big challenge is retaining your top talent. The 2019 Employee Engagement Report polled 25,000 employees across 20 industries in North America, Europe, Asia, and Australia. The main finding was that employee loyalty is dying. The report states that 43% of workers said they might leave their job for a 10% raise. In 2018 only 25% said they would consider leaving their job. Beyond the 10% raise, intangibles are major factors in employee decisions about staying or leaving: workplace culture, benefits, a sense of belonging to a team, and balance. Culture isn’t what you do, but how you do it and how you live your mission throughout the workday.
In Serve to Lead 2.0, best-selling author and speaker on leadership James Strock connect to thoughts that turn out to be the key to retaining top talent in businesses today. “A leader’s top priority is to serve the people,” Strock declares. This is not a new thought; it has been a core concept of servant leadership since Robert Greenleaf coined the term 1970. Greenleaf observed that certain people throughout history have felt compelled to assume leadership roles out of a desire to serve the people around them. The motivation to lead was service, fueled by love. It turns out that this is by far the best way to lead human beings, rather than using fear or greed to gain compliance for generally selfish purposes. Strock brings the discussion into our current era by asserting, “In the twenty-first century, when the essence of leadership is service, a leader serves by enabling others to create value.” Creating value is preciously the point of the Go Beyond Exit because as the old saying goes: a rising tide lifts all boats.
An owner knows their business creates relationships with a variety of stakeholders, including employees, customers, alliance partners, suppliers, vendors, subcontractors, bankers, attorneys, accountants, insurance companies, the local community, different levels of government, associations, and even competitors. For each group of stakeholders, Strock suggests that the business owner ask the following four questions. Who am I serving? How can I best serve? Am I making my unique contribution? What am I learning? Unfortunately, we don’t have space in this article to unpack this extraordinarily useful framework. Strock devotes most of his book to exploring these questions. For our purposes, we will take the first two questions, as they apply to employees you, as a business owner, want to retain.
Who Are You Serving?
The 2019 Employee Engagement Report uncovered these trends in today’s workforce.
Employee loyalty is decreasing
43% of workers would be willing to leave their companies for a 10% salary increase, and weak company cultures are to blame.
Leadership teams lack self-awareness
While 39% of managers strongly agree that management within their organization is transparent, only 22% of employees feel the same way.
Workers need better direction
Less than half of employees feel that their promotion and career path is clear to them. Furthermore, a staggering 44% of employees don’t feel they have sufficient opportunities for professional growth in their current positions.
Employees aren’t getting the recognition they deserve
Only a third of workers received recognition the last time they went the extra mile at work and just a quarter feel highly valued at work.
Employees care deeply about their coworkers
91% of people rate their coworkers positively, and yet just 9% of people think their average coworker is very happy.
Most cultures are decidedly mediocre
We found that less than one third of people believe they have a strong culture.
The #1 factor that predicts performance is the level of support provided by managers.
While high performers rate the level of support they receive at an 8/10, low performers rate it at a 6.8/10.
How Can You Best Serve?
Hire someone to focus on employee engagement
Christoph Seitz is the CEO of CFR Rinkens, a company based out of Los Angeles that ships commercial cargo. It has a little over 100 employees spread throughout the United States and Germany.
The primary responsibility [of the director of happiness] is team member engagement and morale. This is a serious mid-level position. “When we were looking to fill this position,” said Seitz, “we looked for someone beyond entry level who had at least five years of HR experience.”
Offer positive reinforcement to help with retaining good employees. “Employees crave positive reinforcement,” says Tyler Butler, owner of 11Eleven Consulting in Phoenix. She suggests sharing stories about the great work your employees are doing in a regular company-wide email, or if you can, sharing it in the community as well. “By showcasing what people are doing right, you encourage the same type of behavior in others,” Butler says. “You also empower a member of your staff to feel important and ultimately most people yearn for this feeling more than anything else you could do for them.” Emphasis added.
Make it easy for your employees to work for you
The 2019 Employee Engagement Report found that the secret to employee engagement, and hence loyalty, boils down to one word: culture. Culture consists of the values you demonstrate, not what is written in the company handbook or on the website or even repeated ad nauseam in meetings, but how the company actually interacts with the outside world and how people inside the business actually interact with each other. It is the unspoken rules, customs, and expectations that express the values of the leader (the business owner) that have been absorbed into the fabric of the company as a community.
Put your employees first
Most business experts agree that if you put your employees first, it tends to benefit the whole business. Retaining good employees means giving them reasons to stick around. If you want your good employees to stay, plan for employee success, not company success. Planning for employee success means investing in their development, encourage continued education and intellectual curiosity. Let them try new things. Empower them to have a voice, to be heard, to make recommendations. Reward passion and commitment. Celebrate personal growth and achievement as well as company successes and wins. Make promotions and job changes based on what is best for the employee.
An excellent measure of how well a servant leader culture is actually serving employees comes from answering a set of questions posed by Robert Greenleaf himself: “Do those served grow as persons? Do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants?”
Get the wrong people off the bus
The First Who Then What principal has three parts. Getting the right people on the bus and in the right seats constitutes the first to parts. The third part of this vital principle is getting the wrong people of the bus. In every organization, employees (including executives) can be divided into three groups. There are top 20 percent of high-performers, the A players. The top 20 percent carry the company and move it forward. Then there are middle 60 percent. These form the heart of the company, the solid B players, who get the job done. And then you have the C players, the bottom 20 percent. They might be there because of aptitude or because of attitude. Periodically, you should release the lower half of this bottom group.
For the those who don’t have the knowledge, skills, and abilities to get the job done in your company, let them go can be a blessing to them. They know they aren’t doing well. But there most likely is a job out there where they can become part of the middle 60 percent. These employees are not bad, mean, or evil. They are just in the wrong job. I call this “letting them be successful someplace else.” The bottom 10 percent contains another group of people: those with toxic attitudes. They create a vortex of negative energy around themselves that adversely affects other people. Well them go with grace and respect, but you must let them go. Not showing these folks the door will eventually cause your A players to leave your business. When you have culled the bottom 10 percent from your workforce, replace them with potential A players. If you do this, the average quality of your work force will improve, you will hold on to your best employees, and the market value of your company will naturally increase.
Having good people, who work as a proactive and creative team, and are committed to stick around will build significant more value into your business than almost anything else you can do as a business owner.
Go beyond what the world expects