Terms come and terms go, but their meaning stays fairly constant.

Managers used to strive for employee buy-in, ownership, commitment, involvement; today it’s engagement.

Management has worked to develop that behavior for decades, whereas the way to achieve it is as old as humanity.

Disengagement is costly, “Gallup estimates it costs the US economy about $300bn a year and that 17 per cent of employees are “actively” disengaged. These employees each cost their employers $13,000 a year in lost productivity.” That was last year and I’d bet that 2009 will be worse.

Managers of organizations with a high level of engagement know that achieving that is as simple as 1, 2, 3—4.

The 4 acts of engagement are

1. respect;
2. encouragement;
3. support; and
4. rewards.

This isn’t exactly secret management knowledge. There are thousands of books, hundreds of classes, dozens of blogs and forums all teaching variations on this theme.

So if it’s that simple, why isn’t it put into practice more often?

MAP (mindset, attitude, philosophy™) is the reason. MAP shapes a person’s actions.

If you don’t really believe in the value or numbers 1 or 2, you can talk all day and your people will hear what you say as hollow, i.e., no authenticity.

Number 3, support, includes skills training and career development, but how do you provide these when money is tight or, even in good times, when your company doesn’t believe in it?

Ingenuity—not just yours, but your group’s.

Your people aren’t dumb, they know when the company can’t/won’t fund training, but there are tons of ways to work around that, such as building up a broad departmental learning library and sharing their own expertise with each other during organized brown bag lunch sessions.

Number 4 also usually involves money, as it should. But when there’s an authentic, provable lack of funds to provide significant rewards, every company can find enough, monetary and otherwise, to prove that they value their people’s contributions.

Again, people aren’t dumb. If the CEO, execs or their boss fly first class or receive a bonus after telling people that the company can’t afford raises or rewards, it shouldn’t be a surprise when they disengage and eventually leave.

That’s it; not rocket science, but you must do it consistently, sincerely and with great enthusiasm—no matter what else is going on.

Image credit: arte_ram on sxc.hu

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Today I have two offerings about money and those who have it and one sanity update.

Let’s start with the sanity. A couple of months ago I asked if women really were less risk-prone and cited a woman=led startup that was planning on doing geo-thermal drilling in the worst earthquake zone in the country; apparently that project has been delayed.

Next, in case you missed it, is the newest listing of the Top 10 for CEO pay. I couldn’t decide between the two versions, CNN and the NY Times, so here are links to both; each has slightly different peripheral content.

Finally, for 30 years the rich have been getting richer. Think about it, in 1977 the top one ten-thousandth of households took home 0.9 percent of the nation’s income; three short decades later it took home 6 percent, but what’s happening now? Will it bounce back and continue? This analysis offers good information and doesn’t require a degree in economics to understand.

Image credit: MykReeve on flickr

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Three weeks ago I told you about Jim’s quandary in supporting his CEO’s approach to layoffs, asked what you would suggest he do and in a follow-up post shared more about the culture, the CEO and ideas I’d given Jim. I also promised to tell you the outcome, it’s just taken longer than we expected.

Jim called yesterday and told me that he started by sending links to both posts to his CEO, “Sue;” when she reacted positively he asked permission to send them to the rest of the executive team.

Sue refused, saying that she wanted to send them herself, thanking Jim publicly for taking the initiative to start an alternative ball rolling and ask her executive team to bring still more ideas to a brainstorming session two days later.

Sue also said that she had been horrified by reader reactions; she had really thought that her approach was a fair one until she saw it through outside eyes.

Jim said that the entire exec team was super excited; all of them had been struggling; trying to decide who to lay off, when and how to maintain morale during and after the process.

Here is an overview of what happened at the meeting;

• Sue had already discussed a pay cut with the board, but decided that increasing it to 50% would not just be a good gesture, but would help preserve jobs.
• She also asked the executive team to accept a 25% cut, which they all did.

The savings from these two moves would prevent immediate layoffs and give them time to take more creative actions.

• They agreed that it was important to level with all the employees simultaneously in order to squelch the rumors that had started flying.
• The information would include the size of the cuts that Sue and the executives were taking.
• The announcement would be by live webcast instead of email to avoid anyone forwarding it outside the company without thinking.
• Each vp would schedule a Town Hall meeting immediately after the webcast for his department, including everybody.
• After an open discussion and answering questions as transparently and honestly as possible they would ask their people to come up with every possible idea to increase revenue, save money and avoid layoffs.
• They decided to set up a suggestion box on the company intranet to make contributing ideas simpler; they chose to use a wiki so that people could comment and add to other’s ideas, stressing that there were no dumb ideas and people should post anything they thought of.

They started implementing as soon as the meeting was over.

Most of the staff were blown away with the salary cuts they had taken. The meetings went over really well and suggestions are pouring in.

The really great thing is a number of the ideas related to increasing revenue, including new market opportunities. Jim says that the sales team really caught fire and is pushing ahead with these and several others that had been shelved for lack of faith.

Almost everyone agreed that they would rather take salary cuts or rotating furloughs to avoid layoffs.

To date, trust levels have skyrocketed, morale is sky-high and, best of all, the sales pipeline is up 4% and growing.

Sometimes bad stuff is the best stuff that can happen—if it is handled well.

Image credit: arte_ram on sxc.hu

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I have a question for you today and I’ll post my thoughts on the subject Monday.

I had a phone call from an executive today, “Jim.”

In short, Jim said that he understood why his boss was instituting pay cuts across the board, but had found out that the cuts were scaled with those who were young and single taking the biggest hit, older or married less and those with children the smallest.

This isn’t public information and when he asked his boss about the rationale, she said that the company had limited resources and that those with fewer responsibilities should be willing to make a greater sacrifice for the sake of those with greater ones.

Jim believes that this action isn’t legal and will open the company up to a lawsuit and even if it is legal it won’t remain unknown, will destroy employee trust and decimate the company’s culture.

The CEO sees it as the fairest way to deal with the problem.

Jim called looking for ideas on how to convince her that this is a bad idea; further, he would like to offer a better approach.

What would you suggest Jim do?

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We’re coming up on that time of the year and considering the economic climate I thought this post from 2006 especially apropos.

Do you work hard? Did you, or will you, take a vacation this year? A real live vacation during which you actually disconnected from your office/business/work?

If your answer is no, you have a lot of company. The attitude/action even has a name, it’s called “shrinking-vacation syndrome” and it’s prevalent.

Smart bosses know that people need to get away, not just to recharge their batteries and creativity, but to reduce stress and rebuild coping skills. Taking the office along defeats the purpose—especially in these days of ’staycations’.

Smart people know that cramming everything possible into the available time (especially when kids are involved) leaves them more frazzled than they were at the start.

But if you’re not PricewaterhouseCoopers, which has taken to shutting down its entire national operation twice a year to ensure that people stop working, what can you do?

Several things…

If your company offers paid vacations insist that your employees use them. Not by taking them away when not used, but by including “staff taking vacations” as a line item in every manager’s review.

If you’re a small biz that can’t offer paid vacations consider allowing your employees to trade paid holidays for different days they want, e.g., working July Fourth and Thanksgiving in trade for a Friday and the following Monday off.

Small biz owners should also consider closing one Friday with pay at least once, preferably twice, a year, e.g., the Friday after Thanksgiving (or a similar day). Consider it an investment as the ROI in increased productivity and retention will surprise you.

If you’re one of the many managers, found at all levels and in all sizes of companies, who don’t believe in vacations and intimidate your people so they don’t take one, or insist that they “deal with stuff” while gone, I sincerely hope you have few personal expectations and excellent hiring skills, since you can look forward to low productivity, high turnover, and poor reviews no matter where you work!

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Many economic pundits are predicting the end of this economic meltdown (see previous post). Chalk those predictions up to the optimism of springtime and the need to fill a news cycle.

While rates of decline for various economic indicators may be decreasing, the excesses that created this meltdown will take years to work through. The ham-handed responses by government and many businesses will only delay the eventual recovery. This is only a break in the winter weather.

But even as the economic meltdown is only now approaching its nadir, a few new businesses may find this to be a fertile time to set up shop.

Consider the single greatest expense and challenge of most new businesses – finding and attracting talented workers, trained and immediately available for interesting work.

Currently the US economy provides 155 million jobs. This meltdown has reduced employment through five distinct mechanisms shown in the table below:

Given that the measured statistics are usually undercounts and that these unemployment/underemployment numbers will grow in the next 12 months, likely over 32 million workers (over 20%) in the US will have talents and time available to participate in another business.

For many companies, payroll costs represent over 65% of total expenses. For new ventures, personnel costs can be much larger, up to 90% of expenses. In this environment, many workers are searching for work.

New ventures traditionally offer below-market compensation for their workers. However, they offer other significant benefits.

Typically, new ventures offer broader scope in each job, better growth opportunities, ability to make large, direct, measurable contributions to the organization, and the enthusiasm of working in a small, close-knit team. Some new ventures offer profit participation or stock options. For unemployed or underemployed workers, these benefits can be significant, even when the cash compensation is low.

Technology and the recession have dramatically reduced other business operating costs. The cost of computers, phone systems, and tele-conferencing have dropped. Office space is cheaper, and home-based employees can cut that cost even further. Travel, where necessary, is cheaper than any time in the past ten years.

Even without easy availability of capital for start-ups, this recession may offer fertile ground for new ventures and with the added benefit of retaining far more of the equity.

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Who’s innovating? Why is it important to stay focused on innovation? How are companies doing it in today’s economy?

Check out Business Week’s story on the 50 Most Innovative Companies and don’t miss the side bar on the 25 most innovative companies you’ve probably never heard of.

A second innovation commentary comes from consultant Peter Bregman who offers up and interesting perspective on why it’s better to be David in this economy than Goliath.

Finally, what’s happening in compensation these days aside from Wall Street bankers with dubious bonuses?

Here’s the information for those of you wondering what CEOs are earning or whether it’s worth going for an MBA.

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Who’s innovating? Why is it important to stay focused on innovation? How are companies doing it in today’s economy? Check out Business Week’s story on the 50 Most Innovative Companies and don’t miss the side bar on the 25 most innovative companies you’ve probably never heard about.

A second innovation commentary comes from consultant Peter Bregman who offers up and interesting perspective on why It’s better to be David in this economy than Goliath.

What’s happening in compensation these days aside from Wall Street bankers with dubious bonuses? Here’s the information for those of you wondering what CEOs are earning or whether it’s worth going for MBA.

That’s it for this week. Have a wonderful weekend and keep your eye on the innovation ball—that’s really what pays.

Image credit: MykReeve on flickr

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Economic pundits, eagerly searching for signs of the recovery, are grasping at almost anything. “The rate of decline has slowed.” “Unemployment has stabilized.” “The cardboard box index has bottomed out.” And the shape of the recession and recovery has been predicted to be a V,  W,  L, or even a double-bounce W.

I think they’re all wrong.

The old economy will never come back.

This economic meltdown is much like a forest fire. After the fire burns itself out, the storm may be over, but the burn area is fundamentally changed. It does not “bounce back.” It starts at a different place.  Sometime in 2010, the economy will stabilize, but it will not “come back.” We will go forward from a fundamentally different position. This new starting point will reflect the impact of deep, long-term, global trends in the nature of work, the value of the dollar, and our relationship to our government. The current recession is a convenient marker to recognize these trends.

Work Is Changing

The nature of employment will continue to change. The United States will continue to shift to a “just-in-time,” service-based workforce. The manufacturing sector will continue its decline, from 29% of GDP in 1950 to 15% in 2000 (see analysis by Dr. Mankiw). It will drop below 10% by 2010. You can construct your own labor trend at indeed.com. ( This website is a fascinating example of the business of data, which we discussed in the last three posts.)

Many new service-sector workers will be involuntary. Growing unemployment and under-employment in the United States (which will exceed 15% this year) is driving many people into self-employment as service workers. An analysis of Japan’s Lost Decade by Tom Coyner, long-time resident of Japan and Korea, provides one instructive example of this phenomenon, and some associated risks.

These new service sector workers will be driven to a “do-it-yourself” model for almost everything. They will have to provide their own health care plan, retirement plan, office arrangement, and business planning. Many of these workers will be home-based, with little differentiation. The most common product/pricing model will be piecework, with unit pricing based on the alternative of being completely idle. Ironically, one result will be the re-integration of work and home life.

Entrepreneurship is Changing

Investment capital will no longer be available for any but the most solid businesses; and the vast majority of these newly-independent service workers do not have plans to build large businesses. As a result, the successful ones will exhibit four common, positive characteristics:

Local—In a global world, being present still counts. A local service provider who can show up in person has a distinct advantage. In addition, some services simply cannot be outsourced. When your car is broken or your roof leaks, you need a local service person. For locally-based services we may see an increase in a local, personal relationship with service providers.

Immediate—Without investment capital to fund long-term research and development, independent service-providers and small businesses must focus on services that provide immediate value. The “cash-to-cash” cycle must be less than one pay period. Fortunately, credit/debit cards and other immediate payment methods support this trend.

Information-based—Information will provide significant improvements in service quality and competitive differentiation. For instance, simply finding a customer is difficult and expensive. Irritating prospects with unnecessary and unwanted sales promotions is also costly. Successful service providers will use information to target customers on a “just-as-needed” basis.

Green—Setting aside the discussion of whether the earth is warming or whether green is good, government policies will reward green activities preferentially. Independent service providers will offer green services or enhance green aspects of their existing services.

Start-Ups Will Explode in Unlikely Niches

The availability of many talented people and the flexibility of independent service providers will fuel new start-ups. While these may not completely replace the loss of investment capital, they will certainly provide an alternative path of low-cost labor for new businesses. The change may be refreshing, for us individually, and for our economy.

This is perhaps the greatest unknown—how much will individual creativity and inspiration replace financial engineering.

I am hoping for a few delightful surprises ahead.

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The Carrot Principle, AKA, How the Best Managers Use Recognition to Engage The People, Retain Talent and Accelerate Performance, by Adrian Gostick and Chester Elton was first published in 2007.

A new, updated, release this month with a new chapter and the results of an extensive 10 year study of 200,000 managers and employees that confirms what most workers have always known—recognition, not just money, is what draws them in, engages them and results in high performance.

But there’s a catch. (There’s always a catch.)

You can’t just start running around throwing recognition and carrots at your people.

There are four basics of good management you need embedded in your culture—but first they need to be embedded in your MAP (mindset, attitude, philosophy™). They are

1. Goal Setting;
2. Communication;
3. Trust; and
4. Accountability.

The bad part is that if you don’t already believe in this stuff and have a culture that reflects it then the carrots of employee recognition will be tossed out by your people. Your people aren’t stupid; if you decide after reading the book that recognition is a better way than threats and screaming don’t expect to turn things round overnight. It’s going to take consistant effort over a period of time to convince your people that you’ve changed. How long depends on how bad you were and how sincere your changes are.

The good part is that you don’t have to work in a company or for a boss who thinks that way. Gostick and Elton give multiple examples of how “carrot culture” was implemented without support from either.

Carrot Principle walks you through the process and explains how recognition can be practiced in multiple moments without budget-busting amounts of money.

Recognition leads to extreme engagement and successful managers provide their people with frequent and effective recognition.

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