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Ryan’s Journal: When Culture Betrays

Thursday, March 16th, 2017

https://www.flickr.com/photos/roryfinneren/2791004393/in/photostream/

Most of my writing is based on what is going on in my life right now. I have found it’s easier to write about what I know and tap into the emotion of it all. One thing I learned recently is culture can be a double-edged sword and should be respected as such.

If any of you are reading more than Entertainment Weekly I am sure you have seen the meltdowns that are occurring at Uber, the falling stock prices at Valeant Pharmaceuticals and maybe the second bankruptcy of Radio Shack.  All of these are a result of a culture that betrayed the very members it was meant to protect.

How do we watch out for that in our personal lives?

One way I do it is by seeking constant feedback. I have found I have a significant blind spot when it comes to measuring myself, so I suck up my pride and go to those I know will give me a real answer. Perhaps these companies could have done the same?

When looking at these three cases I have found one commonality, pride. Let’s examine each and see what you think.

Uber is pretty public at this point. The CEO had a history of being bold, in your face and decisive. This has its place but can also become unbalanced. Additionally, somewhere from the top down the idea that women should not be treated equal came out and as a result you have cases of sexual misconduct and favoritism playing out.

Valeant was a darling of Wall Street for many years. Its former CEO was incentivized to get his stock to a certain price point. If he did that he was rewarded with stock options that were incredible. Harvard did a study on it and thought the scheme was amazing. What people didn’t know though was the CEO was utilizing accounting methods that favored the stock price. He also utilized a private pharmacy that was undisclosed to the public to deliver his prescriptions. This had an added benefit to the stock. Both methods were found to be unethical, the stock crashed and shareholders lost billions.

Radio Shack recently filed for a second bankruptcy. They have been unable to turn around their stores to get to a profitable point. I am not too old to remember going into these stores as a child and enjoying them. They offered some great products, were knowledgeable and if you were a radio geek you could find just the part you needed. Unfortunately they didn’t expect a rise in cell phones, online ordering and other buying trends. These have all contributed to its losses. They are still around but I wonder for how much longer.

I bring all of these up as examples where the culture of each led to misses and failures.

Culture in my mind is the mentality of a company — its thought processes.

On an individual basis are you allowing your culture to betray you?

Image credit: Rory Finneren

Employee Retention: Not Rocket Science

Wednesday, March 25th, 2015

https://www.flickr.com/photos/jurvetson/6467405231

Yesterday we looked at how a new IBM analytics tool that analyzes tweets found that customer loyalty was severely impacted by employee turnover.

A decade ago research by Frederick Reichheld found that a 5% improvement in employee retention translated to a 25%-100% gain in earnings.

Deloitte recently released its annual survey, which seems to back up the need for improved retention.

2015 Global Human Capital Trends report, their annual comprehensive study of HR, leadership, and talent challenges, the top ten talent challenges reported for 2015 are: culture and engagement, leadership, learning and development, reinventing HR, workforce on demand, performance management, HR and people analytics, simplification of work, machines as talent, and people data everywhere.

The first three are nothing new; the terms have changed over the years, although not the meaning behind them or their ranking as top concerns.

In a major employee retention push, companies are turning to algorithms and analytics to mine a raft of data, identify which employees are most likely to leave and then try to change their minds.

But some things never seem to change and until they do companies won’t make much headway.

At Credit Suisse, managers’ performance and team size turn out to be surprisingly powerful influences (emphasis added –ed.), with a spike in attrition among employees working on large teams with low-rated managers.

With decades of research saying the same thing, it makes one wonder why the finding was “surprising.”

In fact, nothing will change until companies, bosses and the media stop being surprised every time a survey shows that talent acquisition and retention is most influenced by

  • the culture in which they work;
  • the bosses for whom they work;
  • the work itself; and
  • the difference they can make.

Gee, maybe it really is rocket science.

Image credit: Steve Jurvetson

Ducks in a Row: Proof That Employee Turnover Hurts Customer Retention

Tuesday, March 24th, 2015

https://www.flickr.com/photos/betterworksinc/5952007589/

Back in October Twitter and IBM announced a new service to give enterprise a way to mine its 15 billion daily tweets.

Of the research done since the, one result surprised them.

The more a customer shops at a particular store or eats at a particular restaurant, the more likely they are to stop shopping there when employees leave. It stands to reason that you would get to know the people at a place you patronize often, but IBM found that really loyal customers get so attached to employees that they complain on Twitter about having to “start over” if a favorite employee leaves. If they don’t feel like employees know them, this can really impact revenue because the loyal customers are the ones who spend the most money.

Do you find that surprising? I don’t, having done the same thing myself. (I’ve also switched brands when a favorite was acquired by a company I didn’t trust.)

Cost of customer acquisition is the most critical, prime metric when valuing any business, from startup through Fortune 50.

For the last few decades the prime focus has been on investors, while customers came in a long second; IBM’s findings move customers much closer to investors.

Why employee turnover results in customer defections isn’t the least surprising.

It’s a well accepted dictum that people don’t leave companies, they leave managers — or leave because of management turnover, so customers leaving for a similar reason makes sense.

However, employees are still a long third behind investors and customers.

When I started writing this blog back in 2006 I cited research by Frederick Reichheld that proved a 5% improvement in employee retention translated to a 25%-100% gain in earnings.

You would think that a 25% earnings increase, let alone higher, would be enough to get the attention of even the greediest Wall Street types, but obviously not, since low employee turnover is still cause for amazement.

Perhaps the new Twitter/IBM findings will help drive the needed change.

Image credit: BetterWorks Breakroom

If the Shoe Fits: Banking Culture

Friday, November 14th, 2014

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mIf you work, no matter the industry, company size or the level, you’ve been hearing a lot about the importance of culture, especially over the last 10 years or so, most recently from investors.

Bosses know that ignoring culture puts them at peril, but the lesson is just sinking in for many founders.

Culture is a lot more than foosball tables, fancy food and kegs on Friday.

Culture is the values and ethics of the founders made understandable to all.

Sustainable culture is like a tripod, with customers, investors, and employees comprising each leg.

Founders often tend to focus on two of the legs — investors and customers — leaving the third leg to get along more or less on its own.

The problem is that when you over-favor one leg it will get too long; ignore another leg and it will shrink, but the end result is the same—the tripod tips over.

Simply put, concentrating excessively on one leg or another won’t assure success.

Worse, the third leg, employees, is often the shortest, scrawniest, and weakest leg of the tripod.

However, hip perks and a great ‘cool’ factor doesn’t always convert to loyalty and loyalty is bankable.

Founders who doubt loyalty’s bankability should read Frederick Reichheld, who’s written numerous books on the economic effects of loyalty, and shown in carefully researched studies that a 5% improvement in retention translates to a 25%-100% gain in earnings. (Loyalty Rules).

Loyalty happens because people like and trust what the company says it believes in and which is embodied in its culture.

In other words, good culture pays!

Image credit: HikingArtist

If the Shoe Fits: The Lean Startup’s Office Optional Conference

Friday, April 25th, 2014

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mYet again Sarah Milstein and her crew at Lean Startup have knocked it out of the ball park.  The first time I experienced it was at their Lean Startup Conference last year.  With the new Office Optional Conference, they have tapped into a motherload of issues that affect the Future of Knowledge Work and Workers.  Companies both large and small are struggling with attracting, growing, retaining and managing distributed teams, just like an increasing portion of the workforce is enticed by the ability to work from home (or anywhere).

I attended with Galina Landes who leads our engineering team, and one of the great experiences was to see how differently she and I experienced distributed work and strategies for improving what we’re doing.   But then, engineers have always had a more logical approach to most things than those of us working in management or other functions in a company.  Combining our perspectives and discussing strategies was interesting and very productive.

This conference on distributed teams dealt with collaboration, communication and the tools necessary for achieving goals as a team and creating a positive work environment.  I’ve personally struggled with this in my previous company and now as we are building a new one.   Our small team is fully distributed, although several of us are in the San Francisco Bay Area and can meet face to face when necessary.  But it’s still challenging to build a company culture, have good communication and trust without which we can’t achieve our strategic goals. 

Personally, I got a lot of ideas for tools and strategies to enhance our collaboration and communication.  In addition, many of the speakers spoke about the need to create an environment where “water cooler talk” and informal communication (and interruptions) was acceptable.  Just like in a normal office environment.  After all, we human beings are (mostly) social creatures and need to create bonds and trust with those with whom we work to achieve goals.

It was a pleasure to see that so many people from large organizations such as GE to small startups like EMANIO, and everything in-between, dealing with the issues around an increasingly distributed workforce.  In interacting with fellow participants, it was clear that we were all neophytes in the area and even those organizations that successfully had deployed a distributed model were still learning and adjusting their strategies and methods.  Office Optional was a great learning experience and I’d exhort anyone dealing with these issues to participate next time they put it on.  It was invaluable for us.

My only negative feedback would be that toward the latter part, the speakers became a bit repetitive.  However, for a first conference small issues like this should be expected and judging from my prior experience with the Lean Startup team the next one will excellent.

The day ended with a conversation between Eric Ries, who wrote The Lean Startup, and Stanford’s Bob Sutton, who penned the No Asshole Rule, and more recently, Scaling Up Excellence.  Though the conference would have been very good on its own, this was the crowning part of my experience.  Professor Sutton is an engaged and charismatic speaker with deep knowledge of how organizations work.  Excellence is what we’re all striving for and he provided a captivating roadmap for how to achieve it.

Image credit: HikingArtist

Authentic What?

Wednesday, April 23rd, 2014

https://www.flickr.com/photos/54933689@N00/6896999591According to a blue ribbon group at Wharton, the secret of customer loyalty is in connecting on a deep level.

 “If you have been authentic, consumers will love you and share your brand” — Vanessa Rosado, global director of digital capabilities, AB InBev

Or you can be totally inauthentic, if you prefer, because many people won’t even notice.

Retweets. Likes. Favorites. Comments. Upvotes. Page views. You name it; they’re for sale on websites like Swenzy, Fiverr and countless others. 

Of course, if everybody demanded authenticity, instead of accepting cyber-stats as real, we would live in a much better world.

But they don’t.

Then there are the dozens of companies that hype their “community,” but have changed their legal terms so that any interaction with the brand, from buying it to ‘liking’ it eliminates the customer’s right to sue, whether for a perceived labeling error or life-threatening problem.

And then there is Google, who very publicly changed its TOS in response to a lawsuit over its email scanning.

Our automated systems analyze your content (including emails) to provide you personally relevant product features, such as customized search results, tailored advertising, and spam and malware detection. This analysis occurs as the content is sent, received, and when it is stored.

When you upload, submit, store, send or receive content to or through our Services, you give Google (and those we work with) a worldwide license to use, host, store, reproduce, modify, create derivative works (such as those resulting from translations, adaptations or other changes we make so that your content works better with our Services), communicate, publish, publicly perform, publicly display and distribute such content.

While the wording is similar to other sites, Google’s services and their ubiquity aren’t.

It is these words, “upload, submit, store, send or receive content to or through our Services” that raise a giant red flag in my mind.

Google Docs is a service used by thousands of companies of all sizes for collaboration, both internally and with their vendors and customers.

They’re people upload and store designs, marketing plans, contracts, etc. to share and send.

According to its TOS, if Google so chooses it can share the details of those docs with anyone they please or publish them for general consumption.

Of course, everyone knows that Google does no evil and would never consider violating anyone’s privacy, but that old bottom line seems to require continual reinterpreting of both ‘evil’ and ‘privacy’.

The only thing I’m sure of is that the experience being provided by these companies are authentic.

The real question is, “authentic what?”

Flickr image credit: Dee Bamford

Saturday Odd Bits Roundup: Recession, Layoffs And Hiring

Saturday, January 10th, 2009

Recession of not, you still have an organization that needs to be productive.

According to an Academy of Management Journal study of 200 enterprises even a modest downsizing encouraged their most valuable “keepers” to start looking and move on. Check out these numbers; a 0.5% layoff increased turnover 2.6% (13% vs. 10.4%) over companies that had no layoffs. Add to that research by Frederick Reichheld, author of The Loyalty Factor (1996) and Loyalty Rules! (2001), that proved that a 5% improvement in employee retention translated to a 25%-100% gain in earnings!

So why do companies turn so quickly to layoffs? Mainly for these two reasons

  1. Wall Street loves them because they have the fastest impact on the bottom line—and all the Street cares about is the next quarter. It will applaud you now and crucify you when the economy turns around and you have a demoralized staff and nothing in the pipeline.
  2. They’re lazy. They require the least energy, managerial skill, leadership and creative effort, whereas keeping your people and juicing innovation and productivity when times are difficult takes energy, skill, leadership, creativity and work—lots of it.

Ever thought about what does it really costs to hire? Caliper has a nifty calculator. Try it, then multiply the answer by the increased 2.6% who walked when you laid off their colleagues. (Info hat tip to The Engage Sage.)

Smart companies, and even some governments, are getting creative, not for altruistic reasons, but because they don’t want to be crippled when the economy turns around. One of the primary actions that they’re using is to cut hours instead of staff—using with four-day work weeks, X% reduction in hours or closing extra days during the holidays and maybe beyond. Employees know that in an economy such as the current one a reduced job is far better than no job and companies finally figured out that staying prepared for the turn around is as important as cutting costs.

Finally, this WSJ article offers insights on attracting top people to a company in trouble, even one close to bankruptcy. Obviously, if these approaches work in those circumstances think how well they’ll work for healthy companies.

Image credit: flickr

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