Business Management - 2-3 Page Video Transcript & Executive Summary
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Week 7 Citations (Adkins, 2015) Adkins, A. (2015, May 12). Report: What Separates Great Managers From The Rest. Retrieved December 2, 2020, from Gallup: https://www.gallup.com/workplace/236594/report-separates-great-managers-rest.aspx (Clifford, 2014) Clifford, C. (2014, May 20). 30 Secrets to Hiring the Right People. Retrieved December 2, 2020, from Entrepreneur: https://www.entrepreneur.com/article/234096 (Deloitte University Press, 2017) Deloitte University Press. (2017). Rewriting the rules for the digital age: 2017 Deloitte Global Human Capital Trends. Retrieved December 2, 2020, from https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/central-europe/ce- global-human-capital-trends.pdf (Glassdoor, 2016) Glassdoor. (2016). 50 HR and Recruiting Statistics for 2016. Glassdoor. Retrieved December 2, 2020, from https://b2b-assets.glassdoor.com/50-hr-and-recruiting-stats-for-2016.pdf (Gleeson, 2017) Gleeson, B. (2017, October 15). 5 Powerful Steps To Improve Employee Engagement. Retrieved December 2, 2020, from Forbes: https://www.forbes.com/sites/brentgleeson/2017/10/15/5-powerful-steps-to-improve- employee-engagement/?sh=3f77ea74341d (Keller & Meaney, 2017) Keller, S., & Meaney, M. (2017, November 24). Attracting and retaining the right talent. Retrieved December 2, 2020, from McKinsey & Company: https://www.mckinsey.com/business- functions/organization/our-insights/attracting-and-retaining-the-right-talent (Lund, Manyika, & Robinson, 2016) Lund, S., Manyika, J., & Robinson, K. (2016, March 1). Managing talent in a digital age. (McKinsey Quarterly) Retrieved December 2, 2020, from McKinsey & Company: https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/managing- talent-in-a-digital-age (Saylor Academy, 2012) Saylor Academy. (2012). Chapter 15: Organizational Culture. In Organizational Behavior (pp. 1-60). Saylor Foundation. Retrieved November 20, 2020, from https://learn.umgc.edu/content/enforced/522907-001135- 01-2208-OL3-7380/Organizational%20Behavior%20-%20Chapter%2015.pdf
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Chapter 15 Organizational Culture
L E A R N I N G O B J E C T I V E S
After reading this chapter, you should be able to do the following:
1. Describe organizational culture and why it is important for an organization.
2. Understand the dimensions that make up a company’s culture.
3. Distinguish between weak and strong cultures.
4. Understand factors that create culture.
5. Understand how to change culture.
6. Understand how organizational culture and ethics relate.
7. Understand cross-cultural differences in organizational culture.
Customer Service Culture: The Case of Nordstrom Nordstrom Inc. is a Seattle-based department store rivaling the likes of Saks
Fifth Avenue, Neiman Marcus, and Bloomingdale’s. Nordstrom is a Hall of
Fame member of Fortune Magazine’s “100 Best Companies to Work for” list,
including being ranked 34th in 2008. Nordstrom is known for its quality
apparel, upscale environment, and generous employee rewards. However,
what Nordstrom is most famous for is its delivery of customer service above
and beyond the norms of the retail industry. Stories about Nordstrom service
abound. For example, according to one story the company confirms, in 1975
Nordstrom moved into a new location that had formerly been a tire store. A
customer brought a set of tires into the store to return them. Without a word
about the mix-up, the tires were accepted and the customer was fully refunded
the purchase price. In a different story, a customer tried on several pairs of
shoes but failed to find the right combination of size and color. As she was
about to leave, the clerk called other Nordstrom stores, but could only locate
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the right pair at Macy’s, a nearby competitor. The clerk had Macy’s ship the
shoes to the customer’s home at Nordstrom’s expense. In a third story, a
customer describes wandering into a Portland, Oregon Nordstrom looking for
an Armani tuxedo for his daughter’s wedding. The sales associate took his
measurements just in case one was found. The next day, the customer got a
phone call, informing him that the tux was available. When pressed, she
revealed that using her connections she found one in New York, had it put on
a truck destined to Chicago, and dispatched someone to meet the truck in
Chicago at a rest stop. The next day she shipped the tux to the customer’s
address, and the customer found that the tux had already been altered for his
measurements and was ready to wear. What is even more impressive about
this story is that Nordstrom does not sell Armani tuxedos.
How does Nordstrom persist in creating these stories? If you guessed that they
have a large number of rules and regulations designed to emphasize quality in
customer service, you’d be wrong. In fact, the company gives employees a 5½-
inch by 7½-inch card as the employee handbook. On one side of the card, the
company welcomes employees to Nordstrom, states that their number one
goal is to provide outstanding customer service, and for this they have only
one rule. On the other side of the card, the single rule is stated: “Use good
judgment in all situations.” By leaving it in the hands of Nordstrom associates,
the company seems to have managed to empower employees who deliver
customer service heroics every day.
Sources: Adapted from information in Chatman, J. A., & Eunyoung Cha, S.
(2003). Leading by leveraging culture. California Management Review, 45,
19–34; McCarthy, P. D., & Spector, R. (2005). The Nordstrom way to customer
service excellence: A handbook for implementing great service in your
organization. Hoboken, NJ: John Wiley; Pfeffer, J. (2005). Producing
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sustainable competitive advantage through the effective management of
people. Academy of Management Executive, 19, 95–106.
Just like individuals, you can think of organizations as having their own
personalities, more typically known as organizational cultures. The opening
case illustrates that Nordstrom is a retailer with the foremost value of
making customers happy. At Nordstrom, when a customer is unhappy,
employees are expected to identify what would make the person satisfied,
and then act on it, without necessarily checking with a superior or
consulting a lengthy policy book. If they do not, they receive peer pressure
and may be made to feel that they let the company down. In other words,
this organization seems to have successfully created a service culture.
Understanding how culture is created, communicated, and changed will
help you be more effective in your organizational life. But first, let’s define
organizational culture.
15.1 Understanding Organizational Culture
L E A R N I N G O B J E C T I V E S
1. Define organizational culture.
2. Understand why organizational culture is important.
3. Understand the different levels of organizational culture.
What Is Organizational Culture?
Organizational culture refers to a system of shared assumptions, values, and
beliefs that show employees what is appropriate and inappropriate
behavior. [1]
These values have a strong influence on employee behavior as well
as organizational performance. In fact, the term organizational culture was
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made popular in the 1980s when Peters and Waterman’s best-selling book In
Search of Excellence made the argument that company success could be
attributed to an organizational culture that was decisive, customer oriented,
empowering, and people oriented. Since then, organizational culture has
become the subject of numerous research studies, books, and articles.
However, organizational culture is still a relatively new concept. In contrast to
a topic such as leadership, which has a history spanning several centuries,
organizational culture is a young but fast-growing area within organizational
behavior.
Culture is by and large invisible to individuals. Even though it affects all
employee behaviors, thinking, and behavioral patterns, individuals tend to
become more aware of their organization’s culture when they have the
opportunity to compare it to other organizations. If you have worked in
multiple organizations, you can attest to this. Maybe the first organization you
worked was a place where employees dressed formally. It was completely
inappropriate to question your boss in a meeting; such behaviors would only
be acceptable in private. It was important to check your e-mail at night as well
as during weekends or else you would face questions on Monday about where
you were and whether you were sick. Contrast this company to a second
organization where employees dress more casually. You are encouraged to
raise issues and question your boss or peers, even in front of clients. What is
more important is not to maintain impressions but to arrive at the best
solution to any problem. It is widely known that family life is very important,
so it is acceptable to leave work a bit early to go to a family event. Additionally,
you are not expected to do work at night or over the weekends unless there is a
deadline. These two hypothetical organizations illustrate that organizations
have different cultures, and culture dictates what is right and what is
acceptable behavior as well as what is wrong and unacceptable.
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Why Does Organizational Culture Matter?
An organization’s culture may be one of its strongest assets, as well as its
biggest liability. In fact, it has been argued that organizations that have a rare
and hard-to-imitate organizational culture benefit from it as a competitive
advantage. [2]
In a survey conducted by the management consulting firm Bain
& Company in 2007, worldwide business leaders identified corporate culture
as important as corporate strategy for business success. [3]
This comes as no
surprise to many leaders of successful businesses, who are quick to attribute
their company’s success to their organization’s culture.
Culture, or shared values within the organization, may be related to
increased performance. Researchers found a relationship between
organizational cultures and company performance, with respect to success
indicators such as revenues, sales volume, market share, and stock
prices. [4]
At the same time, it is important to have a culture that fits with the
demands of the company’s environment. To the extent shared values are
proper for the company in question, company performance may benefit from
culture. [5]
For example, if a company is in the high-tech industry, having a
culture that encourages innovativeness and adaptability will support its
performance. However, if a company in the same industry has a culture
characterized by stability, a high respect for tradition, and a strong preference
for upholding rules and procedures, the company may suffer as a result of its
culture. In other words, just as having the “right” culture may be a competitive
advantage for an organization, having the “wrong” culture may lead to
performance difficulties, may be responsible for organizational failure, and
may act as a barrier preventing the company from changing and taking risks.
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In addition to having implications for organizational performance,
organizational culture is an effective control mechanism for dictating
employee behavior. Culture is in fact a more powerful way of controlling and
managing employee behaviors than organizational rules and regulations.
When problems are unique, rules tend to be less helpful. Instead, creating a
culture of customer service achieves the same result by encouraging
employees to think like customers, knowing that the company priorities in this
case are clear: Keeping the customer happy is preferable to other concerns
such as saving the cost of a refund.
Levels of Organizational Culture
Organizational culture consists of some aspects that are relatively more
visible, as well as aspects that may lie below one’s conscious awareness.
Organizational culture can be thought of as consisting of three interrelated
levels. [6]
At the deepest level, below our awareness lie basic assumptions. Assumptions
are taken for granted, and they reflect beliefs about human nature and reality.
At the second level, values exist. Values are shared principles, standards, and
goals. Finally, at the surface we have artifacts, or visible, tangible aspects of
organizational culture. For example, in an organization one of the basic
assumptions employees and managers share might be that happy employees
benefit their organizations. This assumption could translate into values such
as social equality, high quality relationships, and having fun. The artifacts
reflecting such values might be an executive “open door” policy, an office
layout that includes open spaces and gathering areas equipped with pool
tables, and frequent company picnics in the workplace. For example, Alcoa
Inc. designed their headquarters to reflect the values of making people more
visible and accessible, and to promote collaboration. [7]
In other words,
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understanding the organization’s culture may start from observing its
artifacts: the physical environment, employee interactions, company policies,
reward systems, and other observable characteristics. When you are
interviewing for a position, observing the physical environment, how people
dress, where they relax, and how they talk to others is definitely a good start to
understanding the company’s culture. However, simply looking at these
tangible aspects is unlikely to give a full picture of the organization. An
important chunk of what makes up culture exists below one’s degree of
awareness. The values and, at a deeper level, the assumptions that shape the
organization’s culture can be uncovered by observing how employees interact
and the choices they make, as well as by inquiring about their beliefs and
perceptions regarding what is right and appropriate behavior.
K E Y T A K E A W A Y
Organizational culture is a system of shared assumptions, values, and beliefs that
help individuals within an organization understand which behaviors are and are not
appropriate within an organization. Cultures can be a source of competitive
advantage for organizations. Strong organizational cultures can be an organizing as
well as a controlling mechanism for organizations. And finally, organizational culture
consists of three levels: assumptions, which are below the surface, values, and
artifacts.
E X E R C I S E S
1. Why do companies need culture?
2. Give an example of an aspect of company culture that is a strength and one that is a
weakness.
3. In what ways does culture serve as a controlling mechanism?
4. If assumptions are below the surface, why do they matter?
5. Share examples of artifacts you have noticed at different organizations.
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15.2 Characteristics of Organizational Culture
L E A R N I N G O B J E C T I V E S
1. Understand different dimensions of organizational culture.
2. Understand the role of culture strength.
3. Explore subcultures within organizations.
Dimensions of Culture
Which values characterize an organization’s culture? Even though culture may
not be immediately observable, identifying a set of values that might be used
to describe an organization’s culture helps us identify, measure, and manage
culture more effectively. For this purpose, several researchers have proposed
various culture typologies. One typology that has received a lot of research
attention is the organizational culture profile (OCP), in which culture is
represented by seven distinct values. [1]
We will describe the OCP as well as
two additional dimensions of organizational culture that are not represented
in that framework but are important dimensions to consider: service culture
and safety culture.
Figure 15.4 Dimensions of Organizational Culture Profile (OCP)
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Source: Adapted from information in O’Reilly, C. A., III, Chatman, J. A., &
Caldwell, D. F. (1991). People and organizational culture: A profile
comparison approach to assessing person-organization fit. Academy of
Management Journal, 34, 487–516.
Innovative Cultures
According to the OCP framework, companies that have innovative cultures are
flexible and adaptable, and experiment with new ideas. These companies are
characterized by a flat hierarchy in which titles and other status distinctions
tend to be downplayed. For example, W. L. Gore & Associates Inc. is a
company with innovative products such as GORE-TEX® (the breathable
fabric that is windproof and waterproof), Glide dental floss, and Elixir guitar
strings, earning the company the distinction of being elected as the most
innovative company in the United States by Fast Company magazine in 2004.
W. L. Gore consistently manages to innovate and capture the majority of
market share in a wide variety of industries, in large part due to its unique
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culture. In this company, employees do not have bosses in the traditional
sense, and risk taking is encouraged by celebrating failures as well as
successes. [2]
Companies such as W. L. Gore, Genentech Inc., and Google also
encourage their employees to take risks by allowing engineers to devote 20%
of their time to projects of their own choosing. [3]
Aggressive Cultures
Companies with aggressive cultures value competitiveness and outperforming
competitors: By emphasizing this, they may fall short in the area of corporate
social responsibility. For example, Microsoft Corporation is often identified as
a company with an aggressive culture. The company has faced a number of
antitrust lawsuits and disputes with competitors over the years. In aggressive
companies, people may use language such as “We will kill our competition.” In
the past, Microsoft executives often made statements such as “We are going to
cut off Netscape’s air supply.…Everything they are selling, we are going to give
away.” Its aggressive culture is cited as a reason for getting into new legal
troubles before old ones are resolved. [4]
Recently, Microsoft founder Bill Gates
established the Bill & Melinda Gates foundation and is planning to devote his
time to reducing poverty around the world. [5]
It will be interesting to see
whether he will bring the same competitive approach to the world of
philanthropy.
Outcome-Oriented Cultures
The OCP framework describes outcome-oriented cultures as those that
emphasize achievement, results, and action as important values. A good
example of an outcome-oriented culture may be Best Buy Co. Inc. Having a
culture emphasizing sales performance, Best Buy tallies revenues and other
relevant figures daily by department. Employees are trained and mentored to
sell company products effectively, and they learn how much money their
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department made every day. [6]
In 2005, the company implemented a results
oriented work environment (ROWE) program that allows employees to work
anywhere and anytime; they are evaluated based on results and fulfillment of
clearly outlined objectives. [7]
Outcome-oriented cultures hold employees as
well as managers accountable for success and utilize systems that reward
employee and group output. In these companies, it is more common to see
rewards tied to performance indicators as opposed to seniority or loyalty.
Research indicates that organizations that have a performance-oriented
culture tend to outperform companies that are lacking such a culture. [8]
At the
same time, some outcome-oriented companies may have such a high drive for
outcomes and measurable performance objectives that they may suffer
negative consequences. Companies over rewarding employee performance
such as Enron Corporation and WorldCom experienced well-publicized
business and ethical failures. When performance pressures lead to a culture
where unethical behaviors become the norm, individuals see their peers as
rivals and short-term results are rewarded; the resulting unhealthy work
environment serves as a liability. [9]
Stable Cultures
Stable cultures are predictable, rule-oriented, and bureaucratic. These
organizations aim to coordinate and align individual effort for greatest levels
of efficiency. When the environment is stable and certain, these cultures may
help the organization be effective by providing stable and constant levels of
output. [10]
These cultures prevent quick action, and as a result may be a misfit
to a changing and dynamic environment. Public sector institutions may be
viewed as stable cultures. In the private sector, Kraft Foods Inc. is an example
of a company with centralized decision making and rule orientation that
suffered as a result of the culture-environment mismatch. [11]
Its bureaucratic
culture is blamed for killing good ideas in early stages and preventing the
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company from innovating. When the company started a change program to
increase the agility of its culture, one of their first actions was to fight
bureaucracy with more bureaucracy: They created the new position of VP of
business process simplification, which was later eliminated. [12]
People-Oriented Cultures
People-oriented cultures value fairness, supportiveness, and respect for
individual rights. These organizations truly live the mantra that “people are
their greatest asset.” In addition to having fair procedures and management
styles, these companies create an atmosphere where work is fun and
employees do not feel required to choose between work and other aspects of
their lives. In these organizations, there is a greater emphasis on and
expectation of treating people with respect and dignity. [13]
One study of new
employees in accounting companies found that employees, on average, stayed
14 months longer in companies with people-oriented cultures. [14]
Starbucks
Corporation is an example of a people-oriented culture. The company pays
employees above minimum wage, offers health care and tuition
reimbursement benefits to its part-time as well as full-time employees, and
has creative perks such as weekly free coffee for all associates. As a result of
these policies, the company benefits from a turnover rate lower than the
industry average. [15]
The company is routinely ranked as one of the best places
to work by Fortune magazine.
Team-Oriented Cultures
Companies with team-oriented cultures are collaborative and emphasize
cooperation among employees. For example, Southwest Airlines Company
facilitates a team-oriented culture by cross-training its employees so that they
are capable of helping each other when needed. The company also places
emphasis on training intact work teams. [16]
Employees participate in twice
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daily meetings named “morning overview meetings” (MOM) and daily
afternoon discussions (DAD) where they collaborate to understand sources of
problems and determine future courses of action. In Southwest’s selection
system, applicants who are not viewed as team players are not hired as
employees. [17]
In team-oriented organizations, members tend to have more
positive relationships with their coworkers and particularly with their
managers. [18]
Detail-Oriented Cultures
Organizations with detail-oriented cultures are characterized in the OCP
framework as emphasizing precision and paying attention to details. Such a
culture gives a competitive advantage to companies in the hospitality industry
by helping them differentiate themselves from others. For example, Four
Seasons Hotels Ltd. and the Ritz-Carlton Company LLC are among hotels who
keep records of all customer requests, such as which newspaper the guest
prefers or what type of pillow the customer uses. This information is put into a
computer system and used to provide better service to returning customers.
Any requests hotel employees receive, as well as overhear, might be entered
into the database to serve customers better. Recent guests to Four Seasons
Paris who were celebrating their 21st anniversary were greeted with a bouquet
of 21 roses on their bed. Such clear attention to detail is an effective way of
impressing customers and ensuring repeat visits. McDonald’s Corporation is
another company that specifies in detail how employees should perform their
jobs by including photos of exactly how French fries and hamburgers should
look when prepared properly. [19]
Service Culture
Service culture is not one of the dimensions of OCP, but given the importance
of the retail industry in the overall economy, having a service culture can make
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or break an organization. Some of the organizations we have illustrated in this
section, such as Nordstrom, Southwest Airlines, Ritz-Carlton, and Four
Seasons are also famous for their service culture. In these organizations,
employees are trained to serve the customer well, and cross-training is the
norm. Employees are empowered to resolve customer problems in ways they
see fit. Because employees with direct customer contact are in the best
position to resolve any issues, employee empowerment is truly valued in these
companies. For example, Umpqua Bank, operating in the northwestern United
States, is known for its service culture. All employees are trained in all tasks to
enable any employee to help customers when needed. Branch employees may
come up with unique ways in which they serve customers better, such as
opening their lobby for community events or keeping bowls full of water for
customers’ pets. The branches feature coffee for customers, Internet kiosks,
and withdrawn funds are given on a tray along with a piece of chocolate. They
also reward employee service performance through bonuses and incentives. [20]
What differentiates companies with service culture from those without such a
culture may be the desire to solve customer-related problems proactively. In
other words, in these cultures employees are engaged in their jobs and
personally invested in improving customer experience such that they identify
issues and come up with solutions without necessarily being told what to do.
For example, a British Airways baggage handler noticed that first-class
passengers were waiting a long time for their baggage, whereas stand-by
passengers often received their luggage first. Noticing this tendency, a baggage
handler notified his superiors about this problem, along with the suggestion to
load first-class passenger luggage last. [21]
This solution was successful in
cutting down the wait time by half. Such proactive behavior on the part of
employees who share company values is likely to emerge frequently in
companies with a service culture.
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Figure 15.6
The growth in the number of passengers flying with Southwest Airlines from
1973 until 2007. In 2007, Southwest surpassed American Airlines as the most
flown domestic airline. While price has played a role in this, their emphasis on
service has been a key piece of their culture and competitive advantage.
Source: Adapted from
http://upload.wikimedia.org/wikipedia/commons/6/69/Southwest-
airlines-passengers.jpg.
Safety Culture
Some jobs are safety sensitive. For example, logger, aircraft pilot, fishing
worker, steel worker, and roofer are among the top ten most dangerous jobs in
the United States. [22]
In organizations where safety-sensitive jobs are
performed, creating and maintaining a safety culture provides a competitive
advantage, because the organization can reduce accidents, maintain high
levels of morale and employee retention, and increase profitability by cutting
workers’ compensation insurance costs. Some companies suffer severe
consequences when they are unable to develop such a culture. For example,
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British Petroleum experienced an explosion in their Texas City, Texas, refinery
in 2005, which led to the death of 15 workers while injuring 170. In December
2007, the company announced that it had already depleted the $1.6-billion
fund to be used in claims for this explosion. [23]
A safety review panel
concluded that the development of a safety culture was essential to avoid such
occurrences in the future. [24]
In companies that have a safety culture, there is a
strong commitment to safety starting at management level and trickling down
to lower levels. M. B. Herzog Electric Inc. of California, selected as one of
America’s safest companies by Occupational Hazards magazine in 2007, had
a zero accident rate for the past 3 years. The company uses safety training
programs tailored to specific jobs within the company, and all employees are
encouraged to identify all safety hazards they come across when they are
performing their jobs. They are also asked to play the role of an OSHA
(Occupational Safety and Health Administration) inspector for a day to
become more aware of the hidden dangers in the workplace. Managers play a
key role in increasing the level of safe behaviors in the workplace, because they
can motivate employees day-to-day to demonstrate safe behaviors and act as
safety role models. A recent study has shown that in organizations with a
safety culture, leaders encourage employees to demonstrate behaviors such as
volunteering for safety committees, making recommendations to increase
safety, protecting coworkers from hazards, whistleblowing, and in general
trying to make their jobs safer. [25]
Strength of Culture
A strong culture is one that is shared by organizational members. [26]
In other
words, if most employees in the organization show consensus regarding the
values of the company, it is possible to talk about the existence of a strong
culture. A culture’s content is more likely to affect the way employees think
and behave when the culture in question is strong. For example, cultural
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values emphasizing customer service will lead to higher quality customer
service if there is widespread agreement among employees on the importance
of customer service-related values. [27]
It is important to realize that a strong culture may act as an asset or liability
for the organization, depending on the types of values that are shared. For
example, imagine a company with a culture that is strongly outcome oriented.
If this value system matches the organizational environment, the company
outperforms its competitors. On the other hand, a strong outcome-oriented
culture coupled with unethical behaviors and an obsession with quantitative
performance indicators may be detrimental to an organization’s effectiveness.
An extreme example of this dysfunctional type of strong culture is Enron.
A strong culture may sometimes outperform a weak culture because of the
consistency of expectations. In a strong culture, members know what is
expected of them, and the culture serves as an effective control mechanism on
member behaviors. Research shows that strong cultures lead to more stable
corporate performance in stable environments. However, in volatile
environments, the advantages of culture strength disappear. [28]
One limitation of a strong culture is the difficulty of changing a strong culture.
If an organization with widely shared beliefs decides to adopt a different set of
values, unlearning the old values and learning the new ones will be a
challenge, because employees will need to adopt new ways of thinking,
behaving, and responding to critical events. For example, the Home Depot
Inc. had a decentralized, autonomous culture where many business decisions
were made using “gut feeling” while ignoring the available data. When Robert
Nardelli became CEO of the company in 2000, he decided to change its
culture, starting with centralizing many of the decisions that were previously
left to individual stores. This initiative met with substantial resistance, and
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many high-level employees left during his first year. Despite getting financial
results such as doubling the sales of the company, many of the changes he
made were criticized. He left the company in January 2007. [29]
A strong culture may also be a liability during a merger. During mergers and
acquisitions, companies inevitably experience a clash of cultures, as well as a
clash of structures and operating systems. Culture clash becomes more
problematic if both parties have unique and strong cultures. For example,
during the merger of Daimler AG with Chrysler Motors LLC to create
DaimlerChrysler AG, the differing strong cultures of each company acted as a
barrier to effective integration. Daimler had a strong engineering culture that
was more hierarchical and emphasized routinely working long hours. Daimler
employees were used to being part of an elite organization, evidenced by flying
first class on all business trips. On the other hand, Chrysler had a sales culture
where employees and managers were used to autonomy, working shorter
hours, and adhering to budget limits that meant only the elite flew first class.
The different ways of thinking and behaving in these two companies
introduced a number of unanticipated problems during the integration
process. [30]
Differences in culture may be part of the reason that, in the end,
the merger didn’t work out.
Do Organizations Have a Single Culture?
So far, we have assumed that a company has a single culture that is shared
throughout the organization. However, you may have realized that this is an
oversimplification. In reality there might be multiple cultures within any given
organization. For example, people working on the sales floor may experience a
different culture from that experienced by people working in the warehouse. A
culture that emerges within different departments, branches, or geographic
locations is called a subculture. Subcultures may arise from the personal
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characteristics of employees and managers, as well as the different conditions
under which work is performed. Within the same organization, marketing and
manufacturing departments often have different cultures such that the
marketing department may emphasize innovativeness, whereas the
manufacturing department may have a shared emphasis on detail orientation.
In an interesting study, researchers uncovered five different subcultures
within a single police organization. These subcultures differed depending on
the level of danger involved and the type of background experience the
individuals held, including “crime-fighting street professionals” who did what
their job required without rigidly following protocol and “anti-military social
workers” who felt that most problems could be resolved by talking to the
parties involved. [31]
Research has shown that employee perceptions regarding
subcultures were related to employee commitment to the
organization. [32]
Therefore, in addition to understanding the broader
organization’s values, managers will need to make an effort to understand
subculture values to see its impact on workforce behavior and attitudes.
Moreover, as an employee, you need to understand the type of subculture in
the department where you will work in addition to understanding the
company’s overall culture.
Sometimes, a subculture may take the form of a counterculture. Defined as
shared values and beliefs that are in direct opposition to the values of the
broader organizational culture, [33]
countercultures are often shaped around a
charismatic leader. For example, within a largely bureaucratic organization,
an enclave of innovativeness and risk taking may emerge within a single
department. A counterculture may be tolerated by the organization as long as
it is bringing in results and contributing positively to the effectiveness of the
organization. However, its existence may be perceived as a threat to the
broader organizational culture. In some cases this may lead to actions that
21
would take away the autonomy of the managers and eliminate the
counterculture.
K E Y T A K E A W A Y
Culture can be understood in terms of seven different culture dimensions, depending
on what is most emphasized within the organization. For example, innovative
cultures are flexible and adaptable, and they experiment with new ideas, while
stable cultures are predictable, rule-oriented, and bureaucratic. Strong cultures can
be an asset or a liability for an organization but can be challenging to change.
Organizations may have subcultures and countercultures, which can be challenging
to manage.
E X E R C I S E S
1. Think about an organization you are familiar with. Based on the dimensions of OCP,
how would you characterize its culture?
2. Out of the culture dimensions described, which dimension do you think would lead
to higher levels of employee satisfaction and retention? Which one would be related
to company performance?
3. What are the pros and cons of an outcome-oriented culture?
4. When bureaucracies were first invented they were considered quite innovative. Do
you think that different cultures are more or less effective at different points in time
and in different industries? Why or why not?
5. Can you imagine an effective use of subcultures within an organization?
15.3 Creating and Maintaining Organizational Culture
L E A R N I N G O B J E C T I V E S
1. Understand how cultures are created.
22
2. Learn how to maintain a culture.
3. Recognize organizational culture signs.
How Are Cultures Created?
Where do cultures come from? Understanding this question is important so
that you know how they can be changed. An organization’s culture is shaped as
the organization faces external and internal challenges and learns how to deal
with them. When the organization’s way of doing business provides a
successful adaptation to environmental challenges and ensures success, those
values are retained. These values and ways of doing business are taught to new
members as the way to do business. [1]
Figure 15.8 Culture Creation and Maintenance
The factors that are most important in the creation of an organization’s culture
include founders’ values, preferences, and industry demands.
23
Founder’s Values
A company’s culture, particularly during its early years, is inevitably tied to the
personality, background, and values of its founder or founders, as well as their
vision for the future of the organization. This explains one reason why culture
is so hard to change: It is shaped in the early days of a company’s history.
When entrepreneurs establish their own businesses, the way they want to do
business determines the organization’s rules, the structure set-up in the
company, and the people they hire to work with them. As a case in point, some
of the existing corporate values of the ice cream company Ben & Jerry’s
Homemade Holdings Inc. can easily be traced to the personalities of its
founders Ben Cohen and Jerry Greenfield. In 1978, the two ex-hippie high
school friends opened up their first ice-cream shop in a renovated gas station
in Burlington, Vermont. Their strong social convictions led them to buy only
from the local farmers and devote a certain percentage of their profits to
charities. The core values they instilled in their business can still be observed
in the current company’s devotion to social activism and sustainability, its
continuous contributions to charities, use of environmentally friendly
materials, and dedication to creating jobs in low-income areas. Even though
the company was acquired by Unilever PLC in 2000, the social activism
component remains unchanged and Unilever has expressed its commitment to
maintaining it. [2]
There are many other examples of founders’ instilling their
own strongly held beliefs or personalities to the businesses they found. For
example, as mentioned earlier, Microsoft’s aggressive nature is often traced
back to Bill Gates and his competitiveness. According to one anecdote, his
competitive nature even extends to his personal life such that one of his
pastimes is to compete with his wife in solving identical jigsaw puzzles to see
who can finish faster. [3]
Similarly, Joseph Pratt, a history and management
professor, notes, “There definitely is an Exxon way. This is John D.
24
Rockefeller’s company, this is Standard Oil of New Jersey, this is the one that
is most closely shaped by Rockefeller’s traditions. Their values are very clear.
They are deeply embedded. They have roots in 100 years of corporate
history.” [4]
Founder values become part of the corporate culture to the degree they help
the company be successful. For example, the social activism of Ben & Jerry’s
was instilled in the company because founders strongly believed in these
issues. However, these values probably would not be surviving three decades
later if they had not helped the company in its initial stages. In the case of Ben
& Jerry’s, these charitable values helped distinguish their brand from larger
corporate brands and attracted a loyal customer base. Thus, by providing a
competitive advantage, these values were retained as part of the corporate
culture and were taught to new members as the right way to do business.
Similarly, the early success of Microsoft may be attributed to its relatively
aggressive corporate culture, which provided a source of competitive
advantage.
Industry Demands
While founders undoubtedly exert a powerful influence over corporate
cultures, the industry characteristics also play a role. Industry characteristics
and demands act as a force to create similarities among organizational
cultures. For example, despite some differences, many companies in the
insurance and banking industries are stable and rule oriented, many
companies in the high-tech industry have innovative cultures, and companies
in the nonprofit industry tend to be people oriented. If the industry is one with
a large number of regulatory requirements—for example, banking, health care,
and nuclear power plant industries—then we might expect the presence of a
large number of rules and regulations, a bureaucratic company structure, and
25
a stable culture. Similarly, the high-tech industry requires agility, taking quick
action, and low concern for rules and authority, which may create a relatively
more innovative culture. [5]
The industry influence over culture is also
important to know, because this shows that it may not be possible to imitate
the culture of a company in a different industry, even though it may seem
admirable to outsiders.
How Are Cultures Maintained?
As a company matures, its cultural values are refined and strengthened. The
early values of a company’s culture exert influence over its future values. It is
possible to think of organizational culture as an organism that protects itself
from external forces. Organizational culture determines what types of people
are hired by an organization and what types are left out. Moreover, once new
employees are hired, the company assimilates new employees and teaches
them the way things are done in the organization. We call these attraction-
selection-attrition and onboarding processes. We will also examine the role
of leaders and reward systems in shaping and maintaining an organization’s
culture. It is important to remember two points: The process of culture
creation is in fact more complex and less clean than the name implies.
Additionally, the influence of each factor on culture creation is reciprocal. For
example, just as leaders may influence what type of values the company has,
the culture may also determine what types of behaviors leaders demonstrate.
Attraction-Selection-Attrition (ASA)
Organizational culture is maintained through a process known as attraction-
selection-attrition. First, employees are attracted to organizations where they
will fit in. In other words, different job applicants will find different cultures to
be attractive. Someone who has a competitive nature may feel comfortable and
prefer to work in a company where interpersonal competition is the norm.
26
Others may prefer to work in a team-oriented workplace. Research shows that
employees with different personality traits find different cultures attractive.
For example, out of the Big Five personality traits, employees who
demonstrate neurotic personalities were less likely to be attracted to
innovative cultures, whereas those who had openness to experience were more
likely to be attracted to innovative cultures. [6]
As a result, individuals will self-
select the companies they work for and may stay away from companies that
have core values that are radically different from their own.
Of course this process is imperfect, and value similarity is only one reason a
candidate might be attracted to a company. There may be other, more
powerful attractions such as good benefits. For example, candidates who are
potential misfits may still be attracted to Google because of the cool perks
associated with being a Google employee. At this point in the process, the
second component of the ASA framework prevents them from getting in:
Selection. Just as candidates are looking for places where they will fit in,
companies are also looking for people who will fit into their current corporate
culture. Many companies are hiring people for fit with their culture, as
opposed to fit with a certain job. For example, Southwest Airlines prides itself
for hiring employees based on personality and attitude rather than specific
job-related skills, which are learned after being hired. This is important for job
applicants to know, because in addition to highlighting your job-relevant
skills, you will need to discuss why your personality and values match those of
the company. Companies use different techniques to weed out candidates who
do not fit with corporate values. For example, Google relies on multiple
interviews with future peers. By introducing the candidate to several future
coworkers and learning what these coworkers think of the candidate, it
becomes easier to assess the level of fit. The Container Store Inc. ensures
culture fit by hiring among their customers. [7]
This way, they can make sure
27
that job candidates are already interested in organizing their lives and
understand the company’s commitment to helping customers organize theirs.
Companies may also use employee referrals in their recruitment process. By
using their current employees as a source of future employees, companies may
make sure that the newly hired employees go through a screening process to
avoid potential person-culture mismatch.
Even after a company selects people for person-organization fit, there may be
new employees who do not fit in. Some candidates may be skillful in
impressing recruiters and signal high levels of culture fit even though they do
not necessarily share the company’s values. Moreover, recruiters may suffer
from perceptual biases and hire some candidates thinking that they fit with
the culture even though the actual fit is low. In any event, the organization is
going to eventually eliminate candidates who do not fit in through attrition.
Attrition refers to the natural process in which the candidates who do not fit in
will leave the company. Research indicates that person-organization misfit is
one of the important reasons for employee turnover. [8]
Click and Learn More Texas Instruments Inc. includes a Workplace and Values Check on its Web
page for potential applicants to see if they fit Texas Instrument’s culture.
To view this Web site, go
to http://focus.ti.com/careers/docs/fitchecktool.tsp?sectionId=152&tabId=1
678
As a result of the ASA process, the company attracts, selects, and retains
people who share its core values. On the other hand, those people who are
different in core values will be excluded from the organization either during
the hiring process or later on through naturally occurring turnover. Thus,
28
organizational culture will act as a self-defending organism where intrusive
elements are kept out. Supporting the existence of such self-protective
mechanisms, research shows that organizations demonstrate a certain level of
homogeneity regarding personalities and values of organizational members. [9]
New Employee Onboarding
Another way in which an organization’s values, norms, and behavioral
patterns are transmitted to employees is through onboarding (also referred to
as the organizational socialization process). Onboarding refers to the
process through which new employees learn the attitudes, knowledge, skills,
and behaviors required to function effectively within an organization. If an
organization can successfully socialize new employees into becoming
organizational insiders, new employees feel confident regarding their ability to
perform, sense that they will feel accepted by their peers, and understand and
share the assumptions, norms, and values that are part of the organization’s
culture. This understanding and confidence in turn translate into more
effective new employees who perform better and have higher job satisfaction,
stronger organizational commitment, and longer tenure within the
company. [10]
There are many factors that play a role in the successful adjustment of new
employees. New employees can engage in several activities to help increase
their own chances of success at a new organization. Organizations also engage
in different activities, such as implementing orientation programs or matching
new employees with mentors, which may facilitate onboarding.
What Can Employees Do During Onboarding?
New employees who are proactive, seek feedback, and build strong
relationships tend to be more successful than those who do not. [11]
for
29
example, feedback seeking helps new employees. Especially on a first job, a
new employee can make mistakes or gaffes and may find it hard to understand
and interpret the ambiguous reactions of coworkers. New hires may not know
whether they are performing up to standards, whether it was a good idea to
mention a company mistake in front of a client, or why other employees are
asking if they were sick over the weekend because of not responding to work-
related e-mails. By actively seeking feedback, new employees may find out
sooner rather than later any behaviors that need to be changed and gain a
better understanding of whether their behavior fits with the company culture
and expectations. Several studies show the benefits of feedback seeking for
new employee adjustment.
Relationship building, or networking, is another important behavior new
employees may demonstrate. Particularly when a company does not have a
systematic approach to onboarding, it becomes more important for new
employees to facilitate their own onboarding by actively building
relationships. According to one estimate, 35% of managers who start a new job
fail in the new job and either voluntarily leave or are fired within 1.5 years. Of
these, over 60% report not being able to form effective relationships with
colleagues as the primary reason for their failure. [12]
New employees may take
an active role in building relations by seeking opportunities to have a
conversation with their new colleagues, arranging lunches or coffee with them,
participating in company functions, and making the effort to build a
relationship with their new supervisor. [13]
OB Toolbox: You’ve Got a New Job! Now How Do You Get on Board? Gather information. Try to find as much about the company and the job as
you can before your first day. After you start working, be a good observer,
30
gather information, and read as much as you can to understand your job and
the company. Examine how people are interacting, how they dress, and how
they act to avoid behaviors that might indicate to others that you are a misfit.
Manage your first impression. First impressions may endure, so make sure
that you dress appropriately, are friendly, and communicate your excitement
to be a part of the team. Be on your best behavior!
Invest in relationship development. The relationships you develop with your
manager and with coworkers will be essential for you to adjust to your new
job. Take the time to strike up conversations with them. If there are work
functions during your early days, make sure not to miss them!
Seek feedback. Ask your manager or coworkers how well you are doing and
whether you are meeting expectations. Listen to what they are telling you and
also listen to what they are not saying. Then, make sure to act upon any
suggestions for improvement. Be aware that after seeking feedback, you may
create a negative impression if you consistently ignore the feedback you
receive.
Show success early on. In order to gain the trust of your new manager and
colleagues, you may want to establish a history of success early. Volunteer for
high-profile projects where you will be able to demonstrate your skills.
Alternatively, volunteer for projects that may serve as learning opportunities
or that may put you in touch with the key people in the company.
Sources: Adapted from ideas in Couzins, M., & Beagrie, S. (2005, March 1).
How to…survive the first six months of a new job. Personnel Today, 27;
Wahlgreen, E. (2002, December 5). Getting up to speed at a new job. Business
Week Online. Retrieved January 29, 2009, from
http://www.businessweek.com/careers/content/dec2002/ca2002123_2774.h
tm.
31
What Can Organizations Do During Onboarding?
Many organizations, including Microsoft, Kellogg Company, and Bank of
America, take a more structured and systematic approach to new employee
onboarding, while others follow a “sink or swim” approach in which new
employees struggle to figure out what is expected of them and what the norms
are.
A formal orientation program indoctrinates new employees to the company
culture, as well as introduces them to their new jobs and colleagues. An
orientation program is important, because it has a role in making new
employees feel welcome in addition to imparting information that may help
new employees be successful on their new jobs. Many large organizations have
formal orientation programs consisting of lectures, videotapes, and written
material, while some may follow more unusual approaches. According to one
estimate, most orientations last anywhere from one to five days, and some
companies are currently switching to a computer-based orientation. Ritz-
Carlton, the company ranked number 1 in Training magazine’s 2007 top 125
list, uses a very systematic approach to employee orientation and views
orientation as the key to retention. In the two-day classroom orientation,
employees spend time with management, dine in the hotel’s finest restaurant,
and witness the attention to customer service detail firsthand. For example,
they receive hand-written welcome notes and their favorite snacks during the
break. During these two days, they are introduced to the company’s intensive
service standards, team orientation, and its own language. Later, on their 21st
day, they are tested on the company’s service standards and are
certified. [14]
Research shows that formal orientation programs are helpful in
teaching employees about the goals and history of the company, as well as
communicating the power structure. Moreover, these programs may also help
32
with a new employee’s integration into the team. However, these benefits may
not be realized to the same extent in computer-based orientations. In fact,
compared to those taking part in a regular, face-to-face orientation,
individuals undergoing a computer-based orientation were shown to have
lower understanding of their job and the company, indicating that different
formats of orientations may not substitute for each other. [15]
What Can Organizational Insiders Do During Onboarding?
One of the most important ways in which organizations can help new
employees adjust to a company and a new job is through organizational
insiders—namely supervisors, coworkers, and mentors. Research shows that
leaders have a key influence over onboarding, and the information and
support leaders provide determine how quickly employees learn about the
company politics and culture. Coworker influence determines the degree to
which employees adjust to their teams. Mentors can be crucial to helping new
employees adjust by teaching them the ins and outs of their jobs and how the
company really operates. A mentor is a trusted person who provides an
employee with advice and support regarding career-related matters. Although
a mentor can be any employee or manager who has insights that are valuable
to the new employee, mentors tend to be relatively more experienced than
their protégés. Mentoring can occur naturally between two interested
individuals, or organizations can facilitate this process by having formal
mentoring programs. These programs may successfully bring together
mentors and protégés who would not come together otherwise. Research
indicates that the existence of these programs does not guarantee their
success, and there are certain program characteristics that may make these
programs more effective. For example, when mentors and protégés feel that
they had input in the mentor-protégé matching process, they tend to be more
satisfied with the arrangement. Moreover, when mentors receive training
33
beforehand, the outcomes of the program tend to be more positive. [16]
Because
mentors may help new employees interpret and understand the company’s
culture, organizations may benefit from selecting mentors who personify the
company’s values. Thus, organizations may need to design these programs
carefully to increase their chance of success.
Leadership
Leaders are instrumental in creating and changing an organization’s culture.
There is a direct correspondence between a leader’s style and an organization’s
culture. For example, when leaders motivate employees through inspiration,
corporate culture tends to be more supportive and people oriented. When
leaders motivate by making rewards contingent on performance, the corporate
culture tends to be more performance oriented and competitive. [17]
In these
and many other ways, what leaders do directly influences the cultures their
organizations have.
Part of the leader’s influence over culture is through role modeling. Many
studies have suggested that leader behavior, the consistency between
organizational policy and leader actions, and leader role modeling determine
the degree to which the organization’s culture emphasizes ethics. [18]
The
leader’s own behaviors will signal to employees what is acceptable behavior
and what is unacceptable. In an organization in which high-level managers
make the effort to involve others in decision making and seek opinions of
others, a team-oriented culture is more likely to evolve. By acting as role
models, leaders send signals to the organization about the norms and values
that are expected to guide the actions of organizational members.
Leaders also shape culture by their reactions to the actions of others around
them. For example, do they praise a job well done, or do they praise a favored
34
employee regardless of what was accomplished? How do they react when
someone admits to making an honest mistake? What are their priorities? In
meetings, what types of questions do they ask? Do they want to know what
caused accidents so that they can be prevented, or do they seem more
concerned about how much money was lost as a result of an accident? Do they
seem outraged when an employee is disrespectful to a coworker, or does their
reaction depend on whether they like the harasser? Through their day-to-day
actions, leaders shape and maintain an organization’s culture.
Reward Systems
Finally, the company culture is shaped by the type of reward systems used in
the organization, and the kinds of behaviors and outcomes it chooses to
reward and punish. One relevant element of the reward system is whether the
organization rewards behaviors or results. Some companies have reward
systems that emphasize intangible elements of performance as well as more
easily observable metrics. In these companies, supervisors and peers may
evaluate an employee’s performance by assessing the person’s behaviors as
well as the results. In such companies, we may expect a culture that is
relatively people or team oriented, and employees act as part of a
family. [19]
On the other hand, in companies that purely reward goal
achievement, there is a focus on measuring only the results without much
regard to the process. In these companies, we might observe outcome-oriented
and competitive cultures. Another categorization of reward systems might be
whether the organization uses rankings or ratings. In a company where the
reward system pits members against one another, where employees are
ranked against each other and the lower performers receive long-term or
short-term punishments, it would be hard to develop a culture of people
orientation and may lead to a competitive culture. On the other hand,
evaluation systems that reward employee behavior by comparing them to
35
absolute standards as opposed to comparing employees to each other may
pave the way to a team-oriented culture. Whether the organization rewards
performance or seniority would also make a difference in culture. When
promotions are based on seniority, it would be difficult to establish a culture
of outcome orientation. Finally, the types of behaviors that are rewarded or
ignored set the tone for the culture. Service-oriented cultures reward,
recognize, and publicize exceptional service on the part of their employees. In
safety cultures, safety metrics are emphasized and the organization is proud of
its low accident ratings. What behaviors are rewarded, which ones are
punished, and which are ignored will determine how a company’s culture
evolves.
OB Toolbox: Best Practices How to Maximize Onboarding Success
Onboarding plans should have the following characteristics:
Written down. If your organization does not have a formal plan, write one
yourself. It may not make sense to share it with others, but at least you will
have a roadmap. If your organization does have one, refer to it on a monthly
basis.
Participatory. The power of onboarding programs is in the interaction. Try to
get participation from others to the extent possible and engage in onboarding
activities offered to you by the organization.
Tracked over time. Keep in mind that research shows onboarding has a
rhythm of 30-, 60-, 90-, and 180-day milestones. Be sure to track your
progress.
Clear on objectives, timeline, roles, and responsibilities. This will help ensure
that role conflict and ambiguity doesn’t detour your onboarding process.
36
Clear on scheduled key stakeholder meetings with managers and mentors.
Include a plan for
1. going over strengths and development areas;
2. hearing about potential problems and critical advice to help you be successful.
Be sure to include a list of your key questions and things you need to help you
do your job better.
Source: Adapted from Bauer, T. N., & Elder, E. (2006). Onboarding
newcomers into an organization. 58th Annual Society for Human Resource
Management (SHRM) Conference & Exposition. Washington, DC.
Visual Elements of Organizational Culture
How do you find out about a company’s culture? We emphasized earlier that
culture influences the way members of the organization think, behave, and
interact with one another. Thus, one way of finding out about a company’s
culture is by observing employees or interviewing them. At the same time,
culture manifests itself in some visible aspects of the organization’s
environment. In this section, we discuss five ways in which culture shows itself
to observers and employees.
Mission Statement
A mission statement is a statement of purpose, describing who the company is
and what it does. Many companies have mission statements, but they do not
always reflect the company’s values and its purpose. An effective mission
statement is well known by employees, is transmitted to all employees starting
from their first day at work, and influences employee behavior.
Not all mission statements are effective, because some are written by public
relations specialists and can be found in a company’s Web site, but it does not
37
affect how employees act or behave. In fact, some mission statements reflect
who the company wants to be as opposed to who they actually are. If the
mission statement does not affect employee behavior on a day-to-day basis, it
has little usefulness as a tool for understanding the company’s culture. An oft-
cited example of a mission statement that had little impact on how a company
operates belongs to Enron. Their missions and values statement began, “As a
partner in the communities in which we operate, Enron believes it has a
responsibility to conduct itself according to certain basic principles.” Their
values statement included such ironic declarations as “We do not tolerate
abusive or disrespectful treatment. Ruthlessness, callousness and arrogance
don’t belong here.” [20]
A mission statement that is taken seriously and widely communicated may
provide insights into the corporate culture. For example, the Mayo Clinic’s
mission statement is “The needs of the patient come first.” This mission
statement evolved from the founders who are quoted as saying, “The best
interest of the patient is the only interest to be considered.” Mayo Clinics have
a corporate culture that puts patients first. For example, no incentives are
given to physicians based on the number of patients they see. Because doctors
are salaried, they have no interest in retaining a patient for themselves and
they refer the patient to other doctors when needed. [21]
Wal-Mart Stores Inc.
may be another example of a company who lives its mission statement, and
therefore its mission statement may give hints about its culture: “Saving
people money so they can live better.” [22]
In fact, their culture emphasizes
thrift and cost control in everything they do. For example, even though most
CEOs of large companies in the United States have lavish salaries and showy
offices, Wal-Mart’s CEO Michael Duke and other high-level corporate officers
work out of modest offices in the company’s headquarters.
38
Figure 15.10 Visual Elements of Culture
Rituals
Rituals refer to repetitive activities within an organization that have symbolic
meaning. [23]
Usually rituals have their roots in the history of a company’s
culture. They create camaraderie and a sense of belonging among employees.
They also serve to teach employees corporate values and create identification
with the organization. For example, at the cosmetics firm Mary Kay Inc.,
employees attend award ceremonies recognizing their top salespeople with an
award of a new car—traditionally a pink Cadillac. These ceremonies are
conducted in large auditoriums where participants wear elaborate evening
gowns and sing company songs that create emotional excitement. During this
ritual, employees feel a connection to the company culture and its values, such
as self-determination, will power, and enthusiasm. [24]
Another example of
rituals is the Saturday morning meetings of Wal-Mart. This ritual was first
created by the company founder Sam Walton, who used these meetings to
39
discuss which products and practices were doing well and which required
adjustment. He was able to use this information to make changes in Wal-
Mart’s stores before the start of the week, which gave him a competitive
advantage over rival stores who would make their adjustments based on
weekly sales figures during the middle of the following week. Today, hundreds
of Wal-Mart associates attend the Saturday morning meetings in the
Bentonville, Arkansas, headquarters. The meetings, which run from 7:00 to
9:30 a.m., start and end with the Wal-Mart cheer; the agenda includes a
discussion of weekly sales figures and merchandising tactics. As a ritual, the
meetings help maintain a small-company atmosphere, ensure employee
involvement and accountability, communicate a performance orientation, and
demonstrate taking quick action. [25]
Rules and Policies
Another way in which an observer may find out about a company’s culture is
to examine its rules and policies. Companies create rules to determine
acceptable and unacceptable behavior, and thus the rules that exist in a
company will signal the type of values it has. Policies about issues such as
decision making, human resources, and employee privacy reveal what the
company values and emphasizes. For example, a company that has a policy
such as “all pricing decisions of merchandise will be made at corporate
headquarters” is likely to have a centralized culture that is hierarchical, as
opposed to decentralized and empowering. Similarly, a company that extends
benefits to both part-time and full-time employees, as well as to spouses and
domestic partners, signals to employees and observers that it cares about its
employees and shows concern for their well-being. By offering employees
flexible work hours, sabbaticals, and telecommuting opportunities, a company
may communicate its emphasis on work-life balance. The presence or absence
of policies on sensitive issues such as English-only rules, bullying or unfair
40
treatment of others, workplace surveillance, open-door policies, sexual
harassment, workplace romances, and corporate social responsibility all
provide pieces of the puzzle that make up a company’s culture.
Physical Layout
A company’s building, including the layout of employee offices and other work
spaces, communicates important messages about a company’s culture. The
building architecture may indicate the core values of an organization’s culture.
For example, visitors walking into the Nike Inc. campus in Beaverton, Oregon,
can witness firsthand some of the distinguishing characteristics of the
company’s culture. The campus is set on 74 acres and boasts an artificial lake,
walking trails, soccer fields, and cutting-edge fitness centers. The campus
functions as a symbol of Nike’s values such as energy, physical fitness, an
emphasis on quality, and a competitive orientation. In addition, at fitness
centers on the Nike headquarters, only those wearing Nike shoes and apparel
are allowed in. This sends a strong signal that loyalty is expected. The
company’s devotion to athletes and their winning spirits is manifested in
campus buildings named after famous athletes, photos of athletes hanging on
the walls, and honorary statues dotting the campus. [26]
A very different tone
awaits visitors to Wal-Mart headquarters, where managers have gray and
windowless offices. [27]
By putting its managers in small offices and avoiding
outward signs of flashiness, Wal-Mart does a good job of highlighting its
values of economy.
The layout of the office space also is a strong indicator of a company’s culture.
A company that has an open layout where high-level managers interact with
employees may have a culture of team orientation and egalitarianism, whereas
a company where high-level managers have their own floor may indicate a
higher level of hierarchy. Microsoft employees tend to have offices with walls
41
and a door, because the culture emphasizes solitude, concentration, and
privacy. In contrast, Intel Corporation is famous for its standard cubicles,
which reflect its culture of equality. The same value can also be observed in its
avoidance of private and reserved parking spots. [28]
The degree to which
playfulness, humor, and fun is part of a company’s culture may be indicated in
the office environment. For example, Jive Software boasts a colorful, modern,
and comfortable office design. Their break room is equipped with a keg of
beer, free snacks and sodas, an XBOX 360, and Nintendo Wii. A casual
observation of their work environment sends the message that employees who
work there see their work as fun. [29]
Stories
Perhaps the most colorful and effective way in which organizations
communicate their culture to new employees and organizational members is
through the skillful use of stories. A story can highlight a critical event an
organization faced and the collective response to it, or can emphasize a heroic
effort of a single employee illustrating the company’s values. The stories
usually engage employee emotions and generate employee identification with
the company or the heroes of the tale. A compelling story may be a key
mechanism through which managers motivate employees by giving their
behavior direction and energizing them toward a certain goal. [30]
Moreover,
stories shared with new employees communicate the company’s history, its
values and priorities, and serve the purpose of creating a bond between the
new employee and the organization. For example, you may already be familiar
with the story of how a scientist at 3M invented Post-it notes. Arthur Fry, a 3M
scientist, was using slips of paper to mark the pages of hymns in his church
choir, but they kept falling off. He remembered a super-weak adhesive that
had been invented in 3M’s labs, and he coated the markers with this adhesive.
Thus, the Post-it notes were born. However, marketing surveys for the interest
42
in such a product were weak, and the distributors were not convinced that it
had a market. Instead of giving up, Fry distributed samples of the small yellow
sticky notes to secretaries throughout his company. Once they tried them,
people loved them and asked for more. Word spread, and this led to the
ultimate success of the product. As you can see, this story does a great job of
describing the core values of a 3M employee: Being innovative by finding
unexpected uses for objects, persevering, and being proactive in the face of
negative feedback. [31]
OB Toolbox: As a Job Candidate, How Would You Find Out If You Are a Good Fit? Do your research. Talking to friends and family members who are familiar
with the company, doing an online search for news articles about the
company, browsing the company’s Web site, and reading their mission
statement would be a good start.
Observe the physical environment. Do people work in cubicles or in offices?
What is the dress code? What is the building structure? Do employees look
happy, tired, or stressed? The answers to these questions are all pieces of the
puzzle.
Read between the lines. For example, the absence of a lengthy employee
handbook or detailed procedures might mean that the company is more
flexible and less bureaucratic.
How are you treated? The recruitment process is your first connection to the
company. Were you treated with respect? Do they maintain contact with you,
or are you being ignored for long stretches at a time?
Ask questions. What happened to the previous incumbent of this job? What
does it take to be successful in this firm? What would their ideal candidate for
the job look like? The answers to these questions will reveal a lot about the
way they do business.
43
Listen to your gut. Your feelings about the place in general, and your future
manager and coworkers in particular, are important signs that you should not
ignore.
Sources: Adapted from ideas in Daniel, L., & Brandon, C. (2006). Finding
the right job fit. HR Magazine, 51, 62–67; Sacks, D. (2005). Cracking your next
company’s culture. Fast Company, 99, 85–87.
K E Y T A K E A W A Y
Organization cultures are created by a variety of factors, including founders’ values
and preferences, industry demands, and early values, goals, and assumptions.
Culture is maintained through attraction-selection-attrition, new employee
onboarding, leadership, and organizational reward systems. Signs of a company’s
culture include the organization’s mission statement, stories, physical layout, rules
and policies, and rituals.
E X E R C I S E S
1. Do you think it is a good idea for companies to emphasize person-organization fit
when hiring new employees? What advantages and disadvantages do you see when
hiring people who fit with company values?
2. What is the influence of company founders on company culture? Give examples
based on your personal knowledge.
3. What are the methods companies use to aid with employee onboarding? What is the
importance of onboarding for organizations?
4. What type of a company do you feel would be a good fit for you? What type of a
culture would be a misfit for you? In your past work experience, were there any
moments when you felt that you did not fit with the organization? Why?
5. What is the role of physical layout as an indicator of company culture? What type of
a physical layout would you expect from a company that is people oriented? Team
oriented? Stable?
44
15.4 Creating Culture Change
L E A R N I N G O B J E C T I V E S
1. Explain why culture change may be necessary.
2. Understand the process of culture change.
How Do Cultures Change?
Culture is part of a company’s DNA and is resistant to change efforts.
Unfortunately, many organizations may not even realize that their current
culture constitutes a barrier against organizational productivity and
performance. Changing company culture may be the key to the company
turnaround when there is a mismatch between an organization’s values and
the demands of its environment.
Certain conditions may help with culture change. For example, if an
organization is experiencing failure in the short run or is under threat of
bankruptcy or an imminent loss of market share, it would be easier to
convince managers and employees that culture change is necessary. A
company can use such downturns to generate employee commitment to the
change effort. However, if the organization has been successful in the past,
and if employees do not perceive an urgency necessitating culture change, the
change effort will be more challenging. Sometimes the external environment
may force an organization to undergo culture change. Mergers and
acquisitions are another example of an event that changes a company’s
culture. In fact, the ability of the two merging companies to harmonize their
corporate cultures is often what makes or breaks a merger effort. When Ben &
Jerry’s was acquired by Unilever, Ben & Jerry’s had to change parts of its
45
culture while attempting to retain some of its unique aspects. Corporate social
responsibility, creativity, and fun remained as parts of the culture. In fact,
when Unilever appointed a veteran French executive as the CEO of Ben &
Jerry’s in 2000, he was greeted by an Eiffel tower made out of ice cream pints,
Edith Piaf songs, and employees wearing berets and dark glasses. At the same
time, the company had to become more performance oriented in response to
the acquisition. All employees had to keep an eye on the bottom line. For this
purpose, they took an accounting and finance course for which they had to
operate a lemonade stand. [1]
Achieving culture change is challenging, and
many companies ultimately fail in this mission. Research and case studies of
companies that successfully changed their culture indicate that the following
six steps increase the chances of success. [2]
Figure 15.12 Six Steps to Culture Change
Creating a Sense of Urgency
In order for the change effort to be successful, it is important to communicate
the need for change to employees. One way of doing this is to create a sense of
46
urgency on the part of employees and explain to them why changing the
fundamental way in which business is done is so important. In successful
culture change efforts, leaders communicate with employees and present a
case for culture change as the essential element that will lead the company to
eventual success. As an example, consider the situation at IBM Corporation in
1993 when Lou Gerstner was brought in as CEO and chairman. After decades
of dominating the market for mainframe computers, IBM was rapidly losing
market share to competitors, and its efforts to sell personal computers—the
original “PC”—were seriously undercut by cheaper “clones.” In the public’s
estimation, the name IBM had become associated with obsolescence. Gerstner
recalls that the crisis IBM was facing became his ally in changing the
organization’s culture. Instead of spreading optimism about the company’s
future, he used the crisis at every opportunity to get buy-in from employees. [3]
Changing Leaders and Other Key Players
A leader’s vision is an important factor that influences how things are done in
an organization. Thus, culture change often follows changes at the highest
levels of the organization. Moreover, in order to implement the change effort
quickly and efficiently, a company may find it helpful to remove managers and
other powerful employees who are acting as a barrier to change. Because of
political reasons, self interest, or habits, managers may create powerful
resistance to change efforts. In such cases, replacing these positions with
employees and managers giving visible support to the change effort may
increase the likelihood that the change effort succeeds. For example, when
Robert Iger replaced Michael Eisner as CEO of the Walt Disney Company, one
of the first things he did was to abolish the central planning unit, which was
staffed by people close to ex-CEO Eisner. This department was viewed as a
barrier to creativity at Disney, and its removal from the company was helpful
in ensuring the innovativeness of the company culture. [4]
47
Role Modeling
Role modeling is the process by which employees modify their own beliefs and
behaviors to reflect those of the leader. [5]
CEOs can model the behaviors that
are expected of employees to change the culture. The ultimate goal is that
these behaviors will trickle down to lower level employees. For example, when
Robert Iger took over Disney, in order to show his commitment to innovation,
he personally became involved in the process of game creation, attended
summits of developers, and gave feedback to programmers about the games.
Thus, he modeled his engagement in the idea creation process. In contrast,
modeling of inappropriate behavior from the top will lead to the same
behavior trickling down to lower levels. A recent example of this type of role
modeling is the scandal involving Hewlett-Packard Development Company LP
board members. In 2006, when board members were suspected of leaking
confidential company information to the press, the company’s top-level
executives hired a team of security experts to find the source of the leak. The
investigators sought the phone records of board members, linking them to
journalists. For this purpose, they posed as board members and called phone
companies to obtain the itemized home phone records of board members and
journalists. When the investigators’ methods came to light, HP’s chairman and
four other top executives faced criminal and civil charges. When such behavior
is modeled at top levels, it is likely to have an adverse impact on the company
culture. [6]
Training
Well-crafted training programs may be instrumental in bringing about culture
change by teaching employees the new norms and behavioral styles. For
example, after the space shuttle Columbia disintegrated upon reentry from a
February 2003 mission, NASA decided to change its culture to become more
48
safety sensitive and minimize decision-making errors leading to unsafe
behaviors. The change effort included training programs in team processes
and cognitive bias awareness. Similarly, when auto repairer Midas
International Corporation felt the need to change its culture to be more
committed to customers, they developed a training program making
employees familiar with customer emotions and helping form better
connections with them. Customer reports have been overwhelmingly positive
in stores that underwent this training. [7]
Changing the Reward System
The criteria with which employees are rewarded and punished have a powerful
role in determining the cultural values in existence. Switching from a
commission-based incentive structure to a straight salary system may be
instrumental in bringing about customer focus among sales employees.
Moreover, by rewarding employees who embrace the company’s new values
and even promoting these employees, organizations can make sure that
changes in culture have a lasting impact. If a company wants to develop a
team-oriented culture where employees collaborate with each other, methods
such as using individual-based incentives may backfire. Instead, distributing
bonuses to intact teams might be more successful in bringing about culture
change.
Creating New Symbols and Stories
Finally, the success of the culture change effort may be increased by
developing new rituals, symbols, and stories. Continental Airlines Inc. is a
company that successfully changed its culture to be less bureaucratic and
more team oriented in the 1990s. One of the first things management did to
show employees that they really meant to abolish many of the detailed
procedures the company had and create a culture of empowerment was to
49
burn the heavy 800-page company policy manual in their parking lot. The new
manual was only 80 pages. This action symbolized the upcoming changes in
the culture and served as a powerful story that circulated among employees.
Another early action was the redecorating of waiting areas and repainting of
all their planes, again symbolizing the new order of things. [8]
By replacing the
old symbols and stories, the new symbols and stories will help enable the
culture change and ensure that the new values are communicated.
K E Y T A K E A W A Y
Organizations need to change their culture to respond to changing conditions in the
environment, to remain competitive, and to avoid complacency or stagnation.
Culture change often begins by the creation of a sense of urgency. Next, a change of
leaders and other key players may enact change and serve as effective role models
of new behavior. Training can also be targeted toward fostering these new
behaviors. Reward systems are changed within the organization. Finally, the
organization creates new stories and symbols.
E X E R C I S E S
1. Can new employees change a company’s culture? If so, how?
2. Are there conditions under which change is not possible? If so, what would such
conditions be?
3. Have you ever observed a change process at an organization you were involved
with? If so, what worked well and what didn’t?
4. What recommendations would you have for someone considering a major change of
culture within their own organization?
50
15.5 The Role of Ethics and National Culture
L E A R N I N G O B J E C T I V E S
1. Consider the role of culture in ethical behavior.
2. Consider the role of national culture on organizational culture.
Organizational Culture and Ethics
A recent study of 3,000 employees and managers in the United States
confirms that the degree to which employees in an organization behave
ethically depends on the culture of the organization. [1]
Without a culture
emphasizing the importance of integrity, honesty, and trust, mandatory ethics
training programs are often doomed to fail. Thus, creating such a culture is
essential to avoiding the failures of organizations such as WorldCom and
Enron. How is such a culture created?
The factors we highlighted in this chapter will play a role in creating an ethical
culture. Among all factors affecting ethical culture creation, leadership may be
the most influential. Leaders, by demonstrating high levels of honesty and
integrity in their actions, can model the behaviors that are demanded in an
organization. If their actions contradict their words, establishing a culture of
ethics will be extremely difficult. As an example, former chairman and CEO of
Enron Kenneth Lay forced all his employees to use his sister’s travel agency,
even though the agency did not provide high-quality service or better
prices. [2]
Such behavior at the top is sure to trickle down. Leaders also have a
role in creating a culture of ethics, because they establish the reward systems
being used in a company. There is a relationship between setting very difficult
goals for employees and unethical behavior. [3]
When leaders create an
extremely performance-oriented culture where only results matter and there is
no tolerance for missing one’s targets, the culture may start rewarding
51
unethical behaviors. Instead, in organizations such as General Electric
Company where managers are evaluated partly based on metrics assessing
ethics, behaving in an ethical manner becomes part of the core company
values. [4]
Organizational Culture Around the Globe
The values, norms, and beliefs of a company may also be at least partially
imposed by the national culture. When an entrepreneur establishes an
organization, the values transmitted to the organization may be because of the
cultural values of the founder and the overall society. If the national culture in
general emphasizes competitiveness, a large number of the companies
operating in this context may also be competitive. In countries emphasizing
harmony and conflict resolution, a team-oriented culture may more easily take
root. For example, one study comparing universities in Arab countries and
Japan found that the Japanese universities were characterized by modesty and
frugality, potentially reflecting elements of the Japanese culture. The study
also found that the Arab universities had buildings that were designed to
impress and had restricted access, which may be a reflection of the relatively
high power distance of the Arab cultures. Similarly, another study found that
elements of Brazilian culture such as relationships being more important than
jobs, tendency toward hierarchy, and flexibility were reflected in
organizational culture values such as being hierarchical and emphasizing
relational networks. [5]
It is important for managers to know the relationship
between national culture and company culture, because the relationship
explains why it would sometimes be challenging to create the same company
culture globally.
K E Y T A K E A W A Y
52
Without a culture emphasizing the importance of integrity, honesty, and trust, the
mandatory ethics training programs are often doomed to fail. The values, norms, and
beliefs of a company may also be at least partially imposed by the national culture.
E X E R C I S E S
1. Have you seen examples of ethical or unethical organizational cultures? Describe
what you observed.
2. Have you seen examples of national culture affecting an organization’s culture?
3. What advice would you give to someone who was interested in starting a new
division of a company in another culture?
15.6 Conclusion To summarize, in this chapter we have reviewed what defines organizational
culture, how it is created, and how it can be changed. Corporate culture may
be the greatest strength or a serious limitation for a company, depending on
whether the values held are in line with corporate strategy and environmental
demands. Even though changing an organization’s culture is difficult, success
of the organization may require the change. Leaders, through their actions,
role modeling, rule making, and story creation, serve as instrumental change
agents.
15.7 Exercises
E T H I C A L D I L E M M A
Your company is in the process of hiring a benefits specialist. As a future peer of the
person to be hired, you will be one of the interviewers and will talk to all candidates.
53
The company you are working for is a small organization that was acquired. The job
advertisement for the position talks about the high level of autonomy that will be
available to the job incumbent. Moreover, your manager wants you to sell the
position by highlighting the opportunities that come from being a part of
a Fortune 500, such as career growth and the opportunity to gain global expertise.
The problem is that you do not believe being part of a larger company is such a
benefit. In fact, since the company has been acquired by the Fortune 500, the way
business is being conducted has changed dramatically. Now there are many rules and
regulations that prevent employees from making important decisions autonomously.
Moreover, no one from this branch was ever considered for a position in the
headquarters or for any global openings. In other words, the picture being painted
by the hiring managers and the company’s HR department in the job advertisements
is inflated and not realistic. Your manager feels you should sell the job and the
company because your competitors are doing the same thing, and being honest
might mean losing great candidates. You know that you and your manager will
interview several candidates together.
Is this unethical? Why or why not? What would you do before and during the
interview to address this dilemma?
I N D I V I D U A L E X E R C I S E
Impact of HR Practices on Organizational Culture
Below are scenarios of critical decisions you may need to make as a manager. Read
each question and select one from each pair of statements. Then, think about the
impact your choice would have on the company’s culture.
1. You need to lay off 10 people. Would you
o lay off the newest 10 people?
o lay off the 10 people who have the lowest performance evaluations?
54
2. You need to establish a dress code. Would you
o ask employees to use their best judgment?
o create a detailed dress code highlighting what is proper and improper?
3. You need to monitor employees during work hours. Would you
o not monitor them because they are professionals and you trust them?
o install a program monitoring their Web usage to ensure that they are spending work
hours actually doing work?
4. You need to conduct performance appraisals. Would you
o evaluate people on the basis of their behaviors?
o evaluate people on the basis of their results (numerical sales figures and so on)?
5. You need to promote individuals. Would you promote individuals based on
o seniority?
o objective performance?
G R O U P E X E R C I S E
Recruiting Employees Who Fit the Culture
You are an employee of a local bookstore. The store currently employs 50 employees
and is growing. This is a family-owned business, and employees feel a sense of
belonging to this company. Business is conducted in an informal manner, there are
not many rules, and people feel like they are part of a family. There are many
friendships at work, and employees feel that they have a lot of autonomy regarding
how they perform their jobs. Customer service is also very important in this
company. Employees on the sales floor often chat with their customers about books
and recommend readings they might like. Because the company is growing, they will
need to hire several employees over the next months. They want to establish
55
recruitment and selection practices so that they can hire people who have a high
degree of fit with the current culture.
Working within groups, discuss the effectiveness of the following recruitment tools.
Evaluate each recruitment source. Which ones would yield candidates with a high
degree of fit with the company’s current culture?
1. Newspaper advertisements
2. Magazine advertisements
3. Radio advertisements
4. Hiring customers
5. Hiring walk-ins
6. Employee referrals
7. Using the state unemployment agency
Next, create interview questions for a person who will work on the sales floor. What
types of questions would you ask during the interview to assess person-organization
fit? How would you conduct the interview (who would be involved in the
interviewing process, where would you conduct the interview, and so on) to
maximize the chances of someone with a high person-organization fit?
E N D O F C H A P T E R C A S E — G O O G L E
Google is one of the best-known and most admired companies around the
world. [1] So much so that googling is the term many use to refer to searching
information on the Web. Founded in 1998 by two Stanford university graduates,
Larry Page and Sergey Brin, Google is responsible for creating the most frequently
used Web search engine on the Internet, as well as other innovative applications
such as Gmail, Google Earth, Google Maps, and Picasa. The envy of other Silicon
Valley companies, Google grew from 10 employees working in a garage in Palo Alto
to 10,000 employees operating around the world. What is the formula behind this
56
success? Can it be traced to any single concept such as effective leadership, reward
systems, or open communication?
It seems that Google has always operated based on solid principles that may be
traced back to its founders. In a world crowded with search engines, they were
probably the first company that put users first. Their mission statement summarizes
their commitment to end user needs: “To organize the world’s information and to
make it universally accessible and useful.” While other companies were focused on
marketing their sites and increasing advertising revenues, Google stripped the search
page of all distractions and presented Internet users with a blank page consisting
only of a company logo and a search box. Google resisted pop-up advertising,
because the company felt that it was annoying to end users. They insisted that all
their advertisements would be clearly marked as “sponsored links.” Improving user
experience and always putting it before making money in the short term seem to
have been critical to Google’s success.
Keeping employees happy is also a value they take to heart. Google created a unique
work environment that attracts, motivates, and retains the best players in the field.
Google was ranked as the number 1 place to work for by Fortune magazine in 2008.
This is no surprise if one looks closer at how Google treats employees. In its
Mountain View, California, campus called the “Googleplex,” employees are treated
to free gourmet food including sushi bars and espresso stations. In fact, many
employees complain that once they started working for Google, they gained 10 to 15
pounds. Employees have access to gyms, shower facilities, video games, on-site child
care, and doctors. A truly family friendly place, Google offers 12 weeks of maternity
or paternity leave with 75% of full pay, and offers $500 for take-out meals for the
entire family with a newborn. All these perks and more create a place where
employees feel that they are treated well and their needs are taken care of.
57
Moreover, these perks contribute to the feeling that employees are working at a
unique, cool place that is different from everywhere else they have ever worked.
In addition to offering many perks to employees, thereby encouraging employees to
actually want to spend time at work rather than someplace else, Google encourages
employee risk taking and innovativeness. How is this done? When a vice president in
charge of the company’s advertising system made a mistake that cost the company
millions of dollars and apologized for the mistake, she was commended by Larry
Page, who congratulated her for making the mistake and noting that he would rather
run a company where people are moving quickly and doing too much, as opposed to
being too cautious and doing too little. This attitude toward acting fast and accepting
the cost of resulting mistakes as a natural consequence of moving fast may explain
why the company is outperforming competitors such as Microsoft and Yahoo! Inc.
One of the current challenges for Google is to expand into new fields outside their
Web search engine business. To promote new ideas, Google encourages all
engineers to spend 20% of their time working on individual projects.
Decisions at Google are made in teams. Even the company management is in the
hands of a triad: Larry Page and Sergey Brin hired Eric Schmidt to act as the CEO of
the company, and they are reportedly leading the company by consensus. In other
words, this is not a company where decisions are made by the most senior person
and then implemented top down. It is common for several small teams to attack
each problem and for employees to try to influence each other using rational
persuasion and data. Gut feeling has little impact on how decisions are made. In
some meetings, people reportedly are not allowed to say, “I think…” and instead
they must say, “The data suggests…” To facilitate teamwork, employees work in
open office environments where private offices are assigned only to a select few.
Even Kai-Fu Lee, the famous employee whose defection from Microsoft was the
target of a lawsuit, did not get his own office and shared a cubicle with two other
employees.
58
How do they maintain these unique values? In a company emphasizing hiring the
smartest people, it is very likely that they will attract big egos that are difficult to
work with. Google realizes that its strength comes from its small-company values
emphasizing risk taking, agility, and cooperation. Therefore, Google employees take
their hiring process very seriously. Hiring is extremely competitive and getting to
work at Google is not unlike applying to a college. Candidates may be asked to write
essays about how they will perform their future jobs. Recently, they targeted
potential new employees using billboards featuring brain teasers directing potential
candidates to a Web site where they were subjected to more brain teasers.
Candidates who figure out the answers to the brain teasers would then be invited to
submit resumes. Each candidate may be interviewed by as many as eight people on
several occasions. Through this scrutiny, hiring personnel are trying to select
“Googley” employees who will share the company’s values, perform their jobs well,
and be liked by others within the company. By attracting kindred spirits, selecting
those who will fit in, and keeping potential misfits out, the company perpetuates its
own values that have made it successful.
Will this culture survive in the long run? It may be too early to tell, given that the
company is only a little over a decade old. The founders emphasized that becoming a
publicly traded company would not change their culture, and they would not
introduce more rules or change the way things are done at Google to please Wall
Street. But can a public corporation really act like a start-up? Can a global giant
facing scrutiny on issues including privacy, copyright, and censorship maintain its
culture rooted in its days in a Palo Alto garage? Larry Page is quoted as saying, “We
have a mantra: don’t be evil, which is to do the best things we know how for our
users, for our customers, for everyone. So I think if we were known for that, it would
be a wonderful thing.” As long as this mantra continues to guide the company’s
59
actions, we might expect the company to retain its distinctive personality, regardless
of what the future holds.
Discussion Questions
1. Describe Google’s culture using the OCP typology presented in this chapter.
2. What are the factors responsible for the specific culture that exists in Google?
3. Do you think Google’s culture is responsible for its performance? Or does Google
have this particular culture because it is so successful?
4. How does Google protect its culture?
5. Do you see any challenges Google may face in the future because of its culture?
60
Hofstede Insights USA vs China
WHAT ABOUT CHINA?
To compare your personal preferences to the scores of a country of your choice, get the Culture Compass™ from our store.
If we explore the Chinese culture through the lens of the 6-D Model©, we can get a good overview of the deep drivers of Chinese culture rela�ve to other world cultures.
POWER DISTANCE
This dimension deals with the fact that all individuals in socie�es are not equal – it expresses the a�tude of the culture towards these inequali�es amongst us. Power Distance is defined as the extent to which the less powerful members of ins�tu�ons and organisa�ons within a country expect and accept that power is distributed unequally.
At 80 China sits in the higher rankings of PDI – i.e. a society that believes that inequali�es amongst people are acceptable. The subordinate-superior rela�onship tends to be polarized and there is no defense against power abuse by superiors. Individuals are influenced by formal authority and sanc�ons and are in general op�mis�c about people’s capacity for leadership and ini�a�ve. People should not have aspira�ons beyond their rank.
INDIVIDUALISM
The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. In Individualist socie�es people are supposed to look a�er themselves and their direct family only. In Collec�vist socie�es people belong to ‘in groups’ that take care of them in exchange for loyalty.
At a score of 20 China is a highly collec�vist culture where people act in the interests of the group and not necessarily of themselves. In-group considera�ons affect hiring and promo�ons with closer in-groups (such as family) are ge�ng preferen�al treatment. Employee commitment to the organiza�on (but not necessarily to the people in the organiza�on) is low. Whereas rela�onships with colleagues are coopera�ve for in-groups they are cold or even hos�le to out-groups. Personal rela�onships prevail over task and company.
MASCULINITY
A high score (Masculine) on this dimension indicates that the society will be driven by compe��on, achievement and success, with success being defined by the winner / best in field – a value system that starts in school and con�nues throughout organisa�onal life.
A low score (Feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A Feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what mo�vates people, wan�ng to be the best (Masculine) or liking what you do (Feminine).
At 66 China is a Masculine society –success oriented and driven. The need to ensure success can be exemplified by the fact that many Chinese will sacrifice family and leisure priori�es to work. Service people (such as hairdressers) will provide services un�l very late at night. Leisure �me is not so important. The migrated farmer workers will leave their families behind in faraway places in order to obtain be�er work and pay in the ci�es. Another example is that Chinese students care very much about their exam scores and ranking as this is the main criteria to achieve success or not.
UNCERTAINTY AVOIDANCE
The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situa�ons and have created beliefs and ins�tu�ons that try to avoid these is reflected in the score on Uncertainty Avoidance.
At 30 China has a low score on Uncertainty Avoidance. Truth may be rela�ve though in the immediate social circles there is concern for Truth with a capital T and rules (but not necessarily laws) abound. None the less, adherence to laws and rules may be flexible to suit the actual situa�on and pragma�sm is a fact of life. The Chinese are comfortable with ambiguity; the Chinese language is full of ambiguous meanings that can be difficult for Western people to follow. Chinese are adaptable and entrepreneurial. At the �me of wri�ng the majority (70% -80%) of Chinese businesses tend to be small to medium sized and family owned.
LONG TERM ORIENTATION
This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and socie�es priori�se these two existen�al goals differently. Norma�ve socie�es. which score low on this dimension, for example, prefer to maintain �me- honoured tradi�ons and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragma�c approach: they encourage thri� and efforts in modern educa�on as a way to prepare for the future.
China scores 87 in this dimension, which means that it is a very pragma�c culture. In socie�es with a pragma�c orienta�on, people believe that truth depends very much on situa�on, context and �me. They show an ability to adapt tradi�ons easily to changed condi�ons, a strong propensity to save and invest, thri�iness, and perseverance in achieving results.
INDULGENCE
One challenge that confronts humanity, now and in the past, is the degree to which small children are socialized. Without socializa�on we do not become “human”. This dimension is defined as the extent to which people try to control their desires and impulses, based on the way they were raised. Rela�vely weak control is called “Indulgence” and rela�vely strong control is called “Restraint”. Cultures can, therefore, be described as Indulgent or Restrained.
China is a Restrained society as can be seen in its low score of 24 in this dimension. Socie�es with a low score in this dimension have a tendency to cynicism and pessimism. Also, in contrast to Indulgent socie�es, Restrained socie�es do not put much emphasis on leisure �me and control the gra�fica�on of their desires. People with this orienta�on have the percep�on that their ac�ons are Restrained by social norms and feel that indulging themselves is somewhat wrong.
WHAT ABOUT THE USA?
To compare your personal preferences to the scores of a country of your choice, get the Culture Compass™ from our store.
If we explore the US culture through the lens of the 6-D Model©, we can get a good overview of the deep driving factors of American culture rela�ve to other cultures in our world. By supplying you with this informa�on please realise that culture describes a central tendency in society. Everybody is unique, yet social control ensures that most people will not deviate too much from the norm. Moreover, within every country regional cultural differences exist, also in the States. Americans, however, don’t need to go to a cultural briefing before moving to another state successfully.
POWER DISTANCE
The fact that everybody is unique implies that we are all unequal. One of the most salient aspects of inequality is the degree of power each person exerts or can exert over other persons; power being defined as the degree to which a person is able to influence other people’s ideas and behavior.
This dimension deals with the fact that all individuals in socie�es are not equal, and it expresses the a�tude of the culture toward these power inequali�es amongst us. Power distance is defined as the extent to which the less powerful members of ins�tu�ons and organisa�ons within a country expect and accept that power is distributed unequally. It has to do with the fact that a society’s inequality is endorsed by the followers as much as by the leaders.
INDIVIDUALISM
The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. In Individualist socie�es people are only supposed to look a�er themselves and their direct family. In Collec�vist socie�es people belong to “in groups” that take care of them in exchange for unques�oning loyalty.
The fairly low score on Power Distance(40) in combina�on with one of the the most Individualist (91) cultures in the world reflects itself in the following:
The American premise of “liberty and jus�ce for all.” This is evidenced by an explicit emphasis on equal rights in all aspects of American society and government. Within American organisa�ons, hierarchy is established for convenience, superiors are accessible and managers rely on individual employees and teams for their exper�se. Both managers and employees expect to be consulted and informa�on is shared frequently. At the same �me, communica�on is informal, direct and par�cipa�ve to a degree. The society is loosely-knit in which the expecta�on is that people look a�er themselves and their immediate families
only and should not rely (too much) on authori�es for support. There is also a high degree of geographical mobility in the United States. Americans are the best joiners in the world; however it is o�en difficult, especially among men, to develop deep friendships. Americans are accustomed to doing business or interac�ng with people they don’t know well. Consequently, Americans are not shy about approaching their prospec�ve counterparts in order to obtain or seek informa�on. In the business world, employees are expected to be self-reliant and display ini�a�ve. Also, within the exchange-based world of work we see that hiring, promo�on and decisions are based on merit or evidence of what one has done or can do.
MASCULINITY
A high score (Masculine) on this dimension indicates that the society will be driven by compe��on, achievement and success, with success being defined by the “winner” or “best-in-the-field”. This value system starts in childhood and con�nues throughout one’s life – both in work and leisure pursuits.
A low score (Feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A Feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what mo�vates people, wan�ng to be the best (Masculine) or liking what you do (Feminine).
The score of the US on Masculinity is high at 62, and this can be seen in the typical American behavioral pa�erns. This can be explained by the the combina�on of a high Masculinity drive together with the most Individualist drive in the world. In other words, Americans, so to speak, all show their Masculine drive individually. The Bri�sh, however, have the same culture in this respect. The ques�on, therefore, should be: is the same drive not normally to be seen on the surface? This difference is a reflec�on of the higher score of the US on Uncertainty Avoidance than of the UK. In other words, in both socie�es we find the same drive, but Americans show it up-front whereas the Bri�sh will take you by surprise.
This American combina�on reflects itself in the following:
Behavior in school, work, and play are based on the shared values that people should “strive to be the best they can be” and that “the winner takes all”. As a result, Americans will tend to display and talk freely about their “successes” and achievements in life. Being successful per se is not the great mo�vator in American society, but being able to show one’s success Many American assessment systems are based on precise target se�ng, by which American employees can show how well a job they did. There exists a “can-do” mentality which creates a lot of dynamism in the society, as it is believed that there is always the possibility to do things in a be�er way Typically, Americans “live to work” so that they can obtain monetary rewards and as a consequence a�ain higher status based on how good one can be. Many white collar workers will move to a more fancy neighborhood a�er each and every substan�al promo�on. It is believed that a certain degree of conflict will bring out the best of people, as it is the goal to be “the winner”. As a consequence, we see a lot of polarisa�on and court cases. This mentality nowadays undermines the American premise of “liberty and jus�ce for all.” Rising inequality is endangering democracy, because a widening gap among the classes may slowly push Power Distance up and Individualism down.
UNCERTAINTY AVOIDANCE
The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situa�ons and have created beliefs and ins�tu�ons that try to avoid these is reflected in the score on Uncertainty Avoidance.
The US scores below average, with a low score of 46, on the Uncertainty Avoidance dimension. . As a consequence, the perceived context in which Americans find themselves will impact their behaviour more than if the culture would have either scored higher or lower. Thus, this cultural pa�ern reflects itself as follows:
There is a fair degree of acceptance for new ideas, innova�ve products and a willingness to try something new or different, whether it pertains to technology, business prac�ces or food. Americans tend to be more tolerant of ideas or opinions from anyone and allow the freedom of expression. At the same �me, Americans do not require a lot of rules and are less emo�onally expressive than higher-scoring cultures. At the same �me, 9/11 has created a lot of fear in the American society culmina�ng in the efforts of government to monitor everybody through the NSA and other security organisa�ons
LONG TERM ORIENTATION
This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and socie�es priori�se these two existen�al goals differently. Norma�ve socie�es. which score low on this dimension, for example, prefer to maintain �me- honoured tradi�ons and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragma�c approach: they encourage thri� and efforts in modern educa�on as a way to prepare for the future.
The United States scores norma�ve on the fi�h dimension with a low score of 26. This is reflected by the following:
Americans are prone to analyse new informa�on to check whether it is true. Thus, the culture doesn’t make most Americans pragma�c, but this should not be confused with the fact that Americans are very prac�cal, being reflected by the “can-do” mentallity men�oned above. The polarisa�on men�oned above is, so to speak, strengthened by the fact that many Americans have very strong ideas about what is “good” and “evil”. This may concern issues such as abor�on, use of drugs, euthanasia, weapons or the size and rights of the government versus the States and versus ci�zens. The US is the one of the only “Caucasian” countries in the world where, since the beginning of the 20th century, visi�ng church has increased. This increase is also evident in some post-Soviet republics such as Russia. American businesses measure their performance on a short-term basis, with profit and loss statements being issued on a quarterly basis. This also drives individuals to strive for quick results within the work place.
INDULGENCE
One challenge that confronts humanity, now and in the past, is the degree to which small children are socialised. Without socialisa�on we do not become “human”. This dimension is defined as the extent to which people try to control their desires and impulses, based on the way they were raised. A tendency toward a rela�vely weak control over their impulses is called “Indulgence”, whereas a rela�vely strong control over their urges is called “Restraint”. Cultures can be described as Indulgent or Restrained.
The United States scores as an Indulgent (68) society on the sixth dimension. This, in combina�on with a norma�ve score, is reflected by the following contradictory a�tudes and behaviour:
Work hard and play hard. The States has waged a war against drugs and is s�ll very busy in doing so, yet drug addic�on in the States is higher than in many other wealthy countries. It is a prudish society yet even some well-known televangelists appear to be immoral.
12/2/2020 5 Powerful Steps To Improve Employee Engagement
https://www.forbes.com/sites/brentgleeson/2017/10/15/5-powerful-steps-to-improve-employee-engagement/?sh=3f77ea74341d 1/6
Leadership Strategy I write about leadership and organizational excellence.
5 Powerful Steps To Improve Employee
Engagement
Oct 15, 2017,05:33pm EDT
Today more than ever, organizations rely on the energy, commitment and engagement of
their workforce in order to survive and thrive in the twenty-first century. As a former Navy
SEAL, I can assure you that one of the fundamental reasons we continue to dominate our
battlefield and defeat a very dangerous and decentralized enemy is due to the fact that we
have 100% employee engagement. We have ecosystems of empowered teams that are fully
engaged and working in a “decentralized command” environment.
Watch on Forbes:
Engaged employees
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According to Gallup’s State of the Global Workplace report, only 15% of employees
worldwide are engaged in their jobs – meaning that they are emotionally invested in
committing their time, talent and energy in adding value to their team and advancing the
organization’s initiatives. More Gallop research shows that employee disengagement costs
the United States upwards of $550 billion a year in lost productivity. So one could see why
this is both a serious problem that most leaders and managers face with today’s
workforce — but also an amazing opportunity for companies that learn to master the art of
engagement.
The current business environment, and the world in general, is moving faster than it ever
has before. Organizations across the globe are faced with more change than most can
handle — in order to compete and dominate their segment they are required to grow faster
often giving them less time to focus on managing all of their financial goals. They are
forced to grow quickly with fewer resource - to do more with less. Managers have to learn
to excel in managing themselves, their teams and meeting organizational goals
simultaneously.
It is a common understanding of a vast majority of leaders that the employees are a
company’s most important asset. But in reality, that is only true when the majority of the
workforce is fully engaged in their work. If not, they are either adding minimal value or
actively working against the organization.
There are three types of employees in any organization:
Engaged (15% of the workforce). These employees are loyal and emotionally
committed to the organization. They are in roles where they excel and where their talents
are truly leveraged. They enthusiastically invest in their work and take on responsibilities
outside of their job description. They are generally more likely to become emerging leaders
and will stay with an organization much longer then disengaged employees.
Not Engaged (67% of the workforce). These employees can be difficult to identify
because they are often relatively happy and satisfied in their role. However, they do the
bare minimum and are not invested in the company’s mission, vision, values or goals. They
are less likely to be customer-focused and are not concerned about productivity or
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company profitability. These team members are both a threat and great opportunity –
because with the proper approach, they can be transformed into engaged employees that
thrive in the organization.
Actively Disengaged (18% of the workforce). We have all worked alongside these
people. They are consistently negative, create a toxic environment, dominate their
manager’s time and are usually vocal about their unhappiness. What’s worse, is they are
often subject matter experts well-respected in their unique skillset. And because of that,
they often have significant influence over others. These employees can easily spread
toxicity throughout an organization and can rarely be transformed into true “A” players.
Most studies point to the fact that employee engagement has a direct impact on
productivity and profitability. That seems self-evident, yet many managers still struggle to
define, measure and improve engagement in their teams.
The Leader’s Role in Engagement
Leaders improve engagement by defining and communicating a powerful vision for the
organization. They hire and develop managers that are emotionally invested in the
organization’s mission and vision and give them the resources to build great teams with the
right people in the right roles. They empower.
The Manager’s Role in Engagement
Great managers ensure they acquire and develop great talent – they get the right people on
the bus and make sure they are in the right seats. They actively prioritize engagement.
Their team’s activities align perfectly behind the mission narrative of the organization.
In many of my articles, I dive deep in to the methodologies, tools and strategies leaders and
managers need to successfully navigate the murky waters of twenty-first century
organizational transformation — for leading change. I showcase how to build a culture that
is more nimble and adaptive founded on the principles of trust and accountability. The
issue at hand is with such low engagement in the workforce, it is very difficult to create a
culture of trust and accountability.
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70% of organizational transformation efforts fall significantly short of realizing the
company’s goals. Why? Because change is hard, takes longer and usually has higher hard
and soft costs than managers and leaders generally plan for. Change can be intensely
personal for employees, causes fear and can actually reduce productivity when approached
improperly.
Humans are emotional creatures — and most managers hold the misconception that their
team members are largely rational in their decision-making process. Yet studies show that
we base 70% of our decisions on emotional factors and only 30% on rational factors. But
this can also be a great way to improve engagement. Improving engagement is
simple — but clearly not easy. Here’s how.
5 Powerful Steps to Improve Employee Engagement
How do managers know who is engaged? Their team members need to be able to
confidently state the following:
• I know what is expected of me and my work quality.
• I have the resources and training to thrive in my role.
• I have the opportunity to do what I do best – every day.
• I frequently receive recognition, praise and constructive criticism.
• I trust my manager and believe they have my best interests in mind.
• My voice is heard and valued.
• I clearly understand the mission and purpose and how I contribute to each.
• I have opportunities to learn and grow both personally and professionally.
The steps for improving engagement aren’t complex, they simply must be prioritized.
Which means engagement must be a core function of the manager’s role.
All else then falls into place.
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Step 1 – Put Everyone in the Right Role
Again, get the right people on the bus and make sure they are in the right roles. This means
that all talent acquisition and retention strategies have to be aligned with meeting company
goals.
Step 2 – Give Them the Training
No manager or leader can expect to build a culture of trust and accountability — and much
less improve engagement — without setting the team up for success. This means providing
the proper training and development while removing obstacles.
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Step 3 – Task Meaningful Work
Engaged employees are doing meaningful work and have a clear understanding of how
they contribute to the company’s mission, purpose and strategic objectives. Again, this is
why they first have to be placed in the right role. I’ve made the mistake of hiring great
talent just to get them in the door – but didn’t have a clear career path or role for them. If
you don’t sort those details out quickly, they will leave.
Step 4 – Check in Often
The days of simply relying on mid-year reviews for providing feedback are long gone.
Today’s workforce craves regular feedback — which of course leads to faster course
correction and reduces waste. Use both formal and informal check-in strategies — and use
them every week.
Step 5 – Frequently Discuss Engagement
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Successful managers are transparent in their approach to improving engagement — they
talk about it with their teams all the time. They hold “state of engagement” meetings and
“engage” everyone in the discussion —and solutions.
Again, these principles are not complex, but must be prioritized. Companies that get this
right will drive greater financial returns, surpass their competitors and easily climb to the
top of “the best places to work” lists.
So get on it!
Check out my website.
Brent Gleeson
Gleeson is the founder and CEO of TakingPoint
12/2/2020 30 Secrets to Hiring the Right People
https://www.entrepreneur.com/article/234096 1/8
FUTURE OF ENTREPRENEURSHIP
30 Secrets to Hiring the Right People
link
Catherine Clifford Senior Entrepreneurship Writer at CNBC
NEXT ARTICLE
May 20, 2014 9 min read
The success of your business depends on the quality of your employees. Small businesses, especially, know that
one bad hire can ruin their entire team's productivity. That's why entrepreneurs obsess over hiring.
We've compiled a wee guidebook of hiring tips from the small-business owners honored on Capitol Hillduring
this year's National Small Business Week. Almost every respondent emphasized the importance of hiring
employees who organically fit into corporate culture and who are passionate about the brand. Overall, personality
trumps credentials when entrepreneurs are deciding who they want to bring onto their team.
Related: What Gets These 30 Entrepreneurs Out of Bed Every Day
Here's a look at some of our favorite bits of advice. Responses have been gently edited for clarity and
grammatical correctness.
1. Blake's All Natural Foods
Entrepreneur: Chris Licata
Headquarters: Concord, N.H.
Hire people that genuinely believe in your mission and are passionate about your products. This business has
been in our family for four generations and it is so important to make sure the people we hire are a great cultural
fit with our team. It's a given that everyone we consider for a position at Blake's has the requisite background and
experience for the job but we prioritize cultural fit over deeper experience every time
2. Janska, LLC
Entrepreneur: Jan Erickson, Owner, Founder & President; Jon Thomas, Co-Founder & Vice President
Headquarters: Colorado Springs, Colo.
The most important criteria for hiring are competency and fitting the company's culture. The
book Topgrading, written by Bradford Smart, recommends hiring only "A" players, and we agree. Bringing new
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employees into an organization really should be a thoughtful process and in some instances, finding the best
candidate for a company can take some time. Most important, the candidate needs to be a good fit for the existing
corporate culture so that they are able to understand and positively embrace all of the components that drive the
business.
3. Fusion Hospitality
Entrepreneur: Bhupender "Bruce" Patel
Headquarters: Tupelo, Miss.
Always look for integrity. Often it is more important than experience.
4. Express Kitchens
Entrepreneur: Max Kothari
Headquarters: Hartford, Conn.
References from people I trust. Key ingredient is learning attitude. Everything else I can train. Either your DNA
has it or not.
5. PARS Environmental, Inc.
Entrepreneur: Kiran K. Gill, President and CEO
Headquarters: Robbinsville, N. J.
In addition to having a strong resume and technical background, attitude is very important. If someone displays
flexibility, willingness to learn new skill sets, and is a good team member, that is invaluable. Having talented
employees can make or break your company.
6. High Plains Architects
Entrepreneurs: Randy and Janna Hafer
Headquarters: Billings, Mont.
"Fit" is everything. Only hire people who share the values, passions and sense of humor of the firm.
7. Bleed Blue Tattoo and Piercing
Entrepreneur: Thomas Ray Conrett, aka Tommy Ray
Headquarters: Lexington, Ky.
I like employees with serving experience. They know how to hustle
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Ryan McFarland, Founder and Chief Enthusiast, of Strider Bikes.
Image credit: Strider Sports International, Inc.
8. Green Technologies
Entrepreneurs: Dr. Amir A. Varshovi and Marla K. Buchanan, JD
Headquarters: Gainesville, Fla.
Hire those who are passionate about what they do.
9. BrightFields, Inc.
Entrepreneurs: Mark A. Lannan and Marian R. Young
Headquarters: Wilmington, Del.
Attitude and work ethic are always more important than a set of technical skills. Almost all skills can be trained,
but a person's personality and demeanor are very difficult to adjust. Make sure they will fit your team.
10. Best Bath Systems Inc.
Entrepreneur: Gary Multanen
Headquarters: Caldwell, Idaho
Let the applicant do 90% of the talking. It's amazing what they will say. All you need to do is listen.
11. Spectrum Aeromed
Entrepreneur: Dean Atchison
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Headquarters: Fargo, N.D.
Hire people that walk fast...they tend to have a sense of urgency about life and a predisposition to taking action.
12. EverLast Lighting, Inc.
Entrepreneur: Michael Olen Nevins
Headquarters: Jackson, Mich.
My best hiring tip would be to retain talent that is motivated by innovation, out-of-the-box thinking. Hire
someone based on their work ethic, and ability to think creatively. We have a series of tests that each of our
candidates take so that we can gauge their abilities.
13. Custom Aircraft Cabinets, Inc.
Entrepreneur: Co-Owners Mike Gueringer and Paul Reesnes
Headquarters: Sherwood/North Little Rock, Ark.
Although qualified skill sets are very important, attitude is even more important. Someone with basic skills and a
great attitude easily surpasses excellent skills with poor attitude.
14. Metaphrasis Language & Cultural Solutions, LLC.
Entrepreneur: Elizabeth Col?n
Headquarters: Chicago, Ill.
Do not hire based on the answers you receive during the interview. If you are considering someone, put them
through the test by giving them a few task that they will be responsible for and see how well they do. If they
cannot complete the task within the amount of time they are given they may not be a good fit.
15. TEVET, LLC
Entrepreneur: Tracy D. Solomon
Headquarters: Mosheim, Tenn.
Look beyond what is in front of you. In addition to what a candidate can bring to your organization today,
consider what they can bring as they and the organization grow.
Related: From Tattoo Parlors to Coffee Shops, a National Celebration of Small Businesses
16. Keiland Construction, LLC
Entrepreneur: Keith Anthony DuRousseau, owner and founder
Headquarters: Lake Charles, La.
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Always develop a shortlist for filling a position. The second interview will unveil the layer required to make the
final decision. If the applicant won't comply with this process, move on. The best employees often interview the
worst.
17. PracticeLink.com and MountainPlex Properties: The Guest House on Courthouse Square, Radio AM
1380, The Market Courthouse Square, The Ritz Theatre, Otter & Oak Outfitter
Entrepreneur: Ken Allman
Headquarters: Hinton, W.Va.
Look for--and hire--humble, hungry and smart people! These are the key ingredients to building a great team, and
when those traits are in balance, great things happen. Another tip we try to follow is to take candidates out for
lunch or dinner before making an offer. For senior-level hires, we include the spouse as well. This adds a different
dimension to the interview process and helps us discover if the candidate will be a good cultural fit for our
organization.
18. Strider Sports International, Inc.
Entrepreneur: Ryan McFarland
Headquarters: Rapid City, S.D.
Pick people with natural enthusiasm for life and a connection to the company cause and mission.
19. Virtual Enterprise Architects, LLC
Entrepreneur: LaKeshia Grant
Headquarters: Washington, DC
My best hiring tip is ask for samples of their work or provide them with an assignment during the interview. It
shows me how they process tasks, the types of questions they would ask and their prioritization of the subtasks. If
they have a logical approach to the task and can demonstrate their skills, they are most likely equipped to do the
job.
20. Cobalt Enterprises, Inc.
Entrepreneurs: Fred Schule (Founder, Owner) and Paul Clark (Owner)
Headquarters: Granite Falls, Wash.
We are the largest employer with 80 employees in a relatively small town of 3421 people however nearly all of
our employees are from the local area and they generally don't turn over. We hire for aerospace and defense
manufacturing so skills involve higher math, technical knowledge and production prowess. Our best tip is to look
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for fundamentals so great Cobalt hires need to be timely, trustworthy, willing to learn, conditioned to change
rapidly and teamwork skills.
21. Golden Cannoli Shells Co. Inc.
Entrepreneur: Valerie Bono, Maria Elena Bono Malloy, Eric Bresciani, Edwin Bresciani
Headquarters: Chelsea, Mass.
Have a clear job description, convey it so there are no surprises and be clear with expectations.
The second generation family business owners of Golden Cannoli: Ed Bresciani, Eric Bresciani, Valerie Bono
and Maria Elena Bono Malloy (L to R).
Image credit: Golden Cannoli Shells Company
22. Triangle Rock Club
Entrepreneurs: Joel Graybeal and Andrew Kratz, managing partners
Headquarters: Morrisville, N.C.
Never make a compromise hire. You are better off waiting to get the right person than settling for a less than ideal
candidate. You can't get best in class results with a mediocre employee. Never compromise your hiring standards.
23. TailsSpin Pet Food & Accessories
Entrepreneurs: Co-owners Jusak Yang Bernhard and Jeffrey A. Manley
Headquarters: Savannah, Pooler and Macon, Ga.
We look for people who care about helping others, and who know the importance of volunteerism and of giving
back. TailsSpin is known as a pet store with a heart. Our community work defines us. We put on events that help
our community and local pet communities. Our events include bi-weekly Low-Cost Pet Vaccine Clinics, the Pet
12/2/2020 30 Secrets to Hiring the Right People
https://www.entrepreneur.com/article/234096 7/8
Care & Adoption Fair, Savannah PAWrade & Pet Costume Contest, Woof! Woof! 5K Run/Walk Over Pet Cancer,
Disc Dog Competition to benefit Vets for Pets, and the Savannah Pet Care Directory.
24. Switchback Brewing Company
Entrepreneurs: Bill Cherry and Jeff Neiblum
Headquarters: Burlington, Vt.
My best employees come to me. More than just competence and talent, they have a passion to be part of our
company specifically. They want more than just a good job, they want a job with my company.
25. Chesapeake Environmental Management, Inc.
Entrepreneurs: Stephanie Novak Hau and Joseph Hau
Headquarters: Bel Air, Md.
Skills can be taught, attitude cannot.
26. MIRACORP
Entrepreneur: Cynthia M. Reed
Headquarters: Mesa, Ariz.
Identify candidates willing to roll up their sleeves and make things happen.
27. House of Bread Anchorage
Entrepreneurs: Ginna and John Baldiviez
Headquarters: Anchorage, Alaska
In our line of business (bakery/cafe) we need employees who have a lot of energy with a friendly, upbeat
personality. So during our interviewing process, along with the usual questions, we "roll play" to see if the
individual would be a good fit for our bakery before we bring them on board.
28. Proventix Systems, Inc.
Entrepreneur: Harvey Nix
Headquarters: Birmingham, Ala.
Be very selective of your team and who you have cheering you on - surround yourself with great people. Coach,
train, challenge, and expect the best from your team. As in sports, it takes an entire team and coordinated efforts
to accomplish great things!
29. Coffee By Design
Entrepreneurs: Co-founders Mary Allen Lindemann and Alan Spear
12/2/2020 30 Secrets to Hiring the Right People
https://www.entrepreneur.com/article/234096 8/8
Headquarters: Portland, Maine
So many lessons learned...and still learning. Take the time to really sit down and talk with applicants and see if
they are passionate about what you do. Trust your gut. And no sympathy hires!
30. Lightwell, formerly known as Oxford Consulting Group, Inc.
Entrepreneur: Michelle Kerr
Headquarters: Columbus, Ohio
Hire to cover your weaknesses. People that you really click with you are or are 'just like you' tend to have the
same weaknesses as you!
Related: Small Business Person of the Year Helps Veterans Take Flight
A STATISTICAL REFERENCE GUIDE FOR SAVVY RECRUITERS
HR and Recruiting Statistics for 201650
A Statistical Reference Guide for Savvy Recruiters2
With more access to information than ever before, job seekers are now carefully considering their choices. Experiences and issues exposed on social media and review sites can either undermine or enhance an employer’s reputation—all this makes building trust absolutely critical.
Last year, our popular eBook 50 HR and Recruiting Stats That Make You Think helped bring to light trends in social media, diversity and mobile recruiting. This year’s candidate-driven market led us to focus on different topics like trust, employee engagement and leadership. Hiring and retaining employees now starts from the inside out.
We hope this collection of statistics from sources like Bersin by Deloitte, KPMG, Edelman, Gallup and Glassdoor research gives you the intelligence you need to make improvements in your company’s employee recruitment and retention practices.
Introduction
A Statistical Reference Guide for Savvy Recruiters3
Filling positions in a candidate-driven market is more expensive and takes longer. Therefore, it’s in an employer’s best interest to
proactively optimize recruiting practices and focus on retention, so that changing jobs is not the fastest way to a promotion.
Recruiting
A Statistical Reference Guide for Savvy Recruiters4
Recruiting Statistics
$4,000 is the average amount
U.S. companies spend to fill an open position.
It takes an average of 52 days to fill an open position, up from 48 days in 2011.
of recruiters say the market is candidate-driven in 2015, up from 54% in the second half of 2011.
The top two obstacles to increasing headcount are:
1 | shortage of candidates (31%)
2 | lengthy hiring practices (27%)
Days
52 1
3
5
6
9
11
10
7
8
12
4
2
90%
47% of declined offers in the second half of 2015 were due to candidates accepting other jobs, up 10 points from the first half of 2015. Source: Recruiter Sentiment Study 2015 2nd Half, MRI Network, 2015
47% of small businesses report there are few or no qualified applicants for the
positions they are trying to fill. Source: NFIB, November 2015
51% of employees are considering a new job. Source: Workforce Panel, Gallup, November 2015
One in three employers are concerned voluntary exits will increase. Source: Harris Poll for Glassdoor, February 2015
52% of hiring decision makers say passive candidate sourcing has been less effective for their company. Source: Harris Poll for Glassdoor, 2014
67% of employers believe retention rates would be higher if candidates had a clearer picture of what to expect about working at the company before taking the job. Source: Harris Interactive Survey for Glassdoor, 2014
89% of Glassdoor users are either actively looking for jobs or would consider better opportunities. Source: Glassdoor U.S. Site Survey, January 2016
57% of Glassdoor visitors are employed either full-time or part-time. Source: Glassdoor U.S. Site Survey, January 2016
Source for #1 and #2: Talent Acquisition Factbook 2015, Bersin by Deloitte, April 2015
Source for #3 and #4: Recruiter Sentiment Study 2015 2nd Half, MRI Network, 2015
A Statistical Reference Guide for Savvy Recruiters5
Issues of trust are relevant to both employees and consumers. After all, every employee is also a consumer, and more likely than ever to
consult reviews or other information online before making important decisions. Highly publicized events involving product recalls, employment scandals and questionable business practices create an environment of mistrust,
leading consumers to demand more information about products, services and employers. Moving toward organizational transparency helps foster an
environment of trust. Transparency is not just a buzzword; it may be a necessity for business survival in the 21st Century.
Trust and Transparency
A Statistical Reference Guide for Savvy Recruiters6
Trust and Transparency
13
15
14
63% 80% of consumers refuse to buy products and services from a company they do not trust
while 58% will criticize that organization to a friend or colleague.
and 68% will recommend those companies to a friend.
of consumers choose to buy products from companies they trust&
Content provided by friends and family is most trusted by 72%.
Content provided by employees is trusted by 52%.
16
17
18
19
Employees rank among the most trusted influencers when communicating about their company’s engagement and integrity. Source: Edelman Trust Barometer, January 2015
32% of senior executives say building trust is one of their biggest challenges, second only to expansion and top line growth over the next one to two years. Source: Global Consumer Executive Top of Mind Survey, June 2015
Nearly 75% of executives believe their consumers demand transparency. Source: Global Consumer Executive Top of Mind Survey, June 2015
90% of job seekers find the employer perspective useful when learning about jobs and companies. Source: Glassdoor U.S. Site Survey, January 2015
Source for #13, #14 and #15: Edelman 2015 Trust Barometer, January 2015
A Statistical Reference Guide for Savvy Recruiters7
In almost any endeavor, enthusiasm and commitment—the very definition of engagement—breed success. Employees who understand their contribution to
the company’s mission are more likely to bring a positive attitude and commitment to the workplace, which trickles down to company performance at every level:
operations, product design, customer service, etc. Research on engagement and company performance shows a strong correlation between the two, proving that
employee engagement is crucial to business success.
Employee Engagement
A Statistical Reference Guide for Savvy Recruiters8
Employee Engagement
20
of U.S. workers were engaged in their jobs in 2015.
Companies with employee engagement programs achieve
26% greater year-over-year increase in annual company revenue,
compared to those who do not have formal programs.
32%
22
21
87% 50% of organizations cite culture and engagement
as one of their top challenges call the problem “very important”.&
24
25
26
66% of HR respondents report they are updating their engagement and retention strategies. Source: Global Human Capital Trends 2015, Deloitte, February 2015
49% of employees would recommend their employer to a friend. Source: Glassdoor Data Labs, December 2015
While 90% of executives understand the importance of employee engagement, fewer than 50% understand how to address this issue. Source: Conference Board, cited by Deloitte University Press, January 2015
23
Mission-driven companies have and they tend to be first or second in their market segment.
30% higher levels of innovation
40% higher levels of retention
Source: Becoming Irresistible, Deloitte, February 2015
Source: Global Human Capital Trends 2015, Deloitte, February 2015
Source: Gallup daily tracking, January 2016 Source: Aberdeen, October 2015
A Statistical Reference Guide for Savvy Recruiters9
It’s often said that culture is set from the top down. But direct managers have just as much impact on employee engagement as top leaders.
By recruiting, training and retaining strong managers and executives, companies create an environment of trust that will naturally
improve employee engagement and increase retention rates.
Leadership and Management
A Statistical Reference Guide for Savvy Recruiters10
Leadership and Management
Managers who are not engaged or actively disengaged
cost the U.S. economy
$319 billion to $398 billion annually.
High-performing companies
spend 1.5X to 2X more on leadership
than other companies, and reap results that are 3X or 4X the levels of their competitors.
1 in 2 employees have left their job to get away from their manager at some
point in their career.
27
29
31
32
35
37
36
33
34
38
30
28
84% of organizations anticipate a shortfall in the minimum number of qualified leaders over the next five years. Source: State of Leadership Development, Brandon Hall, August 2015
86% of global HR and business leaders cite leadership as a top issue for 2016. Source: Global Human Capital Trends, Deloitte, February 2015
Only 26% of employees agree that “my employer listens and responds well to me.” Source: Employees Rising, Weber Shandwick, April 2014
Only 18% of current managers have the high talent required of their role (that unique combination of talents needed to help a team achieve excellence in a way that significantly improves a company’s performance). Source: State of the American Manager, Gallup, April 2015
Only 17% of employees highly rate communications from their company’s top leader and senior leadership. Source: Employees Rising, Weber Shandwick, April 2014
59% of employees who are supervised by highly engaged managers are more likely to be engaged than those supervised by actively disengaged managers. Source: State of the American Manager, Gallup, April 2015
More than 67% of Millennials believe it is management’s job to provide accelerated development opportunities to encourage them to stay. Source: Becoming Irresistible, Deloitte, February 2015
69% is the average CEO approval rating on Glassdoor. Source: Glassdoor Data Labs, December 2015
of managers are engaged.35%
51%
14%
of managers are not engaged.
of managers are actively disengaged.
Source for #29 and #30: State of the American Manager, Gallup, April 2015
Source: State of the American Manager, Gallup, April 2015 Source: Global Human Capital Trends, Deloitte, February 2015
A Statistical Reference Guide for Savvy Recruiters11
With 76% of all U.S. Internet users on social media1, social channels like Facebook, Twitter, Snapchat and Instagram have become increasingly
popular for employer communication and employee recruitment. Company leaders and employees alike can influence perceptions through their personal social
accounts. By encouraging and training leaders and employees to use social media on the company’s behalf, employers can generate goodwill and
provide a first-hand view of life at the company for customers, candidates and future employees.
Social Media
Source: 1 Pew Internet, October 2015
A Statistical Reference Guide for Savvy Recruiters12
Social Media
39
41
40
42
43
39% of employees have shared praise or positive comments online about their employer. Source: Employees Rising, Weber Shandwick, April 2014
There is a 50% increase in employees recommending company’s products or services when the employer encourages social sharing. Source: Employees Rising, Weber Shandwick, April 2014
Only 33% of employers encourage employees to use social media to share news and information about their work or employer. Source: Employees Rising, Weber Shandwick, April 2014
are more likely to purchase from a company whose values and leadership are clearly communicated through executive leadership participation on social media.
believe that companies whose C-Suite executives and leadership team use social media to communicate about their core mission, brand values and purpose are more trustworthy.
61% 50% of U.S. respondents of UK respondents&
75% of U.S. respondents
Source: The Global Social CEO Survey 2014, Brandfog
Source: The Global Social CEO Survey 2014, Brandfog
A Statistical Reference Guide for Savvy Recruiters13
From books to tires to dentists, virtually no aspect of life has escaped online reviews. Company responses to reviews have become
increasingly important, particularly for high-touch products and services. Employers are no exception. Acknowledging faults, thanking people for
their contributions and publicly committing to improvement are new expectations in the era of transparency.
Reviews
A Statistical Reference Guide for Savvy Recruiters14
Reviews
44 45
48
46 47
49
50
The majority of job seekers read at least 6 reviews before forming an opinion of a company. Source: Glassdoor U.S. Site Survey, January 2016
69% of active job seekers are likely to apply to a job if the employer actively manages its employer brand (e.g., responds to reviews, updates their profile, shares updates on the culture and work environment). Source: Glassdoor U.S. Site Survey, January 2016
The Top 5 pieces of information job seekers want employers
to provide as they research where to work are:
7 in 10 Americans seek out advice and opinions before making a purchase.
of shoppers conduct research online before making a purchase over $500.
of Glassdoor users report that they seek company
reviews and ratings before making a decision to
apply for a job.
of Glassdoor users agree their perception of a company improves after seeing an employer respond to a review.
80%
61% 62%
1 | Details on compensation packages
2 | Details on benefits packages
3 | Basic company information
4 | Details on what makes the company an attractive place to work
5 | Company mission, vision and values
Source for #46 and #47: Glassdoor U.S. Site Survey, January 2016
Source: Glassdoor U.S. Site Survey, January 2016
Source: American Lifestyles, Mintel, June 2015 Source: Fourth Annual Major Purchase Consumer Study,
Synchrony Financial, November 2015
A Statistical Reference Guide for Savvy Recruiters15
At Glassdoor, we believe in empowering people with information that helps them make more informed job decisions. When employees
have first-hand information that helps them find a job they love, and companies have insights that help them create
a more engaged and productive workforce.
Conclusion
A Statistical Reference Guide for Savvy Recruiters16
About Glassdoor With millions of company reviews, salary reports, interview reviews and benefits reviews on more than 500,0001 companies worldwide, Glassdoor is a trusted and transparent place for today’s candidates to search for jobs and research companies. Glassdoor helps employers across all industries and sizes advertise their jobs and promote their employer brands to a well-researched, highly selective candidate pool. By advertising jobs via mobile devices, email alerts and throughout Glassdoor, employers influence candidates at the moment they’re making decisions. This results in better applicant quality at a significantly lower cost-per-hire compared to traditional job boards.2
To get involved in the conversation on Glassdoor and start managing and promoting your employer brand, email [email protected], call (415) 339-9105 or visit www.glassdoor.com/employers.
For the latest in recruitment marketing tips, best practices and case studies, follow us on Twitter: @GDforEmployers.
Subscribe Now
Sources: 1Glassdoor Internal Data, June 2015; 2Brandon Hall Group Report: Understanding the Impact of Employer Brand, November 2014
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Rewriting the rules for the digital age
In a digital world with increasing transparency and the growing influence of Millennials, employees expect a productive, engaging, enjoyable work experience. Rather than focus narrowly on employee engagement and culture, organizations are developing an integrated focus on the entire employee experience, bringing together all the workplace, HR, and management practices that impact people on the job. A new marketplace of pulse feedback tools, wellness and fitness apps, and integrated employee self-service tools is helping HR departments understand and improve this experience. Through new approaches such as design thinking and employee journey maps, HR departments are now focusing on understanding and improving this com- plete experience and using tools such as employee net promoter scores to measure employee satisfaction.1
• Organizational culture, engagement, and employee brand proposition remain top priorities in 2017; employee experience ranks as a major trend again this year.
• Nearly 80 percent of executives rated employee experience very important (42 percent) or important (38 percent), but only 22 percent reported that their compa- nies were excellent at building a differentiated employee experience.
• Fifty-nine percent of survey respondents reported they were not ready or only somewhat ready to address the employee experience challenge.
The employee experience Culture, engagement, and beyond
A PRODUCTIVE, positive employee experience has emerged as the new contract between employer and employee. Just as marketing and product teams have moved beyond customer satisfaction to look at total customer experience, so is HR refocusing its efforts on building programs, strategies, and teams that understand and continu- ously improve the entire employee experience. Our research has identified 20 elements that bring this together, each of which requires focus and attention from HR and management.2
The problems of employee engagement and pro- ductivity continue to grow. Overall employee en- gagement, measured by Glassdoor data across thousands of companies, is flat year over year.3 This This year’s Global Human Capital Trends research shows that organizations’ ability to address these issues of engagement and culture has dropped by 14 percent since last year, illustrating how complex the work environment has become. In several im- portant areas, there is little or no improvement at all. (See figure 1.)
2017 Deloitte Global Human Capital Trends
51
Rewriting the rules for the digital age
Figure 1. Percentage of companies that feel they are excellent in each area
2017 2016 Change
Helping employees balance personal and professional life/work demands
23% 19% 21% better
Aligning employees and personal goals with corporate purpose
24% 23% 4% better
Providing programs for younger, older, and a multi-generational workforce
11% 11% Flat
Understanding and using design thinking as part of the employee experience
10% 13% 23% worse
Deloitte University Press | dupress.deloitte.com
Percentages by region:
Latin & South America
North America
Americas 85 84
Asia Oceania
Asia-Pacific 85 85
Africa Central & Eastern Europe
Middle East Nordic countries
Western Europe
Europe, Middle East, and Africa 82 77 77 69 71
Italy 79
UK 84
Canada 80
Belgium 63
76 Netherlands
Spain 77
83 South Africa
USA 85
Mexico 83
93 Brazil 85 Australia
88 China
89 India
France 64
Germany 70
75 Japan
Figure 2. Employee experience: Percentage of respondents rating this trend “important” or “very important”
Deloitte University Press | dupress.deloitte.com
Lower %Higher %
Percentages in selected countries:
Lower %Higher %
Brazil
India
China
United States
Australia
United Kingdom
Mexico
South Africa
Canada
Italy
Spain
Netherlands
Japan
Germany
France
Belgium
93
89
88
85
85
84
83
83
80
79
77
76
75
70
64
63
52
This year’s survey found both challenges and oppor- tunities for improvement across multiple dimen- sions of the employee experience (figure 3).
Several factors make employee experience a chal- lenge today:
• First, many companies have not yet made employee experience a priority for HR lead- ers, often delegating this problem to an annual engagement survey.
• Second, while some companies have created the C-suite role of employee experience officer, most companies have not assigned responsibility to a senior executive or team to design and deliver the employee experience.
• Third, siloed HR departments often find it dif- ficult to obtain the resources needed to address an integrated set of priorities, which range from management practices to the workplace to ben- efits and, often, the work culture itself.
• Fourth, companies need to update their tools to engage employees on an ongoing basis (with pulse surveys at least) to help HR teams and line leaders understand more fully what the talent they employ expects and values. An employee net promoter score is another important tool in this effort.
• Fifth, many companies remain focused on “point-in-time engagement” and have not yet pulled together the disciplines of performance management, goal setting, diversity, inclusion, wellness, workplace design, and leadership into an integrated framework.
A GROWING CHALLENGE
Understanding and improving the employee experi- ence is critical for companies operating in a highly competitive global economy. Providing an engag- ing experience will help companies succeed in at-
Deloitte University Press | dupress.deloitte.com
Understanding and using design thinking as part of the employee experience
Using design thinking in developing HR and talent programs
Providing programs for younger, older, and a multi-generational workforce
Considering diverse employee preferences when designing work
Building a strong and differentiated employee experience brand
Aligning employees and personal goals with corporate purpose
Helping employees balance personal and professional life/work demands
Integrating social, community, and corporate programs
Weak ExcellentAdequate
39% 12%49%
38% 13%49%
48% 10%42%
46% 11%43%
23% 23%54%
25% 23%52%
22% 22%57%
22% 23%55%
Figure 3. Respondent ratings of sub-capabilities related to employee experience
Percentage of total responses
2017 Deloitte Global Human Capital Trends
53
Rewriting the rules for the digital age
tracting and retaining skilled employees. A strong employee experience also drives a strong customer experience.4
As organizations shift to a networked, team-based structure, the employee experience becomes both more important and more complex. People today often have multiple roles with multiple managers. A recent study Deloitte completed with Facebook found that only 14 percent of companies believe their internal processes for col- laboration and decision making are working well, and 77 percent believe email is no longer a viable tool for effective communication.5
The challenge is not getting any easier. Productivity in the United States is rising by only about 1 percent annually, even as em- ployees are working more hours.6 Research shows that the average vacation time taken is down to 16 days in 2016 from 20 in 2000, putting even more pressure on employ- ees seeking a healthy work-life balance.7
Companies need a new approach—one that builds on the foundation of culture and engagement to focus on the employee experience holistically, con- sidering all the contributors to worker satisfaction, engagement, wellness, and alignment.
THE GROWING NEED FOR A HOLISTIC SOLUTION
Traditionally, HR has addressed issues such as em- ployee engagement, culture, rewards, and learning and career development as separate, independent programs in individual silos. Each program has a senior HR leader, a set of tools and diagnostics, and
solutions to drive and measure change.
The employee sees the picture differently. Starting as potential hires and recruits, employees look at everything that happens at work as an integrated expe- rience that impacts daily life in and outside the workplace, including overall physical, emo- tional, professional, and finan- cial well-being. Candidates as- sess future employers from the very start of the talent acquisi-
tion experience and make quick judgments about what life will be like for them in the organization, based on how they interact with the enterprise dur- ing the recruiting cycle.
This integrated view increasingly leads to employ- ees demanding a holistic, end-to-end—recruitment- to-retirement—experience from their employers, whether they are full-time employees, contingent workers, or even crowdsourced talent. This also re- quires a radical change in emphasis on the part of employers.
Companies need a new approach—one that builds on the foundation of culture and engagement to
focus on the employee experience holistically, considering all the contributors to worker
satisfaction, engagement, wellness, and alignment.
54
HR and business leaders face both the demand and the opportunity to rethink the roles, structure, tools, and strategy they use to design and deliver an in- tegrated employee experience. Models such as the one in figure 4 represent a starting point to address a variety of issues: meaningful work, the purpose of the organization, employee talent development and growth, rewards and wellness, the work envi- ronment, fairness and inclusion, and authenticity among management and leadership.
GETTING THE DESIGN AND DELIVERY RIGHT
In recent years, we highlighted trends relating to the overwhelmed employee, simplification of work, and design thinking. Developing an integrated em- ployee experience across multiple dimensions will require HR and business leaders to combine in- sights in all of these areas. Business and HR leaders can leverage the experience of marketing, product
development, and sales executives who are working along similar lines to design integrated customer experiences.
Employees expect not only a better-designed expe- rience but new models of delivery. In a world where employees can manage much of their lives on a handful of smartphone apps, they expect every el- ement of their employee experience, from work to development to rewards, to be accessible and easy to use on their mobile devices.
FOCUS ON EMPLOYEE FEEDBACK IS IMPROVING, BUT NOT FAST ENOUGH
Creating a holistic approach to the employee expe- rience demands better tools and programs to cap- ture employee feedback continuously. A new breed of pulse survey tools, performance management tools, and open survey tools is making this possible. Today, 22 percent of companies survey employees
Figure 4. Factors that contribute to a positive employee experience
Simply Irresistible OrganizationTM model
Meaningful work Supportive management Positive work environment
Growth opportunity
Trust in leadership
Autonomy Clear and
transparent goals Flexible work environment
Training and support on the job
Mission and purpose
Select to fit Coaching Humanistic workplace
Facilitated talent mobility
Continuous investment in
people
Small, empowered teams
Investment in development of
managers
Culture of recognition
Self-directed, dynamic learning
Transparency and honesty
Time for slack Agile performance
management
Fair, inclusive, diverse work environment
High-impact learning culture
Inspiration
Cross-organization collaboration and communication
Deloitte University Press | dupress.deloitte.com
2017 Deloitte Global Human Capital Trends
55
Rewriting the rules for the digital age
quarterly or more often, 79 percent survey employ- ees annually or less, and 14 percent never survey employees at all.
The neglect of regular employee feedback helps explain other challenges companies face today, in- cluding shortcomings in driving culture and pur- pose and providing a healthy work-life balance. This year, only 23 percent of companies believe their em- ployees are fully aligned with the corporate purpose. And, while 84 percent have some program to mea- sure work-life balance, just 23 percent claim their solutions are excellent.
Companies in Nordic countries, the Americas, and Central Europe lead the way, with those in Asia, the Middle East, and Africa still significantly behind.
As one forward-thinking retail executive noted, “We used to prioritize our stakeholders as shareholders first, customers second, and employees third. We now realize we had it backward. If we put employ- ees first, they in turn take care of our customers, and they in turn take care of our shareholders.”
THERE’S AN APP FOR THAT
An explosion of digital and mobile tools has emerged to help HR design and deliver a great employee ex- perience:
• Productivity and collaboration apps: New tools are moving well beyond traditional email to improve productivity and engagement. Prod- ucts such as Facebook’s Workplace, Slack, Mi- crosoft Skype for Teams, Google G-suite, and solutions from companies such as Basecamp, Trello, Asana, and 15Five can support collabora- tive team-centric work and offer engaging plat- forms for learning, goal alignment, performance management, and traditional HR processes.
• Engagement and feedback apps: New pulse survey tools are flooding the market, replacing traditional annual engagement surveys.
• Performance management apps: A new breed of continuous performance manage- ment products that include feedback tools has emerged from vendors such as Reflektiv, Bet- terWorks, Zugata, Highground, Workboard, and SuccessFactors.
• Well-being apps: A new market of well- ness apps brings together competitions, fit- ness, groups, wearables integration, and mi- cro-learning from vendors such as Limeaid and VirginPulse.
• Employee service platforms: These tools of- fer an integrated employee experience for trans- actional and service needs, integrating chatbots and natural language processing with case man- agement, content management, and easy-to-use mobile and web portals.
While all these tools are valuable, the fact that each of these markets is separate illustrates that the fo- cus on end-to-end employee experience is still new. With few integrated toolsets on the market, organi- zations have to bring together independent HR and technology managers to build an employee experi- ence strategy and program.
THE CENTRALITY OF THE EMPLOYEE EXPERIENCE
Looking across all 10 trends we discuss this year, it’s clear that employee experience is a central theme in 2017. Leadership, organization structure and teams, career mobility, learning, diversity, employment brand, and HR services, all affect an employee’s experience.
High-performing companies have found ways to
enrich the employee experience, leading to purposeful, productive,
meaningful work.
56
High-performing companies have found ways to en- rich the employee experience, leading to purposeful, productive, meaningful work.
Innovative companies look to employees them- selves for inspiration. Cisco,8 IBM, GE,9 Airbnb,10 and many other companies have used hackathons to collect employee ideas and design new approach- es to performance management, workplace design, benefits, and rewards. These open, collaborative ap- proaches engage employees directly in designing a
“perfect” employee experience.
Many leading firms are incorporating design think- ing to improve the overall employee experience. Nike, Commonwealth Bank of Australia, Telstra, Deutsche Telekom, and several other companies have redesigned their onboarding, recruitment, and employee self-service applications. In each case, the company developed a new set of mobile apps, new user experiences, or new service delivery solutions to improve and simplify life at work.11 HR should lead these conversations.
Companies are now carefully studying the work- place itself, seeking a flexible, collaborative, hu- manistic environment. Facebook’s new campus is beautiful, personalized, and filled with places to eat, collaborate, exercise, and work together.12 Ap- ple Inc., Google, LinkedIn,13 and workplace design companies such as Gensler,14 Steelcase,15 and Lees- man16 have introduced innovative new workspaces that bring together recreation, collaboration, and individual work in novel ways.17
Lessons from the front lines Ford Motor Co., with nearly 200,000 employees, is going through a transformation, with a mission to
“make people’s lives better by changing the way the world moves.”
With a focus on innovation, Ford is expanding its business model to fortify and transform its core automotive business while growing in the areas of electrification, autonomy, and mobility. These inno- vations are broad and deep, including investments in autonomous vehicles, mobile apps to facilitate car sharing and parking (FordPass),18 big data solu- tions to help people find open parking spaces and
faster routes,19 and “experience centers” to help cus- tomers experience all the digital solutions available through Ford automobiles and connected electron- ics.
These changes, driven by CEO Mark Fields, also require a change in the way executives think about their people. As the company moves from a product to consumer focus in its products and services, it is also moving from a product to employee experi- ence focus in its workforce solutions. While Ford is tackling this across all its core business processes, the HR team is leading the way, looking to deliver high-impact, innovative workforce solutions and experiences that improve workers’ lives. As Feli- cia Fields, group vice president, HR and corporate services, puts it, “Our mission is to make employ- ees’ lives better by changing the way we think about work, feel about work, and the way we do our work differently.”
For a company so established, global, and complex, this is not easy, and the only way to revolutionize the employee experience is to practice design think- ing at scale. As part of Ford’s broad HR transforma- tion initiative (which includes implementing a new global HR operating model and technology plat- form and focusing on digital HR apps), the company embarked on a global listening tour to understand
2017 Deloitte Global Human Capital Trends
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Rewriting the rules for the digital age
what is effective and what is problematic in its em- ployee experience.
Over the last year, starting with a three-week glob- al people strategy lab in which HR leaders from around the globe participated—and that included reviews with Fields and the executive team—Ford developed a new people strategy, HR vision, inte- grated plan, and business case. As part of its efforts to define its vision, the HR team deployed a compa- nywide polling process that let employees contrib- ute ideas, share their experiences, and rate and rank which HR products and services they felt were most important. The company also conducted workshops around the world, attended by more than 200 HR leaders, and leveraged regional focus groups with employees and people leaders across all areas of Ford’s business.
As a result of this broad and open feedback process (this was the first time Ford had done this on such a wide scale), the HR team is learning about what em- ployees really want, what problems and challenges they face at work, and how HR can better enable and empower them in their day-to-day work.
To turn this design thinking process into actionable results, the team then segmented the workforce
into three customer groups (employees, people leaders, and business/union/works council lead- ers), and developed a set of more than 30 customer- oriented “moments that matter” for each of these three segments. These “moments” were developed as personal statements, such as “enabling me to be successful in a new role,” “reinforcing my impact through feedback and development,” and “knowing where I stand and that my perspectives are valued.” Through these “moments,” the HR team is now working to create simpler, integrated, customer- focused processes and tools.
Ford found that many employees felt that people processes were overly administrative, complex, and not always useful in getting their work done. People leaders felt that HR business partners were over- whelmed by operational tasks, negatively impacting the time they could spend engaging and developing their teams. To address these issues, the HR team is now developing products and services that are more integrated and focused on the employee experience, tools that are more intuitive and user-friendly, an interaction model that allows the workforce to in- teract with HR through multiple channels, and programs that are “fit for purpose.” It is working to simplify everything HR does. All of this is aimed at improving the employee experience and freeing HR professionals to support strategic business needs.
This design thinking is folding into the company’s four-year HR transformation program, which was approved because of its strong alignment with Ford’s business transformation agenda. Ford’s people strategy and the HR transformation are now considered integral to the company’s focus on inno- vation and a new way of doing business.
Many complexities remain, of course. Ford’s work- force is located in more than 40 countries, each with unique local regulatory needs. Since manu- facturing plants and labor relations vary from loca- tion to location, designed solutions must be flexible and localized in many ways. The company is shift- ing its organizational focus from the “matrix” to a
“network of teams,” compelling HR to look at new ways to facilitate networks, collaboration, coaching, and career mobility to allow faster innovation. And of course, making processes simple is hard in itself when the company operates on multiple continents
By focusing on the employee experience,
HR leaders can improve employee
engagement, empower teams and leaders,
and develop workforce solutions that will be
useful and compelling to employees.
58
and develops a wide range of products, subassem- blies, and electronic offerings.
The lesson from the Ford experience is simple: By focusing on the employee experience, HR lead- ers can improve employee engagement, empower teams and leaders, and develop workforce solutions that will be useful and compelling to employees. As Ford continues to accelerate its transformation into a digital enterprise focused on improving mobility solutions around the world, the transformation of the company’s employee experience will be critical to the company’s success.20
Start here • Elevate the employee experience and
make it a priority: Recognize that the inte- grated employee experience is as valuable and can have as much (or more) of an impact as the customer experience strategy. Articulate a dif- ferentiated employee experience, and ensure it coordinates all aspects of the work, workplace, and workforce experience. Include the concepts of wellness and well-being in your strategy.
• Designate a senior leader or team to own it: Assign a senior leader for employee experience and orchestrate the functions of engagement, learning, career development, organizational design, analytics, and culture into a coordinated team so that HR can focus on the entire employee experience. Programs such as leadership development, performance management, workplace design, and rewards now fall into the domain of the integrated employee experience.
• Embrace design thinking: Study, listen to, and learn what employees are doing every day and discover new ways to simplify work and im- prove productivity, performance, and engage- ment. Develop employee personas and use them to develop journey maps.
• Consider experiences for the entire work- force: All segments of the workforce—candi- dates, full-time, part-time, freelancers, gig em- ployees, and even, often, alumni—will expect elements of the employee experience to be de- signed to attract and engage them.
• Look outside: Use information from Glass- door, LinkedIn, and others to spot areas of opportunity and weakness. Visit peer compa- nies and look for fresh ideas about how to re- design the employee experience. Investments in benchmarking generally pay for themselves many times over in productivity and a reduction in turnover.
• Enlist C-suite and team leader support: The involvement of senior executives and team leaders is critical, as daily management and en- gagement impact the overall employment brand. Senior leaders can be accountable for the em- ployee experience through goals, rewards, and other performance programs.
• Consider the impact of geography: Even though the trend is global, successful approach- es will vary by geography. International compa- nies should understand cultural differences in how employees perceive the work experience. Cultures that are more collective or group-fo- cused require different engagement programs than those that are more individual-focused.
• Measure it: Move beyond annual or biannual engagement surveys to regular pulse surveys and open feedback systems. Use candidate in- terviews, stay interviews, ongoing performance conversations, and exit interviews as ways to build a complete, real-time understanding of the issues your employees face. Consider instituting an employee net promoter score, which yields one number on the value of the employee experi- ence that can be regularly measured and tracked.
2017 Deloitte Global Human Capital Trends
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Rewriting the rules for the digital age
Figure 5. Employee experience: Old rules vs. new rules
Old rules New rules
Employee experience defined by annual engagement surveys
Employee experience defined as a holistic view of life at work, requiring constant feedback, action, and monitoring
Culture is a topic on the company website and perhaps on the wall, but not measured or defined through behavior
Company uses tools and behaviors to measure, align, and improve culture during change, M&A, and other major initiatives
Companies have a series of HR leaders across recruiting, learning, rewards, engagement, and other HR services
Companies have someone responsible for the complete employee experience, focused on employee journeys, experiences, engagement, and culture
Compensation, benefits, and rewards are managed with a focus on benchmarking and fairness
Compensation, benefits, rewards, and recognition designed to make people’s life better and balance financial and nonfinancial benefits
Wellness and health programs are focused on safety and managing insurance costs
Companies have an integrated program for employee well-being focused on the employee, her family, and her entire experience at life and work
Rewards are designed to cover salary, overtime, bonus, benefits, and stock options
Rewards also include nonfinancial rewards: meals, leaves, vacation policy, fitness, and wellness programs
Employee self-service is viewed as a technology platform that makes it easy to complete HR transactions and reports
The employee experience platform is designed, mobile, and includes digital apps, prescriptive solutions based on employee journeys, and ongoing communications that support and inspire employees
Deloitte University Press | dupress.deloitte.com
FAST FORWARD
In a world being transformed by digital technologies (“There’s an app for that”), increasing transparency (“What does Glassdoor say about us?”), and the rising demand for talented professionals and workers with fast-changing skills, employee experience will become an increasingly important dimension of competing for and engaging your workforce. Employee brand and reputation—the story that employees in the external world tell about your company’s employee experience—will be a critical competitive differentiator. Just as companies now measure customer experience through net promoter tools, social media monitoring, and customer segmentation, so will HR rigorously monitor the health and productivity of its employees. Real-time feedback tools will explode as pulse surveys and always-on feedback systems become commonplace and the definition of employee expands. We will design and monitor the experience of contractors, contingent, and gig workers too.
60
1. Wikipedia, “NetPromoter,” https://en.wikipedia.org/wiki/Net_Promoter. NetPromoter asks a simple question: “On a scale of zero to ten, how likely is it you would recommend this company as a place to work?” Using this question, organizations can sort employees into promoters, passives, and detractors, similar to the identical question used widely with customers.
2. Josh Bersin, “Becoming irresistible: A new model for employee engagement,” Deloitte Review 16, January 26, 2015, https://dupress.deloitte.com/dup-us-en/deloitte-review/issue-16/employee-engagement-strategies.html.
3. Bersin by Deloitte proprietary research with Glassdoor.
4. Kate Taylor, “Chick-fil-A is beating every competitor by training workers to say ‘please’ and ‘thank you,’” Business Insider, October 3, 2016, www.businessinsider.com/chick-fil-a-is-the-most-polite-chain-2016-10.
5. Deloitte and Facebook, “Transitioning to the future of work and the workplace,” November 2016.
6. Bureau of Labor Statistics, “Overview of BLS productivity stats,” www.bls.gov/bls/productivity.htm, accessed December 21, 2016.
7. Project Time Off, The state of American vacation 2016: How vacation became a casualty of our work culture, p. 6, www.projecttimeoff.com/sites/default/files/PTO_SoAV percent20Report_FINAL.pdf, accessed October 6, 2016.
8. Jeanne Meister, “Cisco HR breakathon: Reimagining the employee experience,” Forbes, March 10, 2016, www. forbes.com/sites/jeannemeister/2016/03/10/the-cisco-hr-breakathon/.
9. Executive conversations with authors.
10. Ben Whitter, “Bye, bye, human resources,” LinkedIn, July 27, 2015, www.linkedin.com/pulse/bye-human- resources-ben-whitter-%E6%9C%AC%E7%BB%B4%E7%89%B9.
11. Executive conversations with authors.
12. Todd C. Frankel, “What these photos of Facebook’s new headquarters say about the future of work,” Washington Post, November 30, 2015, http://wpo.st/93cX2.
13. Executive conversations with authors.
14. Gensler, 2013 U.S. workplace survey: Key findings, 2013, www.gensler.com/uploads/document/337/file/2013_US_ Workplace_Survey_07_15_2013.pdf, accessed December 21, 2016.
15. Steelcase, Boosting employee engagement, November 12, 2014, www.steelcase.com/insights/articles/boosting- employee-engagement-place-matters/.
16. Leesman, Leesman_review, 2016, http://origin.misc.pagesuite.com/pdfdownload/51d9a04a-9157-480a-beff- e6e5aa71d882.pdf, accessed December 21, 2016.
17. Kerri Hughes, “16 stimulating design offices to stir the senses,” Creative Bloq, February 19, 2016, www.creative- bloq.com/design/design-offices-912828; see also John Hagel, John Seely Brown, and Tamara Samoylova, Work en- vironment redesign: Accelerate performance through talent, Deloitte University Press, June 3, 2013, https://dupress. deloitte.com/dup-us-en/topics/talent/work-environment-redesign.html.
18. Fordpass, “Home,” www.fordpass.com/, accessed January 30, 2017.
19. Kirsten Korosek, “Ford’s plans to do more than just sell cars,” Fortune, January 12, 2016, http://for.tn/1mStuQp.
20. Conversations with Ford senior management, November 2016.
ENDNOTES
2017 Deloitte Global Human Capital Trends
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Rewriting the rules for the digital age
Josh Bersin, Bersin by Deloitte, Deloitte Consulting LLP | [email protected]
Josh Bersin founded Bersin & Associates, now Bersin by Deloitte, in 2001 to provide research and advisory services focused on corporate learning. He is a frequent speaker at industry events and a popular blogger. Bersin spent 25 years in product development, product management, marketing, and sales of e-learning and other enterprise technologies. He has a BS in engineering from Cornell, an MS in engineering from Stanford, and an MBA from the Haas School of Business at the University of California, Berkeley.
Jason Flynn, Deloitte Consulting LLP | [email protected]
Jason Flynn leads Deloitte’s global Rewards practice. He has more than 20 years of consulting experience, helping multinational organizations design, deliver, communicate, and manage total rewards programs to support their business and talent strategies. Flynn’s broader HR consulting experience includes supporting talent management, HR transformation, and other human capital initiatives.
Art Mazor, Deloitte Consulting LLP | [email protected]
Art Mazor is Deloitte’s global leader for HR Service Delivery and a thought leader in HR transformation strategy. He collaborates with global clients to achieve business impact with a focus on transforming human capital strategies, programs, and services. With a balance of strategic planning, operating model and organization design, process transformation, technology deployment, governance, and change management, Mazor helps generate tangible results through innovative and pragmatic solutions.
Verónica Melián, Deloitte SC | [email protected]
Verónica Melián is the Human Capital practice leader for Deloitte LATCO and the global leader of Deloitte’s Culture practice. She has more than 20 years of consulting experience, specializing in large-scale global transformation projects. Melián’s work focuses primarily on culture change, leadership alignment, communication, HR, and talent strategies.
AUTHORS
CONTRIBUTORS David Brown, Alyson Daichendt, Robin Erickson, David Mallon, Yves van Durme
62
Attracting and retaining the right talent
Scott Keller Mary Meaney
Organization November 2017
2 Attracting and retaining the right talent
Attracting and retaining the right talent
The best workers do the best and the most work. But many companies do an awful job of finding and keeping them.
In the book Leading Organizations,1 McKinsey senior partners Scott Keller and Mary Meaney address the ten most basic issues facing leaders: attracting and retaining talent, developing the talent you have, managing performance, creating leadership teams, making decisions, reorganizing to capture value quickly, reducing overhead costs for the long term, making culture a competitive advantage, leading transformational change, and transitioning to new leadership roles. This article, drawn from the book’s opening chapter, speaks to the first of these topics. Future articles will deal with reorganizing to capture maximum value quickly and with successfully transitioning to new leadership roles.
Why is talent important? Superior talent is up to eight times more productive It’s remarkable how much of a productivity kicker an organization gets from top talent. A recent study of more than 600,000 researchers, entertainers, politicians, and athletes found that high performers are 400 percent more productive than average ones.2 Studies of businesses not only show similar results but also reveal that the gap rises with a job’s complexity. In highly complex occupations—the information- and interaction-intensive work of managers, software developers, and the like—high performers are an astounding 800 percent more productive (Exhibit 1).
Suppose your business strategy involves cross- functional initiatives that would take three years to complete. If you took 20 percent of the average talent working on the project and replaced it with great talent, how soon would you achieve the desired impact? If these people were 400 percent more productive, it would take less than two years; if they were 800 percent more productive, it would take
less than one. If a competitor used 20 percent more great talent in similar efforts, it would beat you to market even if it started a year or two later.
You get even more remarkable results comparing the productivity of the top and bottom 1 percent. For unskilled and semiskilled jobs, the top 1 percent are three times more productive; for jobs of middling complexity (say, technicians and supervisors), 12 times more. One person in the top 1 percent is worth 12 in the bottom 1 percent. For high-complexity jobs, the differential is so big it can’t be quantified.3
The late Steve Jobs of Apple summed up talent’s importance with this advice: “Go after the cream of the cream. A small team of A+ players can run circles around a giant team of B and C players.” 4 Management guru Jim Collins concurred: “… the single biggest constraint on the success of my organization is the ability to get and to hang on to enough of the right people.” 5
Great talent is scarce
The term “war for talent” was coined by McKinsey’s Steven Hankin in 1997 and popularized by the book of that name in 2001.6 It refers to the increasingly fierce competition to attract and retain employees at a time when too few workers are available to replace the baby boomers now departing the workforce in advanced economies.
Fast forward to the wake of the Great Recession, and the war for talent turned into the war for jobs. In economies gripped by financial crises, unemployment hit levels not seen since the early 1980s, so there was no shortage of applicants for many openings. When Walmart launched a new Washington, DC, store in 2013, for example, it received 23,000 applications for 600 positions.
3Attracting and retaining the right talent
It was harder to get entry-level work there than to be accepted by Harvard: 2.6 percent of Walmart applicants made it through, as opposed to 6.1 percent for the Ivy League university. 7
Yet this didn’t end the war for talent. In medium- and higher-complexity positions, where stronger performers have an increasingly disproportionate bottom-line impact, the opposite was true. In those uncertain times, gainfully employed talent became less likely to change employers, so people who had an advantage going into the crisis had an even bigger one. Further, pressure to reduce HR costs made it harder to identify and attract the most talented people. Everything suggests that the war for talent will rage on. “Failure to attract and retain top talent” was the number-one issue in the Conference Board’s 2016 survey of global CEOs—before economic growth and competitive intensity (Exhibit 2). In more complex jobs, this will continue to be true as baby boomers (and their long experience) exit the workforce and technology demands more sophisticated skills.
A McKinsey Global Institute study8 suggests that employers in Europe and North America will require 16 million to 18 million more college- educated workers in 2020 than are going to be available. Companies may not be able to fill one in ten roles they need, much less fill them with top talent. Yet in advanced economies, up to 95 million workers could lack the skills required for employment. Developing economies will face a shortfall of 45 million workers with secondary- school educations and vocational training.9
Most companies don’t get it right
Since business leaders know that talent is valuable and scarce, you might assume that they would know how to find it. Not so (Exhibit 3). A whopping 82 percent of companies don’t believe they recruit highly talented people. For companies that do, only 7 percent think they can keep it.10 More alarmingly, only 23 percent of managers and senior executives active on talent-related topics believe their current acquisition and retention strategies will work.11
Exhibit 1 The relationship between quality of talent and business performance is dramatic.
CDP 2017 Attracting and retaining the right talent Exhibit 1 of 4
Productivity gap between average performers and high performers, by job complexity, %
Source: “McKinsey Global Survey: War for Talent 2000,” refreshed in 2012
Low complexity
Medium complexity
High complexity
Very high complexity
50
85
125
800
4
These leaders aren’t being humble—most companies just aren’t good at this stuff. Gallup reported that in a 2015 survey, more than 50 percent of respondents were “not engaged”; an additional 17.2 percent were
“actively disengaged.”12 Related surveys report that 73 percent of employees are “thinking about another job” and that 43 percent were more likely to consider a new one than they had been a year earlier.13
The fact that the Baby Boomers’ decades of knowledge and experience are now leaving the workplace forever makes this state of play more unsettling. At the natural-resources giant BP, for
example, many of the most senior engineers are called “machine whisperers” because they can keep important, expensive, and temperamental equipment online. If high-quality talent isn’t brought in to replace such people, the results could be catastrophic.
And the scarcer top talent becomes, the more companies that aren’t on their game will find their best people cherry-picked by companies that are. In future, this will be even more likely, since millennials are far less loyal to their employers than their parents were. The Bureau of Labor
Exhibit 2 Almost one-third of senior leaders cite finding talent as their most significant managerial challenge.
CDP 2017 Attracting and retaining the right talent Exhibit 2 of 4
Predicted shortage of talent by 2020, millions
Predicted shortage of talent by 2020, % of total demand
Source: The Conference Board
Advanced economies (Europe, United States)
China Sub-Saharan Africa and South Asia
India
Advanced economies (Europe, United States)
China Sub-Saharan Africa and South Asia
India
1010 1916
16–18 23 3113
High-skill workers Medium-skill workers
High-skill workers Medium-skill workers
Attracting and retaining the right talent
5
Statistics says that workers now stay at each job, on average, for 4.4 years, but the average expected tenure of the youngest workers is about half that.14 People often underestimate the cost of turnover: the more information- and interaction-intensive the job, the greater the threat to productivity when good people leave it, and the more time and money must be invested in searching and onboarding. And if competitors poach your talent, they get an insider’s understanding of your strategies, operations, and culture.
Talent matters, because its high value and scarcity— and the difficulty of replacing it—create huge opportunities when companies get things right. Let’s now turn to how they can do that.
What are the big ideas? Focus on the 5 percent who deliver 95 percent of the value Companies go through cycles of initiatives to improve their talent processes. Yet they reap only incremental improvements, and the vast majority of leaders report that their companies neither recruit
enough highly talented people nor believe that their current strategies will work.
What do these leaders miss? Let’s consider American football. If you asked people who is the most highly paid player on a team, they would correctly say the quarterback, the key person in the vast majority of plays. People would probably say that the second most highly paid player was the running back or the wide receiver, since they work directly with the quarterback to advance the ball. These people are wrong. It’s the relatively unnoticed left tackle, who protects the quarterback from things he can’t see and could injure him.
Some employees disproportionately create or protect value, and not all of them are obvious. A navy, for example, should obviously ensure that it has the best and brightest people commanding f leets of nuclear submarines. Equally, however, it should ensure that it attracts superior talent to the role of the IT-outage engineer, who prevents catastrophes for the crew, the environment, and humanity. In a world of constrained resources, companies should
Exhibit 3 A whopping 82 percent of Fortune 500 executives don’t believe that their companies recruit highly talented people.
CDP 2017 Attracting and retaining the right talent Exhibit 3 of 4
% of Fortune 500 executives who agree that their organizations ...
Source: “McKinsey Global Survey: War for Talent 2000,” refreshed in 2012
... recruit highly talented people
... know who are high and low performers
... retain high
performers
... develop people quickly and
effectively
... quickly remove low performers
18 14 7 3 3
Attracting and retaining the right talent
6
focus their efforts on the few critical areas where the best people have the biggest impact. Start with roles, not processes (which create generic solutions that don’t meaningfully improve results) or specific people (who might help you in particular situations but don’t build institutional muscle).
Picking the right battles isn’t easy—you must understand the true economics of value creation in specific roles. That’s precisely why this can be one of your secret weapons in the war for talent.
Make your offer magnetic—and deliver Leaders know the term “employee value proposition,” or EVP: what employees get for what they give. “Gives” come in many f lavors—time, effort, experience, ideas. “Gets” include tangible rewards, the experience of working in a company, the way its leadership helps employees, and the substance of the work (Exhibit 4). If your EVP is truly stronger than the competition’s, you will attract and retain the best talent. But for three reasons, few companies have EVPs that meaningfully help them win this war:
Not distinctive. A typical human-resources department spends months determining what employees want—a great job, in a great company, with great leaders, and great rewards. HR then says the value proposition should deliver all this, so the EVP resembles that of every business that’s gone through the same process. It’s better for companies to stand out on one dimension while not ignoring the others. Work for Google if you want to face complex challenges, for Virgin if Richard Branson’s leadership stirs you, or for Amgen if you aspire to
“defeat death.”
Not targeted. Although it’s fine to have an overall EVP, what matters most is a winning EVP for the 5 percent of roles that matter most. If data scientists are hugely important, for example, you’ll want an EVP that lets them invent things; offers a clear, rapid career progression; and helps them have a big impact.15
Unreal. An attractive EVP cooked up by HR and pushed through PR used to help secure the best talent. In the long term, however, this was always a losing proposition, since great people would quickly become disillusioned if the reality didn’t measure up. Today, however, talent won’t buy such promises at all. Employees are a more trusted source of information about working conditions than CEOs or HR chiefs.16 The same Internet and social media that help customers investigate product claims do the same thing for EVPs. Sites such as Glassdoor or Job Advisor offer peer ratings and reviews of what it’s really like to work for a company. Your EVP can’t be spin—it has to be distinctive, targeted, and real.
Technology will be the game changer Michael Lewis’s book Moneyball17 pits the collective old-time wisdom of baseball players, managers, coaches, scouts, and front offices against rigorous statistical analysis in determining which players to recruit. Analysis wins, changing the game forever. Could the same be true for recruiting top talent?
When the National Bureau of Economic Research looked into this, it pitted humans against computers for more than 300,000 hires in high-turnover jobs at 15 companies. Human experience, instinct, and judgment were soundly defeated: people picked by computers stayed far longer and performed just as well or better.18 This wasn’t the only such finding. University of Minnesota professors analyzed 17 studies and found that hiring algorithms outperform humans by at least 25 percent. “The effect holds in any situation with a large number of candidates, regardless of whether the job is on the front line, in middle management, or (yes) in the C-suite.”19
Many leaders find this hard to stomach, but some companies are abandoning old ideas. The waste company Richfield Management, for example, uses an algorithm to screen applicants for character traits suggesting a tendency to abuse workers’ compensation. Claims have since dropped by 68 percent.20 After Xerox replaced its recruitment- screening process with an online test from Evolve, attrition declined by 20 percent.21
Attracting and retaining the right talent
7
HR software systems from Oracle, SAP’s SuccessFactors, and Workday already gather information through sources such as LinkedIn to provide advanced warning when top talent may be thinking about jumping ship. At McKinsey, we used machine-learning algorithms to determine the three variables driving 60 percent of the attrition among our managers. Unexpectedly, all three are unrelated to pay, travel, or hours worked.
Although people analytics is a field still in its infancy, it’s gaining speed. In 2016, only 8 percent of companies reported that they were fully capable of using predictive modeling, but that was up from 4 percent in 2015.22 Leaders who don’t implement concrete plans to leverage technology in the war for talent will quickly fall behind. Yet machines alone won’t win it. In 1997, IBM’s Deep Blue computer thrashed grandmaster Gary Kasparov. Today, however, the world’s best chess players are neither computers nor humans, but human teams playing alongside computers.23 That will be true in business, too.
How do I make it happen? The new leader of a major US public institution had a mandate for change. Her department failed to meet the budget for five years. The press was having a field day with tales of incompetence, inefficiency, and bureaucracy gone mad. Morale was extremely low; key talent was leaving. The leader felt she knew what had to be fixed, but she didn’t have the talent. There was no quick fix—each division had its own approach to recruiting, and all were consumed with their immediate needs. The defectors were mostly the higher performers and specialist talent the organization wanted to keep.
1. Aspire
In the leader’s words, a team was commissioned to “fix the leaky bucket, and fill it with the finest stuff imaginable!” Core members from each division populated a task force to meet the challenge. Division leaders were told they were on the hook. The team first determined the talent requirements
Exhibit 4 One of the four elements most valued by top talent should be a source of distinctiveness.
CDP 2017 Attracting and retaining the right talent Exhibit 4 of 4
% of employees satisfied when their companies deliver
Source: “McKinsey Global Survey: War for Talent 2000,” refreshed in 2012
Great leaders Great company Great job Great rewards
Inspirational, supportive,
empowering; focused on development
Reputation, values, culture, business results,
and contributions to society
Interesting, opportunities for
growth and advancement, with
impact and meaning
Wages, bene�ts, and perks; non�nancial forms
of recognition
76818189
Attracting and retaining the right talent
8
for the organization’s five-year plan. Two roles were especially important: general managers and data-analytics specialists. The team then coupled this demand view of talent with a supply view and identified the gaps. Senior leaders gave the team a mandate for bold action.
2. Assess
With the priorities established, the team took a deep dive into the current mess. What did recruits in each target segment care about? How did the institution compare with their other options? Why were people in key roles departing? Which current approaches were and weren’t working? Using interview techniques to get behind superficial answers, the team gathered qualitative data. Quantitative data were generated by predictive analytics algorithms that determine patterns and an analysis of how general managers spent their time.
The organization’s value proposition—the promise of interesting work, on-the-job development, and an attractive, f lexible career path—turned out to be on target. However, the reality didn’t live up to it. When recruits called friends hired previously, they heard that the organization had gone “bureau-crazy.” Recruiters knew this, but their incentives were to get people through the door, so they hyped roles to meet short-term goals. Good talent left quickly, while others, happy with the security and relatively high pay, “quit and stayed,” remaining on the payroll but contributing little.
The team found that specialist candidates wanted a different value proposition: deeper technical development, opportunities for special projects, a more relaxed and informal environment, and freedom from administrative tasks.
3. Architect
The working team recommended two discrete career paths, for generalists and specialists. The role of general managers would be adjusted to let them play
more of a coaching (rather than a coordination) role. For data analysts, the team proposed more relaxed, informal recruitment events on school campuses and a stronger referral program. Predictive analytics showed that the organization had significant weaknesses for some roles. Its leaders agreed to “segment of one” discussions with the highest performers to understand their issues and fix them quickly.
Analytics suggested that ten vital leaders might be on the verge of leaving. They were engaged to help reinvent the EVP for the general-manager role—an approach that not only produced better answers but also helped to promote retention. Further changes were proposed for the annual succession-planning process (for instance, focusing on pivotal roles) and the recruitment process, to make both more efficient.
4. Act
The leader and top team led from the front—for example, by personally attending the newly overhauled top-talent development programs—to communicate the importance of making the target EVP real and vibrant. She quickly became known for asking two questions in every performance dialogue:
“what are your top five to seven priorities?” and “who are your top five to seven most talented leaders?” People learned that there should be a match between the answers. A talent office created to ensure progress reported on key metrics, such as time and cost to hire, as well as acceptance and attrition rates (overall and for key talent). These were studied with as much intensity as operational and financial metrics. To institutionalize transparency, the talent office developed an interactive dashboard with metrics on hiring, quality, fit, and efficiency.
5. Advance
The results appeared quickly: employee engagement shot up and attrition declined, especially among the most recent hires. Acceptance rates started
Attracting and retaining the right talent
9
improving, and employees became a powerful recruiting source. HR launched “choose who you want to work with” campaigns and made the most dynamic leaders and specialists “recruiting captains” for key campuses and career fairs.
Eighteen months later, after rising nearly 40 spots in the public sector’s Best Place to Work ranking, the organization found it easier to access talent, especially data scientists. Attrition dropped to historic lows, particularly in critical general- management and specialist roles. As a final sign of success, instead of trumpeting the organization’s downward spiral, headlines announced the bold new agenda and leadership.
1 Scott Keller and Mary Meaney, Leading Organizations: Ten Timeless Truths, London: Bloomsbury Publishing, April 2017, bloomsbury.com.
2 Herman Aguinis and Ernest O’Boyle Jr., “The best and the rest: Revisiting the norm of normality in individual performance,” Personal Psychology, Volume 65, Issue 1, Spring 2012, pp. 79–119, onlinelibrary.wiley.com.
3 John E. Hunter, Michael K. Judiesch, and Frank L Schmidt, “Individual differences in output variability as a function of job complexity,” Journal of Applied Psychology, February 1990, Volume 75, Number 1, pp. 28–42, psycnet.apa.org.
4 TalentTrust, “How Steve Jobs got the A+ players and kept them,” blog entry by Kathleen Quinn Votaw, October 31, 2011, talenttrust.com.
5 Jim Collins, Good to Great: Why Some Companies Make the Leap...And Others Don‘t, New York: Harper Business, 2001, harpercollins.com.
6 Beth Axelrod, Helen Handfield-Jones, and Ed Michaels, The War for Talent, Boston: Harvard Business School Publishing, 2001.
7 Ashley Lutz, “Applicants for jobs at the new DC Walmart face worse odds than people trying to get into Harvard,” Business Insider, November 19, 2013, businessinsider.com. Scott Keller is a senior partner in McKinsey’s
Southern California office, and Mary Meaney is a senior partner in the Paris office.
Attracting and retaining the right talent
8 McKinsey Global Institute, The world at work: Jobs, pay, and skills for 3.5 billion people, June 2012, McKinsey.com.
9 Richard Dobbs, Susan Lund, and Anu Madgavkar, “Talent tensions ahead: A CEO briefing,” McKinsey Quarterly, November 2012, McKinsey.com.
10 “McKinsey Global Survey: War for talent 2000,” extensive research conducted 1997 to 2000; survey of more than 12,000 executives at 125 midsize and large companies.
11 The state of human capital 2012: False summit, a joint report from McKinsey and the Conference Board, October 2012, McKinsey.com.
12 Amy Adkins, “Employee engagement in U.S. stagnant in 2015,” Gallup News, January 13, 2016, gallup.com.
13 Appirio, “This year in employee engagement 2016: Trends to watch,” blog entry by Jiordan Castle, March 7, 2016, appirio.com.
14 Jeanne Meister, “The future of work: Job hopping is the ‘new normal‘ for millennials,” August 14, 2012, forbes.com.
15 “Five ways to attract and retain data scientists,” Kellogg Insight, October 15, 2015, insight.kellogg.northwestern.edu.
16 Susan Adams, “Trust in CEOs plummets, but still beats trust in government,” January 23, 2012, forbes.com.
17 Michael Lewis, Moneyball: The Art of Winning an Unfair Game, New York: W. W. Norton, 2003, wwnorton.com.
18 Rebecca Greenfield, “Machines are better than humans at hiring the best employees,” November 17, 2015, bloomberg.com.
19 David M. Klieger, Nathan R. Kuncel, and Deniz S. Ones, “In hiring, algorithms beat instinct,” May 2014, Volume 92, Number 5, hbr.org.
20 Joseph Walker, “Meet the new boss: Big data,” Wall Street Journal, September 20, 2012, wsj.com.
21 Tom Starner, “The recruiting game,” Human Resource Executive Online, May 7, 2014, hreonline.com.
22 Josh Bersin, Laurence Collins, David Mallon, Jeff Moir, and Robert Straub, “People analytics: Gaining speed,” February 29, 2016, dupress.deloitte.com.
23 Chris Baraniuk, “The cyborg chess players that can’t be beaten,” BBC Online, December 4, 2014, bbc.com.
November 2017 Designed by Global Editorial Services Copyright © McKinsey & Company
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Managing talent in a digital age Online labor platforms make it easier to find—and harder to retain—talented people. They give companies a real opportunity to transform the way they recruit, develop, and engage their employees.
by Susan Lund, James Manyika, and Kelsey Robinson
It’s safe to say that when one out of every two working-age adults in the United States has registered for a certain website—LinkedIn, for example, boasts more than 122 million US members—it has achieved critical mass. In fact, LinkedIn and sites like Careerbuilder and Monster.com have changed the way employers and employees connect, and digital marketplaces such as Freelancer.com, Toptal, and Upwork have transformed the sourcing of contractors’ services around the world.
Digital labor platforms have also created a more transparent job market. Top performers know their value and are growing more footloose as a result; many are going online to find new opportunities and to evaluate potential employers. What’s more, a lot of people now scour platforms such as Glassdoor to learn what current employees have to say about their job satisfaction, company culture, and lifestyle. Companies that don’t manage their workplace reputations carefully or engage their employees appropriately will find themselves on the losing side of an increasingly digital war for talent.
March 2016
2
A new wave of digital tools can help companies to focus not only on hiring but also on managing, retaining, and developing employees. Digital labor platforms can pull these tools into an integrated whole as companies widen their labor pools, refine their recruiting and screening methods, and deploy their employees more effectively. Such tools, and the platforms that include them, can put the right person in the right job, identify gaps in skills, help employees as they gain new capabilities, chart career paths, and nurture the development of the next generation of leaders.
In short, digital labor platforms occupy a place at the frontier of big data analytics and IT-enabled performance improvement. Companies can capture substantial value by applying digital innovations to some of the most critical organizational challenges: matching the supply of and demand for labor, boosting productivity, and getting the most out of people. McKinsey Global Institute research suggests that businesses deploying digital labor platforms to their full potential could increase output by up to 9 percent, reduce employee-related costs by up to 7 percent, and add an average of 275 basis points to profit margins (exhibit).1
To date, many of the gains achieved with digital labor platforms have come through the external ones, such as LinkedIn. But to realize the full potential of the digital approach, it will also be necessary to use internally oriented platforms more effectively, so that organizations and employees can tailor their interactions and the information they share to their unique needs. In this article, we’ll highlight several of these newer, more internally oriented applications.
MATCHING LABOR SUPPLY AND DEMAND IN THE NEW ERA It’s no secret that the fight is on to retain the empowered worker. Today’s high performers have a better understanding of their own value; competitors and recruiters can now easily discover and screen them. Digital labor platforms make it easy for competitors to pick off the best people inside companies— and enable employees to be more empowered and to announce themselves to the world in previously unimagined ways. These platforms create new opportunities for employers to improve the way they assess and deploy their employees and, by doing so, to differentiate themselves as employers. But the platforms also create intensified competitive challenges and pressures from the external world and from employees themselves. Companies that have relied on large, closed internal labor markets will be under the most pressure.
1 This article is adapted from a report by the McKinsey Global Institute. For the full report, see “Connecting talent with opportunity in the digital age,” June 2015, mckinsey.com.
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The increased restlessness and mobility of employees is good for individuals and for the economy, but tough for companies without compelling employee value propositions.
Many companies rely on familiar data points to determine the potential of their existing and prospective employees; HR may focus, for example, on a person’s school, academic record, or previous employers. But these can be crude indicators of actual performance. Although Catalyst DevWorks has evaluated hundreds of thousands of IT systems managers, it has found no statistically significant correlation between a college degree and success in
Using online talent platforms can increase revenues by up to 9 percent and reduce costs by up to 7 percent.
QWeb 2016 Digital Labor Platforms Exhibit 1 of 1
1Includes productivity gains in front- and middle-of�ce workers. These can translate into revenue or other increased-output opportunities.
2Includes productivity effect for middle- and back-of�ce workers and savings in recruiting, interviewing time, training, onboarding, and attrition costs.
3Figures do not calculate to average, because of rounding.
Source: Bureau of Labor Statistics; company annual reports; McKinsey
260
Incremental impact of online talent platforms
Model organizations
Average:
Professional services Revenue: $2.5 billion Employees: 5,000
High tech Revenue: $11.1 billion Employees: 10,000
Hospital Revenue: $0.5 billion Employees: 2,000
Retail Revenue: $2.8 billion Employees: 15,000
Manufacturing Revenue: $2.4 billion Employees: 10,000
Bank Revenue: $31.7 billion Employees: 100,000
Output increase,1 %
Cost reduction,2 %
Profit impact, basis points
5% 5% 275 basis points3
9 540
230
110
120
255
7
4
5
4
6
7
4
3
3
2
6
390
Exhibit 1
4
that position. Using sophisticated algorithms to assess innate capabilities as well as IT knowledge, the company now hires, trains, and places a wide range of people, regardless of their educational credentials.
Digital tools can also help companies recruit candidates who are not actively job hunting. For instance, they can search GitHub, which hosts the largest repository of open-source code on the Internet, for examples of excellent coding and then contact its authors for recruiting purposes. TopCoder conducts regular online competitions that allow users, even those without formal training or experience, to showcase their technical skills to the companies that post challenges and award prize money. Codility, HackerRank, HireIQ, and TRUE Talent are additional examples of this emerging data-driven ecosystem, where the range of talent grows wider as subjective hiring biases fall.
Online tests, games, and analytics also improve the recruiting process. Good&Co uses online psychometric tests to assess whether a potential employee would be a good fit with a company’s culture and an effective match for a given job. And instituting a 30-minute online screening test comparing an applicant’s profile with those of top performers helped one leading company to reduce attrition among new hires and to raise productivity by 3 to 4 percent.
In fact, online labor platforms are already useful for more than just recruiting. Beyond the hiring process, companies can use digital tools to develop a pipeline of employees with diverse skills. As a result, organizations can not only get smarter about the workers they team together and deploy for specific initiatives and tasks but also address the capabilities they will need in the future. (To read more about the possibilities for these tools, see
“Organizing for the future,” on mckinsey.com.)
MAXIMIZING EMPLOYEE PERFORMANCE Digital labor platforms help recruit and organize a company’s employees, maximize their productivity, and boost their performance in other ways as well. The efficiencies for the company are clear. Done right, the cycle can also be virtuous: workers become more engaged, more fulfilled, and more effective as their careers progress.
Onboarding and training Labor platforms help create a more comprehensive, personalized, and rapid onboarding experience so that new employees add greater value more quickly. Appical (a Dutch start-up that uses digital games) and LearnUp
5
(which offers digital training programs for job candidates) are just two of the companies that create tools to make onboarding more productive. Developing an onboarding agenda helped Google boost the productivity of its new hires by up to 15 percent.2
In a business environment where technology is evolving swiftly, it’s not enough to offer one-time training. Companies in knowledge-intensive industries need mechanisms that support ongoing, self-directed, and virtual learning. Training platforms such as Litmos and Mindf lash enable companies to cut back in-person training sessions and create more effective online learning programs.
Raising employee engagement What’s more, predictive analytics can identify employees likely to depart, f lagging the need for mentoring, new jobs, or advancement to improve their satisfaction and engagement and thus decreasing employee turnover and raising productivity. Bank of America, for instance, has made its employees more engaged by using Humanyze’s sociometric badges (ID cards with embedded sensors that monitor interpersonal interactions) to gauge and improve the cohesion of call-center teams whose turnover dropped sharply as a result.
Wells Fargo has developed a predictive model to select the most qualified candidates for positions as tellers and personal bankers. Working with Kiran Analytics, the company identified the qualities that characterize engaged, high-performing employees in client-facing positions and then screened for those attributes in new candidates. By the end of the program’s first year, the retention of tellers and personal bankers rose by 15 and 12 percent, respectively.3
Strengthening leadership and creativity Online labor platforms can help companies cultivate the next generation of leaders; 3M, for example, has created an integrated workforce-planning platform that increased its employees’ internal mobility and boosted productivity by 4 percent. Google has taken digital innovation in human resources even further. Its People Analytics unit seeks to answer both tactical and aspirational questions, such as what impact relations among team members have on results and how best to tap the creativity of engineers. The group uses rigorous testing and statistical analysis to inform ( but not
2 Chris DeRose, “How Google uses data to build a better worker,” Atlantic, October 7, 2013, theatlantic.com. 3 Katie Kuehner-Hebert, “Predictive analytics for hiring,” BAI Banking Strategies, September 6, 2013, bai.org.
6
replace) human judgment about people decisions. Its proprietary analytics techniques have boosted the productivity of Google’s workers, both as individuals and as members of well-functioning teams.4
ILLUSTRATING THE POSSIBILITIES The impact of digital labor platforms and tools is significant and measurable: on average, according to our research, companies can realize an increase of 275 basis points in profit margins. Of course, not every organization will reap the same advantages. The extent of a company’s benefit will depend on the mix of people and skills it needs in its workforce and on its specific operating model. The biggest winners will have a large share of highly skilled workers and a frequently shifting mix of project teams. But even companies with mostly low-skilled workers will benefit, since digital platforms improve the assessment, deployment, and performance of candidates and reduce attrition and the need for costly recruiting.
Industry example 1: Brick-and-mortar retailers Typically, retailers that operate multiple physical stores hire in large volumes and suffer staff turnover as high as 75 percent a year. The majority of retail jobs do not require higher education but do call for excellent people skills. Moreover, seasonal spikes present a particular challenge: demand for workers rises by 50 percent or more during holiday periods. Throughout the year, these companies need to hire, screen, and train people rapidly and repeatedly.
Labor platforms can enhance the recruitment efforts, customer service, and back-office efficiency of such retailers, while predictive hiring can reduce their notoriously high attrition. These platforms also help such companies to identify high-performing workers for advancement and to provide them with tailored training—a priority in an industry where best-in-class organizations source 80 to 90 percent of their managers internally. In all, we estimate that online labor platforms can increase a given retail store’s output by 3 percent and reduce talent and HR costs by 5 percent, by enhancing the value of the brand and winning customer loyalty.
Industry example 2: Professional-services firms Some of the largest gains online labor platforms generate will accrue to professional-services firms. Because they have so many client-facing
4 Laszlo Bock, Work Rules! Insights from Inside Google That Will Transform How You Live and Lead, New York: Twelve, 2015.
7
workers and so few back-office ones, the productivity gains will be ref lected mostly in increased output, which we estimate can rise by up to 9 percent, while employee-related costs can fall by up to 7 percent. The biggest impact will come from recruiting people with more appropriate skills and from helping employees to access internal knowledge. In global firms, where expertise is dispersed across offices and client work spans industries and functions, digital platforms can help catalog individual expertise at a detailed level. Team-formation tools also take knowledge, interpersonal traits, timing, and geography into account.
EMBRACING THE OPPORTUNITY—AND ADDRESSING THE CHALLENGE Like any tool, a digital platform for managing people must be wielded properly. Most organizations lack integrated systems to manage their current employees—let alone to identify and engage with potential ones or to develop long-term plans for the needs of the workforce. With multiple systems and fragmented data, HR’s visibility into such issues is limited. Migrating data, establishing common standards and protocols, and simply becoming more adept with big data pose significant challenges. (For one company’s experience, see “How Ericsson aligned its people with its transformation strategy: An interview with chief HR officer Bina Chaurasia,” on mckinsey.com.) Only a few companies, most of them new, approach these challenges in a digitally integrated way.
But companies that adopt digital labor platforms early and develop a more analytic and integrated approach to the workforce stand to gain significant advantages. Digital platforms could reduce the transaction and interaction costs of many day-to-day HR tasks; boost efficiency, innovation, customer service, and employee engagement; and reduce attrition.
Many companies have invested heavily to apply digital tools and big data analytics to other corporate functions but have hesitated at the doors of HR, where human judgment has always been central. They’re understandably skeptical about the idea that a more quantified approach to hiring can replace an interviewer’s “gut feeling.” But external studies and our own research reveal that the analytic approach reduces personal bias and, combined with human judgment, helps to land better hires. New technologies can demonstrably improve the customer experience while holding down the costs of attrition and training—and improving the workplace experience.
8
Newly empowered employees are already tapping today’s wired job markets. Competitive opportunities and easily accessible online tools allow those employees to gain a more informed sense of their external worth. Employers should take note and clearly articulate a value proposition for both present and potential employees. Labor-market f luidity is becoming a whole new ball game. Companies, new and old alike, cannot afford to sit on the sidelines.
The authors wish to thank Jacques Bughin, Richard Dobbs, and John Valentino for their contributions to this article.
Susan Lund is a principal at the McKinsey Global Institute, who is based in McKinsey’s Washington, DC, office; James Manyika is a director of MGI and a director in the San Francisco office; and Kelsey Robinson is an associate principal in the San Francisco office.
Copyright © 2016 McKinsey & Company. All rights reserved.
12/2/2020 Report: What Separates Great Managers From the Rest
https://www.gallup.com/workplace/236594/report-separates-great-managers-rest.aspx?version=print 1/7
M AY 1 2 , 2 0 1 5
Report: What Separates Great Managers From the Rest BY A M Y A D K I N S
S TO R Y H I G H L I G H T S
Talent is the most powerful predictor of managers' performance Managers have the greatest impact on employee engagement Talent should be the core of any human capital strategy
To win the global battle for the best customers, companies must choose managers based on their innate talent to lead. Naturally talented managers know how to develop and engage their employees, according to Gallup research. They create enthusiastic, energized teams that build highly successful organizations and engage customers.
Gallup's extensive research and analysis, reported in State of the American Manager: Analytics and Advice for Leaders, provides an in-depth look at what distinguishes great managers from the rest. What follows are some of the report's key findings.
Talent Is the Most Powerful Predictor of Performance
Companies that hire managers based on talent realize a 48% increase in profitability, a 22% increase in productivity, a 30% increase in employee engagement scores, a 17% increase in customer engagement scores and a 19% decrease in turnover.
12/2/2020 Report: What Separates Great Managers From the Rest
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Managers with high talent are more likely to be engaged than their peers. More than half (54%) of managers with high talent are engaged, compared with 39% of managers with functioning talent and 27% of managers with limited talent.
High-talent managers are more likely to be brand ambassadors for their companies. These managers are more proactive about encouraging their friends and family to use their company's products and services, and they have a greater understanding of their company's brand promise.
Managers with high talent also place more emphasis on employees' strengths than their weaknesses. Gallup has found that a strengths-based approach is associated with greater levels of employee engagement and well-being and team productivity and profitability.
Managers Have the Greatest Impact on Engagement
Great managers consistently motivate their teams to achieve outstanding performance. They create environments where employees take responsibility for their own -- and their team's -- engagement and build workplaces that are engines of productivity and profitability.
But not every team has a great manager. That's why managers account for at least 70% of the variance in employee engagement scores across business units. Gallup's study of employee engagement found that just 30% of U.S. workers are engaged, demonstrating a clear link between poor managing and a nation of "checked out" employees.
The percentage of engaged managers is only somewhat higher than the percentage of engaged employees. Gallup research has found that 35% of managers are engaged, 51% are not engaged and 14% are actively disengaged.
Through their impact, Gallup estimates that managers who are not engaged or who are actively disengaged cost the U.S. economy $319 billion to $398 billion annually.
One in two employees have left their job to get away from their manager at some point in their career.
12/2/2020 Report: What Separates Great Managers From the Rest
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Managers' engagement has a direct impact on employees' engagement. Employees who are supervised by highly engaged managers are 59% more likely to be engaged than those supervised by actively disengaged managers.
Female Managers Are More Engaging Than Male Managers
While there are great female and male managers, Gallup has found that female managers are more likely to be engaged than male managers (41% to 35%, respectively). Individuals who work for a female manager are also six percentage points more engaged, on average, than those who work for a male manager.
Female employees working for female managers have the highest engagement (35% engaged), while male employees working for male managers have the lowest engagement (25% engaged).
Employees of female managers outscore employees of male managers on 11 of 12 engagement items on Gallup's 12-item employee engagement survey, the Q .
Specific Behaviors Can Help Managers Increase Employee Engagement
More than half of employees who "strongly agree" (give a 5 on a 5-point scale, with 5 being the highest) that their manager is open and approachable are engaged. At least two-thirds of employees who strongly agree that their manager helps them set work priorities and goals are engaged. And more than two-thirds of employees who strongly agree that their manager focuses on their strengths or positive characteristics are engaged.
What Companies Can Do to Hire and Develop More Great Managers:
Create a holistic, talent-based human capital strategy. Talent is the strongest predictor of performance in any role. Smart businesses place talent at the core of their human capital strategy, weaving it into every aspect of how they align, attract, recruit, assess, hire, onboard and develop managers. These companies clearly understand what success looks like in every manager role and strategically think about how each hire fits into their short- and long-term objectives.
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12/2/2020 Report: What Separates Great Managers From the Rest
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Grow, don't promote. As Gallup has found, companies repeatedly put people in manager roles because they were successful in previous roles or because they have been with the company for a long time. This is a flawed strategy with serious consequences for a company's engagement, financial performance and long-term sustainability. Businesses should be highly conscientious in their succession planning. A great front-line employee is not necessarily going to be a great manager, and a great manager is not necessarily going to be a great leader. Each of these roles requires a different set of talents. Companies should honor the differences between these roles and develop career paths for employees based on talent rather than title. Reward job performance, not job title. Top performers deserve the highest pay, whether they are in manager or front-line roles. In many cases, this type of pay-for- performance system may mean that employees make more money than their managers do -- and there is nothing wrong with that. High-performing employees are vital to a company's performance, which the company should compensate accordingly. Businesses back themselves into a corner when they tie pay to managerial status, creating an environment in which employees constantly compete for roles that don't suit them. Honor managers' need to continually improve. A job title doesn't negate an individual's need for ongoing learning. Companies need to make an investment in their managers and provide them with the resources, tools and support they need to refine and cultivate their strengths. Development is not dependent on tenure, and managers at all stages of their career should have opportunities to learn and grow, whether through a mentor or coach, group classes, conferences or some type of online learning. The best managers are always striving to improve, and their companies should encourage them to do so.
RELEASE DATE: May 12, 2015 SOURCE: Gallup https://www.gallup.com/workplace/236594/report-separates-great-managers-rest.aspx CONTACT: Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A +1 202.715.3030
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- Week 7 Citations
- Organizational Behavior - Chapter 15
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- USA Country Comparison - Hofstede Insights
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- 50-hr-and-recruiting-stats-for-2016
- 51-63 Pages from 2017 Deloitte Gobal Human Capital Trends
- Attracting-and-retaining-the-right-talent-Nov-2017
- Managing talent in a digital age
- Report_ What Separates Great Managers From the Rest
