How to Develop Loyal Employees

This is part two of a two-part series on the importance of developing and maintaining loyal employees. In part one, we explored why every company should focus on having loyal employees and how doing so contributes to its revenue. Part two offers tips of how to develop loyal employees.

When it comes to developing loyal employees, it’s not all about money. Often, senior management thinks that all it takes is a bigger paycheck to keep talented employees around. They often rely on the golden handcuffs, making it difficult for well-compensated employees to leave. But think about that for a second — they may stay, but do you really want your employees to feel like they are hostages? What do hostages do at the first possible opportunity? They flee!

So how do you develop loyal employees, the kind that wants to stick around and not just for a bigger paycheck? Here are just a few tips to get your business on its way.

1. The top way you inspire loyalty in your employees is through reciprocation. Be loyal to them. Let your employees know they are important to you. Treat them like they are humans and that you care about them. Ways to do this include rewarding good work and praising their efforts. As they say in parenting circles to encourage good behavior for children, “Catch them doing good.” Rather than only alerting employees for unsatisfactory performance, find something positive they have done and mention it. Another way is being flexible when their personal lives need attention. Don’t enforce rigid time-off policies. If your boss refused to give you a day off when your wife is in the hospital, how would you feel about that company?

2. Create a challenging but supportive environment that treats employees fairly. Remember the saying that “Employees don’t leave their job, they leave their manager.” If employees do not feel challenged and supported in their efforts, they feel unappreciated. Employees who feel unappreciated rarely stick around. As do employees who feel they’ve been treated unfairly. If you really want employees to resent the company, treat some better than others. Support your employees by providing job training, growth opportunities and asking about their career goals.

3. Get rid of the disloyal, negative employees. No matter how you treat them, some employees will always complain and seem to revel in negativity. That kind of behavior can bring down co-workers and can create a negativity vortex, sucking in other people in the office. Get rid of those people. You don’t need that negativity and they will never become loyal employees. Moods are contagious and if you have too many people who thrive on negativity, your office will become a toxic environment as well.

4. Have transparent and open communication with your employees. Employees hate to be left in the dark. Share the big picture with them. Get buy-in for the goals for your company. Build a team where everyone, no matter what the level, is invested in the success of your business. This can take various forms, from company-wide meetings, to newsletters, to daily stand-up meetings by department.

Share the victories with them. Emulate The Ritz-Carlton, where employees of every department in every hotel in the world gather every day for 15 minutes to share “wow stories.” These are tales of people who went above and beyond for customers.

These stories motivate employees, bond them in the goal of providing excellent service, and recognize those employees that provided it.

In my experience, the majority of people really do want to feel part of a team and like to be loyal to their companies. Don’t make it hard for them to do so.

How Loyal Employees Contribute to the Bottom Line

 

This is part one of a two-part series on the importance of developing and maintaining loyal employees. In part one, we explore why every company should focus on having loyal employees and how doing so contributes to its revenue. Part two offers tips of how to develop loyal employees.

When is the last time you heard about employees risking their jobs to stand up for a multi-millionaire? Or going so far as to organize a customer boycott? That was the situation at Demoulas Market Basket Inc. in Massachusetts where an ugly family feud was playing out this summer.

More than 200 office and warehouse workers walked off the job to support their ousted CEO, Arthur T. Demoulas. Artie T., as he is known to the company’s 25,000 employees, owned with other family members 49.5 percent of the supermarket chain. His cousin Arthur S. Demoulas and his family owned the other 50.5 percent and ousted Artie T. in June.

Employees protest the ouster of popular CEO Artie T. last summer. (Photo from www.bloomberg.com. Photographer: Suzanne Kreiter/The Boston Globe via Getty Images)

Employees protest the ouster of popular CEO Artie T. last summer. (Photo from http://www.bloomberg.com. Photographer: Suzanne Kreiter/The Boston Globe via Getty Images)

The company, founded in 1917, has $4.3 billion in annual sales and family members had been fighting bitterly since 1990 when there was a dispute over the transfer of shares. Lawyers have racked up a lot of fees in the ensuing court battles.

Hourly employees risked their jobs and urged customer boycotts for their boss, estimated to be worth around $675 million. Customers responded and boycotted the stores, even taping receipts from rival markets to store windows. Some analysts put the losses at more than $10 million a day.

Why? As one employee said in an article covering the feud put it: “We are a family and they messed with our dad,” said Charlene Kalivas, 57, a longtime Market Basket employee.

Artie T. won their loyalty by showing he cared about them. He did things like covering medical bills for employees’ sick family members, paying employees who were too ill to work, giving them good wages, decent benefits, Christmas bonuses and personally calling employees when a parent had died. “He’s one of us,” said a protesting employee. “He comes here and he knows everyone by name and treats us fairly.”

The decades-long family feud ended in August when Artie T. and his sisters agreed to purchase the 50.5 percent of the company owned by the other side of the family.

It was a costly, ugly family feud. And the winner was the man who had worked hard to win the devotion and loyalty of his employees.

Yet, you don’t hear too much about the need for businesses to retain loyal employees. They focus more on customer retention and spend millions on retaining them. How much do they spend on keeping loyal employees? Do they care?

They should. The long-term success of any company depends on finding and retaining qualified employees. For all you hard numbers people, consider this: researchers at the University of Pennsylvania surveyed 3,000 companies and found that if a company invested 10 percent of its revenue on capital improvements, it increased is productivity by 3.9 percent. If it invested the same amount in developing employee capital, its productivity more than doubled, to 8.5 percent.

It’s not just because treating your employees fairly is the right thing to do. It’s also the profitable thing to do.

Come back for Part Two when I’ll discuss ways to build employee loyalty.

 

 

The Value of Trust and Integrity in Negotiating

If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing.

Henry Kravis

I write and speak a lot about negotiation. It’s an integral part of a career as a turnaround authority. Anyone in the turnaround field spends a great deal of time negotiating on a client’s behalf with vendors, lenders, bankers and employees — sometimes even family members.

In a previous post, “A Key Ingredient to a Successful Negotiation,” I wrote about the importance of mutual respect among parties in reaching a beneficial and positive outcome for any negotiation.

While some people admire underhanded business tactics and thrive on dirty negotiating and attempts to smear people’s reputations — anything to score a win — I persist in believing that integrity in business still has a place. And conducting yourself at all times with integrity has the added benefit of actually helping you negotiate better deals.

Yes, engaging in dirty tactics may win you a few deals. But word of your character and the way you negotiate will get out. And soon your reputation as a dirty dealer will affect the way you are perceived. Before you even walk into a negotiation the next time, your opponent’s back will be up. They don’t trust you. And without trust and dealing with integrity, deals are much more difficult to make and can even fall apart.

I recently read an article on Forbes.com, “Success Will Come and Go But Integrity is Forever.” The author, Amy Rees Anderson, addresses the value of trust.

“The value of the trust others have in you is far beyond anything that can be measured. For entrepreneurs it means investors that are willing to trust them with their money. For employees it means a manager or a boss that is willing to trust them with additional responsibility and growth opportunities. For companies it means customers that trust giving them more and more business. For you it means having an army of people that are willing to go the extra mile to help you because they know that recommending you to others will never bring damage to their own reputation of integrity. Yes, the value of the trust others have in you goes beyond anything that can be measured because it brings along with it limitless opportunities and endless possibilities.”

In the book “Essentials of Negotiation” the authors Roy J. Lewicki, David M. Saunders and Bruce Barry write about the role of trust in negotiations. “Trust increases the likelihood that negotiation will proceed on a favorable course over the life of a negotiation.”

And in addition to producing more favorable outcomes for your clients during your career, you’ll enjoy a positive reputation for the rest of your life.

And that good reputation can lead to more business. Some of my best and long-standing referral sources are from professionals who sat across the table and appreciated integrity and my straightforwardness.

Even years later, will people remember that you negotiated a big deal for a client? Or are they more likely to remember the dirty way you did it.

I opened this post with a favorite quote from Henry Kravis. I had the fortune to work with him many years ago, so I know firsthand that his sentiments are sincere. He practices what he believes and is also a generous philanthropist.

As that great philosopher Bob Marley said, “The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.”

 

Short-Term Pain, Long-Term Gain

For almost 40 years, I’ve been working with distressed businesses to create value for stakeholders. Unfortunately, the one common theme is that at some point during its life cycle all companies will experience financial difficulties caused by our economy or by management making the wrong decisions. Some companies will experience these difficulties more than once.

It’s how the companies deal with these issues that determine whether they survive or become a statistic of another failed business. The same could be said for individuals — how we deal with adversity can determine our survival or success.

I come from a humble, poor background. We were so strapped for cash that we had to borrow money to bury my WWII veteran father in 1964. Thanks to Social Security, my sister and I received death benefits until we were 21. To make additional money, I mowed lawns at age 12, sold peanuts at football games and had a paper route. The entire family chipped in to help with finances.

Many families also implement survival strategies for the greater good of its members. Some cut out dinners in restaurants so their daughter can go to cheerleading camp. Others drive their cars for 200,000 miles so the family can live in a nicer home. One parent works a day shift while another works at night so they can always have one parent with the children and save on daycare.

We deal with short-term pain for long-term gain.

The same concept goes for the companies I work with. My job is to educate people at these failing companies and implement survival strategy. It’s a tough, stressful job because it does involve people’s lives. I know what it’s like to struggle financially and I don’t wish to take anybody’s job away.

However, generally a turnaround does involve cutting jobs, reducing pay, closing plants, changing products or product lines, and sometime firing senior management that made the wrong decisions. Companies must change direction to survive.

Just look at all of the companies throughout the years that have changed for survival — Coca Cola, GE, Home Depot, General Motors, Chrysler, banks, insurance companies, probably even your company. All of these businesses have made tough decisions for survival. Unfortunately, some don’t. What ever happened to the buggy whip and wooden wheel businesses?

Yes, it’s always tough when people lose their jobs. But I learned to view those necessary job cuts in a different way. Years ago I was driving my son Sam to school. He asked me what I was doing that day. I told him that I had a rough day ahead of me because I was going to Philadelphia to lay off 200 people and close a division of a company. He looked at me like I was an ogre and asked how the kids of those laid-off parents would be able to afford camp, get baseball gloves and enjoy candy (now with kids of his own his concerns still lie in these three areas).

I told him that by laying off 200 people and closing one plant, I was saving 600 jobs and keeping the company alive. Certainly what I had to do was terrible for some people, but it was for the greater good. If I didn’t let 200 people go today then I’d have to let 800 go next month.

The strategy worked. Less than a year later, the chain was merged into a national retail chain and jobs were restored as the footprint expanded. It was another case of short-term pain for long-term gain

Another analogy of a turnaround is that of being in an accident and going to the emergency room. The dedicated doctors and nurses sole goal is for you to survive. Hours of surgery, many stitches, amputation of extremities may be in order. Later, the patient goes to the plastic surgeon, buys a wig or obtains a prosthetic. But, we survive thanks to these dedicated folks. Short-term pain for long-term gain.

All of us individually have made decisions that involved short-term pain for long-term gain. And companies have to do the same.

The One Person Every CEO Needs

I love reading “The Corner Office” column by Adam Bryant in the New York Times on Fridays and Sundays. Adam talks with CEOs and other leaders about management and often asks about the lessons they learned on the road to success.

It’s refreshing how honest many of these leaders are. Yesterday, the column was about Penny Herscher, who is CEO of FirstRain, a business analytics firm. She admitted that she has a strong personality and started out too autocratic, sure she was right all the time. People told her they didn’t want to work for her, or they just left the company.

She mentions a mentor who made a big difference in her life. “He was one of the only people who would hold up a mirror to me and say, ‘O.K., that wasn’t good.’ I needed somebody who would tell me the truth. Many leaders with strong personalities never hear the truth because their people are afraid to tell them. The people who will tell you the truth are the most valuable people in your life.”

Bingo! In my career as a turnaround authority, I’ve seen so many companies in dire situations, on the brink of failure or bankruptcy. Sometimes the root of problems isn’t that hard to determine. Many of the employees knew it. Many in senior management knew it. But no one wanted to tell the CEO the truth.

Usually it’s because they fear losing their jobs, they might be punished, or ostracized, or they have tried several times in the past and their suggestions were ignored.

Every CEO or business leader has to have someone who will deliver the truth, no matter how unpleasant. You can’t fix what you don’t acknowledge.

I read an article online about a company that says it only works with “enlightened leaders.” The title of the article is “Destructive Leadership Practices: Is Your CEO in Denial?”

The author, Jeannie Walters, writes about a time she worked with a growing technology company that had a successful product and received a lot of press. But the high rate of employee turnover was hurting it and great talent didn’t stay.

Turns out, the CEO was “inflexible and demanding. They were too fearful to tell the truth about feeling overworked and under appreciated. Every new employee learned the secret code of ‘don’t ever offend the CEO,’ which also meant never critiquing his original work. This included the design of the logo (it was awful) and the user experience of the very product they were selling.”

She presented her findings about the company to the CEO, which were confirmed by the marketing director during the meeting. He didn’t want to hear it and declared all the information was wrong. Fast-forward a few months: the marketing director is gone and the company eventually shut down.

You’re most likely not going to like hearing about which areas are not working in your company, whether it’s that your management team isn’t functioning, your relationships with your vendors are not good or your business is not as well off financially as you thought it was.

Every CEO needs at least one truth teller in his or her life. You don’t have to like it, but you do have to make yourself open to hearing it, believing it and acting on it. It helps to remember that while you may go through short-term pain, it’s all for long-term gain. Don’t be a CEO in denial.

 

The Failures That Came Before

I like to write about failure, because it’s an integral part of success. Every one of my clients has succeeded, but only after a failure or multiple failures. We read about these mega-successful companies but sometimes don’t know about the failures these owners and founders dealt with along the way.

At the age of 39, Nick Woodman is a billionaire. He founded GoPro, a digital camcorder company recently valued at more than $3 billion. But before becoming one of the youngest self-made billionaires in the country, he had two companies that failed. His first was a site that sold electronics called EmpowerAll.com. It never got off the ground.

He did raise a lot of money for Funbug, a gaming site he started in 1999. But it went nowhere and shut down in April 2001. After coming up with the concept to attach cameras to athletes’ wrists, he launched his first device in 2009. Sales in 2013 were $985 million.

Jack Dorsey always loved computers and after working in dispatching services, came to value the ability to send short messages. He started a taxi dispatching service that worked through a website. But that company failed during the dot com crash.

He took that concept of short messages and used it to co-found Twitter, now one of the most popular social media sites in the world. One of his rules of success is “Fail Openly.” Oh, and also have an amazing haircut.

In an essay for the Wall Street Journal, “Dilbert” creator Scott Adams says his secret of success is failure. Before he achieved success with his comic strip he had several failures. These include his invention of a rosin bag that would attach to tennis shorts with Velcro. Turned out nobody wanted it and he couldn’t patent it.

He created “Dilbert” while working at a bank. He had drawn cartoons to liven up his presentations. After trying on and off unsuccessfully to get “Dilbert” into magazines and newspapers, he finally published the cartoon with United Media in 1989, becoming a full-time cartoonist of the popular cartoon in 1995.

In 2000, at the age of 22 Ben Huh started Raydium, a software analytics company. He managed to get investment money but a year later funds ran out and he couldn’t meet payroll.

But he didn’t lose his sense of humor and six years later, bought I Can Haz Cheeseburger. This odd sounding blog network, which is also the home of LOLcat, has been wildly successful, with half a billion page views a month. Investors were impressed enough to invest $30 million in this site of jokes about cats and other funny blogs in 2011.

The thing to remember is that these people learned something valuable from each failure that spurred them on and allowed them to ultimately become extremely successful.

Nick Woodman claims that it’s his fear of failing again that caused him to work 18-hour days to make GoPro a success, referring to it as “constructive fear.” In an article on Forbes.com, he said, “I was so afraid that GoPro was going to go away like Funbug that I would work my ass off. That’s what the first boom and bust did for me. I was so scared that I would fail again that I was totally committed to succeed.”

Failure is not a barrier to success. It’s merely a step. As Scott Adams said, “Success is entirely accessible, even if you happen to be a huge screw-up 95% of the time.”

That’s what life is really about — learning from our mistakes.

 

Trusting Your Gut More important Than Ever

Researchers at Northeastern University conducted an experiment that involved subjects flipping a coin to see which of two tasks they would be asked to perform. One was short and enjoyable. The other one took longer and was more tedious.

Guess what percentage answered honestly when asked which side of the coin they got? Only10 percent. Others didn’t bother flipping the coin at all or just kept flipping it until they got the side with the easy task.

That’s just one study of many studies that researchers have been conducting to understand business ethics and why people behave the way they do. The sad reality is that while many of us still value integrity and dealing with people honestly, we can’t always count on co-workers or others we are conducting business with to behave in an honest fashion.

That’s why it’s even more important than ever to trust your gut in business dealings. You know that feeling — when something is just off and doesn’t add up.

Maybe you’ve been presented with a proposal for your business and while all the numbers and testimonials about the new service seem legit, something about it just doesn’t feel right.

Or your sales manager is offering an explanation for why his salespeople aren’t meeting quotas. You listen to what he’s saying, and while it sounds plausible, your intuition is telling you something is off.

We are most likely unconsciously calling up past bits of information that together have led us to that conclusion.

Our brains are wired to retain these bits of information and link patterns into clusters of knowledge. I learned a new term for this process of gathering information into meaningful groups. In psychology it’s known as “chunking,” a term coined by the late social scientist Herbert Simon PhD.

“When you see a tiny detail of a familiar design, you instantly recognize the larger composition—and that’s what we regard as a flash of intuition,” according to the article “When to Listen to Your Gut … and When Not To.”

When you can’t really put your finger on why something doesn’t seem right, that’s your gut talking to you. And that’s something you need to pay attention to.

As Mario Cuomo said, “Every time I’ve done something that doesn’t feel right, it’s ended up not being right.”

Over my 30 plus years in my career as a turnaround authority, trusting my gut has worked to my advantage in so many situations. Sometimes it’s when I meet with prospective clients and I can tell they aren’t really committed to making the changes that will be necessary to meet the desired goals. If I worked with them, we’d both end up frustrated.

I also trust my gut when I sense there will be a personality conflict with someone and again, we won’t be able to meet our goals if we don’t have a smooth working relationship. Although I generally get along with everyone, every now and then I sense that won’t be the case.

I also have a fairly good sense of when someone is lying to me. My job involves talking and listening to a large number of people, at all levels of a company. It doesn’t matter what their position is at the business, I can often tell if they are lying to me or just not telling me the whole truth.

While we often can’t explain our intuition or instinct, we know it to be a powerful thing. As Ralph Waldo Emerson said, “Trust instinct to the end, even though you can give no reason.”