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 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.

 

A Hackathon: Not Just for the Software Industry

This is a two-part series on hackathons. In the last column of my recent series on Innovation, I mentioned hosting a hackathon as a way to create an environment of innovation. In this series, I’ll cover what a hackathon is and how to host one at your company.

So what is a hackathon and why do you want to host one? Basically, a hackathon is an event that pulls together people from different departments into small teams for a limited time, generally with a specific purpose in mind.

Although hackathons originated in the software world, their purpose can be anything you’d like, and as large or small as you’d like. Maybe you’re looking for a new slogan or angle for a marketing campaign.

Shutterstock, a website for stock photos and music tracks, hosts a company-wide 24-hour hackathon ever year “to imagine, design and implement an idea they think can provide value to the company.” It awards prizes to employees for best ideas in categories like Biggest Customer Impact and Game Changer. According to the website, “the real prize is the passion and excitement that hackathons themselves evoke.”

Winners also get the opportunity to work on their hacks, perhaps developing it into a product for the company.

In a larger version of the event, AT&T is hosting its first hackathon at CTIA’s Super Mobility Week in Las Vegas next week. The theme of the two-day event is Code for Car and the Home. The purpose of the hackathon is to match developers with technical experts and give them access to a roster of sponsors.

As an incentive, the company is giving away $100,000 in cash and prizes. For example, Volvo is giving away $5,000 for the best app focused on car safety and Samsung is also giving away $5,000 for the best use of Samsung gear. Finalists are invited to stay an extra night and have the opportunity to show their app to industry professionals.

Many companies open up their hackathons to the public to encourage outside opinions and ideas. Having outside participants can also be beneficial for recruiting future employees.

Paypal is hosting a global competition in a series of “BattleHacks” this year held in 14 cities across the world. The challenge is to create code that solves a local problem and become the “Ultimate Hacker for Good.” The World Finals will be in November in San Jose, CA and finalists will compete for $100,000 grand prize and an awesome looking axe trophy.

In addition to creating excitement and possibly new products, campaigns or solutions to problems for your company, hackathons give people from different departments the chance to interact in ways their day-to-day jobs don’t provide.

One of the biggest benefits is that it allows employees the time to focus solely on one thing, harnessing the collection brainpower of several of your employees at once.

In my next column, I’ll cover the basics of how to host a hackathon to benefit your company and generate excitement among your employees. Oh, and no need to award large cash prizes either. Many hackathons are fueled solely with pizza and caffeine.

Getting the Most Out of Your Advisors

Welcome to part two of my three-part series on working with advisors. Last week, I discussed How to Find the Best Advisors for Your Business. This week I share my top tips on utilizing their expertise to foster the growth and success of your business.

  1. Be clear about your expectations and create accountability

A new advisor may have been planning on a phone call every quarter, while you envision monthly face-to-face meetings. In the article “How to Use Advisors to Supercharge Your Business,” Eli Portnoy writes about giving up some equity in his company to his advisors and getting nothing in return. “Our advisors were fantastic and really wanted to help. The problem wasn’t them, it was me. My advisors were brought on at random, and furthermore, I failed to create structure and accountability.”

Leveraging the lessons he learned the first time around, when he brought on new advisors he made it clear what he was looking for from them. He drew up a two-year contract that stated they would meet or talk on the phone every other week and have an in-person session or dinner once a quarter. If all obligations were met, they would receive equity in his company after the two-year period.

  1. Be honest with them

To get the most out of your advisors, you have to operate in an arena of mutual trust. That means you have to share the challenges you are facing and your financial situation accurately.

This may be uncomfortable at times if things are not going so well. But perhaps especially in bad times, your advisors can prove crucial to weathering a difficult situation by first forcing you to confront the issues.

I devoted an entire chapter to facing your harsh realities in my book, “How Not to Hire a Guy Like Me: Lessons Learned From CEOs Mistakes.” Failure to do so is one of the major mistakes I have seen CEOs make, time after time.

If you share your information honestly, your advisors can be the ones forcing you to face your harsh realities before it’s too late. Maybe you are having a cash flow problem and aren’t sure how to resolve it. One of your advisors may have dealt with a similar scenario and have suggestions on the best way to deal with the situation. You can’t get the best advice without revealing the true picture of the financial situation of your company.

Your advisors may have some other great ideas to share with you even when it’s not a time of crisis. Let’s say you’re having your most successful year yet. Your advisors may have ideas on how to build on and leverage that success.

  1. Listen to their advice

While this sounds like just common sense, I can’t tell you how many people I’ve dealt with who had ended up in dire financial shape and it wasn’t because they weren’t getting good advice. They just didn’t listen to it.

I read an article in the Wall Street Journal last week, “Tuning Out: Listening Becomes a Rare Skill.” The article cited a study done in 2011 in Organizational Behavior and Human Decision Processes that found that the more powerful the listener is, the more likely he is to dismiss advice from others.

You can gather the best advisors in your industry and share details about your business. But none of that will do a darn bit of good if you don’t actually follow it. These leaders are those that John Steinbeck was speaking of when he said, “No one wants advice – only corroboration.”

Finding the right advisors and working with them in the best way possible can make a huge difference in the success of your company. Eli Portnoy, the young man who made mistakes the first time around and then instituted structure and accountability, saw a huge difference in his company. “Thinknear took off within months of creating the new advisory board and structure. My personal weaknesses as a CEO became strengths and with the help of my advisors I was able to supercharge our trajectory.”

Advisors can make a big difference in your business, but there are still professional advisors you need to hire. For part three of this series, I’ll talk about those.

Joining the Team at GlassRatner

I’ve been chuckling to myself about the rumors of my retirement that I discussed in a previous column, “No Desire to Retire.” I wanted to let you know that I’m embarking on an exciting new opportunity.

I’ll be joining the well-respected team at GlassRatner Advisory and Capital Group LLC as a principal effective July 1. GlassRatner is a nationally known financial advisory services firm. I was attracted to the integrity of the GlassRatner team members, its national platform and reputation, and the work the firm has done in providing solutions to complex business problems.

They seem to be excited to work with me, too. And they love “How Not to Hire a Guy Like Me,”which of course, is an effective way to win my loyalty.

It’s funny; this opportunity just presented itself a few weeks ago and we’re off to the races already. In my work as a turnaround authority, I’ve learned to recognize good opportunities for growth and success when I see them. I am excited and honored to be joining GlassRatner and believe we will both benefit from the partnership.

Another aspect of GlassRatner I found attractive is its reputation as a collegial firm and the way they function as a team. Look for some of those team members to be guest contributors to my blog. I’m sure you’ll enjoy getting to know them as much as I will.

Creative Ways CEOs Communicate

One of my favorite features in my hometown paper, The Atlanta Journal-Constitution, is the “5 Questions for the Boss: Lessons Learned by Georgia’s Top Executives” that runs in the Sunday paper.

As readers of this blog know, I’m all about lessons learned. In fact, my book is called “How Now to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

A few weeks ago the reporter, Henry Unger, interviewed Phil Horlock, the CEO of the Blue Bus school bus company. Based in Fort Valley, GA, the company has 1,500 employees with sales reaching nearly $800 million this year.

Previously an employee at Ford, Phil was asked what he learned from Ford chief Alan Mulally, who is credited for that company’s remarkable turnaround. Phil’s response? “He taught me and others that you can’t manage a secret.” Phil said he learned that a company needs an open environment where people feel they can communicate what the issues are.

Every Thursday morning from 8 a.m. to noon all the leaders at Ford from all over the world would gather in a room or join by video conference and take turns discussing all the issues they were facing.

Phil says he brought that strategy to Blue Bird, cancelling a lot of the other separate meetings to hold one meeting on Thursdays. He noticed that productivity started to improve and he felt confident he knew what issues they were facing each week.

George Alvorson, chairman and CEO of Kaiser Permanente, has been sending companywide emails to close to 200,000 employees for six years. He termed them “Celebrations” and intended to continue the Friday afternoon practice for just a year. But as an article in the Chicago Tribune reports, he got a strong response to the emails and felt that writing them made him a better manager.

The emails contain data and information about what they are doing well in an effort to make the employees feel good about the company, but are based on absolute honesty, Halvorson said.  (If you’re interested you can read several of them in the book “KP Inside: 101 Letters to the People of Kaiser Permanente.”)

There are 6,500 employees of Epic Systems Corp., a privately held medical records company in Verona, Wisconsin with $1.5 billion in revenue in 2012. Most days, many of the employees are traveling around the world for installation or training on its software system. But once a month, every employee is on the 800-acre campus for the monthly meeting run by Founder and CEO Judy Faulkner. They enjoy free soft drinks and popcorn as they meet in the huge auditorium to be updated on company news.

Good communication is not just about making employees feel good about the company and about themselves, although those are worthy goals. Good communication also equals higher productivity.

According to an article written in 2011 by David Grossman, “The Cost of Poor Communications,” the total estimated annual cost of employee misunderstanding in the U.S. and the U.K in companies with more than 100,000 employees is $37 billion. On the flip side, companies with leaders that are effective communicators had 47% higher total returns to shareholders over the last five years compared with firms that have leaders who do not communicate as effectively.

I see ineffective communication all the time in my position as the Turnaround Authority. In fact it’s one of the common denominators of the companies that I work with. In addition to experiencing financial difficulties, just about every company I am brought in to turn around also suffers from poor communication among its management and employees.

One of the first things I do when I take over as CEO is to gather all the employees together and tell them exactly what is going on. I hold my own town hall meeting to quickly squash the negative effects of the rumor mill.

Is your company suffering from ineffective communication? I suggest you work on improving it. Or, well, you may just have to hire a guy like me.

 

Boots to Business: Veterans Succeed as Small Business Owners

As our country celebrates Veterans Day in recognition for those who have served in the military, there is good news about their unemployment rate. It has been going down in 2013 and in October was at 6.8%, compared to 7.4% in October 2012.

In honor of Veterans Day, I wanted to highlight a government program that is helping put more veterans to work and can actually benefit business by teaching veterans to use the skills they learned while serving in the military to start their own business. Operation Boots to Business is a U.S. Small Business Administration-sponsored training program to help transition service members to business ownership.

Studies conducted by the SBA concluded that veterans are more than twice as likely as the general population to start their own businesses and have those businesses succeed.

Operation-Boots-to-Business-Logo“Being in the military and being an army vet or a veteran, I have been built and trained to run my own business I think it’s a perfect fit and a perfect fit for veterans,” said Jenna Bazaric, Owner & Operator of a Tropical Smoothie Café in a video about the program. “We have the ability to react to change and to talk to and interact with all different types of people.”

Brian Iglesias served 13 years in the Marine Corps and is now President & CEO of Veterans Expeditionary Media. He credits his success to the training and education he got through the program and agrees that veterans have the skills to become successful.

“There are a lot of transferable skills that you can take from the Marine Corps and apply to your own business,” he said. “We have this take-the-hill mentality where we’re goal oriented. We don’t make comfort-based decisions. I have a dream and a vision to own my own business and my comfort comes second. And I’ll push myself and drive myself. That will to win, that will to succeed and to not surrender, to not give up has really helped me. Because it’s tough. Things go wrong. The best part about being a marine and having the military service is that we have the ability to thrive in chaos. Small business ownership is chaos. Things happen all the time and you have to be fast, smart and flexible to overcome those and continue to drive forward and succeed.”

Active duty military members and their partners or spouses are eligible for the program, which includes an intensive two-day intro at a local military installation, followed by an eight-week online course offered by the Institute for Veterans and Military Families, Syracuse University.

I’m in favor of any program that successfully helps those who served our country acquire the skills they need to succeed on their own in the world of business. I wish all the participants in this program the best of luck in their new endeavors.

Happy Veterans Day weekend to all of you and to all the veterans, thank you for your service.