Netflix

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Leftover Vacation Days and the Impact on Your Business

Americans did not use 658 million vacation days last year. For the first time ever, more than half of Americans (55%) did not use all of their days off, according to a study done by Project: Time Off. We are becoming the “No Vacation Nation.”

While Americans used to average three weeks of vacation a year in 2000, in 2015 they only took 16.2 days. That represents a loss of almost one week in 15 years.

Why would people essentially volunteer a week of their time every year for their company? The two biggest factors cited in the study were fear they would return to a mountain of work (37%) and that no one else can do their job (30%).

Unlike other developed countries, in the U.S. employers are not required to give employees paid time off. Employees in the European Union get a minimum of 20 days a year.

While a business owner or CEO may appreciate that their employees didn’t take their allotted time off, research shows their productivity may actually be lower when they don’t take breaks.

Studies show that when employees take time off, their productivity increases. “There is a lot of research that says we have a limited pool of cognitive resources. When you are constantly draining your resources, you are not being as productive as you can be. If you get depleted, we see performance decline. You’re able to persist less and have trouble solving tasks,” said Allison Gabriel, an assistant professor of management at Virginia Commonwealth University in the article “The Secret to Increased Productivity: Taking Time Off.”

In a Wall Street Journal blog, Dr. Kathleen Potempa wrote, “In addition to mental and physical stressors, long periods of work without vacation can lead to reduced productivity, diminished creativity, and strained relationships. Americans seem to believe that logging more hours leads to increased output, but respite deprivation can actually increase mistakes and workplace animosity—in addition to prompting or exacerbating stress-related illnesses.”

CEOs and business owners should look at their own calendars and clear time for vacation as well. Reed Hastings, the CEO of Netflix, takes six weeks a year. “I take a lot of vacation and I’m hoping that certainly sets an example. It is helpful. You often do your best thinking when you’re off hiking in some mountain or something. You get a different perspective on things.”

COO of Facebook Sheryl Sandberg says she was able to write her best-selling book “Lean In: Women, Work and the Will to Lead” because she took all of her vacation days. (I’ve written a book, and would be on the side of people who argue that’s not quite what I’d call a vacation.)

Tony Schwartz, the president/CEO of The Energy Project and author of “Be Excellent at Anything” says at The Energy Project they teach “the greater the performance demand, the greater the need for recovery.” Feeling burnt out one year, he went on vacation and completely disconnected from digital distractions. “By the end of nine days, I felt empowered and enriched. With my brain quieter, I was able to take back control of my attention. In the process, I rediscovered some deeper part of myself.”

Mark Douglas, CEO of the marketing and advertising company SteelHouse, recognized the need for his employees to take vacation and offered them unlimited vacation when he founded the company in 2010. But perhaps due to the reasons stated above, people weren’t taking much.

So he decided to pay them. To take vacation. He pays his employees $2,000 a year to go anywhere in the world. They can split up the money for more than one trip, or use it all at once. Employees who request the money in the form of a bonus are turned down. They must spend it on a vacation.

As a result, his turnover rate is extremely low. Out of 250 employees, only five people left the company in a three-year period, with three of them leaving for reasons unrelated to the job.

So if you are feeling a bit anxious when you see all the empty desks and email vacation notices at your company over the holidays, think of it this way: they are recharging their batteries and will come back more productive than ever.

Take some time off yourself. And enjoy.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

 

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We Are Not Family in the Workplace

You hear it all the time – “I love my job. We’re like family there.” It’s true that a workplace setting may sometimes resemble a family. You spend a lot of time together. You have parties together, go out to lunch, celebrate successes. Sometimes people in the office even get nicknames like Aunt Betty.

But there are big differences between a family and a business. Here are just two: a business has the goal of making a profit. And it can choose who gets to stay and who goes. With family members, for better or worse, you’re just stuck with them.

This family mentality, while it may sound inviting to outsiders and help with employees’ morale, is actually not what you want to encourage in a workplace. Yes, you can keep your parties and celebrations and encourage good relations and positive morale among co-workers. But the overall goal is to build a high-productivity team – not a happy family.

Let’s take a look at Netflix.

Netflix has 81 million subscribers and grew its revenue from $1.2 billion in 2007 to $6.8 billion. This pioneering company has changed the entertainment industry. Its history, place in our society and future is fascinating. You can read all about it in the New York Times Magazine article this past weekend, “Can Netflix Survive in the New World It Created?”

But there was a point early on when the company’s survival was in question. In 2001, after the internet bubble burst, Netflix had to lay off 50 of its 150 employees, cutting its staff by one-third. And what happened? The people who were left had to work harder, but were actually happier.

Founder and CEO Reed Hastings and former head of HR Patti McCord thought it was because they “held onto the self-motivated employees who assumed responsibility naturally.” They said office politics disappeared overnight.

Since then the company strives to maintain what Hastings calls its “high performance” culture. A lot of companies pay lip service to that value, but at Netflix, they mean it.

Netflix captured its culture in a slideshow the company produced in 2004. (And that has been viewed 14.5 million times.) This 124-slide, simply produced show includes the company’s philosophy of hiring, And firing.

“Like every company we try to hire well.”

“Unlike many companies, we practice: adequate performance gets a generous severance package.”

“We’re a team, not a family. We’re like a pro sports team, not a kids’ recreational team. Netflix leaders hire, develop and cut smartly, so we have stars in every position.”

The analogy of the kids’ recreational team versus the pro sports team is perfect to capture the mentality I’ve seen so often in my practice with GlassRatner. I mention a few stories in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

There was the company where the CEO’s grandmother was on the payroll, but whose primary responsibility seemed to knit the CEO socks. There was the beloved “Aunt” Tess who handled payroll, helping herself to the salaries of several non-existent employees every two weeks.

I’ve seen many companies that run more like a kids’ recreational team. Everyone gets a trophy and we love the ladies who brings the snacks!

But in real life, people who don’t perform get cut from the team. And the job of CEOs and senior management is to field the best team possible. Netflix does that early on by recognizing mediocre talent and paying them to get off the team.

Zappos has a similar philosophy for cutting people quickly who aren’t going to be the best team members. They famously use “The Offer,” giving new employees the opportunity to receive $2,000 to leave rather than starting the job.

Last year, Zappos had a large increase in turnover when 18 percent of the company took buyouts, an extension of “The Offer.” Zappos was unfazed, according to this article in The Atlantic, “Why Are So Many Zappos Employees Leaving?”

“We have always felt like however many people took the offer was the right amount of people to take the offer, because what we really want is a group of Zapponians who are aligned, committed, and excited to push forward the purpose and vision of Zappos.”

That’s the kind of team you want to build. A pro sports team. Team members who don’t perform can and will be cut.

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Increased Employee Freedom Helps Retain Top Talent

“Adequate performance gets a generous severance package.” That line is from a PowerPoint Deck with 127 slides written by Netflix CEO Reed Hastings and the former Chief Talent Officer Patty McCord that explains the company’s philosophy of talent management.

The deck has been viewed more than five million times, as reported in an article by Patty in the Harvard Business Review, “How Netflix Reinvented HR,” where you can also review this fascinating deck for yourself.

Maybe it’s been viewed so often because companies are looking to emulate the success of Netflix. After all, it is the world’s leading Internet TV network and has 44 million members. Last year its stock more than tripled.

Or maybe people are curious to learn about a company that has an unlimited vacation policy. As one of the slides in the deck reads: “There is no policy or tracking of vacation. There is also no clothing policy at Netflix, but no one comes to work naked. Lesson: you don’t need policies for everything.”

But that is exactly what happens as companies begin to grow. With each problem they encounter, they institute a new policy. More and more policies mean less freedom for their employees. Netflix found that as the most talented employees felt their freedom decreasing, they would leave.

Netflix began developing a philosophy of fewer policies in an effort to keep top employees. Since going public in 2002, traditionally a time when a company would put even more policies into place, it took the opposite approach: Netflix increased the level of talent at the company and increased employee freedom.

As two of the slides read, “Responsible people thrive on freedom, and are worthy of freedom. Our model is to increase employee freedom as we grow, rather than limit it, to continue to attract and nourish innovative people, so we have a better chance of sustained success.”

So unlike many companies that have strict vacation policies with complicated accrual formulas, Netflix has none whatsoever. Top management is encouraged to take several vacations each year, to refresh them and to serve as an example to their staff.

In an article in Businessweek in 2012, “How to Set Your Employees Free: Reed Hastings,” he wrote about Netflix’s “freedom and responsibility culture” and said they focus on what people get done, not how many hours they work. “We want responsible people who are self-motivating and self-disciplined, and we reward them with freedom.”

Patty McCord said in an article on www.fastcompany.com, “Netflix’s Major HR Innovation: Treating Humans Like People,” that she believes in most large companies 97 percent of the employees do great work on their own and don’t need much help from the human resources department. It’s the other 3 percent that takes most of HR’s energy, costing the company money. Netflix’s approach is to not hire those people in the first place.

I’ve seen something similar so many times in my career as the Turnaround Authority. A small percentage of people can sap the majority or resources of HR. It’s good advice for any company to work hard to find the other 97 percent who can thrive in an atmosphere of freedom and responsibility. And if you do hire people who don’t perform as they should, well, perhaps you can use Netflix’s philosophy on that as well. Reward mediocrity with a generous severance check.

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Want to be a CEO? Any Job Can Be a Good Start

A friend told me about attending a school meeting once and telling another woman that her son had a job as a bagger at a grocery store. The woman said, “What is he going to learn from that?” My answer? A lot.

These days I see a lot of people stressing over getting their children a fancy summer internship, thinking that experience is the key to success. While those may be valuable, I’m a firm believer that you can learn many life lessons from any job. Sometimes those first jobs, which may seem menial at the time, can actually teach you lessons that set you off on a successful career path.

As I’ve written before in “Two Ingredients for Success Never Change,” one of my first jobs was selling peanuts at Atlanta Crackers games. The skills I learned there helped lead me to my career as a turnaround authority. I’ve also worked as a bag boy and a paper boy.

404451_f260I’m not alone is parlaying what may seem like menial jobs into a successful career. A recent article in Fast Company, “The Surprising First Jobs of Famous CEOs” reveals some of the jobs the top CEOs in the country once held.

And more than one CEO of a major corporation got their start at a grocery store. The CEO of Costco, Craig Jelinek, started working on the weekends at a store when he was in junior high. His day started at 6:00 AM with cleaning the bathrooms, sweeping the floors and then boxing groceries. Marissa Mayer, CEO of Yahoo, started as a grocery clerk and says she learned a lot about developing a work ethic from that experience.

More than one CEO worked in a restaurant. Dell CEO Michael Dell, motivated to earn money to add to his stamp collection, washed dishes at a Chinese restaurant when he was 12. (Yes, that probably was in violation of child labor laws.) The CEO of Macy’s, Terry Lundgren, shucked oysters at a restaurant during college to pay the bills, after his father discontinued paying because he wasn’t taking his studies seriously.

Clarence Otis, Jr. is the CEO of Darden Restaurants, operators of Red Lobster and Olive Garden. He says he learned how to interact with a variety of people from his first job as a server at a restaurant at Los Angeles International Airport.

Seems I have something in common with Warren Buffet. We both had paper routes when we were children. But Warren was smart enough back then to claim his bicycle as a tax deduction.

The head of Netflix, Reed Hastings, loved his job selling vacuum cleaners door to door so much that he delayed going to college for a year.

A job, any job, can teach you responsibility, efficiency, organization, how to deal with people and how to get ahead. And that’s just for starters. In many cases, working at a menial job can provide the motivation to get educated for a better career. I know of more than one college student that took their studies much more seriously after a summer spent selling popcorn at a movie theater or stocking shelves at a warehouse.

Any job can be valuable for the lessons you can learn. If you’re just willing to learn them.

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6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 3

For the last two weeks we’ve been discussing the questions you should ask yourself to confront your business’s harsh reality. Read about Part 1 HERE and Part 2 HERE. This week, we’re going to ask ourselves the next two questions your should be asking.

5. Am I protecting the financial integrity of my company during downturns so that I am prepared to profit during better times?

Bad financial times prompt too many managers to take the turtle mentality. Don’t put your head in your shell until things turn up. Take the opportunity to see what is inefficient in your business by eliminating loss leaders and reducing inventory, and increasing marketing and sales expenses in high profit-margin areas. By shoring up problem areas during a downturn, you prepare your company to run lean and mean at all times.

This is not an excuse to avoid monitoring, evolving and preparing during good times, though. Many companies ride the wave of what’s working and worry about problems after the wave crashes on the shore. That’s the wrong approach. As long as you know it’s a wave, you know it will end. Come smoothly onto the shore, long since ready for the next wave. Companies that ignored this advice (not that they asked me) were satellite TV companies and Blockbuster. They both road their waves until they crashed into the shores of cable television and Netflix.

Speaking of crashing, if all of your assets and capital are invested in one area, and a problem occurs, operations will grind to a halt. If you have a Big Gorilla – one client, customer or product that accounts for 25% of more of your sales – you need to rethink what you’re doing. Along these lines, don’t bet the ranch on other opportunities; remain grounded in your decision making. In our experience, Big Gorillas are one of the top five reasons companies experience crises.

As above, consider the advantages of protecting your company’s financial integrity for more profitable times. There are always competitors who have issues, and if you keep cash or credit lines available then you can take advantage of someone else’s mistakes, acquiring new product lines or growing old ones.

6. Do our financial departments have sufficient controls and a fraud awareness policy?

75% of the fraud I discover is from first time offenders. That means the people who ultimately commit the fraud are not those who will come up in criminal background checks. Therefore, when working with your auditor, integrate sufficient checks and balances.

As the CEO you have to have a constant feel for your business financially. Walk the company and manufacturing floors – be hands on. Don’t let your guard down by taking your tie off and lounging in your office. Stay involved.

I once had a BBQ at 1 a.m. for a production crew at a company that ran 24/7. While doing this I discovered a multi-million dollar fraud. Do what would be considered out of the ordinary, and you never know what you’ll find.

One thing I recommend without exception is making your CFO/Controller take a two week vacation once a year. Don’t even let him in the building. Sit at his desk, or have someone else do it, and see what happens. You’ll be surprised every time as you find duplicate expenses, continued payment on cancelled leases or sold equipment, and perhaps personnel that don’t exist.

Conclusion

I hope these 3 posts about the 6 Questions to Ask Yourself to Confront the Harsh Reality of Your Business have been helpful. I’d love to know the answers to any of them if you care to share or questions that you would add to the list and that help you confront your harsh reality. Please share in the comments section below.

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“Good Times, Bad Times, You Know I’ve Had My Share”

If matters go badly now, they will not always be so.

– Horace

Business is cyclical, and the ups and downs are unavoidable. You have limited control over the corporate environment you operate in, and it’s often hard to exert immediate influence even within your own company.

But understanding this should help rather than hurt the way you manage your business affairs.

What you can control is the way you anticipate and react to the circumstances that cause periods of growth and decline. Always be aware of what factors influence the success of your business most strongly, and try not to be too phased when times are tough.

One of the most common mistakes I see amongst leaders of failing companies is that they re-act instead of take a proactive attitude towards their business.

Learn from their mistakes.

Don’t rely on the numbers you’re given. Don’t become complacent. Don’t believe projections. Have contingency plans. Have checks and balances. Face the harsh reality of your situation. Develop alternatives to your primary model and product offerings. Walk the floors of offices and manufacturing facilities.

Take Blockbuster, for example. Since its founding in 1985 until recently, things had been going well for the video and gaming rental giant. The company found a combination of products and services that were in high demand and it grew nationally as a result. But they failed to proactively seek an opportunity like their now main competitor, Netflix.

Now Blockbuster corporate strategists spend most of their time reacting to the evolutions of the movie rental marketplace that Netflix overwhelmingly controls. The company filed for Chapter 11 bankruptcy in September, 2010. Your company, like Blockbuster should have done over the years, needs to keep evolving whether the times are good or bad.

It is true that the biggest battleships are most difficult to turn around, but there isn’t a battleship too big to sink.

Keep Your Business Healthy

There are a few very important things to keep in mind to keep your business afloat and healthy:

1. You need to focus on overcoming the turtle mentality in your company. When things are going  badly, many people have a tendency to try to hide from and ignore the problem. Make sure that through an open communication policy, people feel comfortable sharing their concerns regarding the business. Wouldn’t you rather know if there is a problem that needs your attention while it can still be fixed?

2. Remember, it is not only your own perceptions and attitude you need to manage. Keep a positive attitude even during hard times. People look to you as an example, and they often jump to conclusions based on your behavior. You need to communicate with your colleagues and employees. If the business is in bad shape, be honest, but engage and reassure everyone in the process to make things better. Ask for their ideas and opinions, especially if they are key stakeholders.

Once, acting as CEO at a company with 24 hour operations, I decided to hold a barbecue for those working the night shift. At 1 am, I began cooking on the grill and talking to the team members. As a result, I discovered a multi-million dollar fraud case. Act out of the ordinary and you never know what you’ll find.

No matter how tough things are in the business, you have power. If you take steps to be a proactive leader, keep a policy of open communication with your employees and colleagues and maintain a positive attitude, you will likely land smoothly when a wave comes, rather than crashing onto the beach.

What bad times have you experienced? How did they end?