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Firing Up Organizations in Tough Times

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QuestionThings are very tight right now. Our outlook is uncertain and people are afraid for their jobs. Under these circumstances I’d expect people to get more done, but somehow, we aren’t more productive than before. Any hints?

Answer
It’s funny, being a human being. You would think that when the pressure is on, we would flip into resourceful, productive mindsets and valiantly overcome whatever obstacles block the path to our goals. Alas, it doesn’t happen that way. When we feel scared and uncertain, our forebrain shuts down and our hindbrain screams, “Run!” That worked great when spotting the saber-tooth tiger grinning at us through the grass. But in the modern world, that’s often the opposite of what we need to do to survive.

Fear motivates immediacy


Creating urgency is a first step in mobilizing organizations. But an important truth about humans is that urgency easily slips into fear. Fear mobilizes, and it mobilizes away from the perceived danger. Which way is “away from?” Whichever direction someone is pointed when that hindbrain screams “Run!” Everyone around will also move quickly—in whatever direction they happen to be facing. Fear gets people moving now, but it won’t move them in the same direction.

Fear does more harm than just scatter effort; it produces stress. Under stress, creativity vanishes, problem-solving abilities diminish, and people stop learning. They react from impulse, they don’t think through consequences of their actions, and they become less able to spot patterns and interconnections. This is fine for a five-minute burst of jungle adrenaline, but it won’t lead to a workforce that can navigate a tricky economy.

Any workforce living in stress will have problems over the long term. When morale is bad for months at a time, people disengage. They stop thinking about taking the company to new heights and start groaning when the alarm clock goes off—and groans rarely bring out peak performance.

Leadership motivates coordinated action


Fear’s companion is, oddly, leadership. Fear motivates people strongly, but in random directions. Leadership aligns them in the same direction. Call it what you will: inspiration, vision, mission—setting direction gives people something to move towards. By sharing a vision, everyone in an organization can orient themselves around the same set of high-level goals.

Working towards a larger purpose also mobilizes people, but it mobilizes them in a way that unlocks their creativity, problem-solving, and resourceful mental states. When working towards a large goal they perceive as achievable but challenging, people create eustress, a positive stress that gives them the energy and resources to make progress on the goal.

It’s a big improvement when everyone is moving in the same direction, but one more piece is needed: coordination. The balance between good stress and bad stress is delicate. Once people agree on a goal and are psyched to go there, coordination becomes ever more important. If two groups become blocked by a lack of coordination, bad stress can re-emerge and begin shutting down morale again. So once people are mobilized, the ongoing challenge is making sure they’re supporting each other, and not getting in each other’s way.

Reconnect leadership at the top


The first step to getting the work force back into a powerful, productive mental state is to start with yourself. You’ve probably got the “Run!” response down cold. Now it’s time to reconnect with your “towards” vision. People take emotional cues from their leaders, and if you’ve been stressed about the economy, you’ll be radiating it throughout your organization, so get yourself and your leadership team into a powerful, positive place.

Leave the daily triggers that pull you back into stress. Turn on the voicemail, turn off the e-mail, smash the cell phone, and head off for a weekend in a mountain cabin. Get enough sleep, enough food, and enough physical relaxation so your brain starts working again. Reconnect to your vision. Write, daydream, and brainstorm where you want your group in five years, a year, six months, and three months. Factor in your personal goals as well so you really tap your own intrinsic motivation.

You’ll know you’ve done enough when you feel a strong pull towards your goals. Uncertainty about the economy may still be in the background, but once you’ve regained your equilibrium, you will also feel a strong sense of where you’re going.

Spread that feeling to the rest of your leadership team. Invite them for an off-site, and together, clarify the vision of where you’re headed until it’s at least as clear as perceptions about current problems. Take the time to make sure everyone understands the direction. Bring in their goals, wishes, and aspirations for the organization. While you work, watch their faces. Notice the energy level. When they start getting excited, you’ve tapped their motivation and gotten them back on a powerful path.

Back to the business, decrease stress


Once you return to daily business, you’ll have to decrease stress as you align people. Stress from specific causes (“My kids are sick.”) can be addressed on an ad hoc basis. Stress from vague sources like “the economy” is general anxiety. Often, you can help people by just letting people talk. Listen empathetically and don’t rush into solving or analyzing problems (for most of us type-As, this is much, much harder than it sounds). Feeling listened to can be enough to help someone regain equilibrium.

If the anxiety is about Things We Don’t Really Like to Talk About—like the fear of layoffs—talking can help defuse them. There’s no better way to nurture a fear than to let it remain the stuff of speculation. When left to their imaginations, people deal with uncertainty by imagining the worst and then reacting as if it had already happened. Truth is a great antidote for uncertainty. It is, after all, a form of certainty. Discuss what’s happening, even if all you can say is, “No one knows what will happen, but we’ll keep forging ahead toward our goals.”

Oh, yes. Keeping people healthy is also essential to soothing their nerves. Make sure people are sleeping enough. Sixteen-hour days are probably as productive as ten-hour days with enough sleep and an after-work life. Unless you run an assembly line, productivity is probably tied only loosely—if at all—to hours worked (but that’s another column).

Connect people to forward motivation


As you decrease stress, have the leadership team bring the sense of direction into all interactions. Remind people about the direction. Rally them. Excite them. But don’t overdo it; this isn’t about creating a huge one-time pep rally high. You’re setting a direction for the organization that you want to pervade decision making and keep people steady over the long term.

You build the strongest connections when decisions are made. Have your teams ask continually, “Will this decision move us further in the direction we wish to go?” Once everyone unifies around this question, coordination becomes possible and it will be much easier for people to move forward, which is what productivity is all about.

Your job becomes keeping your leadership team tied to the company vision, and helping them propagate the vision to their teams in turn. People are more productive when they know where they’re going and feel like they stand a chance of getting there. By reducing their stress and fear, addressing their uncertainty, and linking everyday activities to a future direction, people will be able to concentrate on producing results, rather than just running in circles from their anxiety’s imaginary monsters.

Organizational Learning is No Accident

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QuestionWhy do companies fail to learn from their mistakes?


 
Answer

With so much riding on success, you would think that companies would be better at learning. Amazingly, it seems as if they fight tooth and nail against learning, often with disastrous results. The reasons, however, make a lot of sense. And once you understand the reasons, you just might be able to make a difference. If not, at least you can feel self-righteous when the insanity starts.

Few of us think much about learning when not in school or in a training environment. But learning doesn’t just happen; it takes reflection and thought. Reflection time used to be built into the world. It took three weeks for a head-office communication to arrive via Pony Express, allowing ample time to ponder and rethink decisions. Now we have overnight letters, junk mail, e-mail, voice mail, fax, cell phones, 30-second-delayed stock quotes, and the expectation that responding immediately is far more important than responding thoughtfully.

Organizations rarely build in time to do thoughtful learning, and when they do, that time is the first to go when emergencies beckon. When we built the original Quicken VISA card, we scheduled a learning debrief and documentation time. But long before the project’s end, other demands squeezed all the slack out of the schedule. The learning review was the first to go. If you don’t do it deliberately, learning won’t happen.

Implementing insights from a learning review is tough. Learning means behavior change. Organizationally, behavior change is daunting.

Think about what organizational change is: It’s changing structure and processes. At the very least, a lot of people must change how they work. Responsibilities, roles, and reporting relationships change. And that’s just in the easy case; learning that your phone system is the bottleneck in your customer service department may demand reworking physical plant and equipment in several locations. Getting the affected people together to coordinate can take weeks. Then new systems must be designed, built, and documented, and everyone must be taught how their jobs have changed. Then there’s still a learning curve for the new procedures. People get up to speed at the new ways of doing things, and only then has the business “learned.” And, oh yes, this all happens in spare time, because the normal workload is still present and has to be carried for the business to survive.

Part of changing the systems and structure is changing the people. A reorg can be done on paper in an afternoon. But changing just one person is hard, even when he or she understands the need for change (Yes, my doctor said to lower my intake of saturated fats, but those cookies at lunch yesterday were so good I just had to eat … six … of them). Ultimately, organizational learning is doomed to failure unless people can learn.

For starters, a lot of learning breaks down because it’s never communicated. Telling someone “Now you report to Sally and your department is no longer sales, it’s account relationships.” still leaves them to figure out how their day-to-day job has changed. They weren’t necessarily privy to the learning discussions, and can’t do anything meaningful without more information about the changes and the context.

Context answers the question “Why is this happening?” It’s especially important when motivating people. People like things to stay the same. But when we find out why the request was made, it suddenly makes sense. Without knowing the “Why?” most change just makes life difficult with no obvious payoff … thus, resistance.

Even if people understand the changes, they may not have the skills for the new job. When Microsoft learned that security matters to customers, Bill Gates proclaimed that all programmers would spend two months just fixing security problems. A great goal, to be sure, but the programmers had spent their careers building systems without regard to security. How can we expect them to suddenly develop the expertise to find—much less fix—any but the simplest security flaws?

And as with any change effort, Microsoft is starting with workers who uniformly lack the skills being developed. Over time, organizational priorities shape the work force. Security-conscious engineers never had a chance to develop their skills at Microsoft, so if they really cared they left years ago for companies more aligned with their style. Those who stayed are the ones who thrive in the “get it out the door and capture the market” mentality. So the change is starting with the employees least likely to intuit how the changes should happen.

Money can come to the rescue by training people. For a simple skill, it can be quick and easy. But training for large skills must be developed, delivered, and practiced. No matter how much we “thrive on chaos” and jump “into the vortex,” new habits take time to develop. Humans only change at a certain rate and we’ve never figured out how to speed that up. The world may change faster than ever, but people just don’t.

The ones who most need to change, however, are the managers. As the organization reshapes itself, resources will shift. That means money and people. Budgets will get slashed. Empires will topple. Even if everyone else is willing, one recalcitrant manager with the right budget authority can halt a learning effort in its tracks. Managers must let go and support the learning for it to happen. Being human, they can have as much difficulty changing their behavior as everyone else.

By now, I’ve probably convinced you that organizational learning is hopeless. But take heart: now that you know why learning is hard, you can deliberately make it easier.

Organizational learning isn’t easy. There’s no perfect solution. Despite the many reasons why learning is hard for individuals and even harder for organizations, it’s just a behavior that can become a habit. Develop the learning habit. Practice moving learning into individual action. Help people change and grow. Over time, the very forces that make change hard will come to your aid: those who don’t like learning will gradually leave, and you’ll attract a culture of people committed to learning. Even when an organization fights it, strong, dedicated action can at least produce pockets of smart business savvy.

How Your Company Can Learn From Mistakes

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QuestionAny ideas about how to capture lessons learned for a knowledge base—i.e. getting colleagues to NOT fear repercussions of admitting ‘mistakes’ and/or admitting what they did not know?

 
AnswerFirst, the Truth: most of us are afraid to admit mistakes or ignorance for good reason. Culturally, we don’t tolerate mistakes. Since first grade, we’ve been scolded, punished, given poor grades, passed over for promotion, ostracized, and belittled for our mistakes. 2003’s most popular TV series is “American Idol II.” The first several episodes were a countrywide mockery of talentless pop-star wannabes who at least had the courage to take a risk in front of 250 million people. Their reward? Public ridicule.

Sometimes we get the message that mistakes are OK. A well meaning, understanding person—usually from the Human Potential movement—says in a soft, caring voice, “It’s not a mistake, it’s a learning opportunity.” Two days later, the team member who didn’t make the mistake is promoted to team leader. It was a learning opportunity, all right. The learning was, “Don’t screw up, follow the rules, and we won’t punish you. You’ll take home your weekly paycheck, get your gold watch at retirement, and all will be well.”

Society’s message is, “Don’t admit mistakes or bad things will happen.” Before people will embrace their not-knowing, you have to make it safe, even desirable, to take risks.

The organization must support risk taking


Look first to your reward systems. Most organizations reward outcomes: sell the most, get promoted; meet your ship date, get a bonus; meet your earnings projections, get an analyst’s stamp of approval. The rewards come from reaching an outcome, no matter how it was reached. Imagine Laurie, a shoe salesperson for OutcomeCo. Laurie’s sales tactics work on just 1 percent of the customers. Fortunately, the territory is flush with that 1 percent, so meeting quarterly targets is a breeze. Laurie is motivated to milk the 1 percent, rather than take risks to capture the other 99 percent.

And why should Laurie take risks? Risk taking by its nature produces missed targets much of the time. The solution is to reward the learning process as well as the targets. Imagine LearningCo, where the bonus is based on helping the company move faster toward its goals by gathering useful information, developing better ways of doing things, or identifying what not to do again (mistakes). In LearningCo, Laurie is rewarded for capturing the 1 percent, but is also rewarded for noticing market trends, trying cool new sales tactics that don’t work—no doubt involving unicycles, French horns, and a powdered wig—and inventing cool new products that may someday take over the market.

People do what you pay them for, so pay them to learn. Add personal risk-taking plans to your yearly reviews. Ask, “Are you taking enough risks? How can I help you take more?” Applaud in public (and in private!) when someone fails at something wildly, audaciously new. Celebrate whoever has the wackiest new ideas. Otherwise, time spent thinking outside the box is also time spent thinking outside-the-bonus-structure. Given the choice between outside-the-box poverty and inside-the-BMW business-as-usual, don’t be surprised when people choose the BMW.

It’s hard to reward learning in an outcome-based culture; it takes real strength of conviction. Are you willing to pad your schedule with time for failures and experimentation? Will you step up to the plate and give a larger bonus to someone who learned and failed than to someone who reached an important outcome through sheer luck?

A software company rewarded their flagship product’s manager with a Hawaiian vacation when the product shipped. Since the flagship product accounted for 70 percent of the company’s revenue, the manager was given whatever budget and staff he requested to insure success. He had no need to learn; he could just commandeer more resources. Other managers—whose projects were cannibalized without notice for the flagship project—learned to streamline their development and ship on time with limited resources. Taken at face value, it sounds reasonable to reward the flagship manager more than the other managers, yet he contributed much less to the organization’s ongoing strength and capability. By not rewarding the other managers for their learning in a difficult situation, they eventually lost many of their good performers.

Support risk taking one-on-one


Once the organization structures support risk taking, support the behaviors one-on-one. When you see or hear someone pushing the edge of their thinking, step up and ask questions to push further. Brainstorm with them, and walk the example of encouraging people to push their (and the organization’s) edge. When someone has an idea that could lead to great learning, help her pursue it by giving her time and resources.

Also watch how others treat risk taking and mistakes. If you overhear someone making fun of someone else’s mistake or missed targets, ask them, “I wonder if the mistake was because they were trying something new?” Start exploring in conversation whether those present are taking enough risks. If you’re greeted with cynicism and incredulity, “If we did that, we’d just get fired and lose our bonuses,” celebrate! People are handing you their specific objections to risk taking. You can then ask simply, “What would have to happen for you to feel safe enough go out on a limb and try?”

Start learning reviews with facts


Even with one-on-one support for your people, it’s safest to structure project reviews as a review of facts. In fact, there’s no need to make a retrospective personal. Limit analysis to an examination of what did and didn’t happen. Keep personal responsibility out of it, and bring in personal commitment only when the team begins exploring the future. Once learning becomes commonplace, people will become comfortable owning their part in what happens.

At project reviews, the team will assume that its own behavior was flawless. The ubiquitous “they” was the source of all problems. “They” delivered materials late. “They” passed restrictive legislation. “They” didn’t provide the needed direction or focus. A team must get “they” out of its system before considering its own part in what happened.

Have everyone gather together facing a whiteboard (so it’s “us” vs. the whiteboard), and make a big list of everything that went wrong, no matter whose fault. List facts without judgment. If specific people are mentioned, remove the blame and just describe circumstances. “Bob handed in the report late” would become “Report handed in late.”

Then make a second list of all the good things that happened. Be specific. “We supported each other” is too vague. “We stayed late and took on each other’s work in order to meet a tight deadline” is just about right. At the end of this exercise, you’ll have a list of specific actions that can serve as a jumping-off point.

For each “bad” action, ask the team:

  • What choices could we have made to avoid the bad action?
  • What choices did we make that should have been avoided?
  • What misinterpretations of events, motivations, and actions did we make that led to the bad action?
  • What were the correct interpretations?
  • What do all these imply about what we should and shouldn’t do going forward?


For each “good” action, ask:

  • What did we do to cause this?
  • Is there anything we refrained from doing that allowed this to happen?
  • Did our interpretation of events, motivations, and actions help this action come to pass?
  • What do all these imply about what we should do and shouldn’t do going forward?

What you’re after is team learning. If Bob handed in a report three weeks late, the only question that mentions Bob is the question, “How can the team help Bob get the report done on time?” By discussing facts and framing the team’s involvement as one of future joint responsibility, you are shifting from a frame of “Who did what right/wrong?” to “What happened, and how can we help it happen better next time?”

Cultures—learning or not—become self-fulfilling prophecies. If your company has a conservative culture, it’s probably full of people who self-selected not to take risks and not to admit mistakes. Shifting that culture means addressing fears with substance: make sure your organization supports risk-taking in its rewards and performance measures. Model that support in your daily interactions. And even then, you’ll get the best learning when you carefully separate judgments from facts, and keep people engaged in finding solutions rather than rehashing blame. Our society does a great job of squelching learning instincts, but with patience, care, and precise communication, you can make it safe for a group to re-create a culture of learning and exploration.

Young Leader, Veteran Team

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QuestionI am a projects and operations manager at a multinational oil giant based in Cape Town, South Africa. I have seven people reporting to me. I am twenty-four years old and the youngest member of my team—the ages range from thirty to forty-three. What strategies/tactics can I use to gain genuine respect and trust of my direct reports? We have been working as a team for the past seven months.


 
AnswerAs you’re finding out, positional authority is only vaguely useful for getting things done in an organization. The right job title will certainly get people to follow directions thanks to social psychology’s “obedience to authority” principle (see “Harnessing the Science of Persuasion”) but it won’t engage or align them unless they respect and trust you. Respect and trust don’t come from an organizational position; they come from building a strong relationship. Trust and respect are intertwined, but distinct; you can give respect without trusting, and you can trust without giving respect.

You’re six years younger than the youngest member of your team, so don’t count on gray hair or decades of industry experience to contribute to building respect. You’ll have to earn it from scratch.

Let’s build respect the old-fashioned way: by showing you’re really good at what you do. Being the youngest on your team, don’t even try to demonstrate the highest technical expertise. Even if you are the best technically, people won’t feel great about being out-performed at their own game by someone half their age. They will feel great, however, at having their own strengths magnified by someone who’s becoming a really good leader. Build respect by demonstrating excellence at leading.

Ask for help


First things first. Address what no one’s talking about: your age. People trust you when they believe you understand them. When you say what everyone is thinking but afraid to say, you’ll build trust rapidly. Done well, admitting when you’re in over your head can be the foundation for strong relationships. “I’m younger than the rest of the team, yet I’m the manager. We have a job to do as a group. I don’t have your industry experience, and I’m counting on you for our success. My job is doing what I can to help you create that success. If we all do our part, we’ll make a superb team.”

You’re laying the issue on the table and using it to frame a mutual working relationship. Yes, you’re young. And that’s just a fact. The team can either get over it, pull together, and get the work done, or they can turn it into a problem and stonewall. Either way, once you’ve had this conversation, you can talk about the choice they’ve made, rather than silently accepting their implicit reaction.

Now, start helping your team shine. If you make your team members successful as individuals and as a group, you’ll earn not only trust and respect, but also that most coveted leadership quality: loyalty.

Set a mission

Teams that shine use each person’s strengths to get the greatest results. But before you delve into strengths, you need a team mission to set the direction.

Make sure everyone knows and buys into the mission. The mission is why the group was formed in the first place. If you don’t have one, ask the group to help develop the exact wording based on the team’s original charter. Have them choose words that are meaningful and emotionally charged to them. What’s important is that the mission be more than just nice words. It will be how people know they’re doing the right thing. If your team will “develop processes that make existing production more effective” and everyone knows it, they know not to spend time brainstorming new product development. Since a mission is a definition of success, make sure it aligns with your boss’s idea of what success means for the team.

Missions and goals may be vague or may become obsolete over time. That’s fine. Notice when they aren’t adequate and fix them as needed. Just make sure everyone shares an understanding of the team’s current direction. Unless goals are clear, communicated, and agreed upon, you’ve already lost the battle.

A big part of your job is keeping people aware of the mission. Many new leaders assume that once the team knows what it’s supposed to do, all will be well. Nope. Daily work sucks people in and they gradually lose sight of the goal. Remind them often. Use the mission to introduce weekly status meetings, and ask the team to relate their status reports to the team’s larger objective.

Figuring out team dynamics


Once you have a common goal, you’re ready to enlist the team in crafting their working relationship. Take the time to understand each person’s unique strengths and blind spots. For each person, challenge the group to ask:

  • What are that person’s strengths?
  • How can that person’s strengths contribute to the group?
  • What support will that person need from the group to use his strengths most effectively and to compensate for weaker areas?

Include yourself in the discussion. You’ll be contributing direction, facilitation, and management. You’ve already said that your strengths don’t include decades of industry experience, so the team can expect you to bring them questions only experience can answer. Likewise, invite them to tell you when their experience contradicts your plans or decisions. With a roadmap of skills and needs, the team provides mutual support towards a common end.

Your job description as a leader is simple: Support your team in whatever they need to meet their goals. Your goal—telling the truth, framing the relationship as mutual support, setting direction, and aligning team members’ strengths—builds culture and working relationships. In the day-to-day, your team’s need for additional support will change. You’ll find yourself acquiring resources, scheduling projects, and shielding people from organizational politics. By occasionally asking, “How can I help you do your job better?” you’ll quickly learn how you can help your people succeed.

The more you demonstrate true commitment and honesty, the more people will trust you. The better you do your job, the more the team will respect you. You’re doing your job well by honestly addressing the status quo and having the group design working relationships that bring out their best. You may be the only manager in your team members’ careers who has taken this approach. They’ll respect and trust you for doing what it takes to make them successful, and won’t care for a moment that you’re twenty years their junior.

The Essence of Leadership

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QuestionAs the author of this column, I receive a number of questions each month on the topic of leadership. Manu asks how young men and women in India can be taught to think about leadership. A pharmacy director in the U.S. is having difficulty firing up a small number of workers who are not engaged in their work. Linda wants tips on being more decisive. An executive leading a crossfunctional team asks: “How can I motivate them to stay committed to the team and focused on our goals when they have their day-to-day work responsibilities?”
The answers to these questions begin with the very basics. What is the definition of leadership?


 
AnswerIn my experience, “business leadership” is often associated with a CEO of a company who made a lot of money and got rich in the process. Yet when clients tell me their company needs leadership, impressive job titles and large salaries aren’t what they’re after.

We say, “So-and-so is a born leader.” No such thing. Leadership is a relationship between a person and a group plus the skills to guide the group to success. As with any relationship, success depends on both parties. One group’s stellar leader may fail utterly when leading another group. The lack of competent leadership is the number one complaint I hear from non-CEOs.

Rather than just study leaders (thousands of books on leadership cover that ground), I’ve asked hundreds of people who they follow and why. They say leadership is emotional; it’s about inspiration, motivation, and connection. Unlike management, it doesn’t lend itself to systems, structure, and traditional classroom teaching. What inspires people to follow is surprisingly consistent, and surprisingly simple. But be forewarned: Simple doesn’t mean easy!

Establishing the leadership relationship

Call it “vision,” or “mission,” but it all boils down to one thing: First and foremost, people look to leaders for direction. Only by knowing their organization’s direction can people apply themselves to achieve their goals. It needn’t be formally stated; the leader’s actions and decisions convey the direction to the company. The direction needs to pervade every decision and conversation within the company, and it’s the leader who makes that happen. Providing direction for others is a key to creating a leadership relationship.

Even with direction, people must trust a leader. Trust is built on honesty and integrity. People want the truth from their leaders. Outrage from Watergate, the Monica Lewinsky affair, Enron, and many other public scandals were fueled less by the events than by the accused parties’ cover-ups and lies. When Salomon Brothers covered up improper trading in an early-1990s scandal, it fueled the flight of a billion-dollars’ worth of customers as people lost trust in the organization. Warren Buffett rescued the company by using complete and total candor with Wall Street and regulators as a way of restoring trust. Far from being a disaster, telling the truth proved astonishingly effective in quickly restoring the company’s integrity, with a minimum of fines.

Leaders must have integrity, establishing clear values and living those values. One of my clients worked for a newly public company whose CEO urged employees to hold their shares to keep investor confidence high. He then sold several million-dollars’ worth of his own shares. He responded to his employees’ feelings of betrayal saying, “It was just a small percentage of my holdings.” But that didn’t matter! He contradicted himself by selling shares while exhorting his employees to hold theirs. It killed his leadership.

Interestingly, the key is having actions match values, more so than what those values are. If one leader values quality and another values speed-to-market, they will simply attract different people to their organizations. But in either case, they must live their values consistently.

Consistency is another vital leadership element. When a leader changes direction with the market fad-of-the-day, or when his or her values shift according to the latest public opinion polls, people stop following. People want dependable leaders who provide a touchstone in times of change. You may ask: In a world of constant change, don’t we need to shift and adapt? Of course. But you must choose a direction and values that stay stable even while adapting your tactics.

A software company once had a company vision, “We will produce the best ABC widget for DOS the world has every seen.” It was a great vision statement, until Windows squashed the company out of existence. The software maker’s vision was so narrow it couldn’t adapt to change. A mission of, “We will solve the ABC problem for computers worldwide” would have been flexible enough to keep the vision while adapting to technological evolution.

Lastly, followers need to feel connected to their leaders. Leaders almost always connect through shared values; that’s one reason followers leave when a leader doesn’t live his or her values. Helping people feel they are part of something much greater—giving them a personal vision—is another strong tactic. For instance a leader in the healthcare industry may say, “You’re not just joining our company, you’re becoming part of transforming the world of healthcare.” Recognizing and rewarding employee achievement helps cement the connection. On the other hand, taking credit for others’ work is a powerful connection destroyer.

I was surprised by this framework’s simplicity—direction, integrity, consistency, and connection. But its simplicity hides how difficult it is to pull off. It’s difficult because these qualities can’t be faked for long. Creating a direction is easy. Integrating it into every breath and decision is not. Choosing values is easy. Aligning behavior, decision making, policies, and organization around those values is not. Consistency is easy … until things don’t go quite as planned. And connection is easy until things get busy and instinct tells us to stop all this fluffy foolishness and just get down to work.

Building the organization

Direction, integrity, consistency, and connection create the leadership relationship. That’s a first step in building an organization, but it doesn’t address the issue of how leaders make their organizations successful. History is littered with great leaders who didn’t have a clue how to turn their leadership into an enduring business. Let me share some of the highlights:

  • Focus, focus, focus. Know what the organization should be doing and ruthlessly say “no” to anything that would be a distraction.
  • Play to individual strengths. Understand the abilities of everyone you hire and make sure their job plays to their strengths. Don’t spend too much time developing weak areas. If someone can go from good-to-great in their strength, that’s more valuable to the organization than taking someone from poor-to-acceptable. Build organizational competence by teaming up complementary skill sets. Ditto for yourself; know what you’re good at and can do well, and spend most of your time doing that.
  • Play to organizational strengths. Stick to what you’re good at as a company, and get very good at it. If you’re a great software company, opening a chain of high-end fashion clothing stores won’t build a strong organization.
  • You can train people for skills, but it’s much harder to hire attitude. Most companies hire for specific job history or resume keywords, which is precisely the wrong way to go about it.
  • Bring out the best in your people. Hire the best, give them a common direction, and let them do their job. You’ll have a much stronger organization than if you make yourself too important. Remember: Every time you hire someone who isn’t as smart as you, you lower the average IQ of the company.

My favorite books on building organizations are Good to Great: Why Some Companies Make the Leap… and Others Don’t by Jim Collins (it also touches on the “Level 5” leadership character qualities that correlate with success), The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization by Peter Senge, with Bryan Smigh, Charlotte Roberts, Richard B. Ross, and First, Break All the Rules: What the World’s Greatest Managers Do Differently, by Marcus Buckingham and Curt Coffman. All are research-based, easy to read, and have enough great material to keep you building organizations well into the next century.

Most of this column has concentrated on the “soft” skills. When it comes to leadership, I remember what the COO of a multibillion-dollar company once told me: “At the end of the day the financial and strategic issues are there but they are reducible largely by analytics…the people and process issues are not.” If your goal is to become a successful business leader, your route will be smoother if you spend some time working on relationship skills and “softer” aspects of leading. Because at its heart, leadership is nothing more and nothing less than inspiring others to follow your dream and doing what it takes to make possible their success.

No Authority? Use Persuasion

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QuestionI am leading a cross-functional team in a company initiative but the members on the team do not report to me. How can I motivate them to stay committed to the team and stay focused on the goals established when they have their day-to-day work responsibilities?


 
AnswerDéjà vu! My first project management job was the Quicken VISA Card. We were creating software to import credit card statements into financial software. The software had to be integrated with six different Intuit products. I had “dotted-line” relationships galore, but no one who actually reported to me. Much of my team had other primary projects, all with separate deadlines.

Leading a team in those circumstances is an ongoing negotiation between you and your team’s other priorities. You need to capture your team members’ share-of-mind, and keep them wanting to move the project forward. Unlike a direct supervisor, you don’t have the tool of authority to help. You’ll have to rely on relationships and persuasion.

Easy commitment

Think of your job as helping your team members make your project a priority. You need to know enough about them and their competing commitments so you can work the joint project into their lives. Schedule a one-on-one meeting with each member. Find out what else they’re working on, how much time they can commit to the team, and what their big challenges are. Ask about challenges related to their other projects, and spend some time brainstorming ways that you can help them on those projects.

Don’t be afraid to confront the elephant in the room: “Our project isn’t your top priority, so how can we insure we make forward progress while helping you complete your other priorities?” Just asking the question signals that you care about their priorities. They’ll often care about yours in return.

Once you know their other goals, lend them resources. Intervene on their behalf. You heard right: Help them succeed at their competing commitments. The more they fulfill those commitments, the more time they’ll have left for you, and the more they’ll become committed to your project.

Is one of your team distracted by a national product launch, for which the logistics are screwed up? Help straighten out the logistics, even though it isn’t your job. You would love it if she made you a priority over their other commitments, so demonstrate you’re willing to make her the priority as well. Do something selfless for her. She’ll respond. It just might be the first time someone other than a direct supervisor tried to make her life easier.

Staying in mind

Once you’ve opened channels of communication, diligently maintain the relationship. As in many relationships, frequency trumps duration: People remember many brief encounters more than a single long one.

Have you ever attended a full-day project kick-off, followed by six months of silence from the project team? That’s called “getting off to a resounding thud.” When a project starts quietly but comes up daily in conversation, it infiltrates your thinking and becomes part of the culture. That’s what you’re after. You want your project ever-present in your team members’ minds.

But you want it to be present in a good way. Make sure each project-related contact leaves people feeling like it was a good use of time. That means finding excuses to interact that aren’t “status meetings.” Most people dislike status meetings. Personally, I despise them. For frequent-but-brief contacts, connect to provide value to your team members and use as little of their time as possible. Contact them with help, with direction they need, with resources, or with one-on-one requests for status. Remember: Your goal with these contacts is simple awareness.

In addition to awareness, a team for a large project may need to feel a team identity. Do that separately. I believe teamwork should happen naturally, not through off-sites and ropes courses. From your early meetings and ongoing relationship-building, you’ll understand the needs and strengths of your team members. Facilitate their working together, so they build respect for each other as part of getting the work done. Find opportunities for them to help each other and match them up at those times. “Hmm, Sandy, you need help with the bar graph tool? Did you know that Aaron was working on it just last week?” If team cohesion is a real issue, ask them if they would like formal team-building meetings. At all times, let them drive the process in a way that works given their other commitments.

Put your project in context

If people in your organization are generally committed to the goals of the overall organization, you can strengthen commitment to your project by helping them understand how the project fits into the company’s larger goals. For instance, if the company is branching out into new markets with your project, you can help the team understand that the project is strategically important, and not just busy work.

Uncovering Opportunities to Help

Similarly, if there is an executive whose organization spans both your project and your teams’ areas, you might want to ask the executive to talk at a team meeting, to reinforce how much the project matters to the organization.

Appealing to company goals is powerful in a healthy environment, but should be done with caution if morale is low. In some companies (often those with histories of layoffs or unfair treatment), people view the company and its success very cynically. Appealing to company goals won’t be motivating. In many companies, however, people feel loyalty to and care about the company. They’ll be motivated to help the business reach its goals.

There’s no perfect answer to managing a team with other commitments. But if you take the time to make it easy for your team members to contribute, keep your project top-of-mind, and help them understand how important it is, you’ll have the best chance of pulling together a team that can get the job done even amidst challenges and distractions.

Great Leadership for Great Teams

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QuestionI am establishing a publishing house in Africa, and have put together a team with great potential. What strategies and skills must I employ to make the most of this potential? What is the best way to lead a crop of great people?

 
AnswerBy assembling a great team, you’ve already put yourself ahead of the game. Rather than jump-starting the company on your own, you’ll have the easiest time, the most fun, and probably the most success by developing the team and letting the team develop the business. You just have to organize them and point them in the right direction.

Have you ever worked in a really high-functioning team? In great teams, each member brings their best to the party. They only do the things they’re best at, and they do them superbly. The work gets divided to play to each person’s strengths.

Identify your team’s strengths

Get the team together and explore each other’s backgrounds, expertise, likes, and dislikes. Match your discoveries to the work, so tasks go to whoever is most likely to finish them well and quickly.

Does a team member have contacts, industry experience, or experience in specific companies that will be valuable to the group? Put them on related tasks. Experience in a functional area or two can make a resident expert in those areas. Those with great people skills should be doing people work, while those who prefer to work behind the scenes can do research and build infrastructure.

Don’t limit yourself to obvious business strengths. Mental traits can be even more valuable over time: long-term thinking, short-term thinking, idea orientation, data orientation, comfort with stress, technological comfort, people skills, strategic thinking, ability to challenge assumptions. There are hundreds of ways to slice mental traits, but whatever your framework, know that mental traits become great strengths when matched with the right challenge.

For example, some people prefer to follow established procedures. The business press worships “innovation,” “disruption,” and “destroying old paradigms.” Well, guess what? “Out-of-the-box” disruption is great for occasional big conceptual leaps, but it’s the established procedures that drive a successful business. And when boarding a plane, who really wants a disruptive, out-of-the-box pilot, anyway? Give me a pilot who loves completing their sixty-point safety checklist today with the same precision and care they used the first time they went through it.

A strength is nothing more—and nothing less—than a skill so well matched to a task that the results are stellar. Know your team’s skills, and you can all begin turning those skills into strengths.

Use your team to hone direction

Once you have the right “who,” the team can pool resources to choose the “what.” You’ve chosen a business, and your team can hone the strategy and tactics you’ll use to make it successful. In the book Good to Great, Jim Collins suggests that a team choose a single concept—your “hedgehog concept” —to unite the business. The hedgehog does only one thing: roll into an ironclad ball. But the strategy works so well that it’s invincible on its own turf. Your hedgehog concept comes from a brew of your individual values, skills, competencies, and a healthy dose of business sense.

Passion. Rally your company around something you can be passionate about. If you’re all deeply devoted to children, youngsters, and family, for goodness sake, don’t concentrate on publishing HTML reference manuals. Publish books for teens, young adults, and families. Choose a strategy that unleashes your collective inspiration!

Being the best. Your hedgehog concept should be something at which you can be the best in the world. It doesn’t mean you are the best, just that you can become the best. This can be trickier than it seems. Your team members and their skills will contribute to deciding where you can excel. Competition can also affect your choices. Even if you have the perfect team, existing players may have locked up areas of opportunity. If I were starting a grocery store, for instance, I’d be careful about hedgehog concepts that put me head-to-head with Wal-Mart. “Huge stores with great service” is a concept that’s taken. Even a superb team probably couldn’t be best in a world dominated by Wal-Mart.

Using Your Team’s Strengths

Economic viability. Your hedgehog concept should make money. You should also be able to identify your economic drivers in the form of a measurable “profit-per-x.” Often, the “x” is not obvious. For your strategy to make sense, you may choose a subtle “x.” Collins relates the story of a company whose strategy was to cluster stores in one geographic area to be most convenient for customers. Rather than measuring profit per store, the company realized that profit per neighborhood was the key to driving operations, compensation systems, and organizational learning in pursuit of convenience for their customers.

Monitor the commitments your team makes

As you begin implementing your strategy, pay close attention to the commitments you make. Commitments provide flexibility and focus, but can also bind you to a long-term course of action. Since your venture is quite young, you don’t have a lot of operating knowledge to choose commitments wisely. So keep yourself as flexible as possible until you’re fairly sure of your course of action.

Commitments come in all shapes and sizes, but some of the most powerful are the agreements you make on how to frame the world. Your beliefs about what customers want and how they behave, if propagated throughout your company, are a very powerful frame. Ken Olsen, founder of Digital Equipment Corporation, was famous for rejecting IBM’s frame that computers meant room-sized boxes that were only useful to large corporations. He built DEC and revolutionized the industry by inventing the minicomputer. Unfortunately, he got caught in his frame of the minicomputer being The Answer. Oops. In the late 1990s, his once-leading company was acquired by upstart PC maker Compaq.

Supplier and distributor relationships can become commitments. Decisions to vertically integrate (or not) can become commitments. Deeply held cultural values can become commitments. Large capital expenditures can become commitments. One entrepreneur recently told me his company had perfected the ability to open a new market and quickly achieve a 25 percent-plus profit margin. Unfortunately, while going up their learning curve, they built factories several times their optimal size. The company’s survival is still touch-and-go—not because it’s a bad business, but because early commitments have saddled the company with unproductive, expensive assets.

Become a leader, not a manager

Finally, spend regular time leading rather than managing. You’ve got a good team, and you’ve jointly chosen a direction. Now your job is keeping the company on track. Keep your team working well together, and make sure you’re building a company where everyone plays to their strengths. Know your hedgehog concept, discuss it regularly, and make sure it guides the company’s daily decisions. Spend time thinking strategically with your management team. Have them project the hedgehog concept out one, three, or five years into the future, and steer the company and its commitments towards that reality.

Your job is creating an environment where your employees can do their best. Give them all the credit. Recognize and celebrate their accomplishments. When they screw up, lead an “after action review” to help them learn. Remember that you’re building a culture that brings out and amplifies everyone’s strengths, so use mistakes as an opportunity to reexamine the strengths of the team and change your tactics, your assumptions, or your organization.

For now, focus on getting your company off the ground. You’ve hired the crew; together you’ve charted the course. Now stand back and let them bring the dream to fruition.

Inspiring the Jaded Employee

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QuestionI am interested in motivating long-term employees who have fifteen-plus years with an organization. This group has heard all the visions of transient leaders who were furthering their own careers, and have become apathetic to improving their own lot, space, or environment. I’m keen to hear the latest thoughts on whether it’s possible for these people to shift their thinking and practices.

AnswerCurrent wisdom says, “Hire for attitude and train for skills.” That’s because humans are stubborn, and don’t like change. Well, that’s not exactly true: We like change when other people are changing to make our lives easier. That’s why social change takes a generation—the old mindset has to die off to make room for the new. But all is not hopeless. When attitudes are just a reaction to the work environment, people can change. Fix the situation, show them it’s fixed, and let the change begin!

People get cynical and apathetic for good reason. Scandal after scandal reveals golden parachutes, endless perks, and upper managers making millions without linking pay and performance (management by objective seems to stop at the EVP level). Jim Collins says in his book Good to Great (HarperCollins 2001) that there’s even evidence that the worse the leader, the more he or she takes home.

But let’s assume in your situation that management is prepared to be accountable, will accept a pay level the rank-and-file consider reasonable, and genuinely wants to create a new company culture.

Do as I do

Start with action, not words; people want results, not promises. You’ll have to start by delivering change that’s in their best interest, and back up your action with words, not the other way around.

A good place to start is by making a visible sacrifice for the company’s common good. You might consider cutting your own pay, bonus, and raise–especially if you’ve had layoffs recently. Give it back to the people who made it: your employees. Increase their benefits, hire back some laid-off workers, or boost salaries. The role model here is Aaron Feuerstein, CEO of Malden Mills, who in 1995 kept 3,000 employees on the payroll after a fire leveled the business. His belief was that his responsibilities extended to employees and the community as well as to shareholders.

Next, give everyone a sense that showing up for work could make his or her lives better. At first, they won’t be able or willing to believe you. You’ll have to combat their lack of emotion with added emotion. Find the emotional connection people have with the company.

Some research indicates that people are most motivated when challenged to use their strengths to reach goals they think are doable. (See Authentic Happiness by Marty Seligman, Simon & Schuster 2002.) Find emotionally important goals by asking, “What’s important about the work you do?” When they answer, ask, “What’s important about that? What will that do?” a couple of times. Their answers will reveal values and passions. If they reply, “for the pay,” and don’t connect with any further goals, they may have no job passion to awaken. If someone’s never had job-related hopes, dreams, or aspirations, he or she probably won’t develop them mid-career. (Significant emotional and spiritual events might do it, but that’s a bit beyond the scope of this column. Business research suggests that it’s easier to change skills than attitudes, so your best bet may be to start hiring people with a more engaged attitude.) Watch people’s faces: If they become animated, or talk with longing in their voice, you’ve tapped into something real.

Now ask them to stay in that passion, and describe their perfect job. Have ’em go wild. If the past culture has been especially oppressive, you’ll probably be amazed at how unwild their dreams actually are. Things like, “having a desk with three drawers” may be a big deal. Ask them, “What one thing can I do to help you move closer to that dream?”

Listen very, very carefully to the answer; you’re at a critical moment. They’re telling you how you can send an emotional message, not just a verbal one. Whatever they say to do, just do it. Say, “I appreciate your sharing that. I’ll keep it in mind.” Don’t promise anything; they’ve learned that promises get broken. Just quietly get it done. Then check back and ask about next steps. As soon as possible, have them suggest what they can do to drive the change further.

Beware the temptation of self-promotion! Don’t crow about how responsive you’re being. It’s no big deal. Choose small things and take visible actions that people find meaningful. Actions are what people want, not words. They’ll notice, and the word will spread that you’re a leader who actually makes life better, rather than issues empty promises.

Once you’ve taken action and people have evidence that things can be different, it’s time to encourage them step up and do their part. Once they start going, your job is supporting them and helping them align their action with the direction of the overall company.

This isn’t an easy process. If people are truly happy in their work environment, don’t expect them to embrace change. But if the apathy comes from bad leadership and unchanging drudgery, you can change that, and they’ll get it once you start demonstrating that you’re truly different.

Help the change take root

Be vigilant! People will have trouble adapting to you. Even if they’re psyched to take the reins, they may need help coping. I worked with a secretary who dreamed of becoming a project manager. When given her first project, she discovered she didn’t know how to step up and lead. In meetings, she deferred to senior people out of sheer habit, even when the responsibility was hers as project manager. We worked to help her define her role and to acquire the project management skills to master the position. As a leader, you foster change that may push people into new territory. Be sensitive and be prepared to intervene and help insure their success.

As people take charge, they might charge right in someone else’s face. Look out for turf battles, injured egos, feelings of exclusion, and other potential hot spots. When war looks likely, step in and help the participants negotiate a settlement. Get them together, help them find common goals (or remind them of the team’s common goals) and then give them the responsibility for working out their differences. Be available as a resource, but get them in the habit of behaving like mature adults. Once you’ve tapped their motivation, it’s up to you to help them grow to work as a strong team that produces solid, substantial results.

How Leaders Use Questions

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QuestionDo you have anything to share regarding the subject of asking the right questions? Someone once said “Forget the answers; focus on asking the right questions.”

 
AnswerI’ll always remember the mid-1980s commercials featuring Lee Iacocca, then considered one of America’s finest business leaders, banging his fist on his board table and making tough proclamations. But consider the power of well-crafted questions. Statements invite agreement or disagreement. Commands invite rebellion or submission. How are questions different? Simple: Questions engage people. Questions can persuade an audience, align an organization, set direction, or focus attention on the things that enable people to learn.

The Socratic method

On a high school debate team, persuasion happens through fortified logic supported by facts and figures. Most companies work this way, too. You just lay out your logic, present supporting data, and voila—full buy-in is a cinch! … Not. That’s because we’re trained to argue when presented with someone else’s logic. As parents of teenagers can attest, the first reaction to being told what to do is to attack any logic, explanation, or data that isn’t what they want to hear.

Questions provoke answers, however. Ask a teenager “Where are you going?” and you will get an answer. (Most likely, “Out.”) What they don’t do is argue with the question or its assumptions. This is the basis for the Socratic method.

Rather than stating your logic, ask a series of questions chosen to lead your listeners to deduce the logic on their own. This questioning will take longer than lecturing, but you’ll save time in the long run. Your listeners will reach their own conclusion based on your questions. They’ll buy into a conclusion they’ve reached much faster than they will buy in to a conclusion that you just state.

To design your questions, first map out the logic that leads to your conclusion. Be thorough! Since you can’t control peoples’ answers, your data and logic must be airtight. (Otherwise be willing to be convinced when you get an answer you hadn’t considered.)

Here’s an example of the Socratic method in action: Imagine you’re trying to change your culture to judge people based on results, rather than hours worked. You could say this:

“What we really care about is producing business results. Working smarter rather than harder can sometimes produce results. We must reward people who get their results quicker by giving them a bonus based on what they produce, rather than the hours they work.”

You can imagine the response: “Sure we will, Pollyanna. And as long as people are working smart, let’s have them work smart for sixty hours a week.”

Here’s how you might present the same logic as a chain of questions. It takes longer, but it keeps the listener engaged in understanding rather than arguing:

Q: Do we want the business to meet and exceed its goals?
A: Of course.
Q: If we’ve met our goals, who should be eligible for bonuses?
A: Everyone who contributed significantly to meeting the goals.
Q: So what matters is that bonuses be related to each person’s contribution toward the goals?
A: Yes.
Q: What if someone figures out a way to work smarter, and reach goals with less work?
A: That would be great!
Q: And that would be as valuable as taking longer and doing it less efficiently?
A: Of course.
Q: So then how we should base our bonus structure?
A: Well… it should be based on working smarter and achieving results.

Using “how” and “why”

One of the biggest challenges in leading an organization is linking big-picture strategy to everyone’s daily actions. It’s all well and good to announce a sweeping vision like, “Our mission is to ensure the health and safety of everyone who uses HealthCo’s products,” but the next day, your facilities person still has to grab a plunger to clear out a clogged toilet. Guess what? She isn’t thinking about the company vision. And once the toilet’s working again, she probably still hasn’t made the connection between what she does and the company’s grand mission. Your job is to help her connect, and you can do it with questions.

In your conversations, ask, “How?” to help people move from high-level goals to specifics. “We want to build the world’s best widgets.” “How?” “Well, first we’ll look up widget in a dictionary. Then, we’ll…”

Ask, “How?” enough and you can go from leadership goals all the way down to the paper clips needed to reach the goals. In fact, most layers of management essentially take their own goals, ask, “How can we reach these?” and use the answers as goals for their direct reports.

Asking “Why?” or “What do we achieve?” does the opposite; it moves from specifics to reasons. We can ask our facilities person, “Why are you fixing the toilet?”

A: “Because people need working facilities.”
Q: “What will having working facilities achieve?”
A: “People can take care of themselves and concentrate on their work.”
Q: “And why do they need to concentrate on their work?”
A: “So they can do good work.”
Q: “And why do they need to do good work?”
A: “To ensure the health and safety of everyone who uses our products.”

Each “Why?” moves to more basic goals and causes. You know your organization is tightly focused when “Why?” eventually leads to the company’s vision, values, or purpose. It’s rare that everyone can link their job to the mission, but boy, is it worth shooting for—it energizes and inspires a workforce even more than stock options in an Internet company.

Create culture using driving questions

Linking jobs to mission sets organizational direction. But questions also drive personal behavior. If your people ask the right questions relentlessly, you can create a powerful culture.

Take Winters Plumbing of Belmont, Massachusetts. The founders have the audacious vision of a billion-dollar plumbing empire. They ask daily, “How can we so satisfy our customers so that they make us the world’s greatest residential plumber?” The answers have led them to reinvent how plumbers are hired and trained, how they dress, what they drive, and how they are paid. Winters just opened a $50,000 training center to help their plumbers keep getting better.

The driving question filters down to individual plumbers. A non-Winters plumber might ask, “How can I stop this leaky sink as quickly as possible?” They’ll fix a sink. But a Winters plumber will ask, “How can I give this customer a great overall experience?” They’ll arrive well groomed, in a freshly laundered uniform, fix the sink, and even vacuum the area, leaving it better than when they arrived. The right driving question makes all the difference.

As Marilee Goldberg, author of The Art of the Question (Wiley 1997), points out, some questions put us in a judgment mindset, while others stimulate creativity and problem solving.

When things go wrong, you can ask, “What happened and whose fault was it?” The answer may produce great diagnosis, along with a culture of blame and a reluctance to take risks.

Asking instead, “What was the root cause and how can we prevent it in the future?” may produce great diagnosis and encourage brainstorming about prevention.

Be careful to revisit your questions from time to time. A real estate developer I worked with surpassed her dreams and built a $20 million empire, but she was heading towards an early grave from overwork. Every morning, she asked, “How can I make more money today?” Good question for amassing $20 million. Bad question for building a satisfying life once the money’s in the bank.

We live in the so-called “information age,” with a virtual epidemic of people asking for data that won’t impact their actions one bit. They just like having data; it makes them feel secure.

If this describes you, resist! Think before asking. Know how you’ll use the information and whether it’s even the right question. I’ve taken dozens of customer satisfaction surveys that asked, “Did your problem get solved?” An important question, to be sure. But they didn’t ask, “Did your problem get solved after four hours on the phone with poorly trained customer service people who made you want to run screaming into the night?” In fact, the December 2003 Harvard Business Review presents excellent research showing that simply asking, “Would you recommend us to a friend? Why or why not?” could generate better information than a ten-page survey.

We’ve barely scratched the surface of how you can use questions as a powerful leadership tool. Questions can also be used to communicate beliefs, set cultural norms, and push the edges of people’s thinking. But for now, may I offer some questions that will help you make this concept real?

  • What are your current goals?
  • How must your organization act to reach those goals?
  • How can you use questions to persuade, align, create culture, and directly measure the world to help you reach those goals faster?

Answer well.

Is Equity-Based Compensation a Good Thing?

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QuestionDo you think an equity-based compensation plan is a good way to motivate employees?

AnswerMy first instinct was to write, “Yes, of course.” Halfway through my third rewrite, however, I discovered it’s a wickedly complex question. Yes, equity motivates, but the question is what does it motivate? It has to motivate the right behavior for the right reason to be effective. And even when equity does what you want, its hidden gotchas can still cause a train wreck.

What do you hope equity will motivate people to do? You might find easier ways to get the same results.

One popular reason for giving equity is “We want people thinking like owners.” But think again. Most employees don’t want to think like owners; otherwise, they’d be out there starting companies. Besides, one thing owner’s think is, “I will get a huge percentage of the company’s value when it’s worth something.” I have yet to meet an owner who wants their employees thinking that.

We say, “think like an owner” when we mean, “be cost-conscious.” And equity is supposed to do that? I’ve watched company owners take a salary of $200,000 and spend a week and $10,000 worth of management time deciding whether to buy a $500 laser printer for their product development group. When even owners don’t think like owners when it comes to cutting costs, it’s foolish to ask it of employees.

Besides, owning stock doesn’t necessarily lead to frugality. Even in startups, the small expenditures are peanuts. Employees reason (often correctly) that the big expenses—rent, executive salaries, property, plant, and equipment—will make or break a company. And those decisions are big enough that cost is considered as a matter of course.

If the real goal is frugality, skip the stock. Offer people a budget and give them a percentage of any money left in their budget at year’s end. I guarantee you’ll have cost consciousness oozing from the company’s collective pores.

Perhaps “think like owners” means we want employees to get the big picture, use good judgment, and keep the company’s best interest foremost. A laudable goal, but again unrelated to stock. Lack of big-picture thinking is often a leadership void. If you want holistic thinking, share the big picture with people about ten thousand times, coach them to live it every waking minute, and add “gets the big picture and acts on it” to the yearly performance evaluation on which their bonus is based.

Of course, stock is also used to make up for being woefully underpaid and overworked. It motivates until burnout occurs, at which point nothing can rekindle motivation. Given overseas job migration and record joblessness, unemployment fears probably keep people working 100-hour weeks as well as equity could. And if you don’t like to rely on economic bad times to retain people, spark commitment by aligning the culture and work with the people’s values. Equity is optional.

When equity is justified

A closely related goal may justify equity: retaining employees and creating long-term commitment to the company’s success. Stock does this well, especially if they think it will be worth a lot of money someday. Of course, providing meaningful jobs well matched to individual strengths also keeps people around.

You might also give stock to employees so they share in the long-term value they create. If this is your motive, more power to you! You’re a rare breed. Stock is a great way to do this, and I’ve even known private companies to spread the wealth with simulated “phantom stock” granted to employees.

You want people owning stock for the right reasons—but stock motivates different people for different reasons. If someone wants stock in order to get rich in three years, will they make good long-term decisions for your company? Coming from the start-up world, high-six-figure executive motivation puzzles me. Many of these folks jump companies for higher salaries. In start-up land, executives join because they’re passionate about the opportunity and idea. They get $70,000 for thousand-hour weeks, and bend over backwards to make the company successful. It’s beyond me why a big company would pay upper execs ten times that for employment based on money and not a passionate commitment to the company.

You want people emotionally invested in the company’s success. You can get that investment by giving them meaningful work in service of a worthwhile goal. Hire people who believe in what you’re doing and match them to jobs. If you want to reward their commitment, then give them stock, but make it crystal clear you’re rewarding their innate involvement, not trying to buy it.

Although you can’t expect stock to give people an owner’s attitude, some people really do think like owners once they own stock. They take pride in the company and commit 100 percent. They save money, talk up the company, bring in great employees, and sacrifice to help it succeed. If stock motivates someone to do the Right Thing because they identify with the business, give them that stock today!

Of course, some people think equity will give them control. They believe it will give them a voice. If that’s someone’s motivation, think twice. Other than institutional investors and founders, no one will have enough stock to wield power. Besides, if someone wants control and can’t get it by presenting a lucid case through normal channels, do you really want them trying to exert control through shareholder meetings?

Avoiding the stock gotchas

So stock is a great motivator if it makes employees act like owners, rewards emotional commitment, or shares the long-term wealth. But even in those happy circumstances, granting stock is fraught with peril. In many cases, stock recipients have no idea how to value it and have expectations far out of line with reality.

Stock can stop motivating when reality sets in. We hear “stock” and think, “this is it, baby—billionaire in three months!” If you’re using stock to motivate sacrifice, you better make sure it’ll justify that sacrifice. In twelve start-ups over the last twenty-five years, I’ve seen just how worthless stock can be. If someone waits too long and sees the pot of gold evaporate as the company tanks, equity-based motivation turns to equity-fueled cynicism.

In pre-public companies, stock can be granted, but it is worthless without an IPO or acquisition. I owned stock in a private company for almost twenty years before it was finally worth one-tenth of what I’d originally hoped. Even if a private company gets acquired or reaches the IPO stage, major shareholders may make out OK, but little shareholders can get screwed. It doesn’t do wonders for morale. Resumes begin circulating.

Stock has a place in motivating employees, but check out alternatives carefully.

When the money does come through, jealousy can rear its ugly head. For some weird reason, the further people are above the “game over” amount, the more they care about who has what. Those who’ve stuck it out through thick and thin resent making far less than the founder when a company goes public.

If a company is planning an IPO or acquisition, they’ll lose the “you’ll get rich from our stock” effect once they’re on the other side. In that case, motivation based on something other than stock had better be in place.

Public company gotchas

Gotchas aren’t just for private companies. Big public companies have plenty of gotchas, too. There’s rarely a link between someone’s work and share price. Stock makes a nice bonus for people, but it doesn’t affect their performance because no one can figure out how to have an impact. So stock is a nice reward while the share price rises. When the price falls, though, the company has to resort to motivating with good old-fashioned salary.

Warren Buffett doesn’t believe in linking market price to performance. He won’t give options to top managers. He says a manager can do nothing and stock prices will still rise at a company’s return-on-equity, as long as the company can reinvest in its existing business. Executive options become worth millions, even though the recipients are just taking up space. Buffett instead gives managers ample yearly bonuses, contingent upon their producing actual results above ROE.

Even though top managers are given tons of stock, ostensibly to align their interests with the shareholders, the reality is that large and small shareholders don’t have aligned interests. The top company executive who holds ten million shares of stock would sure like the stock to be worth $10 per share, but still scores a home run even if the price drops down to $1. The smaller shareholder with 10,000 shares, however, cares a lot more about that price. Will the top manager do what it takes to make the smaller shareholder rich?

Vesting also makes people do crazy things. Companies don’t give stock all at once, they “vest” it over time to ensure people will stick around. The gotcha is that it works. They’ll grant 5,000 shares over five years, and the employee gets 1,000 shares each year. Disgruntled employees in a successful company end up with the perverse incentive to stick around until their next vesting date. They happily poison morale, radiate misery, and doom projects while waiting for their stock to vest. In this scenario stock has motivated retention too well; a little less retention would be a good thing.

So where does all this leave us? It leaves us realizing that stock is complex. It motivates, but often for bad reasons. Even when the reasons are right, hidden gotchas can turn it into a negative depending on later events. Stock has a place in motivating employees, but check out alternatives carefully. You may find other motivators work just as well and leave everyone happier in the long run.

Stever Robbins is founder and president of LeadershipDecisionworks, Inc., a national consulting firm that helps corporate companies develop far-reaching leadership and organizational strategies to sustain growth and productivity over time. You can find more of his articles at https://www.steverrobbins.com.

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