January 27, 2012

Building a Performance Culture through Engaged Employees: Part 2

Mary MahoneyBY Mary Mahoney

J. Robinson Group Blog

Southwest is widely recognized not only for delivering unique customer experiences, but also for creating a motivational culture.

In 1971, Herb Kelleher reinvented air travel when he founded Southwest Airlines as a low-cost airline with a sense of humor that encourages employees to have fun on the job and customers to have fun while traveling.

Now, 40 years later, Dallas-based Southwest Airlines is the largest airline in the United States based upon domestic passengers carried.  It’s also one of the safest airlines in the world and receives some of the highest marks in the industry for service, on-time performance and lowest employee turnover rate.

Just as with The Ritz-Carlton Hotel Company, Southwest is widely recognized not only for delivering unique customer experiences, but also for creating a motivational culture.

Kelleher, the founder and former president and chief executive officer, gained a reputation for hijinks, including singing rap tunes to his staff and poking fun at airline culture.

But he primarily is remembered for his management philosophy on service.  “You have to treat your employees like customers,” he said.  “When you treat them right, then they will treat your outside customers right.”

Southwest remains loyal to that philosophy. As current President and CEO Gary Kelly said, “Our people are our single greatest strength and most enduring long-term competitive advantage.”  And he promotes this philosophy right on the home page of his company website.

With more than 37,000 employees, Southwest Airlines “gets it” when it comes to teaching employees to deliver positive emotional experiences.

Kelleher’s tradition of encouraging fun on the job remains a priority.  The company realizes that if its people have fun on the job, they are more likely to come to work with a positive attitude and deliver superior customer service.

Southwest’s leadership also engages employees regarding the company’s finances and emphasizes their importance to the bottom line. The airline has an open culture of inclusion at all levels and employees are trained to understand their roles in providing great service and keeping costs in check.

Certainly there are other factors that contribute to Southwest’s success.  Among others, the airline maintains a solid business strategy with low fares and travel perks (your first two bags fly free).  The airline also awards stock options to employees to encourage a sense of ownership.

Colleen Barrett, president emeritus of Southwest Airlines, partnered with best-selling business author Ken Blanchard to write a new book on the airline’s best practices, Lead with LUV: A Different Way to Create Real Success (the LUV comes from Southwest’s stock symbol, LUV).

When asked if she worried competitors would steal her management ideas, Barrett demurred, saying, “the real magic isn’t in knowing the concepts, it is in doing the work.” For Barrett, “doing the work” is the underpinning of Southwest’s model of good management.

Seven key elements serve as the backbone for Southwest Airline’s employee motivation philosophy:

1)    A strong set of values: The top three are employees, customers and stakeholders.

2)    Employees come first: All employees are highly valued and respected as individuals, which in turn, engenders strong feelings of mutual belief, trust, and motivation to perform.

3)    Rewards and recognition: By profusely rewarding its employees for excellent performance, Southwest maintains loyalty, job satisfaction and high levels of personal motivation.

4)    Mission: “The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit.”

5)    Hiring:  The airline has a very stringent hiring process and goes to great lengths to ensure that they hire the best of the right candidates, often acquiring talent from outside the industry. Southwest qualifies a customer service candidate for employment based on attitude, not experience. The company believes that it can teach a person how to deliver quality service, but attitude must be brought to the job.

6)    Distributed Leadership: The company follows a broad-base leadership model, insisting on diverse and senior leadership at the top and throughout the management hierarchy.

7)    Performance Management: Three dimensions of performance are measured with rigorous tracking: Employee well-being, customer satisfaction and shareholder gain. Individual performance is rewarded and clear, immediate feedback is provided for performance improvement.

It is remarkable how training and a positive culture can contribute to a company’s bottom line.

January 18, 2012

Building a Performance Culture through Engaged Employees: Part 1

Mary MahoneyBY Mary Mahoney

J. Robinson Group Blog

Building a performance culture never is as easy as it sounds. Of course, companies expect the people on their payroll to produce results. That’s a bedrock principle of the employment contract. Loyalty, however, can take productivity to the next level.

Execution in business is all about linking strategy, people and processes to achieve results. The degree to which that is done efficiently and consistently can be attributed, in part, to how well employees relate to their organization.

The key to attaining engagement is to share your organization’s business strategy with all employees and align their performance objectives with it.  Those two steps will help ensure that the business strategy is known by everyone in the organization.

Employees who understand how their individual goals relate to the larger goals of the company are more likely to become engaged with their work and more likely to go the extra mile when circumstances dictate. The result: improved execution.

The Ritz-Carlton Hotel Company and Southwest Airlines are organizations that excel because of their corporate cultures.  Both manage, track and communicate goals and link reward systems with individual and team performance.

Ritz-Carlton is one of the most widely known and admired names in lodging and an acknowledged leader in the upper-upscale and luxury segments. (The word “ritzy” even was coined after the brand to mean anything posh.)

While Ritz-Carlton connotes elegance and luxury, it also is synonymous with a high level of service. The company calls it “legendary service.”

Ritz-Carlton’s ability to consistently deliver outstanding service is based on the principle that emotionally engaged employees foster emotionally engaged guests and, ultimately, greater brand loyalty and repeat business.

Its orientation program stresses two points: New employees are told they now belong to an elite, best-in-class organization.  Second, company managers return the sentiment by telling their new charges, “We are lucky to have you.”

In another example of Ritz-Carlton’s devotion to delivering excellent service, the company established the following employee motto: “We are Ladies and Gentlemen serving Ladies and Gentlemen.”

The organization’s goal is to deliver “anticipatory service,” meaning employees are expected to anticipate guest needs and serve them before being requested to do so. At the same time, it strives to make employees feel empowered and engaged, not servile.

This culture is paramount. All Ritz-Carlton employees learn the brand’s gold standards and credo, which are read aloud each morning in staff meetings across the company and displayed on pocket-sized cards carried by each employee.

Ritz Carlton views its employees as critical to its image and ability to perform. There is a clear understanding that the corporate philosophy, commitment to service excellence and employee empowerment each drive customer engagement and loyalty.

Bloomberg Businessweek chronicles how Ritz-Carlton employees share true stories with guests around the world that illustrate how they go above and beyond to deliver outstanding service and create memorable experiences.

(For example, after learning that a guest suffered food allergies, a Ritz-Carlton chef in Bali located special produce in another country and arranged for it to be shipped by air to his hotel. Now that’s a wow factor!)

My next post will examine how Southwest Airlines developed one of the most successful employee cultures in American business.

January 13, 2012

Strategy or Execution: Which Drives Results?

Mary MahoneyBY Mary Mahoney

J. Robinson Group Blog

“Strategies most often fail because they aren’t well executed.” — Larry Bossidy

From now through November 2012, there will be no escape from the daily churn of news stories and analyses about the presidential campaign. Will the highest post in the land be won by brilliant strategies or deftly executed campaigns?

The same question can be applied to other areas, including organized sports.  For example, what enabled the Dallas Mavericks to clinch a victory over the Miami Heat in the 2011 NBA finals? Was it great game plans or fantastic player performance?

Whether it be politics, sports or business, the question is compelling: Does strategy or execution drive results?

Of course, these are not necessarily mutually exclusive options. Strategy and execution, in fact, are intended to be integrated and balanced in a business plan.  Yet history shows one or the other tend to dominate, depending on leadership prejudices.

For decades, best-sellers extolling strategy and strategic planning crowded bookstore shelves and business school curricula. The pendulum swung back in recent years on the heels of high-profile business failures that prompted renewed interest in execution.

In 2002, Larry Bossidy, the retired chairman of Honeywell Corporation, coauthored the best-selling book. Execution: The Discipline of Getting Things Done, which declared, “Strategies most often fail because they aren’t well executed.”

Another execution acolyte, David P. Norton, author of The Execution Premium: Linking Strategy to Operations for Competitive Advantage, claims that fewer than 10 percent of all business strategies are effectively implemented.

Strategy, according to Norton, is a top-down process, and translating strategy to operational terms is the core of effective strategy formulation.

Yet for many CEOs, strategy is the hallmark of executive leadership. CEOs, after all, are visionaries, not implementers.  They readily confess that they view the world from 30,000 feet, not ground level, where the work gets done.

Strategy determines the direction their business will pursue, and CEOs are the captains of their ships.  But every sailor knows that it takes muscle, discipline and know-how to keep a vessel on course and, in the event of a storm, prevent it from sinking.

Execution determines whether the good intentions and promises of a strategy can be translated to results and profits. The key is to mesh strategy and operations to attain goals using targeted initiatives.

Uniting strategy and operations requires strong senior leadership.  Consider Isadore Sharp, founder and chairman of Four Seasons Hotels and Resorts, a luxury chain known for delivering exceptional personal service. 

“There was no vision, there was no grand dream,” he said, reflecting on the nearly 50 years since the first Four Seasons – a modest motor hotel – opened in downtown Toronto. “But there has always been a consistent thread and it propels us forward today, as we continue to grow globally, and that’s service.”

Defining and enforcing a company culture was one of four key strategic decisions made in the company’s formative years.  The Four Seasons culture is based on the Golden Rule: Treat others as you wish to be treated.

“A lot of companies talk about having a culture, but we knew we had to walk the talk if we expected it to thrive in our hotels,” Sharp said.

Sharp walked the talk himself, treating his employees as he would want to be treated and as he ultimately wanted his guests to be treated.  He did this, according to an interview in Business Week magazine, by creating “a reputation for service so clear in people’s minds that Four Seasons’ name will become an asset of far greater value than bricks and mortar.”

The Golden Rule proved to be an immensely powerful tool for aligning the work of individual Four Seasons employees with the company’s strategy.  For example, every employee is empowered to resolve complaints by treating guests with the same care they would expect to receive.

Four Seasons distinguished itself, he said, “by hiring more for attitude than experience, by establishing career paths and promotion from within, by paying as much attention to employee complaints as guest complaints.”

Execution arguably is one of the biggest challenges facing organizations today. Without effective execution, no business strategy can succeed. CEOs need to own responsibility for execution just as they own responsibility for strategy.

January 3, 2012

The Importance of Execution

Mary MahoneyBY Mary Mahoney

J. Robinson Group Blog

I am beginning a new series on execution: How strategy and decisions move from concept to implementation

My Leadership Series highlighted the importance of leadership, core traits of effective leaders and some of the masters, from iconic billionaire businessman Warren Buffet – “the oracle of Omaha” — to the late Steve Jobs, cofounder of Apple Computer and its spiritual and visionary leader.

What makes these leaders and their organizations so successful is not just vision but the ability to execute.  That’s why I am beginning a new series on execution: How strategy and decisions move from concept to implementation.

“We’ve got a plan; now let’s get it done.” We’ve all heard this missive, which sounds simple enough in theory. In reality, even the good companies with smart CEOs sometimes stumble when they attempt to link people, strategy and operations.

Ten years ago, business author Jim Collins asked, “Can a good company become a great company and if so, how?” His best-selling book, Good to Great, attempted to answer the question, listing the following seven steps:

  1. Appoint humble leaders who are driven to do what’s best for the company.  A perfect example is Costco CEO Jim Sinegal, who has achieved enormous profitability without losing touch with reality.  His nametag simply says “Jim,” he answers his own phone, and his office doesn’t have walls. Even more impressive, he reportedly earns an annual salary of $350,000 compared with millions paid to other large-company CEOs.
  2. Reward great employees. In their best-selling management book, Execution: the Disciple of Getting Things Done, Larry Bossidy and Ram Charan urge companies to “reward the doers:” Shower employees who are effective with praise, rewards and recognition and make them examples for everyone else.
  3. Confront hard truths without losing hope. Leaders must have faith that their organizations will prevail, regardless of the difficulties, while honestly confronting the most brutal facts at hand.
  4. Decide “what makes you money, what could you be best in the world at and what lights your fire?” Then find a product or service that leads the organization to outshine all worldwide competitors.
  5. Nurture a culture of discipline. Great companies build a culture of disciplined people who engage in disciplined thought and who take disciplined actions, operating with freedom within a framework of responsibilities. In a culture of discipline, employees do not have “jobs,” they have responsibilities.
  6. Use technology to accelerate greatness.  Technology is an accelerator of greatness “already in place, never the principal cause of greatness or decline.”
  7. Keep the “flywheel” spinning: This refers to the cumulative effect of many small initiatives. In building greatness, there is “no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment.” Rather, the process resembles relentlessly pushing a giant flywheel in one direction, turn upon turn, building momentum from consistent efforts until there’s a point of breakthrough.

When he embarked on his book, Collins and his team studied 1,435 companies, searching for those that made significant performance improvements during a sustained period.

They selected Walgreens, Phillip Morris, Pitney Bowes, Abbott Laboratories and the former Gillette Company (which merged into Procter & Gamble in 2005), among others, and in the process discovered common themes that challenged many traditional notions associated with corporate success.

They found that great companies do not necessarily require a superstar CEO, the latest and greatest technology, innovative change management or even a well-oiled business strategy.

Instead, the success of Collins’ great companies was built on a corporate culture that “rigorously found and promoted disciplined people to think and act in a disciplined manner.”  In other words, great companies need to execute well.

Ironically, some of Collins’ 11 great companies subsequently failed, including Circuit City Stores, the retail appliance and technology giant that declared bankruptcy during the 2008-2009 recession and subsequently closed its 567 U.S. stores.

George Whalin, president and CEO of Retail Management Consultants, said management mistakes over the previous few years combined with the recession brought down Circuit City.

“This company made massive mistakes,” he said, citing the decision to get rid of veteran sales people.  Without an effective sales team, Circuit City could not execute on his primary mission: to sell more goods and provide excellent service.

Another has-been is Fannie Mae, formerly a publicly traded enterprise that was supposed to keep money flowing to mortgage providers.

An investigation in 2004 found that Fannie Mae misapplied account standards, suffered from poor internal controls and incentivized executives to manipulate earnings to achieve profit goals.  Four years later, it was placed in federal receivership by the U.S. Treasury to avoid insolvency.

In the midst of the 2008 banking crisis, Wells Fargo was forced to accept $25 billion in federal Troubled Asset Relief Program, a.k.a. TARP fund, which caused the company’s stock price to plunge 80 percent.   Wells Fargo repaid the government one year later.

The company’s then-chairman, Richard Kovacevich, rejects all claims that his bank failed to execute its responsibilities, insists his bank did not need federal assistance and claims that TARP needlessly terrified investors and shareholders.

When companies fail, their strategies often are blamed as being all wrong. But strategy by itself is not often the cause. Strategies most often fail because they aren’t executed well.

Failed execution means things that are supposed to happen don’t happen. Either the organizations aren’t capable of making them happen or their business leaders misjudge the challenges.

Execution is equal in importance to strategy and goals. It is the critical link between aspirations and results.  For that reason, execution must be the overarching priority of every CEO and business leader.

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