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Stop Wasting Our People Investing in Employees

May 8, 2009
Related Topics: Career Development, Corporate Culture, Employee Career Development, Retention, Featured Article, HR & Business Administration
Irecently spent a weekend visiting a small town in northern Georgia and, as most tourists do, I was shopping. I stumbled onto a particularly nice gift shop and struck up a conversation with the owner, complimenting her on an unusual selection of gifts. You could see that this store owner was more creative than most.

The owner thanked me for the compliments and shared that she and her husband had recently left “corporate life” to open the store. They felt so much better now, she said. No more unreasonable demands from unappreciative bosses and a chance to live a normal life without the travel and long hours. She asked about my work, and when I explained that I helped companies develop positive, high-powered cultures, she was instantly intrigued. “Where were you when my company needed you?” she exclaimed. We spent a few more minutes discussing the “corporate life” before I bid her farewell.

Walking away, I realized her former employer had lost a valuable asset: She had initiative, intelligence and was highly articulate—exactly the kind of employee that most companies say that want. It seemed like a wasteful outcome for her former employer.

Companies expend a great deal of energy to establish programs that eliminate waste. These carry various monikers, such as “lean systems,” the Toyota Production System and Six Sigma, to name just a few. Everyone is investing in “systems” that impose a disciplined process on a group of people. The goal is standardization—the refinement of a process to reduce costs and ensure consistent production of quality products or services. Many companies have also focused on reducing costs by lowering headcount or outsourcing work to lower-wage environments.

Conversely, I only infrequently hear about investing in people to exploit their talent and creativity. How many companies actually have a “human capital investment program” that spends even a fourth of a normal capital program? And the investments we do make in people are often directed to a specific skill or process rather than fostering raw creativity.

It’s just a waste of potential. Consider that:

The average manufacturing company with $500 million in revenue spends about:

  • 1.5-2 percent of its total revenue in R&D. 
  • 5-10 percent in capital investment.

  • Less than 1 percent of its revenue in training and development.

Training dollars are usually spent this way:

  • 47 percent for technical training.

  • 49 percent for leadership training.

  • 0-4 percent for such efforts as creativity development.

It is very common for company leaders to declare “We don’t need to work harder, we need to work smarter!” But are we really investing in creativity and capitalizing on intelligence? Is it new thinking we are fostering, or are we just developing “best practices” that emulate existing thinking? Can we actually “think outside of the box,” as we are exhorted to do by business-book writers?

What happens when everyone has mastered lean and the playing field in that area becomes level? Frankly, the rest of the world is pretty smart too—and a lot more hungry. Is standardization really the way of the future or is it just about competing in the now? Standardization and lean thinking are very important and are the ticket to compete with the best—right now. But it will take real innovation to compete in the future. Perhaps it would be a good idea to begin to think beyond the now and address how to compete in a future when every organization will be a lean one.

The challenge is to standardize on one level while fostering true innovation on another. We are wasting the minds of our people every single day if we do not also embrace the eccentric, the odd and, occasionally, the outlandish. We need to make a place for those who don’t fit the mold and challenge people to be comfortable with reasonable risk. We need to challenge best practices. It is our job, as leaders, to provide comfort with risk and “out-there” thinking.

Donnelly Corp., a large automotive supplier that was later acquired by Magna International, once provided just such an environment. In that company, an average production worker had an idea to use an existing core technology to develop an entirely new product for the industry. Donnelly listened to this employee and provided floor space in the back of a plant, along with a couple of technical people to help explore the idea. The result was a new product and patent that revolutionized automotive window technology at the time. Within a few years, 600 people were employed in the new line and revenues approached half a billion dollars annually.

What was different about Donnelly?

  • There existed a long history of seriously listening to people.
  • The environment encouraged reasonable risk taking.

  • People worked in teams and shared credit.
  • Average people were business literate and understood their customers.
  •  Everyone “owned” outcomes.

Why do companies spend so much on process and so little on innovation? Here are some explanations: 

  • We tend to associate innovation only with high-tech environments, ignoring the fact that any business can benefit from innovation.
  • Innovation requires having time to think—which, in our activity-focused world, might look like not really working.
  •  Innovation requires having sounding boards—people who can help grow and foster an idea; pollinate it, if you will. If your environment is not highly team oriented or participative, there is not enough interaction for pollination.
  • Highly participative environments can be terrifying to managers. It takes more time and skill. One cannot always see results immediately. However, let’s not forget that Toyota invested several decades into refining its highly innovative systems before the rest of the world even realized the advantage it had and began to emulate it. What would have happened if Toyota had taken a short-term view of that investment? Would it be the global industry leader that it is today?
  • There is a belief among many employers that our labor laws are designed to protect the interests of entrenched unions and not to promote innovation and employee participation in managerial decision making.

 It is certainly true that the legal landscape surrounding employee participation has more than one pitfall and many employers view the expense of litigating these issues as prohibitive. As a result, employers take the path of least resistance rather than face the scrutiny of organized labor and the National Labor Relations Board. This is particularly true when innovative thinking and participative teams begin to grapple with issues such as “fairness” and “discipline”—areas normally reserved for union activity.

Having average people make decisions regarding work rules and strategies to enhance motivation and productivity is often ignored as a means of fostering innovation. The one thing that every person in a company has a strong opinion about and would love to influence is the overall fairness of the work environment. It actually is possible and desirable to give average people real influence over decisions of fairness, such as policies, grievances and even compensation.

Such a step requires an investment in their knowledge and the broad sharing of information about the company. Only then can people make good judgments about the business that balance economic and fairness issues. It also requires a carefully structured framework to avoid violating the law. Employee committees or teams must be authorized to make managerial-type decisions without undue influence from management. They must truly be free to make decisions or recommendations, such as those a lower-level manager would make.

Examples of outstanding creativity and problem-solving abound in those environments:

Example 1: During a severe recession, teams of employees were empowered to decide who would be laid off within the team. Managers explained the economics, risks and customer needs to employees and they made the tough decisions. One employee elected to take a layoff because he could afford it so that his co-worker (whose wife was having a baby) could retain his job, even though seniority would have favored the first employee. Those tough decisions were be made by average people until a third of the workforce was laid off.

Example 2: A representative group of employees was charged with making recommendations for their annual wage increases. The market data, which was shared with the team, indicated that a 5 to 6 percent wage increase was warranted that year. However, after much discussion the team refused to accept more than 3.6 percent that year. They felt that it was important to keep the company competitive on the labor side. These people really took ownership and responsibility for the business.

People can be incredibly flexible and creative if they are trusted to make good decisions and have enough good information to do that job. Successfully managing this kind of environment requires a very good facilitator and a lot of hard work, but the work has a high payoff in productivity and innovation. It’s worth taking some risks in this area and making an investment in the knowledge of our people. To do anything else is really wasting the most important resource we have—our collective imagination and intelligence.

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