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Employee Commitment Embrace Today's New Deal

August 1, 1996
Related Topics: Retention, Featured Article
We've taught them well. If not by rote, then certainly by example. Employees in America today are smarter, more productive, more creative, more flexible and more customer-focused than ever before. We like that about employees. We should. We made them that way.

While we've been busy pushing our organizations to the highest possible level—getting our products to market quicker, making our services stand out from the crowd and besting the competition in every possible way—employees have pretty much had to fall in line with our goals and get with the program, so to speak, or leave.

In the process, the old employment contract—lifetime employment in exchange for loyalty—has fallen by the wayside. And a new employment contract has taken its place: shared responsibility. Whereas the promise of being together forever (like marriage) was once our employment pact, we now think of the employment relationship more like dating. We're meeting each other's needs for the moment, but we're not making any long-term commitments.

The problem is, many employers have left the relationship at that: No commitments. No promises. No long-term entanglements. The new deal gives everyone an easy out: if one party feels wronged, it can jump ship. There's no loyalty, commitment or mutual goals binding employees to employers, and vice versa. While that strategy may work for organizations that have short-term goals and don't mind living for the moment, most companies need core staffs that can be counted on when the going gets tough.

Again, we've taught employees well. At the first sign of financial distress lately, Corporate America has instituted layoffs, downsizings, restructurings and delayerings to the point at which workers feel no loyalty—because we've demonstrated little or no loyalty to them. If we've learned nothing else, we must realize that money—while a huge motivator—isn't everything to people. People still want meaningful work and want to feel valued by their organizations in addition to receiving their paychecks.

How to stop making promises you can't keep and start engaging workers for the duration of their employment is the challenge of the moment. What human resources organizations come up with to keep people engaged and fully committed is going to make all the difference in today's highly competitive global environment in which people are a company's greatest competitive advantage.

Old deal vs. new deal.
Under the old deal, employees were reliant on a paternalistic organization for a paycheck, benefits and a wealth of job opportunities. They were pretty much guaranteed a career for life—or at least a job for life. In return, they bestowed their every productive breath upon their company and rarely thought about leaving. It was simple, and for the most part, employer-driven. But that has changed. Now the employment deal is much more of a give-and-take.

An article in a June 1994 edition of Fortune described employees' perspective on the employers' role in the new deal like this: "There will never be job security. You will be employed by us as long as you add value to the organization, and you are continuously responsible for finding ways to add value. In return, you have the right to demand interesting and important work, the freedom and resources to perform it well, pay that reflects your contribution, and the experience and training needed to be employable here or elsewhere."

In a recent commentary about employment in a June 1996 issue of BusinessWeek, Keith H. Hammonds suggests that this new deal essentially translates into what business leaders are now calling worker "employability." While organizations still can't promise jobs for life, they can promise to make workers more "employable" through such avenues as continuous learning, skills building and assignment hopping. And everyone will take on greater financial risk with their organizations through such programs as gainsharing, profit sharing and stock options. Essentially, the stakes are higher than ever. But so are the payoffs—for both sides.

According to Marc Effron, manager of organization effectiveness for Oxford Health Plans, in Norwalk, Connecticut: "We define the 'new employment deal' as an even exchange of performance and assumed risk for rewards. You're expected to work at a torrid pace and focus all your facilities on producing timely, creative, sound business results that are in the best interests of the member, provider, shareholder and community. In exchange, you're provided with unbelievably large opportunities to prove yourself in a fast-growing field and with a premier company and the rewards that go with it."

A special report titled "The New World of Work" in an October 1994 edition of BusinessWeek put it in a nutshell: "Employers have an obligation to provide opportunity for self-improvement; employees have to take charge of their own careers." Fortunately, human resources departments have spent so much time lately helping employees become empowered in their work teams, figuring out their benefits choices and planning for their retirements, that employees for the most part already understand the basics of how to manage their own careers.

However, human resources organizations have to do a better job of identifying what the employment hooks are and communicating them to employees, because in the new employment environment, we haven't given workers a good enough reason why they should care about being fully engaged in our business mission. In a world where everyone thinks of themselves as entrepreneurs, we're going to have to be smarter about creating work environments that engage workers beyond their paychecks. That's the essence of the new deal. It's that easy. And that difficult.

Heat up employee commitment.
The good news is that contrary to popular belief, employees actually aren't burned out or completely disengaged from their companies. But they are shell-shocked and wary, says a brand-new Towers Perrin workplace index on employee attitudes.

The New York City-based organization polled 3,300 employees in large organizations (500 to 10,000 employees or more) last year. The just-released findings show that workers generally feel side-swiped by all the changes going on in corporations these days, but they're surprisingly energized by the greater promises that new-deal employers can deliver. They see their roles increasing in importance and are excited by the opportunity to make a bigger difference to corporate success overall.

The survey captured data in four areas that experts say appear to make a difference in fully engaging employee commitment. These areas (along with percentages indicating employee perception about how well employers are achieving them) are: career security—a measure of employees' sense of shared destiny at their firms (companies are 63% successful); business alignment—the extent to which employees share the company's vision (companies are 70% successful); management effectiveness—employees' view of how well a company is managed (companies are 59% successful); and customer focus—employees' opinions of their companies' responsiveness to customers (companies are 69% successful).

"Overall, these relatively high scores indicate that employees are far more 'in tune' with their employers' needs and concerns than is widely believed," says Steve Bookbinder, head of Towers Perrin's organizational research consulting practice. "Indeed, our findings suggest that companies have a vast reserve of excellent raw material in the form of a willing and able workforce."

But gaining the full commitment of that workforce isn't a company's birth-right. You'll have to work hard to leverage both employees' abilities—and their willingness to use those abilities—to your firm's best advantage. "Companies that fully tap into this are likely to see significant increases in productivity, quality and profitability," says Bookbinder.

Provide employability.
According to the Towers Perrin survey, employees don't want to be—and know they can't afford to be—idle bystanders who do little more than show up, collect a paycheck and go home. They're more willing to accept responsibility for the quality of their work and their performance. Employees are committed to doing what they can to help ensure their companies' financial well-being. They want to be equipped—and trusted—to do what it takes to keep the business viable.

The equipment process usually translates first into high-gear training and career development. For example, Palo Alto, California-based Hewlett-Packard Co. (HP) is one organization that epitomizes the new deal, say the experts. Mary Lou Simmermacher, a press relations consultant for Hewlett-Packard, characterizes the firm's commitment to employee development: "People development is a critical business priority for HP. To compete effectively, HP invests in its people and promotes a strategy of career self-reliance."

A June 1996 article in the Los Angeles Times says skills enhancement and skills management is a top priority: "In the business revolution upending our world, the No. 1 career issue is skills." Giving employees portable or transferrable skills, and a variety of cross-functional assignments, is what savvy employees are after—and what employers must deliver under the new deal.

Valerie J. Gieseke, a consultant at TRI-AD Actuaries Inc., in Escondido, California, agrees. She recently debated the topic of the new deal with a group of human resources professionals in San Diego. Gieseke says the group decided that under the new deal, employees have a responsibility not just to do their jobs, but to be innovative about how they do those jobs. Employees also have a responsibility toward continuous learning. "As an employer, however, I have a responsibility toward my employees to ensure that their skills don't become stagnant or obsolete, to provide opportunities to them for expanding their skill sets and thereby their marketability," she says. "This can be [achieved] through cross-training, external classes and generally trying new things. Designing a job so the same employee puts the same nut on the same bolt all day, every day, isn't part of the new pact."

And the focus of the skills acquisition no longer is on the employee or the employer, but on the customer. Everyone recognizes in the new deal that the customer is the ultimate measure of future success. "Building the skills and competencies customers value becomes the criteria for success—not where you are in some pecking order or some hierarchical chart—because the hierarchy is, in many cases, no longer there, or it has flattened substantially," says Edward R. Goldstein, vice president of Brecker & Merryman Inc., a human resources consulting firm based in New York City.

In fact skills acquisition is so important, employers are scrambling to add training programs to their corporate plates. A survey of Personnel Journal readers earlier this year indicates that 80% plan to add training programs in 1996—a 20% increase in only six months. It seems companies are taking this part of the new deal very seriously.

Rewards of the new deal.
The new deal requires honest communication about mutual objectives and better spoils for the risk-hardy. The current trend in compensation is to increase the amount of at-risk pay so employees have an opportunity for more pay if they help their employers exceed their financial goals. "We're not going to see the massive emphasis on base pay that we've seen in the past," says Marc J. Wallace, founding partner of the Center for Workplace Effectiveness, an organization that focuses on helping companies achieve optimal business performance, based in Northbrook, Illinois. "That's changed for good."

Whatever the exact tie between pay and performance, the new deal requires that you be explicit, rather than implicit, about what people are going to get for their work and commitment, say the experts. And make employees feel like they're truly part of the team.

"On a scale of 1 to 10 of explicitness, we're about an '8,' says Oxford's Effron. "This is manifested most clearly in our compensation system, which is highly skewed toward rewarding exceptional performers exceptionally. Those doing a good job get modest rewards. Those in the 95th percentile can be substantially enriched."

Partner with employees.
Share the risks. Share the rewards. And celebrate the process. Perhaps no organization is embracing this strategy better than San Francisco-based Levi Strauss & Co. On June 12, 1996, Levi Strauss executives announced a groundbreaking plan to reward its more than 37,000 employees worldwide with a one-time cash payment targeted to be approximately one year's salary (or wages for hourly employees) in return for their contributions to the company's financial success. If employees help the organization achieve its cash-flow target goal of $7.6 billion by the close of fiscal year 2001 (November), employees will receive a lump-sum payment.

The deal, known as the Global Success Sharing Plan, is in addition to the company's already rich compensation and benefit programs. Under the terms of the plan, the one-time cash payment would be made after the end of fiscal year 2001.

"One of our company's values is providing recognition and really sharing," explains Donna Goya, senior vice president of HR for Levi Strauss. "And when we say recognition, we mean both financial and psychic. We believe in sharing success with those who create it."

"The new employment relationship is like dating - meeting each other's needs for now, but not making any long-term commitments."

Levi Strauss already has an annual incentive program, but wanted an add-on program that promises rewards for the cumulative effect of employee goal partnership over time. The plan fits into the organization's total culture—one in which employees' lives are as important as the quality of its products, says Goya. The company's plan seems to go against the grain of many companies that are moving toward shorter-term rewards.

"I think there's too much focus on short-term returns [in business today]," says Goya. "When we started focusing more on the long term several years ago, the earnings didn't go away. We've had nine years of record sales." She adds: "This [program] isn't about feeling good, it's about improving the bottom line—because employees work for more than a paycheck. It's about [designing systems that] get employees to bring 'all of themselves' to work so they won't just be showing up to fill a chair. And we won't have constant costs in terms of training new people because of turnover." Levi Strauss, in fact, has very low turnover (less than 2% annually worldwide). "So we think it goes directly to the bottom line in terms of motivation, commitment, enthusiasm and creativity," adds Goya.

Those words are music to employers' ears. The problem is how to fire up those employee motivators in the new-deal era. The answer, if Levi Strauss is a good example, lies in bringing the best ideas of the past—committing to employees—together with the business realities of the present: Partnering with employees to grow a business in which the risks, and rewards, are shared.

Beware of creating a raw deal.
It may be idealistic to think that we can get away with operating under the new deal for long—pushing the deal farther and farther toward the no-fault equivalent of a car-insurance policy. Employees are smart. (Remember how we encouraged them to be this way?) And they've started to catch on that the new deal, for them, may be a raw deal.

Says one human resources professional who requested anonymity: "If the reality is that employment relationships are transitory, then you can't have your cake and eat it, too. If the employer is free to look dispassionately at employees, then employees are free to look dispassionately at employers. We rely far too much on carefully crafted corporate communicator B.S. to make the new deal look better than it is, and to rationalize why we think we can expect loyalty from people without giving it in return. People see through this very quickly, and they draw inferences from our attempts to sugar-coat what for them is a bad deal."

Joan Farrell, who's in charge of human resources issues for Lawson Mardon Packaging, in Fayetteville, New York says that the new deal is alive and well at her company, which is part of Lawson Mardon Packaging, a division of Alusuisse-Lonza Holding Ltd. However, different businesses within her organization emphasize different points on the old deal/new deal continuum. Some units actively emphasize the concept that if you grow, learn and contribute, managers will work equally hard to ensure they manage the business well enough to keep people on board. "Other units emphasize a more fragile relationship dependent upon economic realities, more akin to 'a day's pay for a day's work,'" says Farrell. She says the company even has some units that still say loyalty equals job security. "Even in the most aggressively new-deal units, however, there remains a very human element that says 30 years of loyal service still brings a bit of entitlement," says Farrell.

That doesn't mean we need to jump back on the lifetime-employment wagon. But it may mean we'll have to rethink our companies' missions—and how we expect to get there through employee grit. If the new deal's main tenet is shared responsibility, then we can't act as if we have nothing at stake in the employment relationship. If we take the new deal to its worst-case conclusion, everyone could walk off the job today, with no reason to think twice. What we must do is engage people's hearts, as well as their minds, so that employees are so engaged in working for us, they'd work without a paycheck (in the figurative sense). We can't tell employees that they're partners in the business and then not treat them that way. They will leave faster than you can say "old deal" and they can, and will, take their commitment with them. The question is: How much are you willing to let them fire it up somewhere else?

"Call me old-fashioned, but I question whether this whole trend in employment is in the best interests of employers," adds the HR professional who wished not to be identified. "Few employers really want the kind of behavior that employees are entitled to display under a fair, no-risk model. It's a lot like love. Marriage may not be the institution it once was, but most couples still talk about 'commitment' sooner or later. It's what most people really want."

Personnel Journal, August 1996, Vol. 75, No. 8, pp. 60-66.

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