The Goods on the 'Good Employer'
In an essay based on their new book, <i>Workforce Management</i> senior editor Ed Frauenheim and his co-authors, Laurie Bassi and Dan McMurrer, say workplaces must be at once caring, exacting, and stirring in the emerging "Worthiness Era."
Paul Levy walked the halls of Beth Israel Deaconess Medical Center. But he may as well have been walking a tightrope.
The Great Recession had hit, and Levy, CEO of the Boston hospital, had to cut labor costs while somehow preserving a high level of patient care. As he considered his options, Levy watched as a janitor emptied the wastebasket, a food service worker delivered meals, and other low-wage employees pushed patients through the halls on gurneys. He listened as they spoke kind words to patients and their families, he witnessed their cheerful presence and gentle care, and he realized that these "low-skill" workers were delivering health care.
As layoffs loomed large, this was not an idle insight. Levy knew that these workers are normally the first to go. But he also knew that patients would suffer in small but real ways as a result. Levy was not content with "normal," and so he called an employee meeting in the hospital's auditorium.
He struggled to find the right words that would explain to all present what he had seen and heard: that each of them, down to the lowest-paid employee, was critical to delivering quality health care, and that perhaps there was some way that high-wage employees could find to save the jobs of their colleagues who earned less. He didn't have to struggle for long. Before he was able to finish his thought, the auditorium erupted in applause. He had spoken a truth that touched the hearts of those present. Money-saving ideas poured in, and the hospital managed to save almost all of the positions targeted for layoffs.
In effect, Levy struck a balance when it comes to employees. Employees are both a cost and an asset. Finding the equilibrium between these opposites is most difficult in the midst of an economic downturn, but the challenge never disappears. Day in and day out, in good times and in bad, leaders and managers make myriad choices about their workers—the totality of which determine whether a company can truly be considered a good employer.
The phrase good employer typically evokes images of generous, nice companies. Those attributes are part of the equation. But employer is more complex—and more difficult to achieve. In order for any business to thrive (or even survive), there are many trade-offs and judgments that must be made with respect to employees. To make these judgments wise ones, the worthiest employers measure workers, analyze workplace practices, and make sense of metrics in ways that might be considered cold and calculating rather than compassionate.
Such data-driven management, though, can benefit employees as well as employers, especially when companies possess another key element of worthiness as an employer: a compelling purpose. A company mission that goes beyond merely benefiting a narrow circle of stakeholders or solving a limited business problem can help focus firms on decisions and practices that both treat workers well and inspire them to give their best efforts.
Such a mission helps explain why Beth Israel Deaconess has become a standout hospital, ranked in the top 3 percent of hospitals in the nation. Levy wrote on the hospital's website: "We care for our patients and family members like they are members of our own family." That family sensibility figures into both keeping care quality high for patients and treating workers well, and it helped Paul Levy succeed in his high-wire budget act.
This essay discusses the elements of the Good Employer, revealing a recipe for workplaces that are at once caring, exacting and stirring.
Establishing such a workplace is of growing importance to companies because of a major shift under way in the business world today. Thanks to a convergence of disparate factors, including the explosion of online information-sharing, the emergence of the ethical consumer and the arrival of civic-minded millennials, we are entering a new economic age. We call it the "Worthiness Era." In it, people have newfound power to reward and punish corporations for their actions, and increasingly they are doing so. As a result, the firms that will thrive in the future will be good companies—good stewards of communities and the planet, good sellers, and good employers.
The Good Employer recipe we spell out here—which is equally relevant for employers in for-profit and nonprofit sectors—is largely the product of two decades of research and client consulting by Laurie and Dan. In the course of those efforts, they arrived at a framework for people management that has proven effective at improving business results.
That framework consists of three main elements: a value-creating organization committed to employees, sound data analysis and an inspiring purpose.
A Value-Creating Organization Committed to Its Employees
Great places to work also have to be places that create value for customers and other stakeholders, including owners who expect a good return on their investment. Only those organizations are capable of a long-term commitment to their employees, providing job security and opportunities for development and advancement. This creates a virtuous cycle because organizations committed to employees typically bring out the best in their workers—who in turn create value.
In other words, chief among the ingredients for a value-creating organization is a long-term commitment to employees, where they are:
- Rewarded for developing skills needed to meet the organization's business goals.
- Provided with opportunities for advancement.
- Recognized for their accomplishments.
- Able to feel secure in their jobs.
A commitment to employees is complemented by other leadership, work and learning elements in developing and maintaining a value-creating organization.
Communicating as a leader is easy. Effectively communicating as a leader is hard. It takes time, effort and skill. And firms need high-quality communication from leaders throughout an organization. It requires that leaders and managers effectively communicate what is expected of employees and, perhaps harder still, that they be genuinely open to two-way communication.
Leaders' actions also speak very loudly. Essential leadership behaviors include working collaboratively with employees to identify and eliminate barriers to effective work, following and demonstrating the organization's values, and exhibiting principled and ethical behavior.
The work environment consists of multiple components, including hiring practices, job design, work processes, conditions, accountability and compensation practices.
Taken together, these components comprise the nuts-and-bolts factors that are essential to creating value for all of an organization's shareholders. Many executives believe that responsibility for these "routine" aspects of organizational effectiveness can be delegated. Although it is true that senior executives cannot and should not be involved in the day-to-day minutia of the work environment, any number of post-mortem organizational autopsies have revealed that executive abdication of this responsibility can result in a speedy death.
In 2002, for example, Dan and Laurie conducted an analysis of the work environment at Riggs Bank, a respected Washington, D.C., financial institution. In their report, they called attention to a dearth of defined processes—particularly with respect to hiring practices and employee training—in Riggs' international banking unit. The warning fell on deaf ears. Within two years, Riggs was embroiled in a Justice Department investigation that found the international division had violated a number of money-laundering laws. Shortly thereafter, Riggs was sold for a pittance. Many jobs were lost, shareholders' value was destroyed, and a venerable 168-year-old institution ceased to exist.
From a work environment perspective, executive vigilance is absolutely essential.
Learning is an economic elixir. It makes both people and organizations more adaptable, more able to respond to change, more nimble. It serves as the bedrock for innovation; it is impossible to innovate without learning something new. And when it occurs in workplaces, it is one of those rarest of opportunities—where employers' and employees' incentives can be in perfect harmony, with the potential to almost always make both better off.
Creating Business Intelligence for Being a Good Employer
Traditional systems of measurement, which are so key to running a business, often make it more difficult to be a worthy employer. Although CEOs proclaim "Employees are our most important asset," employees are measured as costs.
At some level, of course, it makes sense for employees to be accounted for as costs. After all, they are not owned by their employer—and that is a good thing. But the lopsidedness of traditional measures does get in the way of balance. And hence, it gets in the way of employer.
There is a nascent movement under way to correct this imbalance by collecting, compiling, and analyzing data in new ways to create true insight—actionable business intelligence—that helps employers better measure (and therefore manage) employees as both costs and assets.
The basic idea is pretty simple: it relies on taking disparate pieces of data and combining them to create understanding that is not evident to even the most tuned-in and intuitive of managers (or, for that matter, to anyone staring at mountains of unfiltered data).
The tools now exist that allow more organizations to apply analytics to create actionable business intelligence on the people side of the business. Done correctly, this has two benefits. It enables organizations to more efficiently create value for their customers and others. Simultaneously, it enhances their capacity for long-term commitment to their employees by providing quantitative information that can counterbalance the cost-focused nature of the standard accounting system.
Goodness as an employer requires more, though, than the ingredients discussed above. It also requires an inspiring purpose, which includes clear identification of both who the company is designed to benefit and what the company is trying to achieve.
For the past several decades, typical companies followed a philosophy of "maximizing shareholder value," benefiting company owners (and often top executives as well, thanks to large quantities of stock or stock options), with little concern for employees or the communities touched by a company.
Increasingly, though, companies are expanding what we might call the people purpose to include employees as stakeholders. Whether explicitly written into company bylaws (often reflected by employees owning stock) or implicitly adopted as an ethos, such a mindset helps ensure that companies will treat workers with dignity and respect. A broad people purpose also can spur great effort and loyalty from employees.
That said, a lofty-sounding corporate purpose will fall flat or lose its uplifting power if it is not genuine. Don't claim to be about environmental stewardship but cut corners on pollution controls and expect to enjoy the fruits of employee passion and optimal performance.
A stirring, inclusive vision not only helps inspire employees on a daily basis but also can buoy an organization during tough times. Consider Beth Israel Deaconess Medical Center and a bruising 2010 scandal it weathered when a personal relationship between CEO Paul Levy and a former female employee became public knowledge. Levy was fined $50,000 by the hospital for "poor judgment," apologized, and ultimately resigned from Beth Israel.
The hospital's ethos of treating "patients with the utmost respect and compassion, like our own family members and friends" seemed to help the organization remain on an even keel even as the scandal unfolded throughout 2010. Board president Stephen Kay told the Boston Globe that the hospital was having "a great year," adding "we have more patients than we've ever had before."
Beth Israel also appeared to remain a good employer overall. In late 2010, Beth Israel spent $3 million in appreciation bonuses. Even before those payments were announced, and despite the scandal, Beth Israel employees were giving the hospital high marks on Glassdoor.com. One clinical research assistant noted that although "some internal competition and politics makes [the] workplace awkward at times," Beth Israel was a "great place to work," citing learning opportunities and a "friendly, supportive staff."
The hospital, in other words, continued to strike a balance between treating employees as costs and assets. All companies seeking to be good employers must do this. By caring for workers, being careful about how they're managed, and providing them with a compelling overall purpose, companies are finding they can be good to their employees and to the rest of their stakeholders as well.
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