In 1960, Douglas McGregor concluded that a new methodology for dealing with people at work that was based on new thinking was necessary if businesses were going to succeed in tapping into the unutilized potential of their employees. He knew the effect he wanted to achieve; he called it the Principle of Integration (today we call it employee engagement)—creating a set of conditions where employees can actually achieve their own goals best by directing their efforts to the success of the organization. In other words, the harder people work for the success of the business, the more satisfaction they experience regarding their personal needs. This makes coming to work and working hard a “win-win” situation. The problem, however, is that McGregor couldn’t figure out a methodology to make this happen. This is where The Engagement Formula comes in.
In 1960, Douglas McGregor laid a solid foundation for The Engagement Formula in his book, The Human Side of Enterprise. Keep in mind, the term “employee engagement” was not in common usage at the time, but McGregor was fully aware of the low level of employee engagement that existed even then. As he put it, “Many managers would agree that the effectiveness of their organizations would be at least doubled if they could discover how to tap into the unrealized potential present in their human resources.” He reasoned that the traditional management model, which he referred to as management by direction and control denies individuals the opportunity to satisfy certain needs at work that are important to them. As a result, using this management model actually prevents businesses from tapping in to the full potential of their employees.
Several years ago, Joe Nocera of The New York Times wrote an article about Herb Kelleher, the then CEO of Southwest Airlines. One of the things Mr. Kelleher commented on was what it actually means to put employees first. As he put it, “We’ve never had layoffs…We could have made more money if we furloughed people. But we don’t do that. And we honor them constantly. Our people know that if they are sick, we will take care of them. If there are occasions or grief or joy, we will be there with them. They know that we value them as people, not just cogs in a machine.” This simple, yet profound formula for success has result in happy employees, loyal customers and contented shareholders for four decades. Sounds to me like it works.
Southwest Airlines has been profitable every year but one since it started 40 years ago. The reason for its success is that Southwest has its priorities in the right order. At Southwest, front line employees come first, customers come second and shareholders come last. The reason is that if front line employees feel they’re being treated well, they’ll take very good care of the customers. If the customers feel they’re being treated well, they’ll not only come back again and again, they’ll also tell others about their wonderful experiences, which is what creates value for the shareholders. This is a very simple formula that consitently produces amazing results. It’s mind boggling that more companies don’t use it
I’ve received a number of emails recently saying something to the effect of, “I can’t wait to see the new management “style” you’ve been talking about. Just to set the record straight, I discovered a completely new “method” or “model” of managing, not a new style of managing. Style deals with things like “hard vs. soft” or “people oriented vs. work oriented” without changing the fundamental framework or “model” that’s used for dealing with people. As Douglas McGregor put it more than 50 years ago in his excellent book, The Human Side of Enterprise, a new management style is the equivalent of putting old wine in a new bottle–the look is different, but the outcome is the same. My new management model is a complete change in this fundamental framework–not just a new bottle, but new wine as well. This model is exciting because it captures all the magic contained in the success stories of companies like Southwest Airlines, Google, USAA, JetBlue, Zappos, SAS and W. L. Gore & Associates.
I’m getting ready to ring in the New Year with friends. I’ll be back next week. All the best to all of you during 2011. I’m excited because 2011 is the year my new management model gets lauched. Talk to you soon.
In business organizations there has always been a fairly large contingent of people who think that occupying a supervisory or managerial position gives them a license to bully–to intimidate and demean the people who work for them. An article in a recent issue of USA Today by Laura Petrecca referenced research which found that one in three adults had experienced workplace bullying and that 75% of the bullying was from the top down. Bullying is immoral because it hurts people both physically and emotionally. In addition, employees who are bullied are far less productive and no longer have the company’s best interest at heart. There’s only one way to stop bullying in the workplace and that is to adopt a company-wide policy of zero-tolerance for anything that even resembles bully behavior. It’s then up to senior management to model this policy. As Jack Welch, former CEO of General Electric once said, ” In an environment where we must have every good idea from every man and woman, we cannot afford management styles that suppress and intimidate.” This is why there is no place for bullying in my new management model.
As I mentioned yesterday, Ram Charan, coauthor of The Talent Masters, has a list of the top corporate talent-management mistakes. Topping the list is “leaders not held accountable for developing talent.” Developing talent means leaders have to give up their control over people and let them decide what to do, how to do it and learn from their mistakes. The reason most leaders don’t do a better job developing talent is that doing so runs against the grain of the traditional management model where the name of the game is top-down direction and control. In other words, closely adhering to the traditional management model actually prevents leaders from developing new talent. This is another reason why the traditional model has to be abandoned and replaced with a new management model. As Mary Parker Follett said in her book, Creative Leadership which was published in 1924, “Leadership is not defined by the exercise of power, but by the capacity to increase the sense of power among those who are lead. The most essential work of the leader is to create more leaders.”
This has always been a mystery to me. Front line employees are the people who do the work that the company gets paid for. It’s the quality of their effort that determines the financial performance of the company. Yet this is the place where senior management chooses to minimize costs. Wouldn’t it make more sense to invest additional money and resources in the one group of people who actually drive the company’s success? This seems like a “no brainer” to me, but this is what the traditional management model, with its emphasis on direction and control, encourages senior management to do. This, in turn, resuls in mediocre financial performance. A new management model is clearly needed. Stay tuned.
A recent issue of The Wall Street Journal featured an interview with veteran management advisor, Ram Charan. The article also included Mr. Charan’s top five list of corporate talent-management mistakes. Included in the list was “placement of loners (people who prefer to be alone or avoid the company of others) in leadership jobs.” What are these people thinking? If you don’t like being around people, how are you ever going to get anyone to follow you? The prerequisite for any leadership position has to be a love for people. This is why the traditional management model, with its emphasis on direction and control, doesn’t work. It focuses only on performance numbers and ignores the people who do the work to drive those performance numbers. My new management model focuses on getting the most out of people which means the performance numbers take care of themselves.