Taking care of customers by taking care of employees, (give them all a raise edition)

ETERNAL TRUTH: Better engaged employees are happier, more productive, are retained at higher rates than less-engaged folks, and provide higher levels of customer service, all things being equal.

So if you want/need/desire improved customer service, all you have to do is find a way to improve employee engagement levels of the folks meant to be providing the customer service. 

Easy, right?

Except when it's not. I have written plenty here, (and so have lots of other folks), about how despite tossing money and effort at improving engagement for at least 20 years, that in aggregate engagement levels are about what they have always been since it became a member of the 'something we measure' club.

But what if there was another, simpler way to improve customer service that didn't involve 'engagement' at all, but did impact those employees that are on the front-line working with and helping customers every day? You'd be interested in something like that, wouldn't you? What if it was as simple as cutting a check? Well, make that several thousand checks.

Check this excerpt from a recent Fortune piece - McDonald's Says its Wage Hikes Are Improving Service:

The hamburger chain in April announced it would raise the average hourly rate for workers at the U.S. restaurants it owns to $9.90 from $9.01 starting July 2015, with average wages climbing above $10 per hour by the end of 2016. The company also said it would allow those employees to earn up to five days of paid vacation every year following one year of employment.

McDonald’s CEO Steve Easterbrook, who took the helm in 2015, has since moved swiftly, closing hundreds of weak stores, bringing back all-day breakfast, and simplifying the chain’s menu, reducing bottlenecks in serving customers quickly. But improving the customer experience hinges on workers being on board with all these changes, hence the raises.

“It has done what we expected it to—90 day turnover rates are down, our survey scores are up—we have more staff in restaurants,” McDonald’s U.S. president Mike Andres told analysts at a UBS conference on Wednesday. “So far we’re pleased with it—it was a significant investment obviously but it’s working well.”

The move reportedly created friction with franchisees, who hire and pay their own workers, as they felt pressure to match the wage hikes. Still, there are early signs it is paying off: In October, McDonald’s reported its first quarter of comparable sales gains in two years. The company built on that growth with a huge 5.7% increase in the following quarter.

Wow, is it that simple? A general 10% across the board wage increase and sales and customer service both rise enough to offset the costs of the increased wages? That's it? Man, what took them so long to sort that out?

In truth, there are a few things to tease out of this experiment, and it could be that some of the non-wage increase changes have been at least somewhat responsible for this recent turnaround in McDonald's fortunes. But as CEO Easterbrook rightly observes, in order for these operational and strategic changes to really work, the employees had to be on board, and raising wages was the simplest, (and possibly best) way to accomplish that.

There are probably a few special circumstances that make this strategy more effective than it would be in other places, even small reductions in turnover are likely to have a big impact on service levels in the fast food business, and even with a high number of employees, giving blanket increases of 10% does not represent massive spending. So get turnover down just a little, keep a few more longer-tenured staff on each shift, and boom - the drive thru lines move a little bit faster and the customers are happy.

Sometimes, maybe most of the time, we tend to over think what it takes to keep people (reasonably) happy, and give them a situation where they feel good about the work they are doing, and the customers that they are serving. 

You might not be able (nor necessarily should you), give everyone on the staff a 10% bump. But there probably is some other, simple, reachable change you can make that would serve the same purpose. It's out there. You can find it.

Just don't call it "employee engagement" and you will be fine.  

There are only 5 possible reasons for any business problem - Bar Rescue edition

Some folks who know me know that about a thousand years ago I spent a fair bit of time working in the Middle East - in Saudi Arabia to be precise. And these same folks also know that every one of my probably hundreds of stories I have told about my time in Saudi fall into only five major categories - it was really hot, we had to find gray market beer, I played rugby with a wild group of expats, we socialized with the (mostly Irish and Canadian) nurses from the local hospital, and sometimes you had to deal with some scary police/security people.

Every story, no matter how it starts, ends up in one of those five classifications. In fact, over the years I got tired of telling, (and people got tired of listening to) the old tales, and now I just list the five categories. The details of any one event or experience don't really matter all that much anyway. But the categories are still valid.

What made me think about this again was that over the long weekend I caught a few episodes of a marathon one of my favorite reality TV shows - Bar Rescue. If you are not familiar with the show, the basic premise is this: Veteran bar and hospitality consultant and expert Jon Taffer gets summoned to 'rescue' or help fix a bar or bar/restaurant that is failing, and possibly about to go out of business. 

Taffer will bring in a team of experts like a master mixologist, a chef, and designers and construction crews that together help to renovate the bar, motivate and train the owners and staffs, and redesign products and processes in hopes of giving the bar a new start and (hopefully), keeping it in business.

But what's the connection to 'Steve's boring Middle East stories?' you might be asking. 

Well it is this: Just like my dopey stories, every major problem facing the failing business owners in Bar Rescue falls into five categories as well. Sure there may be some subtle differences in specific situations, and most of these disaster bars suffer from multiple problems, but at their canter, they are mostly, remarkably, the same.

Every failing bar's problems fall into one of these five categories, (with some specific manifestations where I can think of some).

1. Lack of leadership from the bar owners - shows up in a few ways on the show, my favorite are the owners that simply get trashed drunk at the bar every night and have no idea what is really happening. Other times the owners are part-time or 'hobby' owners and have other businesses or jobs that keep them from paying enough attention to the failing bar.

2. Terrible hiring decisions - often this is the 'professional' bar manager that has no idea what he/she is doing. Also, lots of 'friends and family' hiring of people that are totally wrong for the jobs they are in or are taking advantage of their relationship with the owner to get away with doing substandard work.

3. Lack of attention to maintenance and upkeep - these are the bars with dead fruit-flies in the bottles, accumulated grease covering everything in the kitchen, and tubs of expired and/or rotting food in the walk-in. It is actually kind of shocking what some of these failing bars have allowed to let happen - at times it even threatens the health and safety of workers and customers.

4. Little or no understanding of the market/customers - time and time again Taffer and his team have to advise and educate the bar owners about the local neighborhood, the main drivers of potential traffic to the bar, and how the bar stacks up against the local competition. Typically in these situations, the bar owners have failed to recognize and adapt to changes - trends, preferences, and expectations of customers that are not the same as they once were back when the bar was more successful.

5. Failure to understand the economics - this one is pretty common the show and manifests itself in a few ways. Sometimes the owners really don't know how much money they are really losing or owe. Sometimes they don't have a good grasp on the financial drivers of their business, like knowing what food or drink items are most profitable. Or they are getting fleeced by staff (or even themselves) by giving away too many free rounds of drinks and not realizing how much that is hurting the business.

Just like my Saudi stories can be pretty easily classified, every failing bar's problems on Bar Rescue can fit into one of the above categories. And the the more interesting thing about Bar Rescue than my stories, is that these bar/business problems are pretty likely the same broad set of categories just about and business faces too.

Issues with leadership at the top. Bad hires, poorly trained staff, people in the wrong roles. Failing to keep track of the basic elements needed for any kind of success. Not keeping up with market and business condition changes. And finally, not watching and understanding the finances. Every problem (pretty much anyway), fits into one of these buckets.

Figure out in which one of these buckets that most of your business problems fit and you, like the Bar Rescue team, will know where to spend your time and energy making things right.

Deconstructed Protocols

I have been on a bunch of long, cross-country type flights lately. And part of the deal with a long flight is the time honored tradition of casually glancing at the laptop or tablet of the person sitting next to you to catch a glimpse of their Facebook feed, the movie they might be watching, or my personal favorite - the contents of the PowerPoint deck they are likely about to present the next day.

On my flight from JFK - SFO yesterday I succumbed to my curiosity to steal a glimpse (or three), at my neighbor's laptop. She was preparing and refining a PowerPoint presentation on some kind of really, really complex subject related to health care and disease control in hospitals (I think). While I was not able to make sense of the slides that I was able to see, one slide in her deck just about jumped out at me. It was the slide that seemed to mark the transition from 'These are all the crap things that are going on right now' to the section that would hold the ideas on 'Here is how we fix this mess and (hopefully) fewer people die.'

The slide was titled 'Deconstructed Protocols.'

And when I saw the slide title, I was really blown away. The gist of her presentation, I think, was how hospitals needed to really break down and dissect the specific steps, or protocols, associated with a certain procedure in order to try and figure out why an unacceptable level of post-procedure complications, like infections, have been occurring. And the only way to try and fix the problems is to tear down every element, every step, every piece of communication, every patient interaction, every handoff of responsibility, every piece of equipment used, every medication prescribed, and probably a dozen other things, and assess them both individually and as they exist and contribute to the overall process.

All of which, for a complex medical process, seems absolutely exhausting and probably has lots or people lined up against it.  

Deconstructing this process will take ages, will make people in high positions uncomfortable, and will likely require increased investment in the short term thay may take some time to pay off. All things that are hard, are hard to sell internally, and often have people lined up against anyone trying to drive the changes that need to be made.

What is the point of all this? 

A guess just a good reminder that even in situations like in a health care setting where making needed process, technology, or workflow changes can result in PEOPLE NOT DYING, often the agents of change run up against all the same barriers that you run into in your corporate role.

It will cost too much. This will anger the VP of something-something if you cut his team out of the process. You can really KNOW for sure if your changes will have the desired effect. And on and on and on.

But I hope you stick with it regardless. 

Maybe you are not in the business of saving lives but I bet the change you are (or want to) advocate for will make people's lives better - employees, candidates, managers - doesn't matter. Even when the benefits are obvious and important, effecting change is still hard.

And when the benefits are less clear, like as in most of what we do in HR/Talent, it is even harder. But keep the faith. And deconstruct the protocols.

Have a great week!

Fondly remembering the days of 3% raises

Quick shot for a busy Tuesday - check out this piece that ran on USA Today online over the weekend - Is the annual pay raise dead?, a look at some recent studies and trends in the world of employee compensation.

For what seems like ages, once per year the big total rewards consultancies like Towers Watson or Aon Hewitt would diligently report back that for the average employee annual salary increases would be about 3% (again). The news that annual salary increases would be about 3% became somewhat of a running joke, since it was so consistent and predictable. The phrase of employees being '3-percented until retirement' was fairly common.

Well, if the latest news on annual salary increases is accurate, we may all look back on the 3% raises of the past and wonder what happened to them. Check out some of the comments in the above-mentioned USA Today piece:

"Base salary increases are flat. We don't see the prospect of that changing much at all in the next several years," said Ken Abosch, who studies compensation issues for Aon Hewitt.

In other words, the annual raise is dead. It was already on life support last decade, but the Great Recession has finished off the raise. It's been replaced by "variable compensation" — the bonus.

"The quiet revolution has been the change in compensation mix," Abosch said. "Through a series of recessions, organizations have pulled back dramatically on fixed costs. And base salaries are often a company's most significant fixed cost ... [They] have a compounding effect, and create a drag on an organization's ability to change."

Awesome isn't it when your salary, (and by extension, you), are described and probably considered as 'a drag on an organization's ability to change', instead of, I don't know, a strategic investment of organizational resources in order to hire and retain great people.

One of the effects of a relatively higher percentage of one's overall compensation being shifted towards bonuses or other kinds of variable pay is that it makes 'regular' employment look and feel more like contingent labor. One of the reasons people like 'regular' jobs is the 'regular' nature of their weekly, monthly, and annual earnings. Drive more of these earnings into more company-friendly (and easier to reduce and/or eliminate), irregular compensation, then, well, earnings stability becomes much more tenuous.

Companies need to be more agile and flexible these days, no doubt. But at least in the US they have had the benefit of pretty much universal employment-at-will arrangements to ensure labor and labor cost flexibility. Now it seems like that might not be flexible enough for many organizations.

They want your 3% as well.

It's going to keep getting harder for traditional workplaces and policies

Last week I wrote about the six-hour workday, and experiment that some companies and public sector organizations have been running in Sweden (and some other places), that is designed to reduce employee stress, improve work/life balance, and improve employee engagement and retention. And the six-hour workday comes with the side benefit of helping employees stay more focused on their work while reducing unnecessary distractions.

So far, in limited experiments, the six-hour workday is proving to be pretty effective at moving the needle in a positive direction on some of HR and talent pros most intractable challenges - engagement, retention, and employer brand. Despite all this, will the six-hour workday catch in here in the USA in any noticeable way?

Maybe not. 

Or perhaps the answer is maybe not yet.

'Radical' new ideas are only radical until they hit a tipping point when they have reached just enough adoption, and from a few influential organizations, and suddenly candidates are asking your recruiters about whether or not you have six-hour days or have eliminated annual performance reviews or have implemented an unlimited vacation policy.

I just caught this piece about LinkedIn, and their recent decision to adopt an unlimited vacation policy for their employees. While LinkedIn is certainly not the first organization to trash the traditional PTO process in favor of one where employees and managers figure it out for themselves, they might be one of the largest, with about 9,000 employees worldwide. LinkedIn has likely many motivations that drove the decision to scrap the 'three weeks vacation after 5 years of service' nonsense that probably 97% of organizations use to award and track time off for their employees, but my guess would be the primary ones would be for recruiting and retention.

Likely there are dozens of Silicon Valley startups that have not bothered to worry about setting up traditional PTO plans at all that are competing with LinkedIn for talent. Just think about the difference in these two sentences in the point of view of a talented tech candidate:

1 You will accrue 4.25 hours of paid vacation every bi-weekly pay period, maxing at 80 hours until you reach 5 years of service, when the accrual maximum increases to 120 hours'

2. 'You take as much vacation as you want. Work it out with your manager and team.'

Don't bother telling me in the comments that people don't actually take as much vacation when it is 'unlimited' as they do when their is a set PTO policy and schedule. That doesn't matter one bit to the candidate, or anyone else really.

What matters is that when you can't match (and sometimes you do have great reasons why you can't), more innovative, modern, and employee-friendly policies and perks you are going to be always at a competitive disadvantage.

Once these innovations and perks make that important shift to become 'expectations' you had better have a decent rebuttal to candidates and employees who won't understand why they suddenly have to start worrying about having enough accrued hours of PTO in order to take that long weekend they deserve after pulling 70 hour weeks for two months to meet the last big ship date. 

It is only a matter of time, if it has not happened yet, when one of your hiring managers comes back to you in HR and asks 'Why can't we have unlimited PTO?, the talent we need expects it.'

Have a great week!