Leadership: Art & Science Part 1 - If you Care about Business, you must Care about People first
“The business of business is people”
Herb Kelleher, the founder of Southwest Airlines, based his business on people and made this his priority for his company’s culture. Herb grew Southwest from scratch, from a regional carrier with only a few destinations to a consistently profitable company–even in the early 1990s, when oil prices were skyrocketing and the airline industry was losing billions. He achieved this by showing he cared for every one of his 50,000 employees who operated more than 4,000 flights daily to more than 100 destinations.
“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 of grief or joy, we will be there with them. They know that we value them as people, not just cogs in a machine.” – Herb Kelleher
Why is caring about people so important? This is because people will follow you through hard times and struggles on the basis of how you make them feel. How you make them feel will be the fuel for how well they perform and consequently how well your company will perform. Joe Nocera wrote an article in the New York Times entitled “The Sinatra of Southwest Feels the Love” about two different airlines’ results based on how differently they cared for their employees. From the piece we learned that the same day that American Airlines held its annual meeting, Southwest held theirs. American Airlines was losing money, and its chief executive officer complained from the podium that the state of the industry was unsustainable. Members of both the Flight Attendant’s Union and the Pilot’s Union, in the middle of combative contract negotiations, picketed the meeting and handed out anti-management fliers.
By contrast, the Southwest meeting was a lovefest. The company had made $645 million in 2007, but that wasn’t the top of the shareholders’ minds. They had come to pay respect to Kelleher. When he entered the room, they stood as one, cheering wildly. Southwest’s pilots were also in contract negotiations, but instead of picketing they published an ad in USA Today to thank their founder.
This happened because emotion lies behind every decision we make. Emotions come before behavior. Modern brain scanning technology allows us to see how the areas of the brain related to feelings light up before the areas related to rational thinking and evaluation. If you make people feel good, they will perform their best and they will be loyal to you. On the contrary, when you make someone feel stressed or scared, their fight or flight mechanism is activated. This a spiral of negative consequences: bad cognitive functions, uncontrolled risk-taking, less collaboration, less creativity, decision-making that isn’t thoughtful, less engagement and ultimately less productivity.
Our human brain considers emotions to be so vital for our survival that it stores them in one area of the brain called hippocampus. It uses them to quickly make a decision when you encounter a similar situation (your brain tells itself, “hey, I’ve seen this movie before, and I know how it ends”).
“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” – Maya Angelou
To create a culture where people trust you, trust each other, and trust the company, the first step is to start truly caring about people. This can be achieved by adopting these three leadership behaviors:
1. Listen to people with a main goal of understanding them, don’t just prepare your reply ahead of time. Many leaders feel they are expected to have the answers or to have the last word, thus they quickly take any opportunity to give their opinion. Create time and space for others to talk to you. Don’t interrupt when employees speak, keep your thoughts until the very end, when everyone else has had a chance to talk.
“Most people do not listen with the intent to understand; they listen with the intent to reply.” – Stephen R. Covey, The 7 Habits of Highly Effective People
2. Hold people accountable for telling you the truth and vice versa. Hard truths need to be told with honesty and sensitivity. If you care, you can tell people everything. If you have established a relationship based on care and trust, it is easier to tell someone something unpleasant when it is delivered in an honest yet caring way.
“Never be afraid to raise your voice for honesty and truth and compassion against injustice and lying and greed. If people all over the world…would do this, it would change the earth” – William Faulkner
3. Give people control and autonomy. Most companies are not even aware of the amount of control and restriction that pull down each person’s autonomy. Most of us are familiar with inherited work cultures of processes that tell people what to do and even what words to say in every possible situation. As customers, we have all experienced this when talking to a representative at a call center which is such a frustrating common situation of a horrible customer experience – so common that it was used as the premise for a popular iRabbit ad.
“Control leads to compliance; autonomy leads to engagement” – Daniel H. Pink
Whether your company starts by removing excessive control or by adopting radical new ways of working such as holacracy, there is always a sweet spot between your needs and the needs of your employees.
Read part 2 here!
Leadership: Art & Science Part 2 - Revise your reward system! It might be putting your company at high stake
This is the second part of Silvia’s blog series. Make sure you read part 1 If you Care about Business, you must Care about People first
There are few leaders that have heard about the neurological reward and contentment systems, both at the origin of decisions your employees make. We all know there is a quick way to get people to do what you want them to; ask someone to do something in exchange of a high enough reward and you’ll get an immediate response. Most motivational programs at businesses are built around this. It works for the short term but is proven ineffective for the longer term.
Our brain is biologically inclined to instant gratification and reward. Why? Because motivation and reward seeking are key to our survival. As a species, when our reward system is tickled, it releases dopamine (the hormone that gave us the motivation to endure dangers and tiredness to hunt prey) and cortisol (the hormone that gave us an extra kick of energy when running after the prey). As leaders, we seek to create that type of excitement about goals in our teams (e.g. end year bonus or performance bonus).
However, we need to be careful with this approach because dopamine and cortisol are such powerful drivers of our behavior that the desire to obtain the reward and/or the fear not to get it, can take over our critical thinking and ethical decisions.
Let’s take an example. What role did, what appears to be, an overstimulated reward seeking system play for NASA in 1986?
On January 28th 1986 NASA launched the Space Shuttle Challenger, the first aircraft to carry a non-professional astronaut on the crew, including a school teacher. NASA was the icon of American technological accomplishments, we were in the Space race era, and the US government was eager to see the Challenger in orbit, fearing that doing it quickly, could give an advantage over Russia. The Challenger was going to be the first spaceship able to make it to space, come back home, and be reused in new launches; thus, greatly reducing the cost of the Space Race for America. NASA had done 24 launch assessments to verify the viability of the final launch of the Challenger. Seven out of twenty-four of those assessments concluded that the rubbers that sealed the fuel, called O-rings, had problems when performing under low temperatures. The weather forecast for January 28th, 1986 was 23 F (-5 Celsius) so the day before the launch, NASA scientists called a meeting with the O-ring manufacturer, Morton Thiokol. Morton Thiokol was a proud NASA provider and their business leaders’ primary motivation was NASA’s satisfaction. Morton Thiokol engineers’ primary motivation was to make things work. Thus, fearing the consequences of low temperatures, Morton Thiokol engineers recommended NASA to postpone the Challenger’s launch. NASA was less than pleased to hear that. Morton Thiokol business leaders asked NASA to let them have a private conversation with their engineers. Roger Boisjoly, one of the engineers attending that meeting remembered how their leaders put pressure on them to reconsider the launch on the following day; telling them that it was a strategic decision and not a technical one. The four senior leaders voted in favor of recommending that NASA pursue with the launch of the Challenger, despite the recommendation not to do so by all the engineers. The following day, millions of people, including children expecting to receive the first lesson on space, were watching, when 73 seconds after launch, the Challenger spaceship disintegrated and the seven members of the crew died.
What caused the tragedy? Although the first investigations focused on understanding the defective feature of the O-ring’s rubber components that sealed the fuel deposits; later investigations have focused on the essential role of the short-term reward culture at the time.
Reward is the fuel of our dopamine circuit. However, there is the possibility of too much and too little dopamine. It is a matter of balance. Most companies either over-stimulate or under-stimulate employees’ short reward system. Avoid this pitfall.
Read part 3 here!
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Leadership: Art & Science Part 3 - Never forget Serotonin
This is the third and final part of Silvia’s blog series on leadership. Make sure you read part 1 If you Care about Business, you must Care about People first and part 2 Revise your Reward System! It might be putting your Company at High Stake
What distinguishes great leaders from the masses is that they build a culture that combines dopamine and serotonin. In other words, leaders combine the excitement, created by stimulating the reward (dopamine), with the meaning, satisfaction and pride that each employee gets when their contentment (serotonin) circuit is activated.
Serotonin is also a neurotransmitter, but instead of creating addictive, aggressive, and risky behaviors when over-stimulated, the serotine circuit makes people feel part of something meaningful, bigger than themselves. They feel satisfied and grateful.
To activate the contentment circuit, leaders need to put emphasis on demonstrating values over outputs, and they need to reward employees for acting on those values. In my last blog post, I discussed what happened when NASA didn’t listen to their engineers in 1986 (link). What would have happened if the Morton Thiokol employees would have been rewarded on doing the right thing to make sure their products contributed to the safety of the spaceship launch, instead of being rewarded and pressured to keep clients satisfied, no matter the cost? Although an aggressive reward system on outputs can benefit the short-term economic performance of a business, rewarding on values and creating the right culture helps companies outperform in the long run.
Costco and Walmart have very different leadership styles that cascade into their values and culture. Jim Sinegal, Costco’s founder says his mission is to keep their employees happy. Stakeholders satisfaction is a by-product of Costco’s focus on employees. He personally visits outlets to say hello to the workers. He also makes sure that employees are paid a fair wage and that everyone has health insurance. Costco pays their employees 65% more than Walmart, whose employees have been in the news a few times this year complaining about salaries and benefits. In 2008, when the recession was hitting hard, Costco avoided layoffs unlike most retailers. Jim Sinegal explained it himself in an interview with the Seattle Times:
“ We said … two things: No. 1, we want to drive our business to succeed, so we’re going to lower prices and try to drive more business into our buildings. And in addition, our employees … deserve our loyalty. They needed it just as much then as they ever did, or more. So we said, let’s see how we can get through this thing without having layoffs”
Costco employees generate 200% higher sales than Sam’s Club, Walmart’s wholesale branch. Costco’s employees’ very low rotation saves the wholesaler millions of dollars per year. Moreover, the way employees are trusted and treated makes Costco enjoy the lowest theft ratio in the whole industry.
What about the economic results. Costco’s shares grew 200% while Walmart’s grew 50% between 2003 and 2013. Recently Nasdaq wrote “shares of Costco have surged nearly 84% over the last five years, which tops the S&P 500’s roughly 73% climb. Investors should also note that Costco crushed Walmart’s 11% gains over this stretch”.
Walmart’s employees reward system is under-stimulated, with low salaries and benefits; while their stress system, the fear center, is on high alert due to a culture that emphasizes too much performance and a sense of urgency and immediate results or else. The words of Sam Walton, Walmart’s founder are a perfect example of the culture he created:
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” – Sam Walton
Costco created a culture of contentment by putting values before outcomes. During the crisis, they could have made more money on the short term by making employees redundant, but instead they showed their loyalty to the employees by not adding additional worry.
Mastering the art and science of leadership is the solution to growth beyond success (dopamine). It is the way to ensure greater individual and company value (serotonin).