Observations on Employee Ownership
If Great Places to Work Are So Successful, Why Are There So Few?
May 16, 2011If a practice succeeds in the marketplace, over time, it will become the norm. That, at least, is what most of us were taught if we took an economics course. The market rewards good ideas and punishes bad ones.
Well, not always. As Loren Rodgers reports in his May 16, 2011, Employee Ownership Update, the most comprehensive analysis ever of the relationship between workplace practices and corporate performance confirms what has been found again and again in prior studies: companies that reward fairly, have minimal supervision, and lots of employee involvement in work-level decisions perform much better than those who don't.
Yet if you look at the over 4,500 mutual funds in the U.S., you will not find a single one that uses workplace practices (such as being on the "100 Best Companies to Work For" list) as its selection criteria. But it is worse than that. Having been a board member of the Great Place to Work Institute and a judge for Winning Workplaces, I can tell you that given the prestige of these awards, only a surprisingly small few hundred companies apply each year, and the ones in the bottom half or so of the applicants are, frankly, not that impressive. Job dissatisfaction levels are at all an all-time high, and over half of surveyed employees say they are thinking about looking for another job in the next year (most won't, but it is a good measure of unhappiness).
There are many reasons why companies are not making what seems like the obvious choice to be a better workplace, but these seem most compelling to me:
- It's a lot of hard work to change corporate cultures, and it won't produce quick results. In public companies, CEO tenure is under seven years, and shareholders expect results quarter-to-quarter. That is not an environment that favors long-term efforts.
- Mid-level managers are often threatened by and therefore resist the kind of employee empowerment programs that characterize great places to work. They fear that their positions may be at risk or, at least, their role diminished.
- Our business culture has a strong element of hero worship. To investors, the media, boards, and much of the public, a company's success is determined largely by the CEO. While CEOs obviously matter, corporate success comes from many factors and even more people. The result of this excessive focus on CEOs is that (1) they often get vastly overpaid, creating a growing sense of unfairness among employees, and (2) they believe their own press and think they can do no wrong. Yet one of the traits of a leader of a great workplace is the humility to know that others may have a better idea.
- Culture seems squishy compared to strategic planning, cost-cutting, and other hard number approaches. MBA programs give organizational development short shrift, so future leaders have little concept in how to develop it. Human resource departments are usually at the bottom of the "C-level" totem pole and, perhaps not surprisingly, much more likely to have female executives who may not be regarded by their male peers as credible (it's worth noting that men over six feet tall, and especially over 6'4", are vastly overrepresented among CEO ranks).
- Finally, while sharing rewards equitably, and encouraging and crediting greater employee involvement, may be good for the company, it may not be in the personal self-interest of the CEO. A much bigger piece (and a much larger share of the ascribed credit) of a somewhat smaller pie is still in their self-interest. Sure, they will gloss that over with all the rationales we so commonly see about the need for great leadership, and they most likely sincerely believe their own rhetoric (sort of like they believe people are their most important asset), but the results are toxic to creating great workplaces.