Guest Post by Adrian Gostick and Chester Elton

Over the last few years, our series of business books has focused on “carrots,” our catch-phrase for recognition offered by leaders to appreciate the great work of their employees. And yet in a new 350,000-person study, we learned that the same practices of appreciation and recognition that create great leaders also contribute to the success of breakthrough teams.

Here’s what we found: Cheering is the secret sauce that can create a spirit of camaraderie so strong that the act of supporting each other becomes second nature, where the vast majority of pettiness and finger-pointing stops. And it was appreciation (or recognition) that was the key cheering factor that unlocked commitment, drive, and ultimately, success. As team member talents and efforts were rewarded frequently and specifically, colleagues also strove for the same treatment. They wanted a bit of cheer too.

Sounds good, right? But what if your cheering was under scrutiny from the Wall Street media?

We found that’s just what happened recently at Texas Roadhouse, a restaurant chain with 330 locations and 40,000 employees system-wide. The restaurants were built to resemble a traditional roadhouse found throughout rural Texas, serving great food amid line dancing and country music.

Company founder Kent Taylor opened the doors on his first restaurant in 1993 with a simple people-first philosophy; take care of your employees and they will take care of your guests. His focus on employee happiness was a departure from the conventional management wisdom at a time when competitors were focused solely on taking care of the guest. In this remarkable culture, awards were created for meat cutters, bartenders, and even line dancers. Other national promotions and contests combine for a line-up of employee recognition that is impressive.

It’s an approach that recently earned Texas Roadhouse careful attention from the press. Recently at the company’s annual managing partner conference, CEO G.J. Hart was invited on air by CNBC to discuss the company’s decision to continue recognition practices. While media focus at the time was critical of using company resources to celebrate in a time of rampant economic cutbacks, Hart used the opportunity to create a rallying cry for Texas Roadhouse employees.

Read the words of Service Manager Wendy Ennis of the Clarksville, Indiana, restaurant, as she described to us Hart’s appearance on the news network: “The whole interview was pretty incredible. Not only did GJ not apologize for celebrating his people’s accomplishments, he said he wasn’t sure it was enough. It’s an honor to be a part of a company that’s so committed to taking care of its people—especially now. At a time when most companies are saying, ‘Don’t love your people, don’t do anything extra, just tighten the belt as much as you can,’ it’s almost as if our leadership does just the opposite. The message we get is, ‘Take care of your people especially right now. Love your guests especially right now. Take care of your community especially right now.’ And you know what? The guests tell us they can feel it too and they love it.”

By continually engaging employees through a platform of consistent appreciation, Texas Roadhouse has inspired such employee commitment, not to mention stronger performance and customer loyalty, all of which contribute to better business results. “We have seen a double digit drop in turnover from just a year ago,” says Dave Dodson, communication and recognition program director.

Other company metrics also speak to the success of the Texas Roadhouse’s approach to culture. In 2009, again during the recession, company earnings were at record levels.

The moral of the story: Texas Roadhouse is one of many great examples that illustrate the power of cheering in this economy. Despite the doom and gloom, there is potential in every team to be extraordinary.

New York Times bestselling authors Adrian Gostick and Chester Elton are the authors of The Orange Revolution: How one great team can transform an entire organization coming Sept. 20 from Free Press, an imprint of Simon & Schuster. Learn more at carrots.com. Subscribe to Adrian and Chester’s blogs at http://adriangostick.com and http://chesterelton.com

Thanks, Adrian and Chester! Bret

I am going to recommend “Delivering Happiness: A Path To Profits, Passion, And Purpose,” by Zappos CEO Tony Hsieh. I received my copy of the book free of charge from the publicist. There is a lot of hype surrounding this book, so admittedly I had very high expectations. This is a good book for sure, but it’s not a great one. I liked “Employees First, Customers Second,” better as a CEO’s inside look at the transformation of his company.

Tony has a very engaging writing style. Although he is clearly extremely intelligent and talented, he tells his personal story and the story of building Zappos with others in a very simple sincere way. Tony might come off as goofy at times, but he did not to me come off as arrogant. This is a guy any of us would be lucky to work with or for.

For me, the book really took off at about page 130, when Tony began to describe in more detail the brand, culture, and people of Zappos. Two things that really impressed me were his list of 10 ways to instill customer service into your company, and the 10 core values of Zappos.

10 Ways to Instill Customer Service into Your Company (p. 147)

1. Make customer service a priority for the whole company, not just a department. A customer service attitude needs to come from the top.

2. Make WOW a verb that is part of your company’s everyday vocabulary.

3. Empower and trust your customer service reps. Trust that they want to provide great service…because they actually do. Escalations to a supervisor should be rare.

4. Realize that it’s okay to fire customers who are insatiable or abuse your employees.

5. Don’t measure call times, don’t force employees to upsell, and don’t use scripts.

6. Don’t hide your 1-800 number. It’s a message not just to your customers, but to your employees as well.

7. View each call as an investment in building a customer service brand, not as an expense you’re seeking to minimize.

8. Have the entire company celebrate great service. Tell stories of WOW experiences to everyone in the company.

9. Find and hire people who are already passionate about customer service.

10. Give great service to everyone: customers, employees, and vendors.

10 Core Values of the Zappos Culture (p. 154)

1. Deliver WOW thorough service

2. Embrace and drive change

3. Create fun and a little weirdness

4. Be adventurous, creative, and open-minded.

5. Pursue growth and learning

6. Build open and honest relationships with communication

7. Build a positive team and family spirit

8. Do more with less

9. Be passionate and determined

10.  Be humble

That’s great stuff and entirely consistent with my philosophy at Positive Organizational Behavior. Tony’s description of these core values and the hyper-focus on customer service at Zappos make the book worth your time to read.

I actually think this book is more valuable for aspiring entrepreneurs and young managers than for CEO types. If you are a mid to upper level manager in a company that does not already embrace some of these values, you are going to have a difficult time applying any of this. If you like this stuff, my advice is to find a Zappos like company to work for.

But if you are a young entrepreneur you have a chance to build something new and unique that’s limited only by the stuff between our ears. If you get a chance to build a company from the ground up, then do it right. Tony’s insight as a young entrepreneur building two companies is extremely valuable.

I have to be honest, even though I loved the philosophy, there were times when I found myself skimming quickly through sections of the book just to get finished. And the last chapter of the book on delivering happiness just didn’t work for me. But this is a good book; one that I’m happy to recommend.

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My new post at the Leader Lab is entitled “Seven Things to Expect From Your Narcissistic Employee.” The motivation for this post came from the experience I shared in “Remarkably Unprofessional Behavior.”  I wanted to see what the research had to say about narcissistic employees.

The findings I share in my Leader Lab article are very consistent with the behavior I observed in my student. This person did indeed disparage the subjective evaluator (me) in a way that was unprofessional and unusually aggressive (first time in my 12 year career that I’ve gotten such a flaming e-mail from a student).

I hope to see more research on narcissism in the workplace published in our top research journals. It’s unfortunately becoming an increasingly important personality trait to understand and manage in the workplace.

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I love teaching MBA students. They are typically more experienced, motivated, and professional than undergraduate students. I learn something new from my students every time I teach an MBA class, which is exciting.

In every MBA class I have ever taught, the majority of people are to one degree or another good performers, a few are stellar, and a few in every class I’ve ever taught really don’t belong in a reputable MBA program.

And every few years, you meet the student from hell. Here is an excerpt of an e-mail that I received recently from an MBA student:

Professor Simmons:

The shortfalls we have as your students are directly related to your shortcomings as an instructor. My A- is simply a reminder to you that your instructing was not exemplary and certainly not up to par with the best instructors.

I am halfway through my MBA and the lowest grade I have received up to your class was one A-. I had no problem with that A- because I felt it was justified. I hope that you can improve your shortcoming as an instructor in the future for your students’ academic sake.

This class could have been such a good learning opportunity for students, and if instructed properly could have been so beneficial to us in our career paths. Unfortunately all I learned from this course is that grading can be quite “subjective” and not related to work quality at all. Best wishes to you and an improved future as an instructor.

Please understand that this person earned an A- in my course. I had sixteen MBA students in the course, and twelve of the sixteen earned an A-; four earned an A, and zero earned a grade lower than an A-.  I created a system that got all of my students to the A- level, yet I failed them?

Somehow, this person feels very bitter about not earning an A, and it’s entirely my fault. The attitude conveyed in these words is totally void of personal responsibility and accountability, which by the way was one of my main messages in the class. I think it is safe to say that this person missed that message.

After my initial irritation over this e-mail wore off, my fascination kicked in.  Even though I make my living explaining to others human behavior at work, every once in a while I just have to scratch my head in amazement. How can someone be so narcissistic that an A-, which was an excellent grade both absolutely and relatively, became the impetus for very unprofessional and borderline bullying behavior? This person also obviously has an extreme external locus of control, so how is it that they continue to achieve or at least manage the impression of achievement?

Can you imagine having to manage this person at work? Can you imagine this person managing others?

What do you see in the words of this person’s e-mail? Please share your thoughts with me.

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I am a huge fan of the Service-Profit Chain, which advocates that if you want to grow your business, you need to have loyal and satisfied customers, and satisfied and committed employees are the key to satisfied and committed customers. There is plenty of existing research to support these established links in the service-profit chain.

New research published in the Journal of Applied Psychology, one of our leading research publications, now suggests that the satisfaction and performance of the people that manage service employees also has a significant impact on the service-profit chain. As I discuss in the video, this new study of 306 store managers, 1615 service providing employees, and 57, 656 customers suggests that the performance and satisfaction of managers had direct effects on employee performance, customer satisfaction, and store revenue growth, in addition to the previous links between employee performance/satisfaction, customer satisfaction, and revenue growth.

Simply stated, my advice to companies based on this new research will now be you need to impress the socks off both your employees and the people that manage them directly if you want to impress your customers and grow your business. If you think you can impress your customers when your employees and their managers are disgusted with you, you are living in La La Land.

How you manage managers matters a lot if you want your business to thrive.

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The Service-Profit Chain

(photo credit: Kylan Robinson)

Yesterday I reported the results of a well done research study that suggests the growth and profitability of a business unit over time is contingent upon the flow of valuable employees through the unit over time. The specific employee value the study focused on was the willingness and ability of employees to deliver high quality service to customers.

I love the resource-based view (RBV) of competitive strategy this study was based on because it emphasizes the importance of the human resource. The concept of stocks and flows is central to the RBV. The “bathtub metaphor” is an excellent way to understand stocks and flows.

The stock of the resource is represented by the amount of water in the tub at any given time. Importantly, there must be a critical mass of the resource stock for it to influence unit effectiveness (i.e., too little water in the tub makes it impossible to get clean). The flows of the resource are represented by the water coming into the tub through the faucet and out of the tub through the drain. Flows influence the stock of a resource and whether a critical mass is achieved and maintained…Thus, the stock of a resource at a given time is important, but the flows of the resource determine whether it produces a change in unit effectiveness. (Ployhart, et al. p. 1000)

I would extend the metaphor by suggesting that the temperature matters just as much as the level of the water in the tub. A tub full of water too hot or too cold to stand is about as useful as one without enough water to do the job.

Your business needs a steady flow of service oriented employees in order to grow and remain profitable over time. Not just any employee will do – they have to be good ones. But they don’t all have to be star service providers. You are going to hire some folks that turn out not to be as good as you thought they were. They key will be to have a system in place to identify those folks early and guide them to making alternative career choices.

But even more important than identifying the employees that don’t measure up will be identifying the employees that do. You need to have management systems in place that identify those folks and provide them strong encouragement to stay with you and your business. Your goal is to achieve and maintain a critical mass of those folks in your business at all times.

Don’t miss the connection between cash flow and the flow of good people through your business. Keep your tub filled with warm water.

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Do you believe that the willingness and ability of your employees to deliver high quality service affects the sales growth and profit of your business? If not, you might want to pay attention to the findings of a recent study entitled “The Consequences of Human Resource Stocks and Flow: A Longitudinal Examination of Unit Service Orientation and Unit Effectiveness” by R.E. Ployhart, J.A. Weekley, and J. Ramsey.

This study of 114,198 applicants hired by a retail department store chain headquartered in the US demonstrated that changes in the effectiveness of a unit (store productivity, profit, and percentage of sales growth) was significantly influenced by the flow of human capital through the unit over time. They measured human capital by developing a measure of the service orientation of a unit. The service orientation of a unit was the aggregate of the service orientation of the individuals in the unit, which was measured with a standard service orientation battery completed by all applicants in the study. Bottom line: the service orientation of a unit matters, and it’s the flow of service orientation over time, more than the stock at any given time, which will affect the growth of a unit.

You have to have a critical mass (stock) of high quality employees in order to deliver service that gets results. That’s difficult in service industries that are typically (and unfortunately) characterized by high turnover. If your HR strategy is simply to find the “cheapest way of getting warm bodies,’ this study suggests you are making a big mistake. (p. 1011). Your management policies and practices must maintain a consistent flow of high quality employees over time if you want to have any hope of growing sales and profit.

Here is the “resource-based view” theory that was partially tested in this study:

Human capital is valuable when it contributes to a unit’s core capabilities. It contributes to competitive advantage when it is also rare – that is, not equally held by competitions; it may become a basis for sustained competitive advantage if it is also inimitable; and it may be inimitable because of the unit’s path dependency (performance trajectory over time) and unique history (e.g. the business unit has been the preferred employer and hence highly attractive to applicants), causal ambiguity (uncertainty over which specific combination of practices builds the stock of human capital), or social complexity (interpersonal relationships between coworkers, or between coworkers and customers). An additional requirement for sustainability is that human capital may be nonsubstitutable with alternative resources. (p. 997)

It pays to be very interested in the service orientation of your employees. Your employees affect your ability to grow your business. You should have a system to select not just any employee you can get, but only those most likely to have a service orientation. Once you have them onboard, you need to have more systems to develop them, support them, and impress them in the same way you want to impress your customers.  If you earn a reputation as a good place to work, you are more likely to ensure a flow of good employees over time. To the extent you can do that, you will have an engine of competitiveness not held by your competitors, and one they will find hard to copy.

In an economy where too many companies have the attitude that their employees are just lucky to have a job, you can easily differentiate yourself by deploying a competitive strategy of putting employees first. Employees will notice, your customers will notice, your competitors’ customers will notice; however, your competitor will likely not notice until it’s too late to climb out of the hole they dug for themselves.

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Samuel Culbert recommends getting rid of performance reviews and replacing them with performance previews. I wholeheartedly concur with eliminating performance reviews, but frankly I’m still chewing on the idea of how to replace the system.

Whatever you want to call it, I like his suggestion for three simple questions bosses and subordinates should be asking each other. With these three questions “you affirm the positive, you own your annoyance, and you tell the person what you lack that you believe would be useful” (p.180):

1. What are you getting from me that you like and find helpful? If relevant, comment on the bigger picture: how we are organized and how people and units interact.

2. What are you getting from me (and/or the system) that impedes your effectiveness and would like to have stopped?

3. What are you not getting from me (and/or the system) that you think would enhance your effectiveness, and tell me, specific to you, why do you need it at this time?

It does not have to be this exact wording, but you get the picture. I think you need to give some thought to how to make a conversation like this systematic (e.g. how often to discuss, how to document, how to follow-up). He does not give any specific suggestions, and I don’t have any, but I am confident that you can figure that part out on your own.

The key will be to really care, to really listen, and to really change your behavior based upon what you learn. If you don’t do anything different to become more helpful to your employees, then don’t bother asking again.

They will know it was all just more of the same bullshit.

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Yesterday I enthusiastically recommended the book “Employees First, Customers Second” by Vineet Nayar.  At the end of the post I included this quote from Nayar, “The role of the CEO is to help people excel, help them discover their own wisdom, engage themselves entirely in their work, and accept responsibility for making change” (p. 164).

If you were given the privilege to lead today, how well could you fill this role described by Nayar?

Our job as employees, supervisors, managers, and leaders anywhere we find ourselves is to excel at what we do, find our own wisdom, engage ourselves entirely in our work, and accept personal responsibility for making change. We can only help others develop these habits and capacities to the extent we have done so ourselves.

Even if we are never called upon to be the CEO, we should behave as if it will happen someday. And even if our current CEO never comes close to the standard of excellence Nayar describes, that still does not relieve us of the personal responsibility to try to excel, learn, engage, and accept responsibility for change.

Why are we so eager to wait for others to empower us?

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I want to work for Vineet Nayar!

I loved Nayar’s book “Employees First, Customers Second: Turning Conventional Management Upside Down.”  It is one of the best management/leadership books I’ve read recently.

In this book, Nayar tells the story of how he transformed an already successful company, HCLT, into one of the fastest growing IT service partners in the world. The personal story Nayar shares is compelling, insightful, and at times funny and brutally honest. Have your highlighter handy when you read this because it is packed full of wisdom and quotable passages.

The transformation of HCLT is an excellent example of the logic of the service-profit chain. Nayar’s employees grew the company by impressing the socks off their customers. Nayar and his leadership team partnered with employees to create the systems that made everyone in the organization, including management, accountable to the value zone – the place where value is truly created for customers. Nayar was wise enough to acknowledge that the value zone is not in the executive suite.

One of the most interesting changes they made was in the performance evaluation system for managers. They opened it up so that “any employee could choose to do a 360-degree evaluation of any of the managers they believed had an influence – positive or negative – on their ability to do their job.” (p. 120). They also allowed anyone who had given feedback to a manager to see the results of that manager’s evaluation. By making radical changes to this important system, managers changed their behavior and focused more on their span of influence instead of their zone of control.

Nayar didn’t want satisfaction and engagement from employees, he wanted passion.

Is satisfaction really a useful indicator of anything? Satisfaction is very different from passion. Doesn’t satisfaction actually imply a complacent acceptance of how things already are? If I am satisfied, will I be interested in changing or improving anything? And what about engagement? Is that any better? I suppose that if an employee is engaged, that is better than being disengaged. But isn’t it just another, slightly more active form of satisfaction? (p. 152).

Think they got passion by simply exhorting their employees? Nope. They created systems to both identify the main drivers of passion in employees and to embed those passions into the organizational structure. Employees loved it.

The transformation of HCLT occurred because the systems they put in place successfully transferred the responsibility for change from the CEO to employees:

The CEO can no longer be the one who scribbles strategy on a paper napkin over dinner. He or she cannot be the one who stands in front of a crowd to motivate it with fabulous oratory. The CEO will not be the one who thinks of the best and brightest ideas. The role of the CEO is to enable people to excel, help them discover their own wisdom, engage themselves entirely in their work, and accept responsibility for making change. (pp, 163-164).

That’s brilliant. I loved this book, and I think you will too.

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