Friday, November 19, 2010


A coupleof conversations this week have reminded me how important respect is (altogether now sing with Aretha Franklin...). One of the conversations was related to manufacturing in China. I've had success there because I respected our suppliers. Even when we had problems with the product, I trusted that they could make the changes, that they wanted to make the changes and encouraged them respectfully to improve some aspects of what they were selling to us. The negotiations weren't without frustration (on both sides of the table); however, we accomplished what we needed and the relationships were built with the factory in Jiangsu province.

Similarly, I respected an assembly team enough to let them know in advance that the company was discontinuing their product and the line was going to be shut down in 3 months. It was unlikely that we'd be able to transfer them. Even though the decision was made in December (the holiday season), I had lots of conversations with them. I wanted them to know as soon as possible so they could start looking for other work in the next 3 months. I hoped enough would stay to the end so we could complete the required production quantity. Having a conversation with one woman later, she was upset that I dampened her holiday spirit with the news. I apologized for that. I did ask if she'd rather that I waited till February to tell them, and give them no option to leisurely look for another job. She admitted that she'd rather know as soon as possible. Some people don't want to know right away and have it linger. Unfortunately, it's not a situation where you can tell some and not the others.

To this team's credit, they broke production records in the last two weeks of production. I was there cheering them on, doing my best to still remove obstacles for them to do the best work they could.

One day I was walking through a company's lunchroom. My daughter was working there for the summer. She was sitting with some women from the assembly group. They shouted out that they were encouraging my daughter to stick with college so she doesn't end up working at a job like them. I stopped. It saddened me that they thought so little of their work. I said, "Your work is very honorable. I'd be proud if she did work here, as long as she was enjoying what she was doing." I know they were partly joking, and running a typical cliched response into the conversation, but I used the moment to show that I respected their skills and their efforts.

Likewise, respect needs to be at the foundation for an employee-owned company, an ESOP. Some companies treat their ESOP's as just benefits, handing out the account statements once per year. They treat it like a 401(k) statement of which they can't influence the investment's performance. In general, ESOP companies outperform their peers by a slight margin that becomes substantial over time (according to the National Center for Employee Ownership). I have talked to enough ESOP companies that leverage the culture to know that they can significantly outpace their peers. If they work on explaining how everyone influences the company results, and that they and their friends, team mates and colleagues at the company will enjoy the long-term benefits.

I know a company that was doing so well that many hourly employees had accounts worth $200,000 to $300,000 after 10 years. That means they were averaging an increase in their ESOP accounts that nearly equaled their year's wages. This company worked hard on its culture, and a lot of communication about how to improve the performance, and make its customers successful. (This was the same company where I had the lunchroom discussion.) The values were evident and there was a high level of integrity with those values.

An ESOP may not be good for every company. But I'm shocked when I have conversations with consultants who tell me, "The CEO thinks becoming an ESOP was the worst thing ever." Or another consultant this week told me that ESOP's were really struggling with internal management issues. Respect is key. And part of that respect is making the roles and responsibilities clear. Just like other companies, ESOP's have the distinction between management and governance. Just because employees may have shares in the company doesn't mean they have a right to make decisions; that's still management's job and the board is responsible for making sure management is doing a good job. (Likewise, if I have bought shares in GM yesterday, I can't now dictate what GM does today.)

Respect that people have the skills and the experience to do what they need to do. As leaders, we need to set the direction, make sure there's nothing in the way, and provide the horsepower to get to the destination.

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