Employee Advantage: a new book that may not have needed to be written

 From my Goodreads review: Meier gives compelling evidence for bringing employees more to the forefront of corporate strategy. Citing decades-old and more recent successes in large and medium-sized companies, while providing antagonistic examples of corporations that didn’t, the author shows how treating employees as partners—not just teammates, associates, assets—and allowing them to bring their full range of expertise, experience, knowledge and passions can build or rebuild a successful enterprise providing more value to customers and other stakeholders.

The author starts with the Gallup employee engagement poll which frustratingly shows that despite business press/schools emphasis on employee engagement, it has not changed since they started measuring it. And that many surveys show two-thirds to eighty percent of employees would leave their current jobs—another statistic that hardly varies—the “grass is not greener on the other side of the fence.” I once described this as the left hand’s four fingers thinking life is better for those on the right hand, and vice versa.

As someone who entered professional life in the rebirth of the quality movement more than 40 years ago, I feel like this book shouldn’t need to be written. The lessons have been there since the late 1920’s—Hawthorne Electric Works, where they learned asking employees what will help productivity actually worked—through the late 1940s with the Japanese industrial re-emergence inspired by William Deming and Joseph Juran. Leading through the other Total Quality gurus into Six Sigma and Lean, despite 3M’s misinterpretation of how it would/should affect employee input in the early 2000s, which the author cites and some of which I witnessed. Most of us, who sincerely took these management/leadership philosophies to heart turned around and built successful companies.The evidence is around us as noted by Stephen Covey, Jim Collins, Patrick Lencioni and others. Less-known studies by the National Center for Employee Ownership emphasize that employee-owned companies—which engage employees fully in the mission and vision—continually grow faster, are more profitable and survive (or thrive) recessions better than their corporate counterparts.

Sometimes CEOs only look at what employees can do for them, while forgetting that without employees CEOs have nothing to run. I often describe that people want to go home knowing they’ve contributed to the company’s success and their own success. They’d rather not go home like a teenager from high school sullenly describing their day as “fine.”

While acknowledging that not all of his suggestions will work in every organization, I feel he has ignored a key consumer behavior. He adopts a model from other researchers suggesting that organizations should change in a way to increase employees’ Willingness to Supply (WTS). A long time ago, Kano defined a model showing that certain product (aka workplace) characteristics generate satisfaction if provided: characteristics like culture, environment, autonomy, policies, benefits, etc. Likewise, dissatisfaction is created if it’s not provided. But….there may be characteristics not provided that don’t create dissatisfaction. Likewise, there are characteristics that once provided, and the “customer” experiences them are delighted and wowed. And then the trick is to discover if “more” creates more value (WTS) or plateaus at some level of satisfaction/so-what/ennui and diminishing returns.

I encourage fellow travelers to heed the lessons here and enjoy your work, so that your partners in building an enterprise can enjoy theirs too.
I appreciate the publisher for allowing me to see an advance copy..

Higher Marginal Tax Rates! More Economic Growth!

 Let’s pose a couple of hypothetical situation. Suppose the top marginal tax rate in the US and UK is 98 percent, which it has been at times in their histories. Suppose companies are growing and potentially becoming more profitable as the Industrial Revolution takes hold, a Baby Boom happens which juices the economy through consumer spending. Demand is growing, profits are growing.

Many orthodox macro-economists argue governments should drop the tax rates to boost the economy. This is true of Milton Friedman and even the authors of a forthcoming book, “Common Sense Economics.” However, before government can take action, your company and all other successful companies have a choice.

Your company could take action to avoid further growth. Especially in manufacturing where often more production means more gross margin over fixed general/sales/administrative expenses. Maybe the action is capping your output: no increase in production or capacity or prices (despite clamoring demand for limited supply); artificially suppressing demand by limiting distribution; or worse yet, lowering demand through poor quality products or services or minimal warranties on workmanship and materials. Your small-fry competition jumps into the gap to soak up the demand. Yea! Your company has avoided tipping into the higher marginal tax rate. 

Contrarily, your company could embrace the growth. But instead of bemoaning the higher tax rate, you use it to fund expansion. Demand is growing. Return on investment is high for new opportunities. You increase your expenses: higher wages, bonuses, more employees, more marketing, more equipment, subcontract to other companies for services, more capital expenditures, more training/education, more benefits…more mergers and acquisitions…anything to reduce profits. Because the tax avoidance will fund the increased spending. You’d make sure your net (taxable) profit was as low as possible, if not negative through cash-less expenses like depreciation and amortization. You might not even worry about unions or moving work to low-labor-cost countries.

The authors of that forthcoming book, “Common Sense Economics” (St. Martin’s Press), argue that high marginal rates hinder growth. Yet, they cite the example of British companies buying Rolls Royce cars for corporate vehicles to increase expenses, and essentially only “costing” the companies 2 percent of the car’s value—assuming a quarter million dollar (hundred thousand Pound) car could be expensed rather than added to the capital goods depreciation table, expensing one-fifth, one-quarter or one-third of the value each year. In this example, isn’t Rolls Royce experiencing high growth? What are they going to do? Take the first choice? Go out and buy Ferraris? No, they too will figure out how to avoid only making 2 percent on this increased revenue by buying, contracting, hiring, etc.

I have often called b**s**t on company owners who claim they need lower tax rates to fund hiring or more capital expenditures. If the demand is there, and the ROI is high, an owner or CEO will expand despite the tax rates. A higher tax rate might actually be the incentive for growth throughout the supply chain. No need to off-shore for lower wages maybe.

You can discount some of the first table because growth occurred during WWII or the Allied support prior to US military involvement in 1942. And you can discount post-war growth when the US was essentially the only unscathed industrial nation providing goods to the rest of the world. Note: top tax bracket is not the “effective” tax rate on top income companies and individuals since there are many credits (e.g. R&D, energy efficiency upgrades, etc.) that reduce the tax burden.