Team Analysis: Firms of Endearment by Raj Sisodia, Jag Sheth, and David Wolfe

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Satisfaction of the psychological need for empowerment is one of the chief ingredients of employee motivation. This argument is reviewed and endorsed by authors of both Firms of Endearment (FoE) and our textbook Organizational Behavior: Improving Performance and Commitment in the Workplace (OB). In OB, the authors state that “when a task is relevant to a meaningful purpose, it becomes easier to concentrate on the task and get excited about it.”

In FOE, the authors have a similar argument that “More and more, people want work that engages them wholly, that fulfills their emotional and social needs, that is meaningful.” In addition, authors of both books point out that a certain level of authority (empowerment) or a sense of choice in initiation and continuation of work tasks (self-determination) foster trust and therefore lead to intrinsic motivation. Training is another concept of psychological empowerment that is outlined by the authors of both books, which includes both external – training programs and internal, self-directed learning. The authors perceive training as an important driver for employees to continuously build competence and thus, empowerment. It is an effective means to motivate employees and maximize their potential. Although the views of both books with respect to empowerment are fundamentally consistent, the authors of FoE add that FoE companies take this concept even further. FoEs aim for joy. They delineate three categories of programs FoEs implement to enable employees to find joy in the workplace:

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A fun and playful working environment, balance and flexibility between work and home life, and creative quality-of-life benefits that meet a wide range of employee needs. In doing so, FoEs reduce the tension between the demands of work and home.

Employees “experience a form of ‘relaxed concentration’ that maximizes the potential of each employee.” Adding joy of work into motivation theory makes perfect business sense for several reasons. First, joy breaks the cycle of chronic stress in the workplace, which “degrades a long list of capabilities with regard to creativity and innovation.” Even short-term stress can degrade innovative thinking and productivity. Therefore, reducing the levels of short-term stress provides benefits for the company.

Second, a joyful workplace evokes loyalty and trust. Employees feel that their employer genuinely cares about them, and they reciprocate in kind. As a result, FoEs benefit from high employee retention. This helps build the company’s reputation as a preferred employer enabling it to attract a large pool of talented candidates for job openings. FoE Patagonia, for example, claims to receive 10,000 applications each year for its 100 or so open positions. The two texts endorse a model of employee motivation that is very similar in emphasizing employee satisfaction through empowerment.

FoE demonstrates how the best companies seek an even higher level of achievement by making joy their ultimate goal. Whether this is significant depends on a company’s aspirations. Average companies can succeed with modest employee satisfaction goals. But companies that seek to be best-in-class or world leaders must recognize that this is now the bar that is set for them.

There are many practices that set FOEs apart from other companies. It would be overwhelming for most firms to adopt these policies and philosophies all at once. If an organization wants to transition toward being an FoE, where should they begin? We recommend starting with these two best practices that are relatively easy to adopt yet generate significant rewards. FoEs treat their employees as stakeholders, rather than resources to be exploited. While many non-FoE companies try to hire low-skilled employees and keep wages down, FoE’s approach it from a different angle. They pay significantly higher wages for the same jobs to attract and keep higher skilled workers and reduce employee turnover.

Vice President of People at FoE Wegmans, Karen Shadders, says it best. “If we take care of our employees, they will take care of our customers…. Our pay and benefits are at or above our competitors’. It helps us attract a higher caliber of employee.” At Wegmans, not only is their turnover rate, at 6%, far below the industry average, but their operating margins are double those of their big competitors. The correlation between low turnover rate and high productivity is apparent. Low turnover results in a more experienced workforce, which generates higher productivity. For a company that wants to take the first step toward becoming an FoE, an easy starting point is to increase pay and benefits to attract and retain better employees. There is a cost in the short-term, but it is not difficult to do. The payoff comes over time. Which leads us to our next point. Long-term perspective is a distinguishing characteristic of FoEs. This way of thinking permeates the culture of FoEs from their boardrooms to their breakrooms. The authors state, “equity markets view FoEs’ long-term perspective as making them more attractive investments. This best practice is relatively easy to adopt; it can start immediately and implementation costs nothing. Long-term planning will generate a long list of ideas. The firm can then choose where to begin making changes based on constraints such a time and money. Nevertheless, many non-FoEs focus on short-term metrics, often stock valuation, as a measure of how the company is performing. The problem with this way of thinking is that it can lead to decisions that stunt or hinder long-term success and value.

The founders of Google expressed their commitment to long-term goals loud and clear in their “Letter from the Founders: ‘An Owner’s Manual’ for Google’s Shareholders,” by stating, “shareholders are better off in the long run when the company is doing good things for the world even though they might have to let go of some profits in the short run.” The authors point out a “Zen-like paradox” that the best way to be profitable is to focus less on profit. An aspiring FoE can take courage from role models such as Google and start making decisions that maximize long-term value. It need not require additional capital or cash on hand, nor does it require a radical cultural shift. They might start by committing the company to winning the hearts of their customers, following the examples of Nordstrom and Wegmans. Or they could begin by enhancing the success rate of new employees through additional training, in the way that The Container Store does.

By taking the first step, whatever that may be, the company would send a clear message of positive change throughout the organization and sow the seeds of future rewards. Other best practices of FoEs are much harder to implement. A defining element of a FoE is the belief in their responsibility to forge a mutually beneficial relationship with their stakeholders, including employees, customers, communities, and society, as well as shareholders. This alignment requires balanced service to all stakeholders, not favoring one over the others. This is a radical departure from the way traditional companies behave. It is widely believed in business that these stakeholder groups are in competition with one another. To put any group above or even on par with shareholders is heresy. Yet, that’s just what FOE Honda does. Honda has implemented “programs that create synergies between these groups.” These practices reward employees and suppliers for cooperating to improve quality and reduce costs to consumers.

What would it take for other companies to adopt similar practices?

First, it would require challenging the entrenched belief that capitalism is perfect as-is and that change would necessitate giving up profit. It would also require business leaders to view their stakeholders as part of a system, rather than as separate entities, and to see that “the whole is far greater than the sum of the parts.” Behaving contrary to popular belief is risky, especially for companies that are just starting up or are financially vulnerable. Even assuming that they believe in the cause, such a crusade that conflicts with the interests of their patrons is too much for many companies to bear. Aligning stakeholder interests is too difficult a change in both thought and action for most companies. The second practice that would be difficult to graft onto a non-FoE would be that of blending work and play. We are not talking here about an occasional office party or company picknick, but actually incorporating play into the culture of an organization. There are some companies for whom play is synonymous with the brand image; think Harley Davidson, Google, and Ikea. Others coopted play precisely because it is contrary to their industry culture and use it to differentiate and elevate their firms; think Southwest Airlines and IDEO. But for many companies, there is no clear connection between play and the company’s mission. These seemingly frivolous activities don’t fit the product or brand, or they distract too much from the urgent need to meet company goals and grow the business. Industries such as call centers, manufacturers, and general contractors come to mind, to name a few. Google mixes work and play into their brand and their facility. They claim that this results in higher levels of innovation and production. While this may be a great culture for employees of an innovative, young company, this is not a one-size-fits-all model to be adopted by just any non-FOE without risking the loss of productivity and focus.

Either/or thinking is evident in traditional marketing. In FoE, the authors describe “the twentieth-century marketing paradigm” as “hucksterism – aggressive promotion and selling that put sellers’ objectives ahead of the real needs of consumers.” In the new century, FoEs motivated by love use a different marketing paradigm described as “Healing”. Here we will discuss how a shift from hucksterism to healing could help the firm that employs one of our team members. Healing is defined in the book using a quote by Melinda Davis of The Next Group as “real differentiation [that] comes not in the product itself but in how you collaborate with the consumer’s need to heal.” Rather than viewing consumers as prey or “dehumanized data sets” to be manipulated, the both/and thinking of FoEs is sensitive to the inner needs of consumers. FoEs build trust among their customers by listening to what they say and giving them what they want.

CFR Capital Group, LLC is a Scottsdale-based financial services firm serving individuals and small businesses. It offers investment advising, tax preparation, and bookkeeping services. There is a rift within the company at CFR Capital Group (CFR) between the “financial side” and the “tax side” of the business that was caused by either/or thinking that existed since the company was formed in 2007. The financial side (investment services) generates most of the company’s profit. The tax side (accounting and tax preparation) generates most of the clients. Most employees work in only one division. The associates in the financial division see the tax business as a source of leads for them. The accounting employees see their work as an end in itself and are uncomfortable with, sometimes even resentful of, pressure to persuade their clients to meet with a financial advisor. Tension between the two sides of the firm has impeded the company’s growth and profitability. CFR is currently looking for a new way to promote their financial services. We see this as an opportunity to introduce both/and thinking into the firm. We suggest that the company expand this new strategy to engage all of the firm’s employees as well as all of its clients to generate a new psychological framework for thinking about the company. To date, CFR’s marketing has followed the traditional paradigm of trying to persuade consumers to use their services, using the typical formats of direct mail, print ads, and electronic media. The company would like to develop a new marketing strategy based on hosting events. Using the FoE concept of healing, these events could incorporate the theme of a healthy and wealthy retirement. These would be fun events, such as cooking classes, fitness seminars, and wine tasting. Both clients and employees would be invited, and clients would be encouraged to bring friends. By sharing fun, casual time together, clients and staff would get to know each other as individuals. Emotional experiences like this are what generate trust and loyalty. And not only between clients and the firm but between associates within the firm. CFR would benefit from following the example of New Balance compared to Nike. Like New Balance, CFR’s main customer base is people in mid-life. This is a time of transition and emotional maturation. Figure 5.1 on page 92 of the book compares the values of Nike to New Balance. Nike’s values include “winning” and “roar of the crowd”, while New Balance focuses on “improvement of self” and “inner harmony”.

In the same way, CFR can differentiate itself by thinking like its customers do. With event-centered marketing, CFR can demonstrate that they understand their clients’ needs for self-improvement such as fitness and learning, and spiritual development such as leaving a legacy. By moving toward a healing mindset, they can use their new marketing strategy to align their stakeholders’ interests with their business interests. In doing so, they improve the lives of both their clients and their employees, and they will improve their bottom line.

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