Author: Joshua Seedman
Want loyal, engaged customers? First create loyal, engaged employees. A domino effect of either growth or value destruction begins internally with employees. People are a company’s greatest asset – more than its brand, products, or customers. If an enterprise gets the employee element right a great brand, product, and customer base will occur practically automatically. Unfortunately, up to 85% of the reasons for stagnant growth stem from internal organizational inefficiencies and poor employee engagement. Thus, the first step to innovative products, customer advocates, and profitable growth is to create employee advocates that in turn will be inspired to create those “wow” moments for the enterprise and its customers because the company first created those “wow” moments for its employees. Accordingly, companies can create employee advocates via (1) empowering its employees with the resources and autonomy for an ownership mindset, (2) pushing decision-making down to those who have a daily, constant pulse on the customers (i.e., the front-line), and (3) “getting everyone on the bus” by focusing the entire organization on an aligned goal and purpose. Unfortunately, the two big areas that often dilute employee engagement and holds back growth are (1) poor culture and organizational health and (2) lack of focus and alignment.
The days of being successful on merely a differentiated product are over. Without creating a world-class customer experience the product alone will fail. However, most companies forget that world-class customer service begins and ends with its employees. Simply, if you want raving customers you first need raving employees. However, and according to both Gallup and Qualtrics, only 30% of employees are engaged in their work, meaning 70% of employees are either destroying or not creating any value day in and day out. Accordingly, this article will cover key topics that will help any leader and their organization transform complexity into simplicity, chaos into focus, complacency into a bias for action, and imitation into innovation. Specifically, this article will cover the following three key topics: (1) inside-out | bottoms-up model™, (2) "get everyone on the bus" analogy, and (3) EPC (employee, product, customer) framework. Each of these three core areas is designed for driving organizational health and consequently, profitable growth.
1. INSIDE-OUT | BOTTOMS-UP MODEL (Overview)
Most of the areas holding back a company’s growth stems from internal obstacles, specifically around employees, rather than external market or competitive forces. The proposed “inside-out | bottoms-up™” model advocates that an employee first mindset serves as a gateway to product innovation, service excellence, and ultimately sustainable growth (See Exhibits 1 and 2). Regarding the “inside-out” element, a company must look internally at creating a culture that creates raving employee advocates before it can expect to create raving customer advocates or innovative products. The “bottoms-up” element indicates a renewed focus on the frontline because the heart, soul, and pulse keepers of the organization live on the frontline. Quite simply, this model advocates that every employee - no matter where in the corporate hierarchy - must be transitioned from an “employee” mindset to a true “ownership” mindset. This change in thinking ensures that autonomy, empowerment, and a bias for action permeates the entire enterprise from the bottom-up (Read more HERE).
2. "GET EVERYONE ON THE BUS" ANALOGY (Overview)
Most organizations foster hierarchical bureaucracies that unknowingly foster complexity instead of simplicity and chaos instead of focus, causing major energy and financial leakage. Simply, everyone is "not on the bus." While most leaders claim or like to believe they have everyone within the enterprise on the bus, generally a far different undercurrent is taking place. From a very basic hierarchy standpoint, most organizations are divided in four large groups, specifically (1) upper management, (2) middle management, (3) first line managers, and (4) frontline employees (See Exhibit 3). While the goal is of course to get everyone on the bus, each of these core four areas generally act individually due to a a lack of resources, empowerment, alignment, and focus. This value erosive scenario drives silos, poor cross-functional collaboration, slow decision-making, and stagnant growth across the enterprise. This generally stems from a "culture paradox." Simply, successful companies often begin with an inspired culture. Over time that culture creates growth, growth creates complexity, complexity destroys a once inspired culture (i.e., everyone is off the bus), and poor culture destroys growth. This article breaks down this organizational problem via a simple bus analogy (See Exhibit 3), which can be leveraged by leaders, managers, and frontline alike to drive internal transformation (Read More HERE).
3. EPC Framework (Overview)
Leaders of any organization have three obligations, specifically (1) engage its employees by creating an empowered, innovative, focused, and inspired work environment, (2) delight customers with world-class service excellence, and (3) deliver strong financial results. If the first two take place the third area (financial results) will take care of itself. EPC is an acronym for (1) employee, (2) product, and (3) customer and is a simple framework that highlights the key trigger points to organizational success (See Exhibit 4). This easy to follow-up roadmap ensures that any transformation starts internally with employees because high employee engagement is the fuel behind product innovation and customer service excellence - not the other way around (Read More HERE).
Think Culture Is Just a Buzzword? Think Again
Why Organizational Health is Key to Sustainable Growth
The key underlying theme of this article is that most of the areas holding back growth do not stem from external market or competitive forces but rather stem from internal obstacles. Indeed, a recent study by Bain & Company found that 85% of the root causes for failure to maintain profitable growth are now internal to a company. To correct this common problem any organization must have (1) high employee engagement (i.e., strong organizational health) and a (2) focused and aligned strategy that ensures an "inside-out | bottoms-up" mentality (See Exhibits 5 and 6). Simply, a strong culture and organizational health model should include high employee engagement, an empowerment mindset, a bias for action, autonomy, enterprise wide cross-functional collaboration, aligned purpose, and quick decision-making that is not hoarded by upper management but rather pushed down to the frontline, the pulse-keepers of a company's customers. Concurrently, a world-class strategy should be focused, actionable, and simple, allowing the leaders to align the entire organization to its aspirational goals and purpose. Consequently, value erosive silos, business unit hoarding, resource dilution, productivity breakdowns, and stagnant growth will be mitigated.
While easy sounding in principle few companies get both if either of these two elements right (i.e., high employee engagement coupled with focused alignment). For example, far too often culture, such as employee engagement, takes a back seat to a company’s product or brand. In addition, business units often function in silos with lack of focus from the top meaning everyone is going off in their own direction and working towards their own desired goals. This creates significant energy and financial leakage which ultimately is the destroyer of growth. Thus, with companies often acting as their own worst enemy this article focuses on a new way to think about unlocking growth, specifically an "inside-out | bottoms-up™" approach (See Exhibits 5 and 6).
1. Inside -Out | Bottoms-Up
- Organizational Health Transformation Model -
This article advocates that an employee first mindset serves as a gateway to product innovation, service excellence, and ultimately sustainable growth. This can be achieved via an "inside-out | bottoms-up" model. Regarding the “inside-out” element, a company must look internally at creating a culture that creates raving employee advocates before it can expect to create raving customer advocates or innovative products. In addition, the “bottoms-up” element indicates a renewed focus on the frontline as the heart, soul, and pulse keepers of the organization takes place at this stage. For example, typically, the least paid staff are the ones that have the most touch points with the customer. However, these very employees are traditionally the least empowered because a tops-down instead of bottoms-up approach is taken. This equates to significant value destruction which stems from both employee and customer pain points.
The premise for this inside-out | bottoms-up model rests on the following: while excessive rules may work for compliance, choice is a far better option for bringing the best out of a company and its employees. Simply, choice is the fuel for an ownership mindset/engaged employee, ownership/engagement is the fuel for learning, learning is the fuel for innovation, innovation is the fuel for both distinctive products and world-class customer experience, and distinctive products and customer experience is the fuel for profitable growth. For example, Google allows its engineers to spend 20% of their time working on anything they like. Google understands the power of employee autonomy, empowerment, and choice. Consequently, in a given year, typically 50% of Google’s new products are created from this 20%, including Gmail, Orkut, and Google News.
Without an employee first mindset a domino of value destructive undercurrents start overtaking an organization, including (1) poor employee engagement, (2) high employee turnover, (3) low employee productivity, (4) stifled creativity and poor innovation, (5) poor customer service, (6) low customer loyalty, (7) slow decision-making, (8) internal competition stemming from silos, and (9) stagnant profitable growth. Improving employee engagement is highly correlated to improving customer experience and profitable growth. In its most striking form each dollar invested in improving employee engagement can reap up to a 4X ROI in customer engagement leading to significant revenue increases (See Exhibit 7). In addition, and according to Gallup, highly engaged organizations have double the rate of success of lower engaged organizations and enjoy significant improvements in profitable growth. On the flip side of this, and according to another Gallup study, almost 70% of employees are either destroying or not creating any value day in and day out (See Exhibit 8). Simply, only 30% of employees are engaged in their work. The underlying issue begins with leadership, which snowballs downward into siloed groups that lack empowerment, resources, and focused alignment regarding the purpose and goal of the company. With an up to 4X ROI, improving employee engagement is a simple investment decision.
As illustrated, most companies unfortunately neglect organizational health or think of it as an afterthought because an outside-in | top-down mentality permeates instead of an inside-out | bottom-up approach. In all actuality, organizational health and its accompanying employee engagement should be the first priority because the domino effect of either growth or value destruction begins internally with one's employees. Remember, people are a company's greatest asset – more than its brand, products, or customers. If an organization gets the employee element right a great brand, product, and customer base will occur almost automatically.
Read more about building this employee focused culture HERE.
2. Traditional Company Challenge
- The Culture Paradox & Bus Analogy -
Many organizations experience the value erosive underpinnings of a "culture paradox™" that ultimately produces the bus analogy in this upcoming section (See Exhibit 9). Simply, a culture paradox can be summarized as the following. Most successful companies begin with an inspired culture. Over time that inspired culture creates growth, growth creates complexity, complexity destroys that culture (i.e., everyone is off the bus), and a poor culture destroys growth (Learn more about the culture paradox™ HERE).
To more vividly describe this value destructive top-down approach this article will present a simple visual analogy (See Exhibit 10). Currently, most organizations are divided into four large groups, specifically (1) upper management, (2) middle management, (3) first line managers, and (4) frontline employees. The goal is of course to have everyone on the bus. However, the common scenario is that (1) upper managers are speeding ahead in their fancy race cars with little regard for those who are trying to keep up, (2) middle managers are frantically trying to keep pace in their dilapidated Model T cars, (3) first line managers are struggling to keep up in their old school bikes, and (4) the frontline are desperately trying to run/walk to keep pace with not only the bicycles in front but also the upper managers leading the way in their fancy race cars (See Exhibit 10).
In this scenario, only the leaders have access to a modern vehicle with a GPS system, allowing them to arrive at the company’s desired destination most expediently. However, because the leaders have not made it clear where they are headed everyone under them (middle managers on down) is reliant on trying to feverishly keep up with the leader’s race car (i.e., the only one with a GPS system). In a best case situation, perhaps the middle and first line managers can follow for a quarter to one mile but within a few hundred feet the frontline will be lost. Give it another 1-2 miles and everyone will be aimlessly lost, going their own way. This problem stems from two core issues. Firstly, leaders did not provide their employees with alignment or focus on where the company was headed (i.e., only the leaders knew where the company was headed). Secondly, employees (middle managers on down) were not given the proper resources to take them where they needed to go because leadership was hoarding all the resources for driving positive change. Simply, decision-making was not pushed down to the frontline and employees did not have the empowerment, autonomy, bias for action, or focused alignment to do what was best for the organization and its customers. This becomes more and more prevalent the further down one goes in an organization - equating to the poorest employee engagement with those who spend the most time with the customers (i.e., the frontline). This equates to (1) many employee and customer pain points, (2) toxic company culture, (3) unnecessary processes and micromanagement, (4) countless silos, and (5) tremendous energy and financial leakage.
Bus Analogy RECAP
- Typical Hierarchy Overview -
1. UPPER MANAGERS
Transportation: RACE CAR
- SITUATION: Upper managers often have an ivory tower vision with minimal effort given to appropriate enterprise communication, alignment, and focus.
- PROBLEM: Upper managers have the greatest resources for driving change (i.e., the expensive race car). They also know where they want to go. After all, they are leading the way in their fancy race car and GPS system. However, they have not ensured each employee is focused and aligned on where the firm is going because a top-down instead of bottoms-up approach is taken.
2. MIDDLE MANAGERS
Transportation: MODEL T CARS
- SITUATION: Middle managers often create a micromanaged culture which stems from silos and improper focus, cultural guidance, and empowerment from leadership.
- PROBLEM: Middle managers typically are given minimal empowerment to drive change (i.e., old Model T car) and less focus on where the company is headed (i.e., must blindly follow upper managers as they race along in their fancy car). This produces a culture of processes for the sake of processes in an attempt to keep up with leadership. However, this quickly turns into micromanagement, which stifles creativity, innovation, employee engagement, and ultimately customer engagement.
3. FIRST LINE MANAGERS
Transportation: RIDING BICYCLES
- SITUATION: First line managers typically have minimal alignment and empowerment.
- PROBLEM: First line managers have little to no resources to drive change (i.e., bicycle) and even less idea where the organization is headed. This creates misaligned incentives and silos in the middle to bottom of an organization, leading to a dilution of resources, poor productivity, and financial leakage.
4. FRONTLINE EMPLOYEES
Transportation: WALKING BY FOOT
- SITUATION: Frontline employees are the pulse keepers of the organization because they have the greatest interaction with the customer. However, frontline employees are also generally given the least amount of focus, alignment, and empowerment to do what's best for the company and customer.
- PROBLEM: Frontline employees typically have no resources (i.e., walking to keep pace with the race car) coupled with little to no idea where the firm is headed. This produces poor employee engagement with those who spend the most time with customers and little inspiration because they do not know the company's purpose or mission. This leads to significant waste because a company's largest asset for driving sustainable growth is not appropriate engaged or empowered.
Resolution: "Get Everyone On the Bus"
Companies must transition their employees from an “employee” mindset, to a “partner” mindset, and ultimately to an “ownership” mindset. Otherwise, each employee (i.e., those on foot, bicycles, Model T cars) won’t be capable of keeping pace with the leaders (i.e., those in race cars). This begins with a frontline obsession where employees have a bias for action, autonomy, disdain for the status quo, respect for each dollar as if it were their own, and decision-making power to create those "wow" customer experiences. In addition, companies must transition away from hierarchical bureaucracies. Instead, leaders must bring focus and alignment while allowing their employees the autonomy to cross-functionally create a culture of engagement, innovation, and service excellence. Leaders can accomplish this daunting task by ensuring the following:
- FOCUS: Ensure organizational wide focus and alignment. Simply, to have sound decision-making you must know where you want to go (i.e., what is your aspirational goal). Otherwise, it’s analogous to getting in a car and saying we’re going to drive around. Great – but where? Without focus and alignment any company will waste significant time going around in circles. Indeed, the 2017 Pulse of the Profession report by the Project Management Institute found that 37% of the more than 3,000 respondents cited a lack of focus, alignment, and clearly defined objectives as the greatest cause of failure. This statistic was almost double that of the next highest rated issue, namely poor communication at 19%, lack of communication by senior management at 18%, and employee resistance at 14%. This survey illustrates that a lack of focus and alignment (i.e., everyone is not on the bus) is perhaps the greatest driver of project failure.
- CROSS-FUNCTIONAL COLLABORATION: Break down silos to ensure everyone is working as a team towards a common purpose and aspirational goal versus going off in their own direction either from a lack of focus or ulterior motives.
- EMPOWERMENT & ENGAGEMENT: Give employees the resources for driving impactful change. This will allow the company to reach its aspirational goal most expediently while also ensuring "wow" moments for the customers no matter where they are in the value chain.
Indeed, if a company creates a culture of alignment, focus, empowerment, and inspiration everyone will run to not only get on the bus but will also never want to get off the bus. Consequently, both sustainable and profitable growth will be chasing such a company down.
3. Implementing Sustainable Change
- The EPC Framework -
Leaders of any organization ultimately have three obligations, specifically (1) motivate employees by creating an engaged and inspired work environment, (2) delight customers, and (3) deliver strong financial results. If the first two take place the third area (financial results) will take care of itself. To ensure such change as well as ensure everyone “gets on the bus” this article advocates an EPC framework as a simple methodology for ensuring an "inside-out | bottom-up" approach" instead of an "outside-in | top-down" approach (See Exhibit 11). EPC is a three-step framework and is an acronym for (1) employee, (2) product, and (3) customer. In its simplest form, winners are those that have mastered the following three areas, specifically:
- Employee Engagement (i.e., an empowered culture)
- Product Innovation (i.e., differentiated offerings/services)
- Customer Advocacy (i.e., distinctive service excellence)
This framework puts employees first, which at this stage in the article is likely no surprise. Typically, most companies focus on only one to two of the core EPC issues. For example, it's very easy to get so focused on one’s product or brand that the thought of an engaged employee and a distinctive customer experience takes a back seat - a surefire way to destroy growth and value. On the flip side, company’s may become so focused on their customers that one forgets about empowering their employees - the heart and soul of how a company provides a great customer experience.
To creating raving customers and innovative products, company's must first create engaged employees that have the autonomy and inspiration to create innovative products. Remember, in a given year, typically 50% of Google’s new products are created from the 20% of time its employees are allowed to work on whatever they like. The proposed EPC framework ensures a departure from tunnel vision by providing a simple yet often overlooked roadmap that highlights three key trigger points for growth, allowing a smooth transition to an "inside-out | bottoms-up" model. Indeed, this framework has helped my client’s transition from bottom quartile to top quartile performers across employee satisfaction, customer experience, and product innovation by ensuring that employee, product, and customer are all functioning in unison and playing to each other's strengths.
To recap, most stagnant growth occurs not from external forces but rather from internal issues, specifically around employee engagement and culture. This challenge stems from matrix driven, hierarchical bureaucracies that incentivize individual instead of team efforts. In turn, this landscape unknowingly fosters complexity instead of simplicity and chaos instead of focus. Such an atmosphere consequently creates a silo-driven enterprise that is an imitator instead of an innovator and a complacent, slow decision-maker instead of a challenger of the status quo, equating to significant energy leakage and ultimately major value destruction.
To avoid this erosive, top-down undercurrent, an internal transformation must be a key priority for any organization. We’ve all likely witnessed how companies become so obsessed with their product and/or brand that they inadvertently lose site of the customer and more importantly, the employee. So often CEO’s mention that they want to create raving customers but forget that the first step to profitable growth and raving customers is to create a culture of raving employees. Concurrently, employees will then be inspired and engaged to create those “wow” moments for customers because the company first created those "wow" moments for its employees. The three steps highlighted in this article will help any organization on this journey, specifically companies should:
- Leverage an inside-out | bottoms-up™ model that brings back engagement, choice, empowerment, and an ownership mindset to the workforce (from the bottoms-up).
- "Get everyone on the bus" with the resources and focused alignment that will drive both short AND long-term value (not one or the other).
- Leverage the EPC framework to ensure a highly engaged, inspired employee that in turn will create innovative products, world-class customer service, and ultimately profitable growth.
The Path to Creating Employee Engagement
*** Read Part II HERE, which discusses the "how" of creating employee engagement ***
About the Author
Joshua Seedman is the founder and chairman of PNI Consulting, a management consulting firm that specializes in global transformations. He has over 20 years of operating and general management experience with expertise in organizational transformations, customer experience, employee engagement, digital transformations, sales & marketing, operational turnarounds, culture/change management, and high-stakes negotiations. His experience includes executive roles within F500 companies, top-tier consulting leadership (McKinsey & Company), over 10 years of global P&L responsibility, and corporate lawyer (Davis Polk & Wardwell). He received his MBA from Kellogg School of Management and his Juris Doctor (cum laude) from Northwestern University School of Law.