Growth curve … Do you put employees first?
Motivated staff make businesses stronger
Who’s more important when it comes to company culture: customers or employees?
There’s a fascinating tension in business circles today, about whether you should build a company around your customers, or around your employees.
The easy win is to create a company that’s “customercentric.” Customer-first companies put users’ needs at the centre of their organization. They focus on understanding these customers’ wants, needs and pains, so they can create value by bringing customers new products and services they didn’t even know they wanted.
You could put Apple, Google and Costco on top of the list of customer-facing companies who try to overwhelm their market with value. You could add such Canadian icons as Tim Hortons, Lululemon, Dollarama and Porter Airlines. Yogawear producer Lululemon has set itself the lofty mission of “Creating components for people to live longer, healthier, fun lives.”
Still, many innovative organizations are targeting a different group: their employees. It’s a delightfully non-intuitive notion. Many companies today still see employees as obstacles rather than assets. Hard to lead, costly to train, always wanting more money and fewer hours, employees aren’t as easy to love as customers. But some leaders consider them just as important.
After all, customers are fickle. I may prefer Pepsi over Coke, but I’ll buy whichever is on sale. Employees, on the other hand, are always there. While few may directly generate revenue, each one can decide to create new value every day, in the form of lower costs, higher quality, new efficiencies or better customer experiences. In a world where your competitors are all chasing the same customers, employees may be your most significant competitive advantage.
But becoming an employee-centric company isn’t easy. You have to believe that motivated staff make a difference, and you have to invest in them. You must change your entire approach to recruiting, training, compensation, motivation, strategy and culture. But the results may be worth it.
Last June I met Geoff Smith, chief executive of Ontario construction company EllisDon, and Canada’s finalist in the 2013 World Entrepreneur of the Year competition. Interviewing him on a rooftop terrace in Monaco, I found that after he took over the struggling family business, he straightened it out by going employee-first. His mantra: “We are here for our employees to have great careers.”
Smith’s thinking: When your employees are well-led, properly compensated and challenged to do their best, they’ll look after your customers — and then shareholder value will look after itself. EllisDon is now a different company. As the organization explains: “We strive to give every individual at EllisDon the freedom and the responsibility to do their job, to make our clients successful, to create new opportunities. Our systems must serve our people, not the other way around.”
How do you create a culture like this? Follow Kip Tindell, co-founder and chief executive of The Container Store, a Dallas-based retailer of boxes, shelving and other storage products. When he first expanded his business to Houston in 1988, Tindell wondered how to replicate the outstanding employee culture he had developed in Dallas. That’s when he realized his future hinged on making his employees successful. Since Container Store became an employee-first firm, its sales have grown 20% a year and it has grown to 70 stores in 26 states.
Tindell loves challenging the notion of economist Milton Friedman that businesses exist solely to produce returns for their shareholders. In his new book, Uncontainable, Tindell writes: “We’ve found that if you really and truly take better care of your employees than anybody else (instead of myopically focusing on your shareholder), your employees will truly take better care of your customers.” Like Smith, he says, “your shareholders are going to be ecstatic as well. It’s all about creating a business where everyone associated with it thrives — everyone!”
To help you build this kind of organization, Tindell distilled his experience into seven Foundation Principles. Three of these principles are gamechanging first steps into the world of employee-focus: ❚ One great person = three good people The Container Store hires just three applicants out of every hundred, believing that one great employee delivers three times the productivity of a good employee. This means “you can afford to extensively train them and communicate to them, empower them, and pay them 50% to 100% more than other retailers might pay them.” As a result, the company says, “Our 1=3 employees feel like owners of the company, and strive to do what’s right for each other and our customers every single day.” ❚ Communication is leadership The Container Store errs on the side of disclosing more information to employees, not less. “We ask ourselves, ‘ Who will benefit from having this information? Who needs this communication to help them do their job better and to help them be the best employee, the best leader, the best person they can be?’” ❚ Training is everything Tindell wants his staff to become intuitive interpreters of their customers’ needs. They receive more than 260 hours of training in their first year — compared to a retail-industry average of eight.
Where should you focus in your business: employees or customers? It’s a huge question, but I don’t think the answer matters. Once an organization embraces either of these journeys, it will soon find itself making better decisions and jumping ahead of less-enlightened competitors. Simply choosing a higher purpose will help you find the right path.