Book – Employees First, Customers Second

employees-firstAs management theory is moving away from intuitive hierarchical structures of previous century, several business books and classes mentioned a more innovative approach – a business decision to put employees ahead of customers.  In this case the shareholders moved further down in the hierarchy, and short-term interests can be ignored for the sake of long-term benefits of the organization.  How “Employees First, Customers Second” can even work?  The book demonstrates that this approach can work spectacularly well in times of economic down-turn and also during business expansion.

  • Any business transformation requires innovation both in what you do and in how you do it.  As most of the business world is concentrated on “what,” paying attention on “how” can be the greatest opportunity of accelerated growth.
  • The author noticed that his customers appreciated the employees in the “value zone” – the consultants who were working with customers – rather than any other aspects of the organization. The “value zone” was the most important for the business and needed to be in the center of company.  Current organizational structure had been designed to exalt those with hierarchical power rather than those who created customer value.  The CEO started changing the structure.
  • The company opened financial information of different business units to the entire organization, (and later other business information) as a step to reach more transparency.  Though some leaks happened, the overall result was positive – well performing teams felt recognized, and it was clearer what would be needed for improvement.
  • workAnother step toward transparency: an online forum where any employee could post a question for management. Initially the system was clogged with complaints, much of which were true.  However, the trust to management increased – employees believed that management was willing to acknowledge the dirt – there were less gossip and rumors in the organization.  Employees also tried to solve problems posted by others.  “Simply by allowing questions to be asked, we had improved the likelihood that the answers would emerge.”
  • Customers were more understanding than expected.  They realized that by putting employees first, the company provided the most valued for them.
  • Managers’ 360: anyone who gave the feedback can see overall results. As it was a sensitive situation, the CEO started from posting his own 360 results for the entire organization to see, and the rest of senior managers followed.
  • An employee could choose to do a 360 evaluation of any of the managers they believed had impact on their ability to do their job (positive or negative).
  • The 360 evaluation was used for development, not for appraisals (similar approach used by Google – the objective is improvement rather than punishment).
  • Engaging “passion” – the organization created employee councils around specific areas. Employee councils dedicated to business-focussed issues generated new ideas for the business. “It is my belief that innovation especially in our business, often thrives in an unstructured process like this one.”
  • Company created “Value portal” to encourage communication between customers and employees. More than 100 customers joined, and employees generated thousands of ideas with the potential of saving hundreds of millions of dollars for customers.
  • Planning meetings transformed into recorded presentations available to a much wider audience, including the manager’s team.  “The amount of knowledge sharing outside the walls of the formal hierarchy as extraordinary.”
  • successEconomic downturn – the company decided not to do layoffs. The company asked employees for ideas – and received suggestions that became basis of several beneficial initiatives. “The ultimate impact of the initiative was less on cost-cutting initiatives than it was on increasing revenue.”  (Interesting – similar approach used by successful retailers, who invest into their employees.)  The company’s market share grew 20% year after year during the worst period of the recession. Customer satisfaction score went up by 43% during the recession.

The author argues that the “Employees First, Customers Second” approach could work in good and bad economic times and does improve company’s performance.  Hopefully, more companies will adopt similar philosophy in the future 🙂

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