Paying People to Quit

As launch week, for the new book Under New Management, is drawing to a close, I have

the honor of hosting a guest blog by author David Burkus. Under New Management has been wildly successful this week and I encourage you to get a copy today.

Paying People to Quit: The Cost of an Unengaged Hire

Possibly the most counterintuitive process to appear in recent years is the idea of paying people to quit their jobs. Not only are some leaders finding it beneficial to company performance, but research suggests these incentives may even have a positive effect on the people who stay.

One benefit of paying people to quit is obvious: it screens out people who would probably end up quitting anyway. In a purely logical world, as soon as people figure out that they've made a bad decision in coming to work at a company, they would leave. However, humans are not logical creatures. As such, we’re subject to a cognitive glitch that makes it difficult to quit the things we start. Economists often refer to this as the 'sunk costs fallacy.' Sunk costs represent the time, money, or effort we’ve already invested in a course of action. Money has already been spent, and there’s no getting it back whether we continue down the same course or break away and go our separate way.

Rationally then, the moment we realize we’ve made a mistake, we should change our course of action. But we don’t do that. In one of the original studies on sunk costs, Hal Arkes and Catherine Blumer (both of Ohio University at the time) asked undergraduate students to envision the following scenario and make a choice:

Assume that you've spent $100 on a ticket for a weekend ski trip to Michigan. Several weeks later you buy a $50 ticket for a weekend ski trip to Wisconsin. You think you'll enjoy the Wisconsin ski trip more than the Michigan ski trip. As you're putting your just-purchased Wisconsin ski trip ticket in your wallet, you notice that both trips are for the same weekend! It’s too late to sell either ticket, and you cannot return them. You must use one ticket and not the other. Which ski trip will you choose?

Surprisingly, the majority of students choose the more expensive Michigan trip even though the Wisconsin trip would be more fun. Despite the fact that the full $150 was spent and couldn’t be recouped students were influenced by how much had been spent on the trip and that led them to make a less enjoyable choice. We’re biased toward throwing more money or more effort at a less enjoyable — or doomed — cause if we’ve put significant effort or money behind it already. Jobs are no different.

It takes time to find a job, and when you’re hired, if you suddenly realize the job isn’t right for you, your sunk costs exert pressure to ignore that realization and continue. Offering a quitting bonus can help offset the sunk costs building up in the mind of the future underperformer. 

For both the employee and the employer, sunk costs make it difficult to end a doomed relationship. Companies that pay people to quit are acting rationally and ignoring sunk costs. They realize they can’t really head off a future problem by investing more time and money in someone who isn’t a good fit. When a company pays an employee to quit, it’s often doing so in the belief that even if they accept the offer, the company is getting a good deal. By giving the employees most likely to be disengaged the option to leave, companies save a lot in the long run. According to research from the Gallup Organization, disengaged employees are less productive, more likely to steal from their employer, skip work, and negatively influence customers and other employees.

At companies that have implemented this policy, only about two to three percent of people who get the offer take it. When people stay, not only does the company get to keep the money, but they might even get a more engaged and productive employee. So what happens to everyone who stays? The answer to that question points to the second reason why paying people to quit works: cognitive dissonance.

'Cognitive dissonance' is the term psychologists use to describe the discomfort you feel when two ideas conflict in your mind, as well as your attempts to reconcile them. The theory of cognitive dissonance was first proposed by Leon Festinger, a social psychologist who worked at a variety of universities, from MIT to Stanford.

Jack Brehm, another social psychologist, built on Festinger’s theory with a phenomenon he labeled 'post-decision dissonance.' Brehm theorized that after we make certain decisions, we modify our beliefs to strengthen the validity of that decision. In a famous experiment, Brehm asked 225 female students to rate a series of common household appliances. The students were then asked to choose between two of the appliances they’d rated to take home as a gift for participating. Brehm followed up with the students and asked them to complete a second round of rating the same appliances. Oddly, the students’ ratings had changed. In the second round, most of the participants rated the appliance they’d chosen as a gift higher than they’d rated it in the first round, and likewise rated the rejected item lower than they had before.

While it may seem counterintuitive, offering disengaged or unsuitable hires the opportunity to self-select out can lead to greater engagement and productivity from the employees who remain, as well as increased profitability for the company as a whole.

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David Burkus is the author of the new book, Under New Management. He is host of the Radio Free Leader podcast and associate professor of management at Oral Roberts University. Please visit his website at www.davidburkus.com.

What Does It Take?

What does it take to recognize employee's? Not much.

Michael LeBoeuf, author of The Greatest Management Principle in the World said, "Everybody works smarter when there's something in it for them." For you managers that have been around for "awhile" that may be a lot of hoo-hah. For you leaders that work in "the now" it makes a lot of sense.

Reward programs are extremely important today, and contrary to common thought, it does NOT have to be expensive. What's expensive is not having a reward program.

Here are a few examples:

pay for a trade magazine subscription
off-site training seminar
lunch with the CEO
day off with pay
certificate
traveling trophy
pay for a professional membership
"thank you" and a handshake (wow, what a concept)
tickets to a game
restaurant gift card
make your own taco party
visit to headquarters
free car washes
spa day
bowling party
off work 1 hour early
Entertainment book
lottery tickets (hope there's not a $20million in it)

All of these things are either inexpensive or basically free to you. Add a little fun to your recognition program and watch employee's get more involved and stick around longer.

Walk That Talk

In the past, I’ve known so many supervisors and managers that talk the talk but don’t walk the walk. Good leadership means that you “walk the talk”. Leading is sometimes like raising children – sometimes there’s really not much difference at all. If you’re going to say “do as I say”, you also have to “do as you say”. That goes for any situation. You, as a leader, are on stage . . . the star of the show. You’re being watched more than you realize. In some cases, some may even call it stalking.

Over the past number of years, leaders have been getting more into the “employees are important to me” frame of mind. That’s a good thing. But at the same time, if you tell your staff, “if you are ill, stay home”, you can’t take things away from them or give them bad appraisal marks if the do (unless it’s obviously being taken advantage of).

If you keep telling your staff that they’re doing a good job when they’re not – that’s your fault. You can’t take things away from them or give them bad appraisal marks.

If you give your staff a survey to find out what’s on their minds or what problems or issues they have, then never do anything with the information, youuu might be a redneck. Oops, sorry - actually they’ll lose confidence in you and your abilities to effect change.

If you reap praise on your staff, as you should, but then take all the credit when it comes to your bosses – they’ll lose confidence and acceptance in you.

Are you seeing some kind of trend here?

Leadership Rule #1 – You’re the Leader – You’re being watched – You must be the example – You must set the bar – You must do as you say.

Delivering Happiness

This week I’m breaking with “tradition” a bit in order to write a review of a new book. Like I’ve mentioned before, I received an advance copy of Tony Hsieh’s (CEO of Zappos.com) upcoming book – it’s actually released today – Delivering Happiness: A Path To Profits, Passion, and Purpose. Let me just tell you this – it’s a must read.

Many books on business jump right into the business at hand without a lot of early background. Tony takes us on a journey from his early childhood entrepreneur beginnings to the billion dollar success of Zappos.com. He tells us about his money making ideas as a child, including making buttons (which he advertised in Boys Life) and selling greeting cards. He manages to take us “mid-agers” right down Memory Lane.

We get an inside look at how Zappos grew, following Tony’s sale of LinkExchange (to Microsoft) in 1989 for $275 million dollars. Eventually all of the money would be gone as a bunch of friends tried (and succeeded) to keep afloat a company they dearly believed in. During that time, Tony would grow a relationship with a friend that may be seen accompanying him, to this day, to “breakfast, lunch, and dinner”. That friend being a little drink called Red Bull.

The ups and downs that the Zappos team went through prior to becoming a real success story would have been enough to cause most mere mortals to give up. Not so here. Zappos has a close, family-like, relationship that embraces every employee. They work together, play together, drink together, and basically have fun together.

Zappos’ main focus has always been on customers. The customer experience is literally number one on their list. I challenge you to find another company that allows returns, with free shipping - for an entire year. Do any of the internet companies you work with automatically upgrade to next day shipping? Free of charge?

Sure Tony and friends have made mistakes along the way. But they learned valuable lessons with each one of them. Most notably was that you “never outsource your core competencies”. If you want the best warehouse – run it yourself. If you want the best customer service – take the calls yourself.

Probably the best example of all of how important and transparent the customer experience is, is the Zappos Culture Book (I have one). They put together a hardbound culture book that includes comments from employees, customers, partners and even vendors. Included are the good AND bad comments. Again – how many companies do you know that would do that? Needless to say, most comments ARE good. The book is described as a short-term expense for a long term investment. Get one for free at www.zapposinsights.com/main/culture-book.

Now I could go into so many more examples and stories, like the 10 Core Values, or the leadership training available to everyone, but I don’t want to take anything away from your reading experience. If you’re interested in employee motivation, leadership development, corporate culture, or just Zappos in general, do yourself a favor and head out to your local bookstore (or go to www.amazon.com/deliveringhappiness) and pick up a copy. Then grab a Red Bull, sit back, and enjoy.

You Don't Know Me

In the April edition of SUCCESS magazine, Food Network star Guy Fieri said that one of the top three elements in his marketing strategy is having an “organized effort”. “We don’t need everybody thinking the same way and doing the same thing, otherwise somebody’s not necessary.”

What a concept. But you know? Many staff and leaders do look at certain positions as not being “necessary”, or sub-human even. This is why organizational charts and job descriptions are needed. Each specific position needs to be planned out. But chances are, if you're a new supervisor, you have no control over it. Unless you’re in on the ground floor of creating an organization or a new department, it’s all set up already when you come in.

So where do you start? A-ha – getting to know the org charts and the job descriptions – along with your new staff. These things should have been looked at enough already for you to know that you do indeed need all the staff you just inherited. Don’t fall into the trap of believing you don’t need someone or that they’re not important just because you don’t know what they do.

I’ll give you a good example. Anyone that’s been in the military knows that Mess Cooks, or whatever your branch calls them, get a bad rap. “They don’t do anything.” “All they do is cook.” “Heck, I can cook and I didn’t need any training.” All things I’ve heard before. Okay you know-it-all’s, let’s see what happens when they don’t show up for work. Are you going to jump in and cook up your famous scrambled eggs for 1 - for 5000 people? Ahhhhh, now it’s a different story.

Never underestimate others or their positions within the company without first LEARNING what they’re all about. As Socrates said, “True knowledge exists in knowing that you know nothing.”

Another Interview? You Do It.

“Jeez, I have to hold another interview today. I’ve got more important things to do.” To take a quote from tennis great John McEnroe, “You can’t be serious!” Maybe that’s why you have such a big turnover. The key to successful hiring is to take it seriously and not to pawn it off on someone else.

Your preparation for an interview is just as important as the preparation of the job-seeker. There are a number of things that you can do in order to make interviewing less painless and more successful.
Review resumes the morning of the interview. Don’t sit in front of the candidate reviewing his/her resume. That’s just tacky and shows a lack of commitment.
Be sure you know the job description. You have to ensure that the candidate knows exactly what he’s in for. You can’t leave things out or describe things beyond the scope. The candidate is making a decision on you as much as you are on him.
Think about and write out your questions ahead of time. Don’t sit in the interview going, “um, what else can I ask?” Hey Boy Scout, “be prepared”. Show the candidate that you're serious in hiring just the right person.
Have a place for the interview set up ahead of time. Don’t wait till the last minute looking for a room. Again, it looks as if you’re not too serious, and you’re showing the candidate that you’re unorganized. In addition to finding a place, make sure that it’s in comfortable surroundings. Not somewhere where you have to pull up folding chairs – ouch.
Avoid the power trip. Now’s not the time to show them that “I’m the boss!” Forget the trick questions and sitting in the bigger chair. Provide the opportunity for them to be open and candid.

Even though some small talk is appropriate for helping the candidate relax, the interview questions are one of your best tools for determining the right fit. PREPARE and LISTEN. Limit your talking time.

Asking the right questions and using the tips outlined above will put you in a position for making a better educated decision – a decision (and employee) you’ll be able to work with.

Resistance is Futile

Most people don't like change because they don't like being changed. When change comes into view, fear and resistance to change follow – often despite its obvious benefits. People fight against change because they don't understand the change and its implications or they find it difficult to cope with either the level or pace.

If you think that you can stop change, you’re fooling yourself. You may as well try standing in the path of a hurricane to make it change its course (no thanks). The sooner you realize that the world – yes, even your world – will change whether you like it or not, the better. Then you can concentrate your efforts on taking actions that make a positive difference in your organization. You must discover how to adapt to change and use it to your advantage rather than fight it.

Face it – it’s going to happen. I’ve never worked in any organization that didn’t’ have change. It’s a requirement for improvement. Remember that favorite saying, “We’ve always done it this way.”? Argghh. Take that statement out of your vocabulary and from everyone in the organization!

Instead of reacting to changes after the fact, you need to proactively anticipate the changes that are coming your way and make plans to address them BEFORE they hit you. Ignoring the need to change doesn’t make that need go away. The best leaders are positive and forward looking, AND they also communicate.

Leaders armed with a complete understanding of the need for change and knowing the type of change required can best communicate with employees. Open discussion of change is the best tool in reducing the resistance to change. Get employees on board by projecting positive and strong discussions. Show the fiercest resisters what’s in it for them. Appeal to them either in terms of personal gain (status, salary bonus, recognition, etc) or avoided loss (financial or job).

Rumors, if allowed to run rampant, are extremely harmful. Keep everyone updated on the most recent decisions. This will make employees feel that they’re a part of the process. With healthy communication, employees are more apt to remain with the company - and often develop an even deeper bond during a time of change. That’s exactly what you need.

Motivation Starts With Recognition

I recently read a good article from Successful Promotions magazine called, “How Mickey Makes Magic”. It discusses how some companies will cut back on their employee recognition programs when times get tough. What a mistake. Just think about it. What happens to your employees when you take away motivation? What happens to their service? What happens to retention?

In 2004 Disney World was hit by three major hurricanes within about five weeks (once during Labor Day weekend) and this year has seen a drop in revenue due to the economy. Yet even in hard times they realize, “you don’t mess with employee recognition programs.”

“Disney’s theme parks and hotels have the lowest staff turnover rates in the travel industry.” That’s made possible, in part, by keeping cast-members engaged. They’re not the highest paid people around so it’s got to be something more. You may think that they have some big elaborate program for recognition but they really don’t. Most of it is very simple and things most companies could also do.

One of the tools that Disney uses is the “Recognize Everyday Magic” kit. The kit consists of simple sticky notes, thank-you cards and praise cards that managers give out to cast-members when they find them “doing something right.” Every manager gets one of these kits.

Managers are also encouraged to come up with their own types of recognition. Some managers have designed their own pins to carry around in their pockets and hand out as they see someone doing something right with a comment like, “Thanks for making a difference.” Pins really don’t cost that much to produce – maybe a couple of dollars a piece, give or take depending on the style.

Another very simple idea is to let everyone know when you implement suggestions that employee’s have made. Disney has a newsletter entitled, “You Said … We Listened.” This is a quarterly newsletter that lists “ideas generated by employees that resulted in changes.” Let others know that you really do listen.

A very important thing to remember with any recognition program is that recognition is NOT a yearly check-off. Good behavior should be reinforced immediately. So don’t look for your annual Christmas party to show your only thanks.

These are just a few things that you can do that have been proven successful by one company. Take a few minutes and think about what you can do. Maybe even get suggestions from your employees. There’s a simple type of recognition right there. What better motivation then to let your employee’s get involved in decisions?

Make Time for People

When people become new supervisors they usually go through the, “I’m going to do this, I’m going to do that” phase. This is a great thing to do. Set goals. Plan things out. The bad thing is that many people don’t follow through. They get tied up in operations and forget about all those great plans.

One thing that people normally say is that they’re “going to make time for their staff”. Sound familiar? How quickly we forget.

As a supervisor, you’re a resource for your staff, a mentor, a teacher. To others, you’re a trusted colleague. You’re in a people job now. If that doesn’t fit into your agenda, then you’re in the wrong position. You have to make time for people.

Some of your staff won’t need a lot of supervision, or time for that matter. That’s fine. Let em work. But you still need to be available when they do need you. Others are going to need constant supervision and an open door. When these folks come to see you, ignore the phone, put down the pen and listen. Show them how important they are and how much you care. This is not only courteous and respectful, but also motivating. They’ll believe that you find them important and begin to act like it more. They’ll have more confidence and act more decisively.

If you’re not in the same physical area as your staff you can still be available. Provide a means for them to get in touch with you quickly – phone, e-mail, voicemail, etc. Make sure that you get back in touch with them quickly. No more than 24 hours. Make this a habit and they’ll have greater trust and respect for you.

Need another reason for making time for people? You’ll reduce turnover. As I’ve posted before - most people don’t quit their jobs, they quit their bosses.

Gotta Do What You Gotta Do

According to the ADP National Employment Report, from January through April this year, U.S. companies with fewer than 50 employees let go 904,000 employees. Being laid off is a huge psychological and financial event, but it can be just as traumatic for the business owner who has to perform this dirty deed. Although a much different setting, managers and directors of large organizations can go through the same thing.

But just like the flight attendants tell you on the plane, always put the oxygen mask on yourself first. You're no good to anybody if you're incapacitated. I'm not trying to be cold here but lets face it, you gotta do what you gotta do. If you don't look after the business, why would anyone else?

A number of years ago, I knew a guy who had a yard landscaping (mowing) business that took off like hotcakes. He quickly developed a rather large clientele and hired extra people in order to keep up with the workload. And then, alas, Winter rolled around and the workload dropped just as quickly as it had grown. He felt so bad about the idea of having to lay off some of his workers that he couldn't do it, and the business eventually (fairly quickly actually) fell apart. Instead of putting on HIS oxygen mask, he tried to share it . . . and there wasn't enough. The survival of his business depended on him putting on his own mask first.

When the time comes to lay off staff is when the real leader comes out. Honestly explain to your employee(s) the reasons for your decision, express gratitude for their loyalty and service, and be sure that you re-enforce the fact that the lay off isn't in response to their performance. And remember that you aren't the focus of the conversation, the life of the organization is. Sometimes you just gotta do what you gotta do.

Using Humor to Make Your Point

Over the past few months I've been given a fantastic example of just how important humor can be in getting your point across. A friend of mine sent me a training video that his organization had made that was produced by a physician. It was to be shown to all of their staff of "semi"-professional medical people. The information was way over any of their heads, and there was a lot of it. On top of that, the physician himself narrated the video. We've all known medical types that just aren't quite, shall I say, exciting. My friend told me that by the time the short video was over, most of the people were either falling asleep or talking amongst themselves. In a different setting of people this video probably would have gone over much better. It just didn't fit this group.

A couple of months later this same friend sent me their revised video - a cartoon. When I first turned it on, my first reaction was, "what the heck?". "This is just too goofy." But then as I watched it, I noticed that I was much more intrigued with the cartoon than the original video. Why? It was cute and comical. Even kind of silly. And you know what? I soaked in the actual point of the cartoon a lot easier and quicker than I had in the original. It turns out that it produced the same reaction with the employees of my friends organization.

According to the book, Motivating Employees, by Anne Bruce and James S. Pepitone, "humor helps us put things into perspective." "When you encourage people to have a sense of humor about their work, it forces them to take a step back from the situation at hand. When they do that, they can usually see more clearly and in more detail everything surrounding the situation."

I'm not saying that everyday has to be "Hee-Haw" (70s TV), but there is a direct correlation between having fun on the job and staff productivity, motivation, and retention.

Leading by Example

Almost nothing can create as much credibility as leading by example. Ralph Waldo Emerson said, "What you do thunders above your head so loudly I cannot hear the words you speak". In other words - actions speak louder than words.

One of the jobs of a supervisor is to be a role model. You were put in that position because you "fit the mold". You are a "model" employee. Just because you are now a supervisor/manager doesn't mean it's time to sit back and take it easy. You are expected to be setting an example in keeping with the standards of the organization. That may mean MBWA (see 08/22/08 blog) or rolling up your sleeves and giving a hand.

There are a few things that I think may guide you down this road to better leadership:

• Don't be afraid to get out there and see what's going on and be the first to give praise - sincere praise - not just a painted smile and "good job".
• Infuse inspiration into your talk, your body language, your memo's, etc. Let people know that you're excited about your job and your organization - 'this is a great place to work!'.
• Share in your rewards and at-a-boys. Chances are, you didn't do it all yourself. Let your staff know how much they're appreciated. A small gift may be in order, or a pizza lunch.
• Along with sharing in rewards comes taking responsibility. If you mess something up, take the hit. Never play the blame card. This will encourage others to do the same. And you know - you'll spend alot less time trying to figure out 'what happened?'.
• Be honest. Anything less than that and you can kiss everything else you've done good-bye. No honesty - no trust.

Doing anything less than these five things will surely produce an unmotivated team for you - if you have a "team" at all.

Developmental Training

Walt Disney once said, "The growth and development of the Walt Disney Company is directly related to the growth and development of its human resources - our cast". This is true in ANY organization. Think about it. Where would you be without your employees?

Just to put someone through orientation (one of my sore spots) and train them on their job is not enough. In order for them to perform at their best, training must be functional, complete, and on-going. Developmental training needs to be given top billing. It's an essential investment in your employee's future. Without it, how do you expect them to get better? How do they become leaders, or better leaders?

You can't sit on the bubble for years saying, 'we should be doing developmental training'. By the time you finally get around to it, it's usually to late - at least for the employee's you currently have. Habits have set in. When I first joined the Navy, it was near the beginning of the "kindler, gentler Navy". The "in your face" days were on the downswing and being replaced by 'would you do this' and 'please' - and even providing explanations (gasp). ALOT of the old-timers resisted and I even know some that ended up retiring just because they couldn't stand it anymore.

To many organizations developmental training means sculpting for leadership. If you subscribe to this type of belief then you're wasting a valuable resource - your front-line. Everyone must be included. There is a plethora of training out there. Google "soft skill training" and you'll find numerous places that will give corporate discounts for groups of online courses. Everything from customer service to computer skills to communication and time-management. But remember, just providing this type of training isn't quite enough. You need to set up some type of recognition for completing courses. This provides motivation to go even farther.

With development training investment, you'll see improved retention because it shows employees that you're taking an interest in their future, cost savings (caused by retention), higher quality output and even strengthened customer service. Learning causes positive habits which benefits both the individual and the organization.

Now don't you think it's time for you to recognize this win-win program? You won't be sorry.

Opus Dei Management

I recently read an article by Jeffrey Pfeffer called The Benefits of Company as Family. It caught my eye because of the reference to Opus Dei which was a big part of The Da Vinci Code - good movie. Pfeffer talks about the three weeks he spent at IESE, a Spanish business school founded by Opus Dei in 1958. There they have a bigger emphasis on ethics and values than other business schools.

Where alot of schools AND businesses overlook the personal relationships of their staff, IESE emphasizes the long-term. They have more personal commitment to their students/faculty with a caring culture. The alumni association boasts enrollment of forty percent of the schools alumni - Wow. The dean of the school arranged all doctors appointments and transportation for Pfeffer's wife when she took ill while visiting. Take care and get to know your students/staff now and they'll be there for years to come.

In Pfeffer's same article he talks about U.K.-based Innovation Group. They have lowered their employee turnover from 30% to 4%. Huh? No typo here. When new staff come on board, their spouses receive flowers as a welcome to the company. Family members are invited to every social function they hold - no sneaking around the copy room. And because there is so much travel involved, the company offers concierge services and gifts to recognize their sacrifices. FOUR PERCENT turnover. The industry STANDARD is 30%.

Take those extra steps - they count. You don't need to spend an exorbitant amount of money or go way out of your way to make an organization more liked. Just be more "human", less "corporate".