What is your favorite ending to this article's heading? In today’s economic climate, it seems when the going gets tough, the tough start cutting…. heads, that is. There’s no laughing at Motorola if a manager comes in and says “OK, team, let’s count off by three's”. Can you imagine a quality company such as Motorola cutting some 30% of their staff from just a couple years ago?

I have the privilege of working closely with Right Management Consultants, Inc. (US: RMCI), the world's leading career transition and organizational consulting firm. While most of corporate America digs in to try and wait out the storm, Right is in the eye of the hurricane, providing caring and insightful career management services to those who have been “sized” (downsized, right-sized, "fill-in-the-blank" sized). I get a first person view of the effect that “reductions in force” have on those who have lost their jobs. But there is a less talked about dynamic in the wake of job cuts that is unmistakably present: the effect on those who survive.

Recently I talked with a man who had served his organization more than 15 years. He was a well-liked employee, responsible for a team of nearly 20 people and training countless people over the years.  When notified his department was impacted, he was walked out by two armed guards, unable to go back to clean out his desk, say good-bye to his work family, or take down the certificates of recognition earned over the years.

We could certainly focus on how this made him feel. But imagine how those who were left felt. “Am I next?” “Am I going to be walked out like a criminal just because our cost center doesn’t make the cut?” Organizations right now—perhaps yours—are suffering a productivity paralysis as a result of actual or feared cuts. Though the real cost in dollars may be difficult to quantify, let’s be clear: those who manage by “When the going gets tough, the tough start cutting” risk springing new leaks as fast as they try to plug the others.

Is this a call to stop cutting heads at all costs? No. There are clearly times when cuts need to be made. Studies have shown that 19% of the people in an organization are “actively disengaged”. In a sense, they are poison and they are actively spreading that poison to others. Part of your role as a leader in any sized organization is to make sure you are constantly "improving your hand"—increasing the capability of your organization—to more reliably deliver better results in the future. An increasing number of companies are implementing a strategy of segmenting people based on performance into the Top 20%, Middle 70%, and Bottom 10%.  The idea is to position the Top 20% for greater leadership opportunities, to develop and challenge the Middle 70% to step up their performance, and to manage the Bottom 10% out of the company. Strategies like this can certainly make some people nervous, but if you truly manage the Bottom 10% out of your organization in a responsible way, these cuts actually energize organizations instead of paralyze them, and are equally appropriate in good times and in bad.

I would certainly call for every effort to make the termination process as dignified as possible, which is no small challenge. But the real focus of this month is a challenge to call leaders to pay attention to the survivors. What are you doing to reach out to them, to bring them back into the fight? The truth is your survival through the rest of the storm might just rely on them being engaged.

Focusing on employee satisfaction in the midst of an economic storm is somewhat contrarian. It’s clear we cannot take our eyes off the customer, and shareholder value cannot be ignored. We might rationalize that the job market is such that our people aren’t going to leave, so put them in third place behind the customer and the dollar. Or we might incorrectly confuse employee satisfaction with just giving people whatever they ask--the corporate equivalent of a parent spoiling the children.

In their excellent book, The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value, authors Heskett, Sasser, and Schlesinger provide an insightful formula for addressing this issue. They assert that we should first focus on employee satisfaction. Why? It goes like this: Highly satisfied employees have a better likelihood of nurturing highly satisfied customers, and money will inevitably flow from very satisfied customers. In an environment where the focus seems first on the money and last on the employees, perhaps this formula is most needed today.

Does the formula make sense to you?  Are satisfied sales people more likely to better serve their customers?  Are satisfied ministry staff better able to take care of their flock?  Are satisfied teachers likely to more effectively pour into their students?  The Service Profit Chain concept says, "Yes!"

Here is my challenge for you: Make this month the time you and your teams renew a focus on real employee satisfaction. Hey, you may not be the CEO, so your ability to change corporate policy is limited.  But you can focus on improving employee satisfaction in your areas of influence.  Get your staff together and wrestle with this issue. I have provided some questions below that provide some structure to that discussion. You might just be surprised at what you can do—even in the short-term—to improve employee satisfaction without breaking the bank. And remember: this is not just to help everyone feel better—it’s about an approach that will ultimately help you better serve your customers and your CFO (hmmm... there’s a valentine you might want to remember to send this year)!

When the going gets tough, the tough pour into their teams! May the service profit chain be a winning formula for you this year!

Team Questions

• Directions: Before the meeting, print out this newsletter and have copies available for team members.

• Have your people take a couple minutes to read through the newsletter article, including the interview with Steve Schmidt.  Ask them to highlight interesting points.

• (After everyone is done reading) “Do you buy-in to the service profit chain formula? What do you see as its merits? Its weaknesses?

• “Where do you think the primary focus of our organization is right now (employee satisfaction, customer satisfaction, shareholder value)? What do you base that on?”

• “What are some affordable, actionable things we could do to improve associate satisfaction over the course of the next 6 months?” (Capture on a flipchart or whiteboard. As a team, pick a couple actions to focus on, assign owners, and start taking action. Make sure to follow-up on progress next month.  Also, send me a quick e-mail summarizing an idea or two you came up with!  I would love to share your ideas with our readers!)

Finding ways to balance work and life is a constant challenge for people today, regardless of industry or organization size.  If you have participated in my Get a Life! Striving for Work/Life Balance keynote, you know that I believe there is not even such a thing as work/life balance and that we often beat ourselves up for not attaining some mystical balance that the real world just does not afford. 

However, there are things we can do as leaders to provide a helpful bridge between the realities of the workplace and home in a way that can improve employee satisfaction!  It starts with showing a genuine interest in the family lives of people.  Do you know the name of the spouse or "significant other" of each person on your team?  Do you know the names and approximate ages of their children, where applicable? 

Years ago I started keeping a simple document that had key family information for each person on my staff.  When I overheard comments about a person's family (perhaps a vacation, a movie the kids love, a favorite restaurant, etc.) I made a point to add a quick note to the document.  Occasionally before a one-on-one meeting with the person I would take a quick glance at the family notes and then make a related comment during the discussion.  This simple approach has meant so much to people!

You can take it a step further by looking for opportunities to invite loved ones to company events.  Here is an example:  For a number of years now, we have organized a team picnic during a summer month and invite spouses and children to join us.  The menu is never fancy--just typical picnic fare.  We would even have an annual watermelon seed spitting contest that all ages would join in!  Including spouses and children creates a great atmosphere that people remember long after the event.  Remarks from team members and their family include:

• From a spouse: “It helps so much to actually see the people my husband works with each day.  I can now more easily picture what's going on when he talks about the day over dinner.”

• From an employee: "My kids love 'going to work with daddy'!  Though it's only for a short time over lunch, they think they've gone to work with me!"

• From another employee: "I've never seen families involved like this.  It makes me think the company actually cares about my life, not just my output."

To better understand how the Service Profit Chain works in the real world, I want you to hear from a leader with hands-on experience implementing it. Steve Schmidt is the President of the Americas Region for ACNielsen. ACNielsen, a VNU company, is the world's leading provider of market research, information and analysis to the consumer products and services industries. More than 9,000 clients in more than 100 countries rely on ACNielsen's dedicated professionals to measure competitive marketplace dynamics, to understand consumer attitudes and behavior, and to develop advanced analytical insights that generate increased sales and profits. Before taking over the role of overseeing the company's North, Central and South American operations, Steve served as the President of ACNielsen North America and President of ACNielsen US. Prior to joining ACNielsen in 1995, Steve served as President of the Canadian operations for Pillsbury Foods and in a number of senior leadership roles at Pepsi Cola and Proctor & Gamble.

Steve took the reins of ACNielsen U.S. at a challenging time.  In late 1996 ACNielsen had just returned to its roots as an independent company trading on the NYSE. The company was suffering from late product deliveries and poor customer satisfaction.  Both profits and employee morale were in a downward spiral. 

To navigate out of these difficult waters, Steve and the leadership team focused ACNielsen U.S. on a core set of principles, including a fundamental belief that the Service Profit Chain works. The result is one of the great turnaround stories of the late 1990’s.  Since 1996, ACNielsen's global operating income has more than tripled and net income has nearly quintupled. Return on equity and return on assets have more than tripled as well.  Associate satisfaction scores have risen with revenues, putting ACNielsen employee satisfaction in a category considered world class.

As you will see, Steve credits the Service Profit Chain as a key strategy for the turnaround.  I caught up with Steve in late January for this interview.

AK: At a high level, people can acknowledge that employee satisfaction could lead to customer satisfaction which should lead to shareholder value. However, what were the challenges in actually moving this from a good idea to working in practice, and how did you attack those challenges?

SS: The key to getting the service profit chain accepted and implemented within any company is that you have to engage your key managers in terms of literally believing that it’s their idea. The way we made it come to life is we held a global leadership conference and invited Jim Collins, from Stanford University to attend. He introduced us to the Service Profit Chain process and helped us create the vision and core purpose for ACNielsen. Bob Lievense, who at that time was President and CEO for ACNielsen, then led the initiative to adopt the Service Profit Chain concept and we let everyone within the company participate, discuss it, talk about its values, etc., with a focus on how we could become a service organization. The key to our success in essence was to make everyone feel like they were part of the decision to implement the service profit chain within the ACNielsen Company. Once you have a vision and core purpose, the first real challenge is to then engage everyone. The second challenge is to walk the talk. One unique aspect that we did do was we tied everyone's incentive target (25%) to associate satisfaction. That was significant. We let people know just how important this concept was by our actions: we set annual objectives and targets, that we then communicated to all associates along with our performance against those objectives / targets. And every one of those business objectives was directly linked to the feedback from the annual associate satisfaction survey.

AK: As the economy has struggled to get a foothold, has it been more challenging to stay focused on the Service Profit Chain when the marketplace is demanding shareholder value?

SS: Actually not. I believe that in times like these…the better our people are…the better we are able to compete…the better we are able to retain the highest quality individuals and the better we are able to attract those individuals who would be coming from industries which are not as successful as we are. We have continued to focus on the Service Profit Chain process. It definitely works! It’s the core of everything we do and it would be foolish of us to pull back during these tough times.

AK: The service profit chain is primarily focused on service organizations. However, through your personal experience leading this initiative and through your work with leaders in other organizations, do you see applicability in other industries?

SS: I think the service profit chain works in any industry, in any company. The fundamental principles of associate satisfaction leading to client satisfaction leading to shareholder value apply to every industry. Yes, people represent the majority of costs in the service industry, and therefore employee satisfaction receives high profile attention; but I can’t think of an industry or company anywhere in the world whom this wouldn’t benefit.  At the end of the day, we all sell something. Every industry and every company has to sell products and services. You either are selling your people, or you’re selling your products. To sell a product or service you need people. The better your people are motivated, trained and the more they understand that it’s all about selling more products and services profitably, (which means you have to have satisfied clients); then ultimately you will drive shareholder value. Shareholder return doesn’t necessarily mean you have to be a publicly traded company. Privately held companies have internal shareholder evaluation programs; but it’s all about making the company more profitable. So if you take it at its most holistic definition, this should apply to any industry, any company, anywhere.

AK: If a Horizon Time reader senses the service profit chain idea is something for them and their organization, what first steps would you recommend they take?

SS: Read the book, The Service Profit Chain by Jim Heskett. It’s going to give you a great feel for what it’s all about.

Thank you, Steve!  For more information about ACNielsen, please visit their web site at www.acnielsen.com.  If you are interested in exploring career opportunities at ACNielsen U.S., you are invited to visit www.leadwithus.com.  For an in-depth review of the ACNielsen story, I invite you to review this article from Watson Wyatt, a global consulting firm focused on human capital and financial management.

Each month I include links to help in your personal and leadership development. Here are the links for this month!

"Reinforce Your Career", by Deborah M. Kolb, Carol Frohlinger, and Judith Williams. January 2002 fastcompany.com.  Great advice for moving from being just a survivor, to a person positioning themselves for the future.

"In Rough Waters", by Patricia Wallington. February 1, 2002 CIO Magazine.  Effective leadership is particularly important during turbulent times.  As Patricia says, "smooth seas never made a good sailor—difficult times test a leader's true mettle. View these rough waters as a chance to expand your leadership skills for an environment that may prevail for some time." 

"The Productivity Paradox", by Christopher Koch, side-bar in September 2001, Darwin. For years, economists have struggled with the "productivity paradox," the sense that the billions invested in technology have not yielded significant gains in worker productivity.  Check out this short article to find the strongest correlation between technology spending and increases in revenue.  Are you surprised?

"The Business Case for Superior People Management", by Kathryn Callahan, Watson Wyatt Strategy@Work.  Can a company increase its shareholder value by changing the way it manages people? The answer from Watson Wyatt's new Human Capital Index® (HCI) research is a resounding yes. Find out what works!

"Smarter Moves for Tougher Times", moderated by Alan Webber, February 2002, FastCompany.  A roundtable of seasoned business leaders assembled in Dallas to come up with short-term tactics for surviving the downturn and long-term strategies for winning in the future. Lesson 2:  Don't cut your culture.  It won't easily recover.  Read on for more helpful lessons.

Any change going on in your organization?  It’s all around us. Layoffs. Reduced budgets. Less people being asked to do more. Increased anxiety. Uncertainty about the future. Whether at work or at home the environment we have to lead in is characterized by change, and there are few signs the change is about to stop.

Would your organization benefit from experienced help navigating all this change? Would your teams benefit from being more confident in their ability to detect the changing winds so they can leverage them instead of being driven by them?

Here are three ways I can help:

1. I have a powerful presentation called Navigating the Winds of Change: Staying on Course in Business & in Life. I can come to your organization or conference and clearly give you the practical tools and concepts to better navigate today’s changing seas. Do you have a staff meeting, department meeting, company offsite, etc. being planned for this year? Contact me today to get your dates reserved. I personally 100% guarantee your satisfaction. 

2. I am now offering an audio tape version of “Navigating the Winds of Change” presentation. Please contact me for information on how to order.

3. In early April, the book Navigating the Winds of Change: Staying on Course in Business & Life will be published. An early draft of the book is available for download from the Institute’s web site. Click here for details.

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