How often have you heard a CEO declare, “Our employees are our most important asset.” The first clue that something is wrong is that the CEO is already referring to the employees as a thing, rather than as people. The second clue is that you notice that the organization has a “human resource department”, which makes clear that the employees are something to be mined and exploited. The final proof that something is wrong is that you look around the organization and notice that the firm is a living example of a Dilbert cartoon, with a rash of downsizings, outsourcings and reorganizations, where no one’s job is safe (including the CEO’s).
So what would it be like to work in an organization where the employees really were valued? One answer is described in a new book by Vineet Nayar entitled Employees First, Customers Second (Harvard Business Press, 2010).
In 2004, Nayar became CEO of HCLT, an IT service provider with some 30,000 employees headquartered in India. The book is a narrative account of his experience there, and how he went about putting employees first (really!).
Prior to joining HCLT, Nayar had founded a smaller firm that was driven by product and service innovation, where the staff believed that if they did not innovate every eighteen months or so, with a new product or service to the market, they would not remain competitive and would lose their position as a market leader. In this firm, most people were looking forward.
By contrast, HCLT was an older business that had grown rapidly in its early years, but as it grew bigger, it had gradually slowed down. Change was more difficult and took longer to implement. Bright ideas often got left on the table. In this organization, people were looking backwards, frustrated and suffocated by the constraints of the past.
Three experiences marked Nayar’s initial interactions with HCLT. The first was when he began having conversations with employees, and telling them that HCLT had lost its competitive edge, that the only way to avert disaster was to transform the corporation. He found that even the staff most interested in change—the “transformers”—were angry and found his promises of change unconvincing. He saw that trust in management, including himself, was low.
The second experience was when he met with the CIO of a customer who had had a highly successful experience with HCLT. Nayar came to the meeting expecting to be thanked. Instead, the CIO thanked the team that had done the work and told Nayar how lucky he was have such wonderful people.
The third experience was when he met with customer who had had a disastrous experience with HCLT. Nayar walked into the room, ready to explain how he was going correct the problems. But before he could say a word, the client said, “Your people did everything they could but your organization didn’t support them properly.” The client was angry at Nayar, not at the team.
These and other experiences led Nayar to see that the people doing the work were the ones who created value for the customers. Taken together they created the value zone within the organization. Without them, the firm was nothing but a shell, layers and layers of management and aggregators who had nothing to offer to the customers. The management did not live in the value zone or anywhere near it. Often, management got in the way of creating value. Overall, management was not helping the people doing the work. Instead, it was often wasting their precious time and energy by requiring them to make endless presentations about irrelevant things and write reports about what they had or had not done.
Nayar saw that management had to stop wasting the employees’ time and start supporting them and enabling them to create more value for customers. He had to find a way to put the value zone at the center of the organization.
For HCLT, the value zone was not so much in what the firm delivered—the products and technology offered by competitors were similar. Instead the value zone lay in how the technologies and products were brought together and implemented.
The existing organization exalted those with hierarchical power rather than those who created customer value.
So Nayar set out to invert the traditional pyramid and made the management accountable to value zone and people in it, rather than have the people in the value zone accountable to the management. To enable employees to create value for customers, Nayar had to establish a new level of trust and transparency within the firm. In the process of the role of management changed from being a controller to an enabler.
Nayar believed that by putting employees first—doing everything they could to enable those people who bring real value to customers—the employees would serve customers better than ever before. The goal was to unleash the power of the bright minds in the firm so that they could align themselves with the customers’ challenges and become the customers enablers and facilitators. The goal was to develop partnerships based on transparency and trust that would create value for the customers.
Rather than merely saying that people were the firm’s most important asset, and mouthing the slogan of “Employees First”, Nayar set out to make it a reality. The book is a narrative account of the concrete steps he took to make it happen.
- He began by engaging in conversations. Rather than telling people what to do, he engaged in dialogues all across the organization. He didn’t come empty handed to discussions—he came with ideas, but then he stepped back and did his best to inspire conversation, and listen to what people were thinking and feeling, so that the managers and staff could understand and eventually own the idea.
- Realizing the need to enhance trust, he set out to make HCLT a radically more transparent organization. One of his first steps was to make the firm’s financial and performance data freely available to everyone in the organization. His idea was to show that the firm had nothing to hide and was willing to share both the good and bad, so that everyone could see what was going on. By and large, the change was successful: as people used the information to compare their own performance with that of others, and often worked harder to improve their own performance. True, some information leaked out and caused embarrassment, and some staff were demotivated by the information they saw. But on balance, change was massively positive.
- Another step was to establish an online forum where any employee could post any question and Nayar or one of his leadership team would answer. The questions and the answers were made available to everyone in the organization. The comments and questions came pouring in. The leadership team did not claim to know the answers when it didn’t, or say that it could fix something if it couldn’t. The result was fewer rumors flying around the firm. For a period, Nayar was concerned about the overwhelmingly negative tone of the incoming questions. But in time, he learned that the forum led to many face-to-face discussions among the employees, and inspired others in the organization to start trying to fix problems of which they had been unaware. By being open about what was wrong, the conversation gradually shifted to what could be done about it.
- Another step was to give employees a direct line of sight to what the customers were feeling. For instance, Nayar convened a meeting of their 300 most important customers, and had a conversation about the changes under way in HCLT and broadcast that conversation live to HCLT staff.
- A fourth step was a shift from a focus on delivering products and services to a focus on enabling the customers to improve their business results. In particular, there was a focus on having teams help customers compete in terms of time:
o Order to cash: reducing the time from the moment of accepting an order to the receipt of payment.
o Desire to hire: reducing the time from defining an open job to filling it.
o Concept to manufacture: reducing the time from prototype to finished production unit.
- In order to implement his idea of “reverse accountability” in which managers were accountable to employees, the organization introduced the Smart Service Desk, in which employees could create a ticket whenever an issue arose. The ticket was assigned to the appropriate department and would be given a deadline for resolution. The system tracked its progress as it worked its way to solution. If the relevant executive did not resolve the issue within the specified time, the ticket was automatically setn to the executive’s manager, and so on up the line. The system is transparent since the employee could check the status of the issue at any time. The system was widely used, with over 30,000 tickets per month, in a firm of 30,000 employees. Once the system was running, the management was able to sort out the recurring problems and work on root causes with the goal of achieving a zero-ticket week.
- The next step was to reinforce the shift in management’s focus from establishing zones of control to establishing zones of influence by radically expanding 360-degree feedback. In addition to managers getting feedback from staff who reported to them, they also received it from anyone in the organization who had a view about their work. Any employee could choose to do a 360-degree evaluation of any manager they believed had an influence—positive or negative—on their ability to do their job, regardless of how long they had been with the firm or what their reporting relationship was with their manager. The process helped reinforce managers’ results-based influence rather than traditional structure-based zones of control.
- To widen responsibility for tackling firm-wide problems, Nayar established a CEO-discussion section on the intranet called My Problems, which dealt with the problems or questions that Nayar as CEO felt that he could not answer or resolve, such as how to improve the firm’s image with the IT rating agencies. Nayar was deluged with advice and he engaged in back-and-forth with contributors to arrive at solutions.
- To engage employees around their passions and beliefs and ethics, Nayar saw that he had to go beyond employee satisfaction. So the firm established an Employee Passion Indicative Count to identify the core values that are of most importance to people and that drive their potential to act passionately, personally and professionally, and therefafter established communities of passion, called Employee First Councils, organized around specific areas of passion. Soon enough, the business-focused communities were generating all kinds of ideas for HCLT’s business.
- Then Nayar decided to recast the role of the CEO by transferring some of the responsibility for setting strategy to the employees. Instead of a pyramidal process directed from and approved by the top, instead three hundred managers prepared and recorded their strategic plans on an internal web portal and submitted them for review by another 8000 managers, both above them and below them in the hierarchy. Exposure to a wide audience resulted in higher quality plans, with greater depth, frankness and specificity. Discussion of the plans resulted in a massive expansion of organization-wide learning.
Nayar sees three reasons for transferring a good deal of the responsibility for managing the company to employees:
- Understanding: The CEO is too far away from the value zone to really understand it.
- Speed: The speed of thought and change and implementation gets suffocated in hierarchy.
- Complexity: The complexity of the knowledge and service economies is so great that no individual or company unit can understand it; instead the CEO’s role is one of enabling the people who do have the do what they are good at.
The CEO’s role shifts from being a crafter of strategy, a person who motivates by giving speeches, or being the one with the brightest ideas to being someone who enables people to excel, helping them discover their own wisdom, engaging fully in their work, and accepting responsibility for making change.
One problem with the book is of course its title, Employees First, Customers Second, which is misleading and unfortunate. Nayar’s actions did aim to reverse the idea of a traditional bureaucratic firm where employees are there for the good of the management and respond to their orders. He took steps to invert the pyramid so that the managers are focused on enabling the employees to serve customers better. That's not really putting customers second. If customers ever come second, then the firm is doomed. Despite the nutty title, the book is a valuable contribution to our understanding of the 21st Century corporation.