The Workplace as a Mirror

How we set up our workplace mirrors our assumptions about human behavior and the world we want to create. As employees, most people have little direct say about this, often to their disappointment. Those of us who are managers or leaders, however, have a great deal of influence on how our workplace is created. Mostly these assumptions are unconscious or at least unspoken. Unfortunately, most work mocks human capacity.

Maslow and his associate, management theorist Douglas McGregor, believed that business leaders needed to take a closer look at these assumptions if they wanted to create a more successful workplace. McGregor wrote, “Next time you attend a management staff meeting at which a policy problem is under discussion or some action is being considered, try a variant on the pastime of doodling. Jot down the assumptions (beliefs, opinions, convictions, generalizations) about human behavior made during the discussion by the participants. Some of these will be explicitly stated.…Most will be implicit, but fairly easily inferred.”³

McGregor identified two contrasting assumptions about human nature: what he called “Theory X” and “Theory Y.” If you believe in Theory X, you likely subscribe to a mechanical or highly hierarchical approach to management in which people need to be watched and controlled because they inherently dislike work and want to be directed. The theory of human nature consistent with Theory Y is that people are motivated to work and enjoy controlling their work environment if certain conditions are satisfied. Of course, although most of us would wholeheartedly express our support for Theory Y, the reality is that most businesses are still organized according to Theory X. Top-down employee reviews, time clocks, and 90-day probationary periods when you start a new job are just a few examples of how Theory X lives on, even within some of my hotels. I find that when I speak to leaders of other companies and call attention to this point, they often realize that the environment they have created for themselves, their employees, customers, and investors is, in fact, at odds with the things they say they hold dear as personal values. Have these people, many with good intentions, purposely created a workplace with values in contrast to their own? Of course not. It is more likely a situation of failing to stop, self-analyze, and consciously change course.

Much of what we do in the workplace is inherited from past generations at home, at school, and at work. It is incumbent on us to walk our talk, not that of our grandparents, our professors, or our early employers. Whether you hold an entry-level position or are the CEO of the company, do you know which theory your workplace is based on? Just asking the question might shake things up, as the act of getting conscious may wake you up to the potential misalignment of your company's habits to your own perspective on human motivation.

Why Are We So Focused on the Short Term?

For me, walking my talk means that I use my business as a vehicle for making a better world. I like to use the expression karmic capitalism, which suggests that business can have a transformative effect in our lives, both personally and in our impact locally and globally. If capitalism has a habitual tendency toward the short term, the concept of karma is spread over many lifetimes. Karma applied to the business world means that individuals in companies consider the long-term effect of their actions—on the environment, the community, their relationships, and themselves. A little New Age? Perhaps. But during the first decade of the new millennium, we witnessed the karmic consequences of the actions of Enron and Bernie Madoff, among others. They experienced the biblical version of karma: reaping what they sowed.

Stephen Covey, in his best-selling book The 7 Habits of Highly Effective People, uses the metaphor of the “emotional bank account” to describe “the amount of trust that's been built up in a relationship.”⁴ Successful leaders recognize that they can't constantly make withdrawals from their business relationships. You have to create balance by making deposits—in the form of giving people something they want or need—if you are going to make withdrawals from your relationships. Prosperous farmers do this with their land. Harmonious spouses do this with each other. Socially responsible companies do it with the community. During the post-9/11 downturn that challenged the global hospitality industry and all of Joie de Vivre's hotels, one of the critical things that helped the company not just survive but thrive was our ability to tap into the long-term relationships we'd created with loyal guests and corporate accounts. In the darkest days of that time, our vice president of sales, Peter Gamez, and I would not just make sales calls in the traditional sense. We would go see longtime customers and express directly our need to make a withdrawal from that emotional bank account we'd built up over the years. The emotional bank accounts we had with corporate customers had a positive balance that enabled us to make these withdrawals, largely because our customers understood and appreciated that we hadn't price-gouged them during the good times of the dot-com boom. We undertook other activities to draw on our reservoir of good will in the bank account, including sending a letter to the most frequent guests of our hotels telling them that we needed their help during these challenging times and asking them to spread the word about us to their friends and families. Sounds a little like George Bailey in It's a Wonderful Life, doesn't it? In our own way, we were hoping our “townspeople” would show up, cash in hand, just like they did at the end of that classic movie.

Karmic capitalism is just another way of saying “what goes around comes around.” When you make a conscious decision to live your work life this way, it completely alters your perspective on how you make business decisions and how you treat your business relationships. And it has the potential to reorient the logic of our economy so that human capital is valued with the same kind of reverence as financial capital.

There is an ongoing conflict in companies between the theory espoused by legendary economist Milton Friedman, who advocated “fundamentalist capitalism” (a strict focus by corporations on maximizing shareholder value), and what I believe are more enlightened leaders who embrace the philosophy of the long view. In Built to Last, Jim Collins and Jerry Porras empirically proved that companies focused on core values and a sense of purpose are more successful in the long term than those that are purely profit driven. Yet, we continue to see company after company make decisions that sacrifice long-term performance and value to meet short-term goals such as quarterly earnings. Why? We live in a world that's often distilled down to cryptic, monosyllabic texts or tweets sent moment to moment from our so-called smartphones. The business world often feels much more short term and transactional than long term and transformational. The quickening pace of change has created almost a rent-a-relationship approach to how we do business (sounds a little like the past life of the pay-by-the-hour Phoenix Hotel before Joie de Vivre came along). Many business leaders have built their enterprises on the pure Friedman form of capitalism that seems to align with the harried pace of life we Americans have adopted. Especially in the post-9/11 era, we equate professional success with personal satisfaction and fulfillment. Yet, the tendency of companies to focus on the short term and toward purely functional relationships is directly at odds with what surveys show about the aspirations of American businessmen and businesswomen.

How do we explain this paradox? We know that profit maximization has not exclusively been the driving force of exceptional companies.

John Bogle, who founded the Vanguard Group, the second largest mutual fund company in the world, lamented in his book, The Battle for the Soul of Capitalism, the fact that stock market investors have increasingly taken a short-term, profit-taking perspective toward their investments. He says investors have moved from an “own-a-stock” approach to investing to a “rent-a-stock” perspective, as the average length of holding a stock has tumbled from more than six years to approximately one year. Yet, similar to Collins and Porras, Bogle cited that “[mutual] fund managers who hold companies for the long-term and allow intrinsic value to build over time have provided higher returns to their clients than managers [who] hold stocks for the short-term and trade them whenever Mr. Market offers them a tempting but momentary price.”⁵ America's most well-respected investor, Warren Buffett of Berkshire-Hathaway, lives by this theory of focusing on the eternal, intrinsic value of a company.

James Sinegal, cofounder and long-time CEO of Costco, has consistently received flack from stock analysts who believe he's paid too little (he makes a salary equal to only 12 times the average pay of his line-level workers) and that his employees are paid too much. He says, “Wall Street is in the business of making money between now and next Tuesday. We're in the business of building an organization, an institution that we hope will be here 50 years from now.”⁶

Mihaly Csikszentmihalyi writes in his book Good Business, “We have learned to develop five-minute and even one-minute managers. But we would do better to ask ourselves what it takes to be an executive who helps build a better future. More than anything else, we need hundred-year managers at the helm of corporations.”⁷ Maslow would agree. He wrote, “There are many qualities of enlightened management, which become very, very clear and very easy to understand if one asks the manager, ‘Do you want this company to grow even after you're dead?'”⁸

We know that people in general want to make an impact, create a legacy, and do something that feels truly substantive. These people—our colleagues, subordinates, supervisors, customers, and investors—long for a connection to others and something bigger than themselves. I believe they want to transcend the base of the pyramid.

Satisfying Our Tendency Toward the Tangible

Okay, you may be thinking that talking about new management philosophies, karma, pyramids, and the like is easy here in hippie-dippy San Francisco, from my enlightened hotel company with the funny name, but that the real world doesn't work that way. The classrooms of graduate business schools and the corridors of Wall Street still focus on market fundamentals more than human fundamentals because business has a natural tendency toward the tangible and rewards short-term performance. Accountability, one of the keystones of business, is easier to measure when it comes to results as compared with relationships.

Recently, both academicians and business leaders have been looking for ways to make the intangible, long-term values in business more tangible. Author of The Loyalty Effect, business consultant Fred Reichheld acknowledges that the “pursuit of profit dominates corporate and individual agendas, while accountability for building good relationships gets lost in the shadows.” But he goes on to say, “The growth of any organization is simply the accumulated growth of the individual relationships that constitute it.”⁹ He and his partners at Bain & Company have created a simple measurement, the net promoter score (NPS), which allows companies to turn the intangible of customer loyalty and the associated word-of-mouth proselytizing into something business leaders can measure. Companies as diverse as Enterprise Rent-a-Car and Intuit are using this tool as a means of determining whether they're building long-term relationships. Some things are so big, they're almost impossible to measure. The motivation of the human spirit is hard to calculate but easy to witness. Remember MasterCard's “Priceless” commercials? How can you compare the cost of a baseball bat with seeing your child hit his or her first home run in Little League? Yet, in the business world, accountability, which literally means “the ability to count,” defines how we value things. But is the inability to easily measure something a valid excuse for dismissing its value? Many business schools worldwide teach the old adage “If you can't measure it, you don't focus on it.” But as Maslow asked in his book Eupsychian Management, “Where do you put consumer good will and consumer loyalty in your balance sheet?”¹⁰ As mentioned in the book Karaoke Capitalism, economist Jonathan Kendrick's work shows that the overall ratio of intangible to tangible resources in modern companies has shifted from 30:70 to 63:37 during the past 70 years. We all know that the value of intellectual property has risen exponentially in our knowledge economy, but how would a company show this on a simple balance sheet?

Consider your laptop. Twenty years ago, 80 percent of the cost was the hardware, and 20 percent was the software. Today, it's roughly reversed: the intangible soft stuff inside your computer is four times more valuable than the tangible hard stuff that encases it. Could this be a metaphor for the way in which companies themselves are evolving?

There is a new field of psychology called Positive Organizational Scholarship (and an interesting book by the same name) that is looking for ways to make the intangible more tangible in the workplace. Academicians have found a means of systematically measuring the capacities and processes that give life and strength to an organization. What they have discovered is that there is an interconnected ecology of relationships found in the most successful organizations: Companies that cultivate an environment that allows for peak individual performance are rewarded with peak company performance. They have been able to show that qualities like creativity, integrity, trust, optimism, and teamwork have a profound impact on productivity, customer retention, and product quality.

The Pursuit of Happiness at Work

The pursuit of happiness isn't mutually exclusive of the pursuit of profit. Bill O'Brien, former CEO of Hanover Insurance, once said, “Our traditional organizations are designed to provide for the first three levels of Maslow's Hierarchy of Needs: food, shelter, and belonging. Since these are now widely available to members of industrial society, our organizations do not provide significantly unique opportunities to command the loyalty and commitment of our people. The ferment in management will continue until organizations begin to address the higher order needs: self-respect and self-actualization.”¹¹

In creating the Declaration of Independence, Thomas Jefferson and our founding fathers rephrased English philosopher John Locke's dictum of “life, liberty, and property”¹² to something that was a little more karmic. They could have chosen different words: the pursuit of wealth or intelligence or even safety. But they chose the pursuit of happiness to cap their mission statement. You can do the same for your company. In fact, companies around the world are changing their work rules and company customs to assure they are more consistent with human nature. These enlightened companies are proving every day, as they strive to reach the peak of their own pyramid, that they can optimize their relationships with employees, customers, and investors while simultaneously generating outstanding financial results. What are the assumptions that define how your workplace is organized, and how is the pyramid integrated into your company's values?

John Mackey, founder and CEO of Whole Foods Market, talks about the upward flow of human development. John is well known among the company leadership of Whole Foods to whip out a Maslow pyramid to make a point about his company's business model. He believes both profits and personal happiness are best achieved when not aiming directly for them. They are the result of a collection of other activities that inspire your employees and yourself to a consciousness of the interdependencies we have with each other. So the Whole Foods Market working model flows entirely from these assumptions. That's why you see line-level employees having a significant say in everything from what kinds of benefits program they'll have to who they should hire, while receiving stock options and complete transparency of wages and salaries throughout the company.

Another example is Yvon Chouinard, the founder and owner of Patagonia, whose book, Let My People Go Surfing, sums up his philosophy not just about the workplace but also about the nature of people. This large private company doesn't believe in time clocks and rigid schedules. In fact, when a surf swell is on its way, you may see a mad dash out the door of both line-level employees and senior executives. In return for the flexibility, fairness, and care the company demonstrates, Patagonia's employees exhibit deep loyalty to the cause (and that's how they think of their environmentally friendly company) on which they work, resulting in little turnover and extremely high employee and customer satisfaction.

There are even examples of more traditional companies embracing Maslow-like management philosophies. The multibillion-dollar energy giant AES has consciously built its assumptions about people into its business model. Cofounder Dennis Bakke writes about this in his book Joy at Work, where he says most companies haven't evolved from the industrial mentality of management. Bakke started asking more fundamental questions of his organization, like “What if we eliminated the employee manual or detailed job descriptions?”¹³ Based on the response to these questions, he reorganized the company into autonomous teams that were given unprecedented decision-making flexibility that spoke to the leadership's trust in the judgment of its people. These family-like groups helped improve interpersonal relationships in the company while enhancing learning and a sense of meaning for the employees.

Finally, I have to mention the ultimate in Theory Y management styles: Ricardo Semlar's Semco, based in Brazil. Semlar has written about his unique company in Maverick and The Seven-Day Weekend, two books that dare to ask the question “Why?” This and Semlar's management philosophy question everything that is taken as a given in running a company. Semco's employees are encouraged to choose their own salaries, set their own hours, and have no job titles.

Making the Hierarchy of Needs Tangible

As Joie de Vivre was struggling with the post-dot-com, post-9/11 downturn, as I was facing the greatest challenge in my professional life, as my competitors were declaring bankruptcy and the press was predicting Joie de Vivre was next, I was immersed deeper than ever in Maslow's theory of human motivation. One night I experienced a moment of clarity: I needed to make Dr. Maslow's theory tangible in my company.

I don't know if you've ever been part of a company that's suffered through a catastrophic period. All workplaces have fear ripples that move like concentric circles out from those places in the business that are most unhealthy. Well, in a difficult time, it's like you move from throwing small pebbles in a pond to throwing a few boulders. The ripples become tsunamis unless you do something to focus people's attention on a more positive outcome. During our company's tsunami, when every part of our business was threatened by tidal waves, I decided to turn our attention to how the Hierarchy of Needs could be our tangible operating model for sustainable success.

The question was: How could I translate Maslow's pyramid into something actionable for my team? I found an answer in James MacGregor Burns' book Leadership, which describes two types of leadership: “transactional” and “transforming.” Burns writes, “The relations of most leaders and followers are transactional—leaders approach followers with an eye to exchanging one thing for another.…Transforming leadership, while more complex, is more potent. The transforming leader recognizes and exploits an existing need or demand of a potential follower. But, beyond that, the transforming leader looks for potential motives in followers, seeks to satisfy higher needs, and engages the full person of the follower. The result of transforming leadership is a relationship of mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents.”¹⁴

I wish I had written that! This short excerpt captured everything I had been thinking about as to how I could lead us out of our current challenges. What a provocative way of thinking of my job as the CEO. It's almost like a transactional leader is leading from the bottom of the pyramid while the transformational leader is leading from the top.

In studying Maslow's pyramid, I started to realize that the five layers of his pyramid—physiological, safety, social/belonging, esteem, and self-actualization—really represented three states of being. At the base of the pyramid, where we find physiological and safety needs, we do our best to survive. Basic survival is where we place our attention. In a company, this means that the organization is just focusing on the basics of running the business. It is treading water, but potentially in a pond full of fear ripples growing into tsunamis. In this situation, a transactional leader may focus on just the basics. For example, he may cancel the company holiday party (as many of our competitors did) in a downturn to sustain cash flow and save money. Nice short-term move, but possibly the opposite of what this company's culture needs to surf the tsunamis.

As we move up Maslow's pyramid, we strive to succeed in our social relationships and in our esteem. These third and fourth levels of the Hierarchy of Needs represent what many people and companies strive for. It's the stuff that gives us pleasure as individuals or brings us a sense of accomplishment as a businessperson. It is satisfying but not necessarily transformative. Most individuals and companies do not strive beyond this level, despite the fact that they might have the ability and opportunity to reach a more subtle but powerful kind of success, which exists at the very top of the pyramid.

At the top of Maslow's pyramid, a less tangible but very powerful state exists that enables us to transform ourselves and our relationships with others. This idea of self-actualization as applied to the workplace means a company can live up to its full potential and, just like Superman, leap small buildings in a single bound. That's what Joie de Vivre needed to do during the biggest U.S. hotel downturn in 60 years. We couldn't afford to purely survive during the tsunamis; we needed to transform our relationships with our employees, customers, and investors so that we would come out of the downturn with heightened momentum and a new sense of purpose.

Once I drew the Transformation Pyramid with these three levels of survive, succeed, and transform, I was able to communicate the natural progression from what's tangible at the bottom of the pyramid to what's intangible at the top. It became easier for me to then translate how Maslow's Hierarchy of Needs could be applied to the three most crucial relationships found in the workplace with employees, customers, and investors. It is clear that there are essential base needs in each of these relationships, and if you don't satisfy those survival needs, you can't move up the pyramid. Yet, just focusing on those base needs will never allow the relationship, or the company, to succeed and transform into its greatest potential.

Of course, this Transformation Pyramid is a wonderful model for life. Many of us are redefining success as something more intangible, more meaningful: the idea that we can transform ourselves and the world through the work we do. But this head-in-the-clouds approach can feel disorienting without an organizing principle for how to get there. By imagining that there's a progression from survival to success to transformation, one can have confidence that transcending those tangible basics in life is a path worth taking. Or as Anaïs Nin once wrote, “The day came when the risk it took to remain closed in a bud became more painful than the risk it took to blossom.”¹⁵

In the next chapter, I will tell how I turned this Transformation Pyramid into the template that allowed Joie de Vivre to create much deeper relationships with our three key stakeholders: our employees, customers, and investors.