Chapter Five
Creating Loyalty
Compensation is a right; recognition is a gift.
Rosabeth Moss Kanter, Harvard professor and author 1
In the last half of the 1990s, there was a popular TV series full of philosophical witticisms that became the talk of corporate lunchrooms, if not boardrooms. Young Boston attorney Ally McBeal, the anxious waif in a miniskirt, had a way of turning a phrase, such as “men are like gum; after you chew, they lose their flavor” or “we're women; we have a double standard to live up to.”
If you were a fan of the show, you may recall that Ally (played by Calista Flockhart) had a therapist (played by Tracey Ullman) who told her, “You need a theme song. Something you can play in your head to make you feel better.” So Ally and her therapist set about to finding the perfect theme song (with a Motown beat) to help Ally get through her days as a high-pressured attorney and her nights as a romantically challenged single gal. At Joie de Vivre, we figured, if it works for Ally, maybe it can work for us. We didn't create a theme song or some rah-rah cheer that we expected all employees to sing, but we did come up with a theme book that helps define our Joie de Vivre spirit. I've given away dozens and dozens of copies of the children's book The Little Engine That Could to our employees to show them my appreciation for their can-do attitude. This was prompted in part by what we learned from Market Metrix, the company that provides our employee and customer satisfaction reports. They discovered that the number one perception that correlates with the likelihood our guests will return is whether they believe our employees showed a can-do attitude with respect to providing them service.
As you may remember, The Little Engine That Could is about an overachieving train that is pressed into service to try to get children's toys over a mountain. Against everyone's expectations, the little blue engine is able to accomplish this by constantly reminding herself, “I think I can . . . I think I can . . . I think I can.” Although simple and somewhat sentimental, this optimistic and resourceful message resonates well with Joie de Vivre's history and reputation as a David struggling among the Goliaths of the hospitality industry. But this resilient underdog message could also sum up the nature of much of our employee base of immigrant and not highly educated workers. Many of them arrive in this country against all odds and scratch out a living in one of the most expensive areas of the world. The fact that a room attendant is given this book personally by the company's CEO, with a customized inscription inside, makes the recognition all the sweeter. Plus, this employee can go home and share the story with his or her family. We believe that this is much more meaningful than some stale and obligatory plaque on the wall.
I'll never forget a thank-you note I received from Jill Plemons, one of our senior directors of sales at a couple of our hotels. She had been presented with the book in front of all of the Joie de Vivre salespeople to recognize her tenacity in sales during a time when her hotel's renovation project was constantly getting delayed. In Jill's note to me, she wrote, “Thank you so much for the book and recognition at our sales meeting. I cannot tell you how appreciative I am of this gesture. My grandfather was a railroad engineer, and this was an all-time favorite growing up.” I'll bet that book was worth more than any random cash bonus we could have given her.
Maslow admired psychologist and philosopher William James, who died about the time Maslow was born. James once wrote, “The deepest principle in human nature is the craving to be appreciated.”2 Hunger is associated with craving. And, as physical hunger needs are met, the kind of hunger people feel most acutely is the hunger for recognition, which addresses the social and esteem needs on Maslow's hierarchy.
Jill's note reminded me that giving recognition could be just as rewarding as receiving it, especially when you realize how meaningful it is to the recipient. Every CEO should be issued a T-shirt with James' quote on it when they start their new job leading their company. Most organizations get so caught up with the tangibility of compensation issues that they forget that giving authentic recognition to peers is one of the greatest ways to ensure low turnover and high productivity. The irony is that compensation costs big dollars yet truly only satisfies base needs whereas recognition is an inexpensive gift that provides a huge bang for the buck in satisfying employees' higher needs. Then why do most companies spend the vast majority of their time focused on the bottom of the Employee Pyramid?
Although Mary Kay Ash, founder of the multibillion-dollar Mary Kay Cosmetics, is best known for recognizing her top salespeople with signature pink Cadillacs, the reality is this Texan's rise to the top was founded on her approach to “praising people to success.” She advised her managers to “pretend that every single person you meet has a sign around his or her neck that says, ‘make me feel important.’ Not only will you succeed in sales, you will succeed in life.”3
I wish Mary Kay had mentored my first boss, Mac, the guy I answered to when I worked at McDonald's for six weeks at age 14. Mac taught me something about employee loyalty (or lack thereof) that I later learned when reading the book First, Break All the Rules: What the World's Greatest Managers Do Differently. Authors and Gallup Organization execs Marcus Buckingham and Curt Coffman surveyed 80,000 managers in over 400 companies and discovered a truism: “Employees join companies, but they leave their managers.”4 I joined McDonald's, but I left Mac.
The Gallup folks found that the single most important variable in employee productivity and loyalty is not the pay, perks, benefits, or workplace environment. It's the quality of the relationship between employees and their direct supervisors. As Buckingham and Coffman described in Fast Company magazine, “What people want most from their supervisors is the same thing that kids want most from their parents: someone who sets clear and consistent expectations, cares for them, values their unique qualities, and encourages and supports their growth and development.”5 In fact, they found there were twelve key determinants that define a strong workplace. The six most powerful ones all have something to do with an employee and their boss, such as “Has the employee received recognition in the past week?” Or “Does his or her supervisor seem to care about the employee as a person?”
One of my favorite pastimes is to walk into an unfamiliar hotel, plant myself in the lobby, and just feel the vibe of the staff. I can usually get a sense of whether this hotel has a good employer (or more specifically, a good general manager) by the invisible report card the employees are wearing on their foreheads and in the actions I witness between employees and guests and among employees. Sometimes it's just noticing that the ubiquitous Employee of the Month plaque on the lobby wall hasn't been updated for months. If you are keen, you don't have to wait for your annual or twice-annual work climate or employee satisfaction surveys to determine whether you've got an engaged staff.
I welcome you to do this with one of Joie de Vivre's businesses. While we're not perfect, what you're likely to experience is the result of our culture of recognition. During the downturn, we were faced with an unrelenting torrent of bad news. In response, our chief people officer Jane Howard and the rest of our executive committee searched for ways we could create some good news or at least a good vibe among our employees. Some of the steps we took were simple and became habitual, like our former president Jack Kenny calling eight to ten employees per week to wish them happy birthday or to congratulate them on their anniversary of working for the company.
During the downturn, each of our hotels was encouraged to create its own unique approaches to recognition. We educated our managers that recognition was the gift that kept on giving in how it created positive goodwill during a time when the poor economy was instilling a lot of fear. As an example, our budget-priced Hotel Carlton has created some of the highest employee and customer satisfaction scores of all Bay Area hotels and was featured for this fact in the Wall Street Journal. The general manager did little things like asking new employees at their orientation to fill out a form entitled “My Personal Favorites” (favorite candy or style of music or book, etc.). Doing this allows our Carlton management team to provide customized rewards to that employee when we want to provide recognition for something they've done.
But our executive team realized that the companies that truly live and breathe a culture of recognition make sure it starts from the top. We take this issue seriously enough that we changed the way we end each of our weekly corporate executive committee (EC) meetings with the top 15 department heads in the company. As a ritual, at the end of each meeting, every EC member is given the opportunity to talk for a minute about someone in the company who deserves a little extra recognition and why. It could be a bellman who climbed six flights of stairs with dozens of bags for a German tour group when the elevator broke down or the front-desk host who, after her shift, sprinted to the airport to return a bag that a guest had forgotten (we even have a story of an employee, about to leave for a vacation in China, who offered to return a personal item to a recent guest of ours in Hong Kong). The stories are usually succinct yet nonetheless poignant. At the end of each story, an EC member from a different department volunteers to call, e-mail, or visit the employee in person to tell them what a great job they're doing.
This little institutionalized program could be enacted in any size company, but it's particularly relevant to Joie de Vivre because we've grown beyond 3,500 employees. Not only does it remind the senior execs in the company about who's in the trenches, but it also helps us feel good about what we're doing. And we had a real thirst for good news during the downturn. In addition, any fast-growing company will find that regularly exercising this recognition muscle will help break down the silos that start to develop between departments. When the director of technology calls a relatively new hotel salesperson to congratulate them on signing up their first corporate account, it sends the message that we're all in this together. The fact that the word has spread beyond their own department head gives that salesperson a sense that this is big news among the company's top execs.
Why Recognition Rules
What are the best practices of companies that have become strategic in their approach to recognition? First off, they follow best-selling author Bob Nelson's advice that “you get what you reward.” If you want to understand what a company truly values, don't just read their mission statement on the wall; ask to see their institutionalized recognition programs and how these connect with the company's financial and strategic goals. Great companies establish a clear link between what people are rewarded for and the organization's priorities.
There are lots of statistics that reinforce how important recognition is in the workplace. In his book Liberating the Corporate Soul, Richard Barrett cites a study that shows that about 40 percent of the variability in corporate financial performance comes down to something as simple as employees' sense of fulfillment in the workplace. Further, nearly 70 percent of the variability in employee satisfaction is attributable to the quality of the employees' relationship with their manager. According to a study cited in Adrian Gostick and Chester Elton's Managing with Carrots, companies that have an employee recognition strategy show double the return to shareholders compared with those companies that don't have such a strategy.
DaVita is a multi-billion-dollar company dedicated to operating the best kidney dialysis centers in the world. With thousands of dialysis centers nationwide, CEO Kent Thiry knows it's essential that employees clearly understand the company's goals because there's a great risk that what matters at headquarters isn't translating to its tens of thousands of teammates in the field. When Thiry joined the company in 1999, DaVita was in financial default and didn't have a set of core values that defined its operation. Thiry engaged his employees to help create seven core values. Since then, every six to eight weeks, Thiry and his other senior execs call the entire group of 800 leaders who helped create the core values and ask them the question “What evidence is there that we are living and sustaining our core values?” And at the company's annual awards ceremony, Thiry presents awards to the dialysis centers that best exemplify each of those seven values, with the team from each being flown across the country to accept the awards (and receive a video of their speeches that they can share with their coworkers back home).
DaVita's operation has a lot of parallels to Joie de Vivre. In general, the employee base is not highly educated. Ninety percent of its staff is giving hands-on service to customers, so employee attendance is a critical component of the success of a dialysis center because there is very little slack in operational staffing. To align employee recognition with a company goal of minimal absenteeism, DaVita created a We Are Here award that recognizes companywide those employees each year who have perfect attendance. Each of these reliable teammates, who showed up on time every day that year, has their name placed in a hat. Every six months, 50 with perfect attendance records are randomly recognized with a $1,000 bonus, which is given to them at their dialysis center by a senior executive of the company (vice president level or up). DaVita has given away millions of dollars to thousands of employees since starting this recognition program, and the company now has, by far, the lowest absenteeism in their competitive subset. In addition, turnover has dropped in half at the company since it instituted this unique variety of recognition programs.
What recognition program can you put in place in your company that will align your employees' actions with the company's objectives?
Creating a Culture of Recognition
Best recognition practices aren't limited to just formal companywide initiatives. Great companies educate and obligate their managers to provide one-on-one informal and formal feedback mechanisms to their subordinates to reinforce business objectives.
Informal recognition, which tends to be most prevalent in the workplace, includes actions like positive in-person or e-mail feedback or spontaneously giving someone a small gift as a token of appreciation. This can be powerful because it's in the moment, customized, frequent, and doesn't have to be limited to boss to employee; it can also be peer to peer. Formal recognition includes programs like the annual awards ceremony, the employee-of-the-month club, or the performance review supervisors give their subordinates. Formal recognition executed properly helps to publicly define the company's values and goals and can provide widespread acknowledgment to those receiving the recognition.
Companies that have created a culture of recognition tend to emphasize both informal and formal mechanisms whereas companies that are strong in the formal recognition but weaker in the informal represent a more traditional recognition culture. Often these traditional recognition cultures can be a little paternalistic and disconnected from their line-level employees.
On the opposite extreme is the loose recognition culture, which describes companies that have strong informal recognition but weak formalized mechanisms. These companies may offer a more collegial environment for employees, but often there's a bit of a disconnect between the company goals and the employees' actions. In fact, because formal recognition programs like employee reviews and companywide goals and rewards are not a high priority, this type of company runs the risk of creating a happy culture while experiencing poor execution of its business strategy.
The grid below shows all three of these recognition cultures, along with the culture of neglect, which is a place you certainly don't want to be.
Companies That Use Informal versus Formal Recognition
Let's look a bit deeper to understand what you can do to improve your informal and formal approaches to recognition.
One of the benefits of using the Employee Pyramid as a guide is that your leaders can have an internal dialogue about how your organization is addressing money, recognition, and meaning. Companies that consistently exhibit impressive amounts of informal recognition usually have a high emotional intelligence factor among their managers and employees. There's a friendliness and an openness to acknowledging the whole person in these types of company cultures.
For informal recognition to be effective, it must be (1) sincere and deserved, (2) specific and individualized, and (3) offered on a timely basis. Much of informal recognition is about creating a deeper connection with your employees. Providing positive feedback is a bit of an intimate act so many managers can sort of gloss over it or provide it in an abstract way. They say “great job” to someone as they're rushing out the door. No eye contact. No clarity on what “great job” they're referring to. No explanation of how the employee's actions made a specific difference. If the manager thought about it for a moment, he or she might realize that being specific about the recognition could help the employee understand how they can repeat that behavior.
Great recognition cultures have profound ways of training their managers about this stuff. In the book The Southwest Airlines Way, author Jody Hoffer Gittell outlines one method Southwest has used with an example involving three groups of supervisors-in-training:
One member of each team was blindfolded and asked to throw a ball into a trashcan. Unknown to the throwers, one team could say nothing, the second was instructed to say only “good job” or “keep trying,” and the third could give detailed information about where the bucket was. Not surprisingly, the third group had the most success. The person who had received the best instructions said, “I couldn't wait for it to be my turn again.” “Wow!” said facilitator Chris Robbins. “How does that relate to work? How many agents do you think we have out there who are told nothing or just ‘good job’ instead of people really listening to them?”6
So the more specific and direct you can be, the more likely you'll see improvement in the members of your team.
How should you give feedback or recognition? Bob Nelson, author of 1001 Ways to Reward Employees, is an expert on the subject and has surveyed thousands of employees. He's found that nearly 90 percent of employees feel that in-person praise is extremely or very important to them (as opposed to only partly important or not important at all). Compared on those same metrics, written praise scores only a little higher than 60 percent, e-mail praise was just under 50 percent, and voice-mail praise was only extremely or very important to 26 percent of the participants in this survey. So the mantra in your company should be “Whenever possible, connect with your people in person.”
Not every recognition has to have a reward attached, but if you are going to provide some reward, it's best if it's (1) customized to the tastes or needs of the recipient, (2) publicly offered so that the honoree is held in higher esteem and others can be encouraged to follow suit, and (3) immediately available to the recipient so that there's some instant gratification.
The list of what you can do to promote informal recognition is endless. At Joie de Vivre, on occasion we do all of the following and more:
- Send a flower arrangement to the home of an employee who has been working extra-long hours on an assignment—to thank both the employee and his or her family.
- Give employees a surprise check as they leave on vacation to say thanks for their hard work.
- Take a junior employee along on a visit to see some dignitary just to acknowledge the employee's efforts.
- Make it a practice to create a list of two employees daily who deserve some extra credit; keep that list handy so that when you are commuting, you can use this time wisely by calling the employees (or leaving a voice mail if that's the only choice) and saying thanks for some specific accomplishment.
As for formal recognition, the key is to make sure things don't get stale. Has your annual awards dinner become a little too predictable? Are your awards truly addressing the key goals of the organization? Do you have the same collection of people organizing your same old collection of recognition events? Is your company newsletter dead on arrival from the perspective of your employees' interest in it? You may need some fresh blood with new ideas.
Formal recognition doesn't necessarily mean just some big annual awards dinner. Intuit spends 1.5 percent of its annual compensation budget recognizing employees. They have a formalized approach to something that sounds very informal. The human resources department has created a bag of tricks or rewards like all-expenses-paid weekend getaways that managers can access on a regular basis to thank their star employees. Similarly, Autodesk employees get to surprise coworkers with on-the-spot bonuses of $1,000. Programs like Autodesk's peer-to-peer bonuses and Intuit's bag of rewards have some of the flavor of the informal recognition programs I just described, but the cost and scope of these rewards require a more formal, systematic approach from the organization.
Often, best practice in formal recognition just means taking some vehicle you already have and making it better. I was fortunate to review Southwest Airlines' companywide employee newsletter, “Luv Lines,” which came out soon after the Hurricane Katrina disaster in New Orleans. It was hard to read this newsletter without a lump in my throat, as the breadth and depth of the stories of heroism by Southwest employees in New Orleans was truly impressive. One whole section of the newsletter was dedicated to outlining every single job category, from maintenance and engineering employees to the crew schedulers, with an explanation of what extra steps these employees took in the wake of the disaster to not just help speed the recovery of the airline in that region but also in giving back to the community. It's one thing to say a generalized thanks to the employees. It's quite another to offer all Southwest employees this level of detail regarding each job classification.
At Joie de Vivre, we create a peak experience every year with our holiday party, an event that can often be formal and predictable at other companies. This event is so fun and heartwarming that we get dozens of former Joie de Vivre employees showing up each year to reconnect with the thousand or more members of our family who celebrate at this event. One of the most inspiring elements of this party is when we recognize our top performers of the year in seven different categories. We pay careful attention to recognizing all of the nominees (more than 100 people) with their names on a big screen. The finalists come to the stage, and the big winner of the evening (the Extraordinary Service award winner) wins a paid trip for two to some exotic place like Bali, plus an extra week of vacation. There's something magical about employees seeing one of their own, whether it be Horst the night auditor or Vivian the executive housekeeper or Marcel the spa bath attendant, win the award that will take them on a trip halfway around the world. In the downturn, we came painfully close to having to cancel this important tradition. In fact, many of our competitive Bay Area hotel companies cancelled their holiday parties to save money. But my belief is that in difficult times, these events strengthen the bond between our employees and us. In fact, it's even more important to create recognition and culture-producing events during the tough times.
We've found this awards party to be such a culture booster at Joie de Vivre that our company created San Francisco's first Hotel Hero awards for the entire local hospitality industry. At this annual event, the mayor and other dignitaries give out awards to the city's most deserving line-level employees from all San Francisco hotels in front of hundreds of their hospitality peers dressed in black tie and gowns. I came up with this idea in 2003 when it was becoming evident that the San Francisco hotel market's precipitous decline was creating a malaise for managers and line-level workers in our city's biggest industry. In addition, many of the city's hotels were distracted by, and distraught with, the prospect of upcoming adversarial union negotiations. The downward spiral that can affect any business felt like it was affecting our whole regional industry. As difficult as it was to create this new tradition from scratch, and with no start-up budget to work with, our chief development officer, Christian Strobel—who led the Hotel Heroes planning process—used our successful holiday party model as a means of creating a new citywide tradition. This event is one of my personal peak experiences each year because I get to feel the love bubble that's created when deserving doormen, bartenders, and room attendants are the stars for the night.
Another formal means of recognition that most companies can spice up is their corporate-wide goal of the year. Clearly, it's a best practice to have something that all employees can shoot for and, of course, there's often some financial incentive that comes with achieving that goal. At Joie de Vivre, we believe there's even greater mileage if we add some theatricality to meeting the goal. A few years ago, our former president, Jack Kenny, and I volunteered to have our heads shaved live onstage at our holiday party if the company met our can-do attitude goal of the year. While my receding hairline no longer makes this much of a stunt, I can tell you our employees appreciated this wacky payoff for our communal goal. More recently, when the company once again hit its can-do attitude score, Jack, our chief operating officer Fred DeStefano, and I dressed up like Diana Ross and the Supremes and performed “Ain't No Mountain High Enough” at our summer barbecue.
From Virgin's Richard Branson dressing in a wedding gown to Southwest Airlines' Herb Kelleher dressing like Elvis, CEOs have a long history of taking one for the team to celebrate and recognize some companywide goal. In the early 1980s, Sam Walton (Wal-Mart) challenged his employees to exceed an 8 percent pretax profit goal for the year. He said he would do the hula in a grass skirt on Wall Street if the employees in the company helped reach this goal. True to his word, that good ol' boy from Arkansas—accompanied by real hula dancers, ukulele players, and a bunch of Wal-Mart employees—sported a hula skirt for the mass media in the financial district canyons of the Big Apple when his company met its performance goals.
Creating a culture of recognition at your company will mean you will have happier employees, less turnover, and more productivity. Psychologist John Gottman's landmark study on marriage found that successful relationships averaged a five-to-one ratio of positive to negative interactions. Other studies in the business world have put this ratio at three to one with respect to what drives productivity in employees. If your workplace is more focused on giving feedback only when something is going wrong, as opposed to celebrating what's going right, you may end up with a high divorce rate in your company.
Compensation and recognition are the foundation of the Employee Pyramid. But truly inspired employees, whose work life is transforming into a kind of self-actualized experience, need to have a real sense of meaning in what they and their company do. In the next chapter, we will explore how you can infuse meaning into the workplace.