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An Open Letter to Employers
By Mark W. Sheffert
January 2005

There was this CEO who was so concerned with the results of an employee survey showing poor morale at his company that he pulled everyone together for an emergency meeting.

He stepped to the podium, leaned into the microphone and proclaimed, "We've got to do something right away to address this morale problem we're having. Therefore, there will be no more vacations or pay increases until the damn morale picks up around here!"

While this is not the way to address employee morale, I know several CEOs who would handle the situation exactly this way. The difference is, they wouldn't have surveyed employees in the first place.

The employer-employee relationship is a two-way street. In last month's column, I asked employees to stop blaming their employers for changes brought on by technology advances, outsourcing, and the global reach of the economy. I advised them to adapt to the new knowledge economy by obtaining new skills and being more flexible.

Powerful market forces are acting on businesses, and keeping a lid on expenses, improving productivity, and finding innovative ways to increase revenues are imperative to a company's survival, I said. Using new technologies and reaching into new, global markets is in our best interest in the long run, and is therefore not a trend that will go away in the foreseeable future. These are harsh realities.

But have you, employers, thought about another reality: that your greatest resources, your employees, are being traumatized by these changes? Many employees feel frustrated and undervalued. They don't trust you like they used to, because the family-type of environment that used to pervade our businesses has been replaced by a mostly contractual relationship due to mergers, technological developments, the benefits of outsourcing, and other factors. These changes have created huge fears of unemployment.

You have to remember that your business is made up of people. All the technology, strategies, marketing plans, and machines in the world don't operate without people. So, employers, unless you simply don't give a damn, you have some work to do. Let's discuss what you can do now to prepare your companies for the future by helping your employees.

Lead with People, Not Strategy

If you're like most employers, you need to better understand the link between people and profits. Business leaders tend to set their strategy first – being the low-cost provider, the most innovative, the best in customer service – and then define core competencies they need in order to execute the strategy. Out of this exercise, the organization's core values emerge.

However, some of the most successful organizations are those that lead with their corporate values – and how they treat their people is an important part of their value system. No matter what your strategy is, it's your people who make it work. Taking inventory and harvesting the skills, innovation, and knowledge of your people to guide your strategy development makes good sense.

Your culture and corporate values are inherently unique and impossible for another company to recreate. Lead with them, and you will have a unique competitive advantage that no one can touch.

Minimize Turnover

Keep in mind the tremendous cost of employee turnover and do what it takes to minimize it. Replacing an employee costs about three times his or her wages in lost productivity, training, and recruiting costs, not to mention the immeasurable knowledge that walks out the door. Consider that about 80 percent of a company's digital data is generally inaccessible because it's stored on individual employees' computers. Likewise, much of your company's knowledge base is stored in employees themselves, accessible only through them.

To keep the keepers and turn the marginal employees into keepers, encourage people to develop themselves by writing plans for their own professional development. Then adhere to sound advice on job and culture matching and training for employees.

Peter Drucker said that up to 66 percent of a company's hiring decisions will prove to be mistakes within 12 months. Another study says that profits can be increased by 30 percent just by implementing better hiring practices and assigning employees to the jobs for which they are best suited.

One way to make better hires is to find candidates who fit your corporate culture. To do that, you have to know your organization's "corporate DNA." Profile each person's interests and traits relative to productivity, quality of work, initiative, teamwork, and problem solving. This creates a picture of the organization's culture. Then, survey job candidates to predict their match with that culture. (A beneficial by-product: You'll be a better manager, because you'll understand each person's job better and know what motivates employees.)

Train, Train, and Train

I'm always amazed at the amount of money organizations spend to insure their machines against loss without considering the same kind of investment in keeping employees' skills up to date.

To get a better perspective on training, I talked to Matt Kramer, commissioner of the Department of Employment and Economic Development (DEED) for Minnesota. He says that the current economic recovery is unique. Typically, recovery is measured in terms of declining unemployment; not so this time around. Rather, businesses are investing in improving productivity, which doesn't necessarily translate into hiring.

The upshot is that employers must invest in the skills of the workforce they currently have. Kramer's advice is to "train, train, and train," and to take advantage of state-sponsored programs for customized training at institutions like those in the Minnesota State Colleges and Universities system. (Read more about these programs, especially the Minnesota Job Skills Partnership, at www.deed.state.mn.us/programs/mjsp.htm.)

Foster Innovation

The future belongs to employers who can adapt to change, which means encouraging innovation from employees.

Back when the United States was primarily an agrarian society, it took 60 percent of our population farming to feed the country. Today, only 3 percent of the population farms and achieves the same result. That's the product of innovation.

Nearly every innovation comes as a response to a problem, and we certainly don't lack problems. Create an environment in which innovation is just part of what your people do. Create new products using existing infrastructure, or create new applications for existing products. Reward innovation, and frequently communicate your company's vision and how everyone's job fits into that big picture. They'll figure out how to fill in the gaps.

The Last Resort

While much coverage has been given to the political backlash against outsourcing jobs, Kramer says the backlash he's seen has been on a more pragmatic level. As some businesses have found, it's not easy to manage a call center that's a dozen time zones away, operating in a different culture and a different language.

If outsourcing seems the only way to avoid going out of business, he suggests outsourcing within our own time zone, to Fergus Falls or Faribault. Blue Cross and Blue Shield, Delta Dental, and Northwest Airlines all have outsourced jobs to the Iron Range with great success, Kramer notes. In outstate Minnesota, businesses can lower their operating costs, offering lower wages than in the Twin Cities because the cost of living is lower outside of the metro area. (No one wastes time sitting in rush hour traffic, either.)

Outsourcing overseas might look good on the profit and loss statement, but it has costs that are difficult to measure in terms of impact on remaining employees. Be sure to explore other options before you jump.

It's on Your Shoulders

My admonition to employers is basically the same as it was to employees: Change is not an easy thing, but the future belongs to those who prepare for it. This has never been more true – for both employees and employers – than it is now.

Employers need to train their employees in the latest and greatest skills and technologies so they can lead in the new knowledge economy. Don't waste any time. Take action now to jump into the future.

C'mon and join me. Let's log onto that DEED Web site for information about Minnesota's training programs. Then I'll read through the inbox on my Pocket PC, check my Outlook calendar that's been synched with everyone else's in the office, and check voice mails on my cell phone – all the while listening to my favorite music on my new MP3 player. This old dog is learning some new tricks, and so can you.

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