Organizational Resiliency to Time and Change Effects

The arrow of time in our universe is unidirectional, moving from the past, to the present and forward into the future.  No matter how much we might desire to freeze moments that are precious to us, capturing forever their special meanings, they slip through our fingers as time marches on oblivious, neither slowing, standing still, nor retreating from its own journey. Though we sometimes seem to view ourselves as disconnected observers of time, remembering past and projecting or modifying the future from some place outside of the flow, we live within the time flow and are firmly subject to it.

One thing that is certain, as time moves forward things change. Things change for people as well as for organizations, inexorably. And just like you cannot control the flow of time in which we reside, you cannot slow down, stop or reverse change from happening. But both individuals and organizations can do things that will help them cope with change and to deal with, mitigate and even use its effects to personal and organizational advantage.

One key to dealing with the effects of change is to become more resilient, on an individual level and an organizational level.  How does a child raised in poverty in the Bronx rise to become a Supreme Court judge, or a child from humble roots in Ohio become the Speaker of the House, or a child raised by a teen mom, in an unstable, unpredictable environment, rise to become President of the United States? These were not children of privilege, these were children of resilience. Look at the innumerable children of immigrants, living and growing up in marginal conditions, who over the years became the engines of our economic prosperity, the pillars of our educational institutions, the creative geniuses behind our innovations and technological breakthroughs, or perhaps simply the doctor who saves the life of your child.

Organizations of resilience are seen everywhere we turn, from family farms, to single proprietor craftspeople, to large private sector corporations, to governmental entities, to NGOs and educational institutions. During the course of a year these organizations may be dealing with recession and the resultant drop in business, the next a merger or acquisition perhaps a hostile takeover, the next a disruptive new competitor, the next a disruptive new technology.  Each and every organization out there today will have a continuous stream of challenges that they will need to successfully overcome. And in today’s environment those challenges are coming at them at a faster and more furious pace.  How do these organizations become more rather than less resilient to the forces that will constantly impinge and perhaps even use the constant state-of-change to their advantage?

Resiliency is the notion of positive adaptation when faced with significant adversity or environmental threats. This definition implies that significant threats or severe adversity is present and that the individual or organization positively copes with those threats. The research that has been done on resiliency has shown that being more resilient rather than less leads to more positive outcomes for both individuals and organizations. And it is pretty clear that organizations that partake of certain activities can enhance their resiliency. Cutting across the literature the activities that make organizations more resilient seem to fall within 3 main buckets. The first one is paying attention to and mitigating the effects of the external environmental factors. The second bucket is investing in organizational capabilities and the third is recognition of achievements. Each of these buckets has sub-activities that could be summarized as follows:

Environment

Monitoring: Information collection, environmental monitoring and the appropriate analysis, dissemination and actions surrounding that information (for example, employee, customer and supplier surveys, mystery shopper, competitive benchmarking, technology awareness monitoring, market trends, the gathering and analysis of other business metrics)

Reducing: Minimizing the occurrence of negative chain reactions that can occur from one threat, before they spiral out of control. Compartmentalization of negative events so that they do not affect the entire organization. (for example, by the use of strong internal and external communications networks, strong accountability systems).

Investment

Warding: Investing in a shared vision, a shared operating style, senior leadership, employees, products and services, and quality—the standardization of those products and services as well as organizational procedures. (for example, creating a customer service culture, of a values statement, or a standard of operational excellence)

Transforming: Turning risks into opportunities by developing a culture of innovative and creating organizational capabilities (for example, rewarding innovative ideas and performance that goes above and beyond to solve problems, creating deep bench strength, tapping into the diversity of talent and developing that talent)

Enhancing: Increasing organizational effectiveness and efficacy (for example, cost control, state-of-the-art business processes, contingency planning)

Achievement

Celebrating: Celebrating and rewarding organizational and personal accomplishments (for example, successful completion of organizational and personal goals; installing robust reward and recognition systems)

In reviewing a number of models and then stepping back from any single model of organizational performance, there appear to be six enduring challenges that virtually any organization faces in its pursuit of growth and financial sustainability, in terms of increasing its resiliency or, more generally, Organizational Vitality. These are the challenges that organizations need to become more resilient upon. Three of these challenges can be viewed as internally focused and there can be viewed as externally focused. They are:

Internally

Clear and Compelling Leadership. The overarching mission and direction of the organization needs to be developed and translated through its leaders in order to properly secure and align resources.

Engaged Employees. Organizations need to create an engaging experience to encourage the most from the people who fuel the processes, create the innovation, and deliver for the customers.

Quality Work Processes. Products need to be efficiently created and, along with services, effectively delivered.

Externally

Attractive Offerings. Organizations seek to create value by providing customers—particularly paying customers—with valued and competitive products and services.

Service Orientation. Organizations need to instill a service orientation. No matter what the organization offers, it must be offered in a manner that distinguishes the organization.

Customer as Brand Advocates. Developing brand advocates who are willing to speak highly of your products or service in this interconnected age is critical.

Increasing an organization’s resiliency like any other activity is not a magic bullet that solves each and every problem faced, however the evidence does seem clear that resiliency enhancement can have positive and lasting organizational performance improvement affects.

References:

Saltzman, J.M. & Brooks, S.M. (2010), Strategic Surveying in the Global Marketplace and the Role of Vitality Measures. In Lundby, K. (ed.), Going Global: Practical Applications and Recommendations for HR and OD Professionals in the Global Workplace. Jossey Bass.

© 2010 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Employee Attitudes during this Recession

“When the tide goes out, you can see who’s been swimming naked.”

Warren Buffet on leadership in a recession.

How do employees react during a recessionary period? What happens to their attitudes about work and the work environment? What about their perceptions towards leadership? And most importantly do those attitudes, or shifts in attitudes actually affect organizational performance? The information that has been distributed on this topic over the last couple of years has been somewhat less than clear, or at the very least has been sending mixed interpretive messages. Some of the reported data has indicated that employees on a whole are less positive, less engaged or as some term it actively disengaged. That finding could represent a possible reaction to the somewhat harsh measures that some leaders adopted as they attempted to increase the odds of organizational survival during a deep recession.

Other reported findings strongly affirmed that employees are more positive now than prior to this recessionary period, possibly as a result of realizing how ugly things are on the outside, so the inside is looking pretty good. That would be a result underpinned by both frame of reference comparisons and the notions of cognitive dissonance, the need to resolve conflictual cognitive positions (e.g. even though I used to really hate it here, the place must not be so bad since I am staying). Categorical statements, that something is all one way or the other, black or white, raise my warning antennas and so one is left wondering, is it possible to look across the various reported results, many of them stated in a categorical fashion, and make some sense of it all? Scott Brooks, Walter Reichman and I did just that and here is a summary of some of what we found.

Methodological observations regarding the reviewed reports:

Some of the reports we reviewed¹ are based on client data, meaning data that has been collected from clients during the course of a consulting firm running their employee surveys. Client data over the course of a few years can change, depending on which clients the consulting firm happens to have, what survey cycles clients are on etc. One industry for instance that may be well-represented in the norms during normal economic times like retail, and has been hard hit by the recession may cut costs by delaying or canceling their survey, and so their industry may be underrepresented in the data during a recessionary period if the norms are client based. So when examining client data over time you may not be looking at an apples-to-apples comparison even if the data is coming from a single source such as a consulting company.

Additionally, surveys of clients that occur during recessions may represent clients that are weathering the recessionary storm slightly better than most, since the budget for collecting the data has not been axed, or the data may be coming from organizations that are deep adherents (at least more so than others) to the notions of collecting and measuring certain aspects of employee attitudes, employee engagement being one of those. And of course the employees themselves who are being surveyed in client based norms are the survivors, those who have not been laid-off, which may also have an impact on their attitudes, especially when compared to the general population. One approach to correcting some of the issues with client-based research is the use of a standard basket of companies for tracking purposes, similar to the Dow Jones Industrial Average methodology. That could be achieved through a consortium of companies who agree to share their results. That would fix the problem of which companies are included (since it would be standardized) but not who from each company is included (during a recession we would still be surveying only survivors).

Some of the reports that have attempted to shed light on the state of employee attitudes during this recession are based on random sample surveys or stratified random samples (meaning you make sure certain demographic categories, such as senior managers, or females etc. are adequately represented). These data are not client based, but rather are gathered from people who have agreed to complete surveys, usually for some kind of incentive, for instance, a chance to be entered into a lottery for each survey they complete. These surveys include a cross section of people, some employed, some under or unemployed but if sampled correctly are representative of the population as a whole, not necessarily the employed population, or the population from companies that care enough about employee attitudes to be out there measuring it. Depending on how the sample is drawn they may come from private and public sector organizations, government as well as not-for profit. It may include those working full-time as well as part-time. One issue of course here is the motivation that these individuals have for completing the survey. Many of them, we have to assume, are not doing it for the sake of the research, but rather in a fashion to maximize their ability to achieve whatever incentive is being offered. (That is why it is called an incentive.) That creates a question in many minds of just how these people will respond, and will they take the survey seriously.

One conclusion from looking at all of the data that gets put out is that unless it is clearly stated in the report, and often times it is not, and the methodology explicit, you really don’t know who is included in either client-based or in random sample survey reports and hence the conclusions from one report are not all that easily compared against another.

Some broad trends we saw:

• “Engagement” during this recession has not declined.  With an eyeball meta-analysis, the actual change may be slight improvement, perhaps 2-4 percentage points over the last year.   This “surfs across” potentially meaningful differences in sampling, methodology and varied definitions of how you measure engagement. But those institutions that describe engagement as declining are in the minority.

• Not all employee opinions act the same way, moving up or down in lockstep.
  • Stress is increasing.
  • Opinions about leaders have fluctuated.
  • US Employee Confidence hit a low 1Q09 and has not returned to the 2Q08 baseline.
  • One conclusion is that “engagement” may not be the best indicator of the strain of the recession on the employee population and hence organizational performance.
  • There is no “overall” recession impact across all survey topics

• There is evidence of polarization within some organizations. While different across different studies, there seem to be segments (levels, functions, etc.) within the organization showing divergent trends:
  • Perhaps while engagement goes up, there is a growing core of actively disengaged employees.
  • Executives and middle management respond differently, though exactly which layer feels the squeeze most keenly is not clear from the reports (and they likely differ organization-by-organization… as is clear in some cases among our own clients).

• Increasing frustrations (driven by increasing workload and lowered rewards/benefits) among high performers/high-potentials put them more at-risk for eventual voluntary turnover.

Some More Detail:

One concept created a good number of years ago called Employee Confidence^© has been tracked quarterly since June 2008³, by asking employees about attitudes towards their company’s internal as well as external performance (organizational performance). Internal covers such areas as business processes and leadership and external covers the attractiveness and value of products and services offered to the market as well as competitive positioning. Also tracked has been people’s perception of their personal situation, again both internally and externally. The internal situation deals with perceptions of job security and future prospects at current employers, and the external with being able to land on their feet elsewhere if necessary by finding another job. (To be part of this tracking study, which cut across the 12 largest economies globally, you needed to be: an over 18, full-time employee in the private sector, in a company with at least 100 employees. Data was collected quarterly on random samples of 5000 in the USA and 1000 in each of the other countries, with the exception of Russia where the number was 500. Incentives were used. The data was compared to known demographic characteristics of the working population in each of those countries.) Taking a step back from all the data, both from this Employee Confidence sample and from client based data, and drawing some insights and overall conclusions, or at least observations what we see as highlights include:

About Employee Engagement:

In 2008/2009 you generally did not see declining employee engagement scores at organizations (there was the occasional exception). The scores were flat at worst but most were actually rising with many hitting heights not seen within the organization prior. This was in spite of the general concern among clients that engagement would decline during the recession. Some of this can be attributed to good management taking action on important issues and some is environmental, a response to the concern that people have about losing their jobs. One notable study had a client with 7 point rise in their employee engagement score across about 25,000 people. A determination was made that 2-3 points of that rise was likely due to management actions and 4-5 points was due to the environment. (Drop me a note if you want to know how that was done jeffreysaltzman@orgvitality.com).

About Employee Satisfaction:

In many cases however, items that were markers of the employee’s current state of satisfaction with their situation declined. By way of explanation, a person can be very unhappy with increased workload and stress, with their 401k losing substantial value, with no company match, no raises, friends being laid off, increased concern about their own job security, perhaps seeing management taking care of themselves before the rank and file, but that person can still be engaged in their work. As an example, a person can be very engaged at their employer making buggy whips as Henry Ford is in the next building figuring out how to mass produce cars. They are engaged, working diligently to produce the best buggy whips in the world, but their level of engagement does not stop the world from changing nor does it assuage increased concern at seeing the world changing with perhaps the employer not changing or not changing fast enough to keep up. A corollary to this is the false notion that employees who complain are not engaged. They in fact may be the most engaged as they are trying to communicate to the organization information to head off a potential disaster as they see it.

While some people/organizations measure satisfaction and engagement with the same items, they are clearly different constructs. (Of course there is no agreed upon set of items in use to measure engagement within the employee survey industry which may account for some of the reported differences).

About Job Prospects and Job Security:

Being able to find other employment if necessary, which is normally very favorably rated, began to decline and has remained at or near the bottom of all the items tracked. Most normal people by nature tend to rate their skill sets highly and see value (beyond what others may see) in what they can do.  This makes them normally very confident in their ability to find another job should the need arise. The precipitous decline in this dimension is a fundamental shift in people’s confidence (it has rocked their world and how they self-perceive) and affects all sorts of behavior including buying patterns and a willingness to tolerate intolerable conditions at an employer. As this score recovers we will see people who had been staying with an employer because of a lack of opportunity elsewhere move on with a corresponding increase in voluntary turnover. This may be starting already as for the last 3 months voluntary quits has surpassed layoffs as why people leave jobs and for the 15 months prior to that layoffs surpassed quits.⁴ This finding is perhaps giving an inkling of what is to come.

Perceptions of job security at the beginning of the recession when all the layoffs started were understandably in steep decline. This lasted through the first quarter of 2009 and roughly corresponded to when a massive bulge of layoffs occurred with 3979 mass layoff events occurring in 1Q09, a record high affecting 705,000 people⁵. This also corresponded to the lowest Employee Confidence scores recorded. However, once that bottom was hit there was a rather sharp rebound later in the year. One possible interpretation is that employees felt that the organizations had cut to the bone and could not cut any more. Employees felt that they had survived so far and so where likely to weather the storm. Exceptions to this pattern of decline and then rebound occurred in industries that were weathering the recessionary storm rather well including healthcare, education, government and food service. They did not see nearly as much of a decline. Females were more positive about job security than males, not because they were females, but because of an over-representation in industries that were doing ok. The gap between males and females disappeared when the rebound occurred, possibly due to the males feeling that all the cutting that was to be done had been carried out.

About Business Process:

During this recession it was pretty clear in the data that the majority of employers were trying to cut their way to profitability, rather than innovating with new attractive offerings or by moving into new markets. They were revamping internal processes, laying off people, cutting budgets and benefits. They were looking inward rather than outward to find solutions to their performance problems. And while it is always healthy to improve internal organizational performance, in this case it is a rather risk adverse approach compared to modifying the products and/or services being offered. It is more of a sure thing to cut back on costs rather than create products that people find attractive, even in a recession, as a way to protect margins in the short term. Not every company took that path however and historically companies that have been started in recessionary periods included: HP, GE, Burger King, Fedex, Microsoft, CNN, Trader Joes, and our own OrgVitality. Each one creating a path to success based on offering attractive and valued products and services to the marketplace that were relevant to the economic time period in which they found themselves. In this recession Autodesk, Nucor, Colgate Palmolive, Apple, Coca Cola, Target, McDonalds, Dunkin Donuts, and Google among others for instance have done quite well by developing new and innovative products and by moving into new markets.²

About Organizational Effectiveness and Leadership:

At the beginning of the recession, the back-half of 2008, management was given the benefit of the doubt and was given stable or slightly increasing scores from the rank and file regarding their job performance. Of course you need to keep in mind that the rank and file during this period are the survivors, those who had not yet lost their jobs. As it appeared that the recession was going to get really ugly in the first quarter of 2009, the rank and file lost a lot of confidence in management and performance ratings on management plummeted. The realization hit that there was no magic bullet that the recession was going to be painful and deep and of a long duration and the blame, at least partially, was laid at management’s feet.

Ratings of leadership over the last year and a half or so have been very volatile with some organizations reporting extremely favorable ratings on leadership while at the same time others are reporting the poorest scores of recent memory. There has also been more divergent trends within organizations, often with vital groups perhaps feeling more stress than others (e.g., VP levels) declining dramatically while other levels are able to maintain or improve. A sharp recovery was noted in the perceptions of the job being done by management, as rated by employees, during the back half of 2009 as many of the programs designed to temper the recession began to have an effect among those still employed and further draconian layoffs were not as prevalent.

About Geographic differences in the USA:

If you compared the attitudes of employees against the unemployment level at the state level a significant relationship was found. In other words, in general those states that were exhibiting higher levels of unemployment were generally those where employees had the lowest levels of confidence. Some interesting patterns and exceptions to that statement emerged.

Those employees in southern states tended to be more positive than their unemployment level suggested they should be. In general, those in the mid-west were less positive than they should have been with the notable exceptions of Nebraska, the most positive single state and the state with the lowest level of unemployment, and Michigan with the highest level of unemployment and the second lowest level of employee confidence. Those states located in the northeast and west had employee attitudes as predicted by their unemployment levels with the exception of Oregon where employee attitudes were less positive than they should have been. The states that were exceptions certainly had the attitudes going in the predicted direction given their unemployment levels, it is just that the corresponding employee attitudes were more exaggerated than expected in either the positive or negative direction.⁶

Interpretation:

• The recession has put organizations and employees on edge.  While dealing with the increased stress and load created by aggressive cost-cutting, employees have a heightened sensitivity to leadership messages and missteps and organizational cues regarding the future.  Critically, employees watch how the crisis has revealed the organization’s commitment (or not) to its stated values.
• As a result of this sensitivity, organizations may experience greater swings in engagement and/or satisfaction through the recession (the two not necessarily being related or moving in the same direction), though the swings may go in either direction and may be concentrated within a specific population. These swings may occur within key segments (e.g., management layers, functional areas or performance levels).
• But changes in survey results seen across clients lead to a conclusion: the recession isn’t the only cause of changes in employee opinions and engagement in particular; it’s the organization’s response to the recession.
• In many cases, employees have rallied behind their organizations’ recovery efforts, and are as engaged or more engaged than ever.  In part, they are not simply comparing the “now” to what was.  Clearly they understand that the crisis has demanded dramatic change, and they have hunkered down to help.  To some extent they may compare themselves to other cases of what might be, for example to the failings of other organizations or to their unemployed acquaintances.
• One way to sum it up is that the recession has become a test of Vitality including strategy, values, behaviors, organizational agility and resiliency.  Organizations are not passive players regarding the degree to which decision-making authority is sucked upwards, open communication is stifled, leadership commitment to values are maintained, or the emphasis on service remains central.  Certainly, it has become harder to invest in employees.  But in many cases, employees understand that and may take even greater pride in how their organizations handle the recession.

¹Sources of published findings which were reviewed included: OrgVitality, McKinsey, CLC, Metrus, Valtera, Modern Survey, Kenexa and Towers Perrin among others.

²The Business Week 50, Business Week, March 26, 2009

³The Employee Confidence Framework was developed by Jeffrey M. Saltzman.

⁴ MSNBC June 9^th, 2010

⁵Bureau of Labor Statistics; http://www.bls.gov/news.release/pdf/mslo.pdf

⁶Saltzman & Brooks, “Strategic Surveying in the Global Marketplace and the Role of Vitality Measures”, appearing in “Going Global” (Kyle Lundby, editor), 2010 Jossey-Bass

© 2010 by OrgVitality, Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Heart of Hearts

There is an old story that describes a very special clock. This clock does not work like most clocks, keeping track of the passage of time. Rather this clock, though it looks like a regular clock, keeps track of the time until a certain event is supposed to happen. It counts down the days, hours and minutes until that moment is to occur. What strikes me about this is not that you can create a clock that is a count down timer rather than a tracker of the passage of time, but that a single aspect of reality can be thought of in distinctly two fashions. One is to keep track of the passage of time and the other is to keep track of time until an event is to occur, one aspect of reality, time and 2 distinct points of view about how to measure it. The clocks can look identical, both are measuring time, yet they operate in distinctly differing fashions.

As I spend more and more time with various organizations I am struck by another duality of what I view as another single aspect of reality. And that reality is how employees are viewed. In order to make the point I will put it into stark terms using extreme descriptions while realizing that most organizations do not fall at one extreme or the other.

At one extreme there are management teams of organizations that truly believe that their success is because of their employees and at the other extreme you have management teams that view employees as costs to be controlled, two extreme points on one scale. And to me there is a very interesting part to this concept. On the surface it can be extremely difficult to tell the difference between these two groups. Much of what they do looks similar. Among the one group’s goals will be to retain the valuable assets called employees and among the other group’s goals will be to make sure everyone is replaceable, that the cogs in the wheel are easily replaced should one fall off. 

Both groups will have impressive plaques on the wall describing their mission, vision and values. Both groups will say things like “employees are our most important asset”. Both could have certain employee benefit programs in place. And both could be very respectful of employees treating them well and providing opportunity for all to succeed – in good times. The difference while there all along becomes much more obvious when there is an economic downturn or when the organization feels some kind of stress.

In the organizations that view employees as the true reason for their success, an overriding theme seems to permeate. What can we do to help make our employees more capable of success? How can we knock down the barriers that get in their way, those things that prevent them from performing? How can we enable them more? How do we maintain the motivation that they brought with them when they first came to this job?

It has been documented over and over that the most positive employees in most organizations are the ones you just hired and it takes the average organization about 3 years to beat that “positiveness” out of them. What happens to these employees that their degree of positiveness flags? The data suggest that they begin dealing more and more with the organization’s bureaucracy. They are not given the same amount of attention as when they first joined up. Their jobs did not deliver on the salary expectations they may have thought were there. They were not given recognition for their performance over time. They did not advance as quickly as they thought and in fact they seem to feel that their talents are not being recognized. Realistic job previews help in this area but they are only part of the answer and this pattern of decline is not necessarily seen in all organizations, but is seen in a relatively large number of them.

Some management teams upon hearing this will think to themselves, “well then turnover is not so bad, after all as we hire new people we will get people with more positive attitudes and hey, if they stick around for 3 years or so, great we can just hire more replacements at that time.” People after all are just costs to be controlled.

Other management teams will view the turnover as a loss of organizational memory and with that goes capability and long-standing relationships with others that can characterize successful organizations. While some of this comes from a Wall Street and its resultant short term orientation, with managers of today feeling intense pressure to make their profit numbers, I think another component of this comes from the heart. I think some managers in their heart-of-hearts believe that the path to organizational success is through their employees and others believe that employees are simply part of the problem, preventing organizations from being as profitable as they could be. I think is shows up in hundreds of subtle ways and some not so subtle ways in the day-to-day actions of the organization.

In some recent conversations I have had with senior managers of various types on this idea, I get general agreement, but I also get a good deal of discomfort. It seems that some organizational managers don’t necessarily want to operate in this fashion but feel that because everyone else is, in order to remain competitive they have to as well.  What may cause this to show up more starkly once again is that we are now in a period of economic uncertainty, with many betting that we are already in a recession and speculating on how long it will last. Some organizations will immediately go to layoffs, cutting off those expenses called employees, while others will try to figure out how to better utilize those assets called employees to help weather the storm.

Wayne Cascio a professor of management and international business at the University of Colorado in Denver and an Industrial Organizational Psychologist has conducted a series of studies and has published a book on alternatives to layoffs in down cycles, and has found that those companies that follow these practices of retaining valuable employees, treating them as assets, in the long-term outperform those that quickly resort to layoffs. He finds that those companies that “view their workers as assets to be developed rather than costs to be cut” will be more likely to succeed and “In general, we found that it was just not possible for firms to ‘save’ or ‘shrink’ their way to prosperity.”

But in order to operate in this fashion the organization has to believe, it has to believe in its employees in its heart of hearts.