Throw us a bone already

Especially these days, we all have horror stories of how poorly companies treat employees in a downturn. And it’s almost a truism that how an organization treats employees in bad times is a better measure of its character than how it treats them in good. I remember one downturn experience in particular that I think not only illustrates this, but also highlights some key challenges for folks who want to be effective leaders.

In the economic fallout after the attacks of 9/11, my firm was struggling because one of the core business units was closely coupled to the financial markets for its B2B and B2C customers. As January rolled around, none of us expected much in the way of a salary adjustment, but we had worked extremely hard as an organization and had a lot of wins to celebrate, macro economic conditions notwithstanding.

So as January came and went, and February quickly slipped by, we all started wondering why our reviews were being pushed and rescheduled, pushed and rescheduled—even the annual kick off with our CEO had seemingly evaporated.

Eventually word got out, trickling down through managers and department heads, that there were going to be no raises and that they had decided to wait on official performance reviews and the annual kickoff meeting until mid year because “things were so busy right now responding to the challenging economic conditions.”

At the time I remember being incredibly angry that upper management didn’t have the guts to tell employees in person that we weren’t getting raises. After all, they had no problems telling us throughout the previous year how critical putting in extra hours was to “make it happen” for our customers—what kind of leaders didn’t feel comfortable being straight with their teams?

In hindsight, having had the privilege to be exposed to a different class of leadership, there are some easy things our CEO could have done differently. For one, keeping the annual kick off scheduled and telling everyone face to face that, despite all our hard work and all the wins, big and small, that we had the previous year, the firm was struggling and it wouldn’t be possible to give anyone salary adjustments.

Even if that was all he did, I think people would have felt better about working there and about him as a leader, because getting up in front of all those employees to deliver bad news and open yourself up to their comments, questions, and complaints is a hard thing to do.

But on top of that, even looking at the situation from a bottom line perspective, he should have done more, because the risk of attrition after that kind of announcement would have been very high. All that experience and knowledge poised to walk out the door calls for something more, even for purely self-interested reasons on the leader’s part.

He could have paid for “pizza Fridays” once a month to thank people for all they do or given everyone a $25 Starbucks gift card…anything, really, would have been better than the nothing we got. Even if he wound up spending ten or fifteen thousand dollars out of his own pocket that year (easily affordable given his salary and bonuses), it would have been money well spent and gone a long way toward instilling confidence and respect in his employees—something that was nonexistent once we all realized how shamefully we had been treated.

And although some folks might argue that companies must do whatever they can to survive because they have obligations to their shareholders, or that pizza and gift cards count for little against the 3% raise we didn’t get, I think both of these objections miss the point.

Most importantly, obligation to shareholders is only one of many obligations a company has:

  • To customers – they purchase goods and services that last longer than the current quarter, and so a company must operate in ways that honor that
  • To employees – they are one-third of a company’s assets (along with physical and information assets) and deserve to be treated at least as well as the other two-thirds
  • To society as a whole – without the support of the larger societal context (education, infrastructure, government, etc.) markets wouldn’t exist in the first place, and so companies have an obligation to operate in ways that honor that

I think the first point is fairly obvious—without satisfying customers consistently, you can’t live up to your shareholder obligations for very long. But the last two may seem less obvious and are likely to prompt strong disagreement from some folks (and I’m excited to hear about it in the comments).

Here’s how I think about it: I believe we all have the obligation to treat people as ends and not means and that this obligation extends to the organizations we build, including corporations. I also believe that, since most people have to work in some capacity to support themselves, giving people meaningful work is one of the highest callings there is. It allows people to feel good about themselves, provide for themselves and their family, drive the larger economy, and contribute positively to society—the proper functioning of which is an important prerequisite for the existence of corporations in the first place.

So to me, all of this is interconnected, and you can’t prop up one of these obligations to the exclusion of the others and be a successful organization for very long. In fact, the corporations that have been the most successful over the long haul at least try to balance these, even if in practice they’ve fallen down at times.

In the end, my idea of being a great leader is to be able to create the kind of organization that gives people meaningful work to do, values them as ends rather than means, chooses delivering value to customers over delivering shareholder value because in the long run the former drives the latter, and understands that the long-term interests of society and corporations are not mutually exclusive but rather support and enhance each other.

Anyway, would love to hear from folks out there about this big topic—excited to continue the conversation with the community on this.


3 Responses

  1. As I understand it (and I’m by no means an expert), the idea the corporations may have obligations to anyone beyond their stockholders goes against the governing rules of incorporation. To allow for the kind of bigger picture thinking that you’re describing, the “B Corporation” has been proposed:

    From their website:
    “Current corporate structures make it difficult for good businesses to consider stakeholder interests-those of their community, employees, and environment. Because they are legally required to maximize shareholder value, profitable, high-impact businesses find it difficult to scale and create liquidity without compromising their mission.

    The B Corporation legal framework specifically expands the responsibilities of the corporation to include these stakeholder interests. By redefining the legal purpose of the company this framework makes it easier for good businesses to make decisions that support their social or environmental missions.”

    • Kim,

      I definitely agree with you in the narrow sense of obligation, i.e., what a corporation is legally obligated to do. But I think even when there’s not a legal obligation, corporations of every kind do have ethical obligations that go beyond benefiting shareholders–and I think that doing meeting these obligations is great for their business and will ultimately drive shareholder value over the long haul.

      I also love the link to the B Corporation framework–thanks for sharing that with us!



  2. This is an extremely relevant topic, especially given the current economic conditions. I have read countless articles and have heard numerous stories about employees who feel overworked, exploited, and unappreciated. Although many individuals are enduring their current positions, as the job market improves over the next few years I anticipate there will be a mass exodus of talent among those companies who lacked strong leadership during the recession. Companies that don’t value their workforce in difficult times can’t expect employee loyalty, commitment, and stellar outcomes once market conditions improve.

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