(Not So) Random Thoughts

For this week we have a number of observations. Beware: Some border on rants.

'Managing change slowly' is a misnomer -- and a mistake. There are many things to manage. A bank account, a production facility, a vineyard, a budget. Change isn't one of them. Change you lead. Whether it be the need for new required behaviors because of the introduction of a computer system, culture change due to increased competition, or, as another example, the dramatic change following a merger or acquisition, effective, long-lasting change that enhances performance is something that must be led. With energy, passion, excitement and urgency. And here's the kicker: The faster the better. Like your life -- or the life of your company -- depended on it. Contrary to popular belief, companies are not huge ocean-going vessels powered by oars, only capable of painfully slow change. Don't buy the antiquated concept that change must happen in a laborious step-wise fashion. Your people don't buy it, your customers don't buy it, why should you? The best change is led, and led quickly. We have the data to prove it. And a process to drive it.

No such thing as bad publicity, eh? Just ask United Airlines. Have you had the wonderful experience of trying to determine the number of frequent flyer miles you have on United Airlines or talk recently with a reservation agent by phone at the new United? The United that just completed the acquisition of Continental Airlines? The United that can't quite add your Continental Airlines miles to your UA miles? The United that mysteriously changed your frequent flyer number? The United that just added somewhere in the neighborhood of 600 reservation agents -- and still hasn't gotten it right? The airline that greets you with a recording asking you, get this, 'to please call back in 72 hours' due to high call volume? Maybe because their systems can't add your miles correctly and assigned you a new frequent flyer number and many are freaking? Note that call-back-in-72 hours tape is what you hear when you use a special phone number for elite frequent flyers? (Not that I'd consider myself elite, mind you.) 72 hours? To make an airline reservation? Are they kidding? We're not making this up. But if we were, just image:

Thanks for calling United Airlines. Your business is very important to us. Please hold for the next available Reservation Agent. Your wait time is currently [silence while computer computes]...72 hours. We can't believe it either. Kick back and get comfortable. We'll be with you in a few days. Or not.

Looks for all the world like a company trying desperately to manage change. And probably a company that spent millions on consulting firms to help them do so. So much for the friendly skies.

The non-response is the new corporate 'no'. I'm old enough to remember when people in business actually responded to queries, requests, and proposals. You'd of course be contacted if there was an approval in your future. And get this kids, you were also contacted if the answer was 'no'. These were commonly referred to as 'courtesy calls', as in we'll give you the courtesy of knowing that we have not approved your request or that you didn't get the job. During such a call, you'd also be informed as to why you had been denied. Really! It's true! Way back when, you'd apply for something -- often in the form of a formal proposal that might have taken weeks and thousands of hard and soft dollars to prepare -- knowing that someone would eventually get back to you with an answer. Ah, those were the days! When there were manners. But no longer. The modern (read: rude, unprofessional) approach is to respond only when the answer is 'yes'. I guess many in business believe that there is no need to get back to anyone if all you've got is bad news. To all of those people I have only one wish: That you obsess over a proposal, devote countless hours to its preparation, spend real money flying a team to a presentation, and then never being informed of the outcome. If that sounds like sour grapes, so be it. Harumph.

Speaking of a different era, we offer a warm welcome back to our friends at Sterling Cooper Draper Pryce. Seventeen months is quite an extensive recess, don't you think? It's far too long a time to be forced to drink alone. Thank goodness you're back. We've missed you.

The Soul Crush, Revisited

It's been a very interesting week in our financial community.

First, we had Greg Smith's op-ed piece in the New York Times last Wednesday outlining his decision to leave Goldman Sachs. If you haven't read it, you should. Take a minute now to do so. We'll wait.

The fallout from Greg's letter has been fascinating. From James Gorman, CEO of Morgan Stanley, instructing his people not to take advantage of the situation, to J.P. Morgan Chase's CEO Jamie Dimon telling his operating committee to avoid going after GS clients, stating that 'It's not the way we do business.', to Mean Street's Evan Newmark calling Smith 'naive', to United Technologies stating publicly that they are standing by GS despite having 'a love-hate relationship' with the investment banking firm, to, what, about a zillion comments online. Not surprisingly, most missed the real point of Greg's very public resignation letter. More on that later.

Then we had Matt Taibbi's latest article about Bank of America, "Too Crooked to Fail", in Rolling Stone. You probably haven't seen it, but you should. As you read it, consider that the bank described in the article is a new and different one than the bank founded in 1904 by A.P. Giannini. Indeed, Bank of America, originally called the Bank of Italy, was founded in San Francisco with the primary objective of serving immigrants and farmers, two significantly under-served communities at the turn of the century. The bank provided loans to San Franciscans within days of the 1906 earthquake and fire that devastated the city, with Giannini using a plank of wood on the sidewalk as his makeshift branch. A signature and handshake were all he needed to secure a loan. Had it not been for BofA, San Francisco might not have been rebuilt following the earthquake and the Central Valley of California might not be the provider of fruit and vegetables for much of the country, nor Napa Valley the home of world-class wine. As thousands of current and former employees will attest, BofA was one of the best, most ethical places to work in the state. I know this first-hand, having been an employee of the bank in the '80s.

What Taibbi outlines is a gradual and significant change in BofA's corporate culture. What was once a culture focused exclusively and passionately on serving customers and communities is now, apparently, a culture driven predominantly by a motive for profit at the expense of the customer. Without doubt, this is not A.P. Giannini's bank, nor is it the bank that thousands of former employees remember nor, critically, the bank the vast majority of currently employees signed up for.

Starting to see a parallel between Greg Smith's Goldman Sachs and Matt Taibbi's depiction of BofA? Beyond, of course the alleged unscrupulous practices of two enormous financial services institutions?

What's common about GS and BofA is, of course, a radical change in corporate culture. From one defined by a customer-centric business model, high moral standards, pride in community service, one anchored deeply in a belief in the value and honor of banking, to a culture defined by profits at all cost. That was BofA. And according to Smith, that was Goldman Sachs.

If 'corporate culture' is defined loosely as 'how we do business here' and includes commonly demonstrated behaviors, morals and ethics, consider the impact on employees of a dramatic change in that culture. It can be significant, especially if the original 'employer-employee contract', so to speak, has been violated or, worse, broken. This occurs whenever morals and ethics are compromised. Said another way, you've got trouble when stated values do not match widely observed behaviors.

The potential outcome? The Soul Crush. (See our blog of February 19, 'The SCQ'.)

That's what we see in Smith's letter. It's also what we see happening at BofA. Souls being crushed or, at least, damaged as their company, the organization thousands have invested so deeply in emotionally, changes from something worthy of their pride to something far, far less. Smith is getting out. Others have preceded him; others will follow. Our bet is that many at GS and at BofA want to leave, but can't. Not yet, anyway. But watch as the economy continues to strengthen.

Goldman Sachs and Bank of America are not alone. The cultures of many organizations are changing significantly, some for the worse. We urge severe caution. Corporate culture defines an enterprise as clearly as does its logo. It's your brand. Treat it with great care, for once it deteriorates, it's a very long road back to respectability. Now is the time to ensure that your company's culture is strong, vibrant, and absolutely consistent with your stated values. Anything less is a bet against the long-term retention of your best people. Anything less is a bet against your organization's future.

Just ask Greg Smith.

This Thing Called Trust, Part II

So, maybe our observation that trust might be an issue in the workplace was a slight underestimate. Given the volume of mail we received during the week -- an all time TJOW record -- it appears that we struck quite a nerve. A frayed, exposed, raw, incredibly sensitive nerve. One we poked, as one writer described it, with a fully-charged cattle prod.

That's our job and we're proud to do it.

Based on input we've been receiving from employees in client organizations throughout the country, we thought trust was a problem in many places. We didn't realize, though, that the issue was so widespread. Or so painful. And if those who wrote to us are at all representative of the greater population, the volume of workers who are at this very minute seriously considering leaving their company for another due to a lack of trust is massive. Shockingly so.

Ironically, for years employers feared that retirement would gut their company of critical skills. After all, those damn Baby Boomers, who form the foundation of most organizations, were fast approaching the magic age of 65. But the economic downturn took care of that impending problem. With compensation fixed or in decline, pensions gutted and stock prices crushed, who could possibly afford to retire?

Thank you, bad economy. In your own sad way, you've stabilized the workforce of many companies.

But, as the economy turns upward -- at long last -- and as jobs become more readily available, it seems that trust is the issue leadership should be concerned about. Actually, 'concern' is putting it mildly. 'Fear' might be more a more apt descriptor. Only, of course, if retaining top people is important. Only that.

So, what's to be done?

Plenty, and fast.

Before outlining the approach we typically take to improve trust at work, let's be clear how we define trust. For us,

Trust = (Commitments + Perceived Intentions)/(Observed + Unobserved Behaviors)

Where:

Commitments = promises

Perceived Intentions = promises thought to be made

Observed Behavior = behaviors actually seen

Unobserved Behaviors = behaviors thought to occur

Thus, trust is high when commitments and perceived intentions are consistent with observed and unobserved behaviors. Said another way, trust is strong when promises are kept and appropriate actions follow stated intentions. Conversely, trust is weak when behavior, whether observed or unobserved, is not believed to be consistent with commitments or intentions. Like when you're told top performance will be rewarded, but then is not.

So, how best to ensure that behavior is consistent with stated intent? That is a far more tangible problem to solve, but one that will, indeed, address weak trust.

Here's how we approach it:

First, evaluate the situation. In a shameless plug for our firm, The Schnur Consulting Group has developed and validated a survey-based tool to assess trust. (See, Ma, those years studying personality assessment at Berkeley have not gone for naught.) The 18-item SCG Trust Index survey provides a highly accurate, statistically-sound predictor of trust's impact on employee retention at the group and individual level. The tool also helps define a road map to bolster trust and, in the process, reduce the potential debilitating effect posed by lack of trust on company performance. Interviews and focus groups provide valuable data to clarify the findings of the SCG Trust Index.

Following assessment, identify a short list of behaviors essential to the organization's success. Critically, the behaviors must be tangible and observable and linked to company performance. No intentions allowed. Intentions are nice but, for the most part, meaningless. Intending to do something is entirely different from actually doing something. Here we're only concerned with what's seen. The list must also be short, with no more than 10-12 behaviors. The key, of course, is selecting the correct behaviors. The SCG Trust Index and our experience improving performance should be your guides.

Next, communicate these behaviors aggressively throughout the company. How is the question, especially since everyone in the company will be required to demonstrate these behaviors on a regular basis. Again, the SCG Trust Index will define how best to position the behaviors appropriately and to educate people about their value to the organization.

Within a month after communicating the behaviors essential to company success, begin the personal assessment process. This step, to be repeated quarterly or semi-annually depending on the results of the SCG Trust Index, enables everyone in the company -- from front-line employees to the CEO -- to receive feedback on the frequency with which the individual was seen to demonstrate each behavior. We're not concerned with quality; instead we're intent on quickly creating habits. To do so, our approach focuses on encouraging people to demonstrate key behaviors often. Do so and you'll quickly have a higher functioning organization. (And, yes, SCG has a streamlined, cost-efficient way to collect and report these data and to facilitate behavior change even in the most incorrigible.)

Finally, track progress. Monitor data collected by the personal assessment process. Move those unable to score satisfactorily out of the organization. Conduct the SCG Trust Index annually. Interviews and focus groups at the 6-, 12- and 18-month marks are also recommended.

It's not quite this simple. But it is this straightforward. Call us and we'll walk you through the process.

But do not delay. There is nothing quite so insidious, nothing quite so destructive as lack of trust. Simply put, it's a killer.

This Thing Called Trust, Part I

Trust is a curious thing. On one hand, trust is an amazingly resilient belief capable of surviving the most horrific attacks. It can be bent, stretched, twisted, and pushed to often unreasonable limits. Yet it recovers and regains strength repeatedly. When strong, trust enables us to overlook the flaws and foibles of others, especially our employer. It helps us remain steadfast in our views of work, our coworkers, those above us, those below us, and the very company within which we spend the majority of our day. It fuels our drive to perform. It enables us to defend the energy, determination and commitment we give to our employer. It protects us. It provides hope.

On the other hand, trust is a remarkably delicate thing, prone to destruction with just one perfectly placed remark or action. That same multifaceted, complex cognition that can withstand a ferocious onslaught is also fully capable of shattering fatally into thousands of tiny pieces, never again to be rebuilt. Once destroyed, it forever changes our beliefs of work, the workplace, and especially the company for which we toil. And not in a good way. For the loss of trust undermines our resolve, our dedication, our willingness to do all that it takes to perform at an outstanding level. Lack of trust has a nasty way of causing us to question the very purpose of our effort at work. It undermines our desire to expend the additional, discretionary effort most jobs require. You know trust is an issue when you or others ask, "What's the point?" and/or "What am I doing here?" Worse still, the loss of trust kills passion.

Resilient, yet delicate. Strong, yet prone to destruction. Ethereal yet concrete. And the kicker? Trust is an absolutely essential element of success at work.

You'd think company leadership would be more concerned about it, given trust's central role in strong bottom-line performance. And while leadership may be interested in maintaining if not bolstering trust in their people, the actions of many suggest otherwise. Here it's not about intention. It's about behavior -- specific, observable acts that affect one's level of trust.

Sadly, as employees throughout the country will tell you, there's been plenty of bad behavior to go around over the last few years, including:

• Communicating without full honesty about the company's true state of affairs (even if the intention was to 'protect' employees from the truth)
  
• Layoffs that cut to and into the bone
  
• Reductions in hours, pay and/or benefits
• Budget cuts that curtail training or other career development opportunities
  
• Job restructurings that increase responsibilities without a commensurate increase in pay
• Loss of merit increases and/or bonuses
• Promises made but not kept (often about promotions)
• Anything that hints at or actually says, "You should feel lucky to have your job."
  
• Record profits (largely due to significant budget cuts) without a return of at least some of the recent takeaways
  

And that's just some of the myriad actions that have reduced or killed trust and, in turn, significantly reduced the potential for companies to perform brilliantly. Sit with people at work as we do daily and the stories will curl your hair. Also striking is the sheer volume of people who claim to have at least one foot out the door. Without doubt, souls are being crushed and many are looking to leave. (For some background on the crushing of souls in the workplace, see our blog of February 19, 2012, The SCQ.)

So, what's to be done? A terrific question, one every company should be asking now that the economy is on the mend and the job market is reemerging. Any company filled with people should be concerned with this thing called trust. Any company interested in keeping its top talent and performing well in the market, that is. And we think the answer may surprise you.

Come back next week. We'll talk.