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Sustainability is often defined as businesses and other activities that take into account people, planet, and profit. “Planet” clearly refers to environmental impacts, and “profit” means making money and being financially sustainable. But the “people” side is less well defined.

One of SJF Advisory Services’ goals is to help provide this definition.

We are about to release a major report, Employees Matter: Maximizing Company Value Through Workforce Engagement, in which we profile 24 companies that can directly correlate their high road human resources practices and broadly shared employee ownership with increased business performance and ability to weather economic downturns.

I will give a keynote the morning of September 15 highlighting some of the great companies profiled in the Employees Matter report, as well as overall report findings.  I will also talk about the Green Jobs Awards program recently launched by SJF Advisory Services and Green For All, including some early findings from the applicants (awards to be announced at a November awards event). www.greenjobsaward.org

Immediately following my keynote, executives from three of the companies profiled in the Employees Matter Report (Maria Kingery of Southern Energy Management, Stephen Irvin of Namaste Solar, and David Murphy of Better World Books) will participate in a plenary session moderated by noted social entrepreneurship professor Cathy Clark, with the aim of settling once and for all the question of whether treating employees well is merely a nicety or a necessity for a healthy business.  Don’t miss this exciting session – register now at www.sjfsummit.org.

– Anne Claire Broughton, SJF Advisory Services

A recent Wall Street Journal article, “Who Has Innovative Ideas? Employees,” once again underscores the incredible resource companies have just waiting to be tapped — their people. This article, by JC SPender and Bruce Strong, introduces the idea of “innovation communities,” or cross functional groups in a time limited setting tasked with solving specific problems or generating new ideas.  Doing so can be a low cost way to both engage employees and to emerge even stronger from economic downturns.

Innovation is the key to surviving and thriving. As we noted in our previous post on creativity and innovation in business, U.S. firms are unlikely to be able to compete globally on low cost in the long term but instead must rely on doing things in new and creative ways.  If you missed the fantastic Institute for Emerging Issues forum on creativity last February, this video (featuring many of the speakers highlighted at the forum), will fill you in on the need for creativity and design thinking in business, education, and throughout our society. And the great thing about creativity is that it is very engaging.

– Anne Claire Broughton

Do you like your job?

According to a study published by The Conference Board in January 2010, only 45% of Americans said they were satisfied with their jobs — a marked drop from the more than 61% who said they were satisfied in 1987.  Job dissatisfaction does not track economic cycles, the study finds; instead, a consistent, downward trend in satisfaction has been spurred on by workers who do not find their jobs interesting, incomes that do not keep pace with inflation, and the rising cost of healthcare. *

Yet somewhere in the world, people like going to work.

Some of them are the thirty two members of the Employee Engagement Network who contributed favorite nuggets of wisdom to a recently released e-book, “The Top Tens of Employee Engagement” to help others create, improve, and expand positive office cultures.

David Zinger, the Network’s host, defined employee engagement in his entry as “the art and science of engaging people in authentic and recognized connections to strategy, roles, performance, organization, community, relationship, customers, development, energy, and happiness to leverage, sustain, and transform work into results.”

In other words, it’s no easy feat.

While most authors’ entries argued that there is no time like the present to transform a lagging office environment, their suggestions and tips got specific: such efforts will take time, careful attention, measuring and monitoring through surveys and interviews with employees and customers, and loads of communication.

Most entries, too, focused on soft skills: how to talk and listen more effectively. And many contributors noted that individuals are responsible for their own sense of engagement or, as it might also be known, happiness and satisfaction. But they point out that a sense of well being is “bidirectional” – the idea that employees and their employers are all in this together. As David Zinger writes: “employee engagement is more encompassing than motivation. Employee engagement embraces our emotions about work, how hard we work, how much we care about the organization, etc. It is a richer and more complex concept than motivation and includes bidirectional engagement from managers, leaders, and organizational communities.”

We at SJF Advisory Services are very encouraged at the existence of a 2,785-member global Employee Engagement Network and this great compilation. A few of our other favorite nuggets from the Top Tens of Employee Engagement include:

• Recruit and promote for engagement – make sure those in management are able to engage others for success
• Ask questions such as “How can I help you right now?” Questions engage the mind more than statements
• Promote authenticity: employees encouraged to be themselves are more likely to be effective in the workplace
• CEOs should be “chief engagement officers” and use their role to communicate and engage employees at all levels
• Be a low tech communicator – teams that talk face to face have a higher rate of engagement
• Track progress, recognize and celebrate success, learn as you go – what gets measured is more likely to be accomplished, and that is worth celebrating!

Read the full report on the Employee Engagement site.

-Anne Claire Broughton and Christa Wagner

*http://www.usatoday.com/money/workplace/2010-01-05-job-satisfaction-use_N.htm

Jim Baron’s students at the Yale School of Management often comment that creating a great company culture is easy when business is booming but can go by the wayside when conditions head south. Their skepticism prompted the widely published management professor to find examples of firms that use their culture to get though economic downturns. He recently caught us up on his research in an interview — below are some of his insights.

Baron thinks the cases of companies that use their culture to get through downturns are rare. (That’s why we specifically asked the companies profiled in our forthcoming report, Employees Matter, how they have dealt with the worst economy since the Great Depression, and whether their culture was a significant factor in keeping them afloat. Many of them told us that it is.)

Although a great culture is not a guarantee that a firm will outlive downward cycles, these firms tell us that their culture, or what Baron calls “HR blueprints,” have made it much easier to weather the storm for a multitude of reasons.

Baron and his research team first published on the subject of HR blueprints in 2002. In the mid-1990s, Baron began studying several hundred start-ups in Silicon Valley, tracing the premises that guided firms’ development. He found that in this pool of small startups, firms differed more in the cognitive idiosyncrasies of their founders than in their human resources structures. When a company is small, HR isn’t that complicated, he said.

He was also interested in how long the “Sandhill Road” philosophy would prevail – i.e., the famous venture capital boulevard in Northern California that prized the Internet economy value of flipping firms. Interestingly, unlike fifteen years ago, Baron is convinced that building a sustainable organization with a distinctive culture is starting to become a more widespread corporate value.

Baron’s research was some of the first of its kind. And it showed that firms that tried to change their HR blueprint midstream were often harmed by it. On the other hand, firms that got their culture right the first time survived much better. He said that an approach to business that involves worrying about products now and then figuring out the culture later does not serve entrepreneurs well empirically.

The goal of his research was to get in very early in a firm’s evolution. Fortunately, the gene pool was ripe for this kind of study: there were literally thousands of companies that got started overnight in the rise of the Internet-driven boom of 1994 (and underwent the dotcom bust in 2001). The results of the study were used to predict how well firms did in the run up as well as survive the bubble.

Baron and his team identified five categories for the firms they studied: Commitment firms, those that emphasize long term relationships with employees, including shared ownership; Star firms, which prized only their top-most performers, did not pour resources into broad based employee development and had a reputation for ‘churn and burn;’ Engineering firms with a kind of ’skunk works’ mentality; Bureaucracies that employ rigorous project management techniques; and Autocracies, which sum up as ‘you work, you get paid.’

At first glance, it might seem that the Bureaucracies or even the Star-oriented firms would have the most staying power and long term profitability. But Baron found that the Commitment firms did best in the run-up…and the shakeout. None of the Commitment firms failed over the period, they had the lowest turnover, and were most likely to go public. Silicon Valley venture capitalists say that the Star model is best — it locks in talent. But Baron told us that that model is prone to the “Reggie Jackson effect” — the top ten all time home run hitter who was also number one in strike outs. The Star model can knock it out of the park, so to speak, but it is also the type of firm at highest risk for failure.

While Star firms had the potential to outpace the Commitment firms in profitability and overall success, it was only in some specific cases. For Baron, the key lesson is that the impacts of economic ownership seem to be much more about the effects of psychological ownership. While Commitment firms might provide broad based ownership in the form of equity in the company, their real competitive advantage is in fostering a broad sense of emotional investment and ownership.

–Christa Wagner

Over beach vacation last week, I hijacked my dad’s copy of Delivering Happiness: A Path to Profits, Passion, and Purpose by Tony Hsieh, CEO of Zappos.com. You may have heard about it on NPR. Hsieh built and sold a company right out of college and, with the proceeds, as well as a venture fund he raised called Venture Frogs, did some early stage investing. Hsieh ended up investing in, and later helping to build, Zappos.com as CEO.

The company was recently acquired by Amazon for $1.2 billion (employees netted about $40 million in the sale) — and will continue to grow with its existing team because the company’s culture is working so well.

The Zappos.com story is an amazing one and it validates a lot of the lessons we’re writing about in our forthcoming report, Employees Matter (an update of our 2004 Beyond Paycheck-to-Paycheck report).  In the book, Hsieh uses his e-commerce firm to demonstrate the importance of hiring carefully in order to build a great culture of engaged employees, how to use training effectively, when and why to promote from within, and the many benefits of treating employees well.  Zappos.com is a company well known for delivering fantastic customer service; part of Amazon’s attraction to the deal was the Internet based shoe and apparel company’s strength in customer relationships – a strong match for Amazon’s savvy in the technology department.

A few quotable lessons from Delivering Happiness:

• “A company’s culture and a company’s brand are just two sides of the same coin.”
• “It’s really important to come up with core values that you can commit to.”
• “If you just focus on making sure that your product or service continually wows people, eventually the press will find out about it.”

Zappos.com understands the value in letting employees have a little room to do great work on their own terms.  The purpose of supervisors, Hsieh argues, is to help employees do well, remove obstacles in their way, and empower them to make decisions. In other words, decentralize decision making.

Hsieh says that employees should know the core values of the company inside and out – and be able and allowed to make decisions based on them even without top management always weighing in.  Again, decision decentralization!

Finally, if your company is good enough at creating a great culture, employees will enjoy seeing one another outside of work.  Sometimes the best inspiration comes out over a glass of beer.

–Anne Claire Broughton

A new book, Profit at the Bottom of the Ladder, just published by Harvard University Press (and recently reviewed in this post in the New York Times’ Economix blog) makes the case for why workforce best practices should include engaging employees at the bottom of the ladder (in other words, entry level workers).  In a six year study of a handful of medium sized firms from several countries around the globe, researchers from McGill University led by Jody Heymann sought to understand how employees – especially those with the least education or professional experience – and their companies could succeed together financially.

The research involved selecting companies that had thoughtfully chosen to improve the working conditions for their least educated employees in an intentional and strategic way – and documenting the bottom line results.  Engagement practices included benefits often only available to higher-level employees, such as increased wages, profit sharing and other forms of asset building, leave and flexibility programs (even at manufacturing firms!), provision of health care, extensive on-the-job training, and opportunities for advancement. Using primarily a qualitative methodology, the researchers conducted hundreds of top to bottom interviews with employees and their managers.

The findings are at once remarkable and common sense. Broad based engagement is, in fact, a key driver for positive financial and performance outcomes including: reduced absenteeism, lower turnover, easier recruitment, a more highly motivated workforce, savings to the firm, and improved competitive advantage across sectors.   Acting on the recommendations of employees on the line resulted in significant time and money savings at American Apparel and Dancing Deer Bakery, for example.  (Dancing Deer Bakery is also profiled in SJF’s upcoming  report on employee engagement and its bottom line impacts to be released this fall.)

Finding the argument that there is no casual relationship between engaging lower level employees and increasing company profitability to be erroneous – but recognizing that this is viewpoint to which most mainstream business subscribes – this book uses exhaustive 360 degree analysis of a cross section of firms to dispel it.  The authors do point out that most of the firms profiled are privately held, which may enable them to take a long view of growth.  But they are doing well in the present, too, despite the recession. A compelling quote from the book succinctly captures this point:  “While we cannot say that all of the companies will remain financially successful, the working conditions at the firms we studied either during economic downturns or when entire sectors were threatened, had provided them with crucial tools that markedly increased their chances of survival.”

-     Christa Wagner and Anne Claire Broughton contributed to this post

Why is WD40 called by that name? Because the first 39 formulas did not work. The company just celebrated their 50^th anniversary of the winning formula – and it attests to the idea that a willingness to try, fail, and try again is a critically important piece of innovation.

This was just one of the interesting insights offered by Tom Kelley, General Manager of IDEO, #5 on the Fast Company 2008 list of the top 50 most innovative companies in the world, at the 25^th annual Institute for Emerging Issues forum, North Carolina’s annual conference that brings business leaders, policymakers and the public together to talk about the top issues facing the state.

The conference, held in early February, focused on “Creativity,” a theme that blended nuts and bolts strategies to promote innovation, economic development, and entrepreneurship with artistic performances and presentations from thought leaders.

A number of high-profile speakers, like Kelley and David Pink, a best-selling author on innovation, offered nuggets of wisdom that readers of this employee engagement blog may benefit from:

Daniel Pink:

• Any kind of routine work is becoming obsolete — accounting, engineering, information technology, law – if it can be put on a spec sheet with one right answer, it is routine, and it is cheaper to have it done in India or by a computer.   For example, 1 million U.S. tax returns were done in India last year; 23 million were done on TurboTax.  The prescription: the U.S. must increase the creative content of all jobs.
• The world belongs to the “Ts” – people with both depth of knowledge and skills and breadth as thinkers – the engineers and scientists who think like artists and vice versa.

Roger Martin, Dean of the Rotman School of Management at the University of Toronto:

• We are exalting analytical thinking over creative thinking. No new ideas ever came about via analytical thinking (inductive or deductive logic).  They come from creative/intuitive thinking (adductive logic).  Both are important.  We need a nexus of the two which leads to design thinking, which is the basis of a creativity-oriented economy.
• People are paid more in creative jobs because they use more of their brain. One solution is to increase the creative content of all jobs.
• In the worst of times, unemployment in the creative-oriented jobs doesn’t even reach 4%; there is usually a shortage of skilled workers. In routine jobs unemployment rarely gets as low as 4% but is generally much higher.
• Don’t conflate creativity with high tech – high tech is only 1% of the economy or 1 in 56 jobs.

Tom Kelley:

• Sony, the electronics giant, slowed their pace of innovation, allowing Samsung to outpace them in electronics in 2004.  Samsung remains dominant. One reason? Samsung did “listening posts” where employees from any level contributed ideas and older people listened to younger people.

John Denniston of Kleiner Perkins; listed in 2009 by Fast Company as one of the 100 most creative people in business:

• The U.S. is home to only two top solar, two top wind, and one top advanced battery maker. We have only 17% of the global market share in Cleantech.  We must not take our technical dominance for granted.

–Anne Claire Broughton and Christa Wagner contributed to this post.

SJF Ventures portfolio companies Cleanscapes, a sustainable solid waste and recycling collection management service, and groSolar, a premier provider of solar energy systems, are great examples of entrepreneurial companies that are leading the new green economy. These firms provide products and services that lessen environmental impact, reduce natural resource use and also create high-quality jobs.

So we were interested to read recently that research from the Donald Vial Center on Employment in the Green Economy at UC Berkeley and a report by Karen Chapple (2008) reinforce our long-held belief that creating well-paid jobs with opportunities for advancement is an integral piece of the emerging green business and cleantech sectors.

The Donald Vial Center conducts research on how the green economy and climate change will affect labor markets, and the engineering changes, new job skills, and innovation that will be necessary in a range of sectors as a result of anticipated state and federal climate change mitigation policies. The Center also works to promote and publicize best practices in green jobs training, certification, and economic development programs. Although the Center is focused on California, there will likely be research resulting from its work that will have national applications.

Interestingly, Chapple’s report, “Defining the Green Economy: A Primer on Green Economic Development,” notes that while many green collar jobs are entry level, there aren’t de facto supports in place to ensure that they are high quality jobs (p. 4). Communities that want to develop green strategies in traditionally low-wage sectors, such as waste management or retail, should seek to develop a policy for evaluating job quality impacts or even legislate for job quality standards like a living wage ordinance. While we wouldn’t disagree with her recommendation to use public programs and policies to improve employment equity, we believe there are many thoughtful businesses in these emerging sectors that already recognize that strong employee engagement impacts the bottom line.

For example, Cleanscapes, the waste management company mentioned above, has found a bottom line advantage in outstanding treatment of their entry-level employees. The highly-engaged culture at Cleanscapes includes morning team rallies, safety and inspirational message displays, keeping everyone on a first-name basis, cultivating pride in personal and equipment appearance, open door policies and an employee assistance program.

The role of the public sector or other intermediaries should not be discounted as key components of the new green economy. But, as SJF’s portfolio companies demonstrate, many companies are utilizing high road labor practices, particularly around employee engagement and employee ownership, and seeing connections between these practices and improved financial and business results.

We posted a few weeks ago about the new green cooperative laundry that is creating a new model for building thriving businesses that create wealth for low- to moderate-income individuals in Cleveland. The project has a very inspiring video that we highly recommend.

Workplace flexibility has long been seen as mainly the province of middle and upper wage workers, but a recent report by Corporate Voices for Working Families looked into the potential benefits of flexible scheduling for lower-wage employees (those who earn $10 per hour or less than $20,000 annually, which they estimate at more than 25 percent of the US workforce and growing).

This report surveyed managers and lower-wage employees who do and do not have access to flex time (such as compressed work weeks, employee control over scheduling to accommodate personal preferences or family responsibilities, and periodic unscheduled leave). Service industries, manufacturers, and customer care services all were shown to potentially benefit from adding flextime programs. The following case studies presented some interesting findings:

• Bright Horizons Day Care Centers’ managers needed to be flexible themselves in creating flexible schedules for employees and still cover the 10-12 hours centers are open and state mandated teacher-to-child ratios. But instituting such programs improved retention and recruitment. Management found that employees were more willing to cover for each other due to feeling empowered by their ability to have some control over their own schedules; posting everyone’s schedules prominently was helpful in managing scheduling.
• Procter & Gamble allows many customer relations employees to telework, resulting in more motivated employees and savings for the company. The programs started when satisfaction surveys reported problems non-exempt employees had balancing their work and non-work schedules, coupled with the company’s desire to retain talented female employees after maternity leave. Employees cite the ability to go to appointments without using vacation time and the money they save commuting as benefits. The program has allowed the company to staff up when call volumes are expected to be higher, and deal with emergencies such as inclement weather because employees are working from home.
• A consumer goods manufacturer with continuous operations needed to institute flextime as a result of its around-the-clock production schedule. The flextime policy allows employees to add 2 hours to the end or start of a shift in exchange for that time off later. Swapping happens within a work team and cross training allows for creation of a ‘relief pool’ to cover absences, saving the company overtime expenses. The report notes that manufacturing may not be thought of as a workplace conducive to shift-swapping and flexibility, but the upfront investment management made to work with employees to implement it has paid off.

The researchers found that formal flexible time arrangements, policies that give workers access to a variety of time off options and schedule control, and creating a work culture that is supportive of occasional flexibility can yield impressive results. One important aspect of such programs is that they are not one size fits all – allowing employees to create their own strategies to manage their time necessarily means that outcomes will differ. But, as the report argues, the payoffs in better recruitment and retention, better engagement and customer service, and higher financial results are worth it.

The report’s survey helps illustrate where employees were feeling crunched for time, and what they would like to see their management due to address it.

Taking personal time during the work week is not uncommon:

• 1/3 of respondents take time off during the work week to attend to personal or family matters, take time without pay, or trade shifts with co-workers
• Employees with children are more likely to use flex time
• Women are more likely to use flex time than men

Flex time is desired:

• Having access to types of flexibility, such as compressed workweeks, can impact employee satisfaction
• 9 in 10 employees would use flex time if it were offered without penalty

Flex time isn’t always within reach of employees:

• Vacation is easier to access for some employees than taking breaks when they are desired, taking time off during the workday, and taking added time off without pay
• 1 in 5 respondents is expected to work overtime without notice

The report argues that when managers offer a variety of flexible scheduling options to lower wage employees it can be an effective management tool, lead to productivity increases, and control costs. In fact, flex time options, the report found, made companies more desirable to younger workers and helped retain top performers at high turnover jobs such as sales.

Tips for effective implementation:

• Help workers to view flex time as a business tool, not an entitlement. Recognizing the hidden costs from unscheduled absences, managers can increase productivity and avoid overtime costs if flexible options are implemented.
• Cross training employees is one way to help ensure that customer service is seamless in spite of employees’ schedules.
• Flex time should not lead to poor performance. Employers should address performance problems one-on-one rather than put the flex program at risk for other employees.

Other resources around workplace flexibility include Workplace Flexibility 2010 and the US Chamber of Commerce’s Institute for a Competitive Workforce.