Kate Gebo, a 20-year veteran of United Airlines, became the Chicago-based company's executive vice president of human resources a few months after what she refers to as "the Dr. Dao incident."
Anybody who was near a TV or the Internet at the time remembers the incident: Dr. David Dao, a 69-year-old passenger, was forcibly removed from a United plane by aviation officials after he refused to give up his seat for cabin crew on a flight from Chicago to Louisville. Passenger videos of Dao being dragged down the aisle quickly went viral, creating a PR disaster.
Amplifying the public's outrage was United's seemingly weak response, including guarded apologies and a leaked e-mail from the CEO to employees in which he reassured them that they had "followed established procedures," even as he stressed the importance of treating customers and employees with respect and dignity.
The public outcry was an eye-opener for the airline. "What we saw in a major way with the Dr. Dao incident is that policies were followed—it's just that the policies did not at all fit the circumstances at hand," Gebo says, "and our employees didn't feel like they had the power or permission to move away from those policies and do something that made common sense."
Even before the incident, Gebo, then serving as chief customer officer, was well-aware that customers weren't happy, and she was part of a team working to overhaul United's customer strategy. But the incident made crystal-clear that employees would be key to the transformation. Leading that change was what attracted Gebo. "That's how I got the role leading HR," she says. Gebo soon began leading a shift in the organization's culture, from one of compliance to one that might be called a culture of autonomy.
Autonomy — The degree to which a worker feels independence, freedom and discretion to plan the work process and choose how to complete the work.
United isn't alone. A growing number of companies are seeing the need for this organizational change. Rules, policies and procedures used to take priority in U.S. businesses, as leaders sought steady, sustained growth and product consistency. But today's economy, in which information spreads quickly and customers hold more power than ever, hinges on employees' ability to respond nimbly to customers' needs. That shift in thinking requires a culture which embraces values over blind obedience and gives workers the latitude to serve those who really hold the key to the success of the business.
A Virtuous Chain
Academics have known since at least the mid-1990s that engaged, empowered employees create happy, loyal customers, who in turn make a business profitable. The flip side of this "service-profit chain" is that unhappy employees can provide poor service, pushing customers elsewhere.
"Ultimately, value comes from customers who buy products from the firm," says Dave Ulrich, a professor at the University of Michigan's Ross School of Business and an organizational consultant. "Having employee well-being without customer commitment is clapping with one hand."
Some companies have intuited this logic for a long time. Low-cost Southwest Airlines is known for its philosophy of, among other things, hiring for attitude and getting out of employees' way. But until recently, companies like Southwest have been exceptions. With the rise of the so-called reputation economy, that's beginning to change. "Everything is being rated, everything is visible, and every single visitor to a hotel or a park or anywhere has the power to amplify their unhappiness," explains Anna Tavis, an associate professor of human capital management at New York University in New York City. Just as Yelp and Twitter have given voice and power to customers, Glassdoor and readily accessible best-workplace lists have empowered employees, making it easier for them to find better employers—especially in today's tight labor market.
But although more companies are recognizing the virtuous cycle between empowered employees and loyal, profitable customers, changing old ways has not been easy. "The move to a culture where people on the front lines are trusted to make decisions is a huge, huge, huge leap," Tavis says. The shift must start at the highest levels of management, experts say.
At United, Gebo quickly learned that changing the culture required much more than telling employees to start doing what they think is right. "Even if you tell somebody, 'Hey, just do the right thing,' they don't know what those guardrails are," she says. Since it's not always obvious what the right thing is, they may worry about being fired for doing something for a customer that maybe they shouldn't be doing.
To guide employees' decision-making, United, like other companies trying to cultivate employee autonomy, needed to agree on a set of shared values. In United's case, these boiled down to "the Core4," with "safety," one of the four, always No. 1. "If your solution is safe, caring, dependable and efficient, then it's the right decision," Gebo says. That message came directly from the top, delivered by the company's CEO and its president. Subsequent employee training delivered to all front-line employees explained how to apply the Core4 with actual customers. For example, if a flight attendant spills a drink on a passenger, the employee can now compensate the customer right then and there.
Initial results are encouraging: In the two locations where United pilot-tested the initiative, customer satisfaction scores have risen by 6 percent to 8 percent, Gebo reports. But change throughout the 90,000-person workforce will take a long time, especially for the company's veteran employees who are steeped in previous attitudes. For years, for example, United had trained its workers on the importance of collecting fees, touted as essential to the company's survival. "Now we're saying, 'Hey, the way to keep customers is actually, when it's the right circumstance, waive the bag fee, waive the change fee,' " she says. "That's a whole different way of thinking for people, and they're a little uncomfortable with it." Reaching wary long-tenured employees is the biggest challenge right now, Gebo says.
The Road to Autonomy
CULTURE OF COMPLIANCE
CULTURE OF AUTONOMY
|Asking “What is legal?”
|Asking “What is the right thing to do?”
|Serving customers and employees
|Managers view HR as an obstacle and a cost
|Managers view HR as a collaborator and an asset
|Decision-making is top-down
|Decision-making occurs at every level of the org chart
|Managers assign specific tasks
|Company rewards are based on rules and orders
|Company rewards are based on delivering business results
|Employees tend to be afraid of making mistakes
|Employees feel empowered to take action
|Organization is bureaucratic and slow
|Organization is responsive and fast
|Customers tend to get frustrated
|Customers tend to feel satisfied
|Employee engagement is low
|Employee engagement is high
|Employee turnover is high
|Employee turnover is low
Trust with Accountability
Corporate leaders generally agree that giving employees greater autonomy pays off. 1-800 CONTACTS, the Draper, Utah-based retailer of contact lenses, works to provide stellar service for all of its products, a strategy that has helped make it by far the largest lens seller on the Web, says Dave Walker, chief people officer. That's in large part because the company's roughly 1,000 employees know that they can do whatever it takes to take care of a customer, even it means occasionally sending a free pair of $600 lenses. "If they have to say, 'Oh, I've gotta talk to my manager, you're going to need to talk to this department or that,' that's just a disaster in our world. Why would we ever make someone wait who wants to give us money?"
The desire to please customers doesn't mean letting compliance slide. Contact lenses are a prescribed device, so the retailer, like a pharmacist, still has to verify a customer's prescription. But if a customer calls from his or her car wanting the same lenses that were ordered last time, call-center agents can offer to contact the prescribing doctor's office themselves. "We try to remove any roadblock to people doing their best work," Walker says.
Managers also offer guidance along the way. "We'd rather coach on the back end than have all these rules and policies and procedures on the front end," Walker says.
Lisa Barrington, SHRM-SCP, a consultant in Phoenix, Ariz., heartily endorses that kind of "trust first and question second" approach. "I'm not saying that if you have a brand-new employee you go out and give them access to $2 million," she adds. Providing employees with training and ground rules to guide their judgment is a better approach. "You give them that latitude, and they're going to become more engaged and more interested in doing their job because they can please people."
Meaning Leads to Results
Research shows that wanting to help others is part of human nature. Being able to satisfy that need in employees can elevate even the most mundane jobs, Barrington says. You may be a fast-food worker, "but if you have the opportunity to please people, to make a customer smile, you go home feeling better—and sometimes it takes that autonomy to do that," she says.
Joanne McInnerney, SHRM-SCP, witnessed this as vice president of human resources at Novelis, an Atlanta-based maker of rolled aluminum with about 11,000 employees worldwide. Under previous management, a top-down decision-making approach gave front-line employees the impression that they didn't have the authority to make decisions or even voice concerns. After a new CEO set more customer-centric goals for the company, empowerment began spreading as a natural consequence, she says. Once employees knew what the goal of "delighting customers" looks like, they began to speak up when an order wasn't meeting specs. The old focus on maximizing shipment volume and revenue had, by contrast, prompted employees to allow defective shipments to go out despite their better judgment.
"We all want to be part of something bigger than ourselves," McInnerney says, "so if you feel able to speak up and are given control, you're going to automatically like coming to work." It makes sense that Novelis' employees are now extremely engaged and proud to work for the company, which is enjoying record levels of earnings and customer satisfaction, based on employee surveys.
As a consultant, Barringtonhelped bring about similar changes in a much smaller firm—a physician group. Although medicine is a highly regulated field, Barrington knew there was room to increase employee autonomy and satisfaction. Using the results of an engagement survey and information gathered in follow-up focus groups, she identified such opportunities. For example, employees didn't like being told when they had to come in, so Barrington suggested that leaders express only the desired result—what coverage was required to meet patient needs—and let employees work together to ensure adequate staffing. "This made a huge difference in their satisfaction," she says. Employees proposed four-day workweeks (with longer days) and a rotation for Saturday office hours. Because employees were part of the solution, "engagement soared," Barrington says, and both absenteeism and turnover fell. Patient satisfaction scores rose as well.
At Enerplus, an oil and gas producer in Calgary, Alberta, Canada, a cultural transformation began with getting rid of the company's dress code, says Lisa Ower, who was recruited for the role of vice president of people and culture to improve engagement. Enerplus had "kind of the old-school culture where you come to work, you put in your time, you leave, and you don't really feel very engaged while [you're] there," Ower explains. The new CEO wanted to change that. "Why have arbitrary rules that only 1 percent of your workforce might break? It's really empowering to the individual to say to them that we trust that they're going to understand how to be professional." Not only that, but excessive rules can impede productivity—as it did for an IT professional who used to have to wear a suit and tie even though his job had him constantly climbing under desks to fix equipment. Being able to work in a T-shirt made him more comfortable and more productive.
Scrapping the dress code was just the beginning at Enerplus, although changing old ways of thinking and working took time and training. Within a year, employee polls of leadership effectiveness rose by 30 percent. Within 14 months, engagement scores rose from 63 percent to 87 percent. With higher engagement and fewer obstacles to doing work, productivity rose, too. "Even our CEO would say that he doesn't believe we ever would've reached 100,000 barrels a day without this cultural piece," Ower says.
Nothing Ventured, Nothing Gained
Although focusing on compliance seems necessary to reduce risk, focusing on people and culture is actually a more effective way to do that, says Jathan Janove, an Oregon-based organizational consultant and former employment attorney. "Employment litigation is really about anger and desire for revenge," not about compliance itself, he explains. Employees hire a plaintiff's lawyer or file a claim with a government agency not because of noncompliance, but because of the way they're treated as human beings.
Besides, avoiding all risk stunts business growth. Companies that value innovation understand that growth requires a willingness to take risks. Dropbox, the San Francisco-based cloud storage company known for its progressive culture, lists among its core values a picture of a cupcake, representing surprise and delight. Its vice president and global head of people, Arden Hoffman, points out that the compliance cultures of highly regulated industries like financial services tend not only to have very strict rules about what employees do and how they do it, but also to mete out serious ramifications if employees break those rules. "In a highly regulated industry, you figure out what you cannot do," she says. "Here, you figure out what you can do."
The same could be said of software provider Ellucian, a Reston, Va.-based company with 3,000 employees. After going from being a technology company to a software-as-a-service company, Ellucian changed its business model to radically shift many responsibilities from customers to employees. With ongoing software updates and the need for new modules to work smoothly, employees could no longer merely execute tasks assigned by managers, says Holly Kortright, senior vice president of people. Conducting frequent updates meant "people were going to discover things and they needed to own them themselves," she says. "So we empowered folks to own their careers and own their work."
Like at many companies, Ellucian's leaders discovered that ownership is best when it's shared.
Marina Krakovsky is a business journalist and speaker based in Silicon Valley. Her most recent book is The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit (Palgrave Macmillan, 2015).
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