Your shareholders want to see results, and all your metrics show your firm is operating like a fine-tuned machine — the company is doing great, running efficiently, and turning big profits. It’s every CEO’s dream scenario.
So why has a horde of disgruntled employees appeared outside your office door with a long list of demands in hand? And why don’t you recognize half of them?
Oftentimes, said Thomas Kochan, a professor of work and organization studies at MIT Sloan, companies find that external pressure from shareholders to tighten up their operations, often at labor’s expense, can send them down the path of creating a poor work environment. Relying too heavily on metrics and keeping too much distance from your workforce can compound the problem.
“[The organization] might have been relatively stable. People might have felt good about working at a place, but the change then sets off a spiral where the trust is broken,” Kochan said. “There are often cuts in benefits, and it just feeds on itself.”
That scenario played out at The Home Depot in the early 2000s, when CEO Robert Nardelli’s preference for centralized management and tight operations saw profits soar, but customer service and employee morale tanked, Kochan said. “Home Depot, historically, as many of us appreciated, was a place you could go and find experienced, knowledgeable staff that could help you find what you needed,” he said. Under Nardelli’s tenure, Kochan said, “all of a sudden, customer service declined, and the stock market actually penalized them for it.”
A top-down approach no longer works with a modern workforce, Kochan said. You need to be in constant communication with your employees to ensure the decisions you’re making from on high are translating appropriately to all parts of the business. Eventually, Nardelli was thrown out of Home Depot, he said, and the company’s employees regained control over some of the local decision-making at their stores, such as which items to stock for particular regions that experience different weather.
Historically, United Airlines has been plagued with a toxic company culture that seeps down from the leadership to its employees, and eventually into the customer experience. The issues created by this environment have surfaced in a series of very public, high-profile incidents, including one that saw a 69-year-old physician dragged off a plane by police and another in which a dog died after flight staff forced a passenger to stow it in an overhead compartment.
Kochan said United’s issues stem from the company’s leadership failing to empower employees to solve problems in real time. “When the workforce feels customers are dissatisfied, and they can't do anything about it because they don't have the discretion to solve [problems], you get a reinforcing cycle of very low morale and frustrated people,” he said. “The employees feel like they're bearing the brunt of the customer service problems and can't do anything about them.”
Kochan said leadership should take cues from their workforce, give their employees the autonomy to handle situations as they arise, and trust that they can handle them appropriately. Southwest Airlines, among the most profitable of air carriers, has been lauded for its company culture, Kochan said, and ranks highly in customer satisfaction as a result. “It’s a business strategy that says, ‘We’re really going to emphasize our customer service, and we’re going to support our employees to make sure they’ve got the tools and the trust to take action.’”
Born-digital companies like Uber and Instacart, which rely heavily on algorithms and independent contractors to manage and run their operations, have found themselves grappling with culture problems, too, Kochan said.
Instacart faced a backlash from workers after changes to the algorithm that determines a driver’s compensation saw reductions in the amount of money that went towards tips, Kochan noted. “Somebody figured out an algorithm that they thought was fair, and they weren’t trying to screw these shoppers, but they didn’t understand the full consequences of what they were doing.”
The company was forced to reform its compensation system. “(The company) recognizes that the drivers are independent contractors, and they have no obligation to do it, but the company relies on them,” Kochan said. “There’s got to be ongoing dialogue about these things.”