A Little More on Loyalty

Following up my last post on the strange phenomenon of willing senior-level turnover, one of my colleagues suggested I expand on the following:

How do today’s companies inspire, and enact, loyalty within the shifting parameters and instabilities of the contemporary business world? This is the question that gnaws at me.

It really is a quandary in the world of “at-will employment.” Downsizing, right-sizing, presumed right-sizing, grading, rating, ranking, bottom 10% trimming (yuck!), all of these are the strident tools of Management Consulting—not to mention Fear and Loathing in the Workplace, to borrow from the late Hunter S. Thompson. But what are the tools of inspiration, engagement, and leadership for everyday folks?

Many of us remember the phrase Getting to Yes from the 1981 tome by Roger Fisher and William Ury about straightforward negotiation. Let’s try to eke out a pathway for Getting to Loyalty, or at least identify the mismatched needs that most open the door to conflict. Here’s the rub as I boil it down from my experiences—the priorities of individuals and companies in the hiring decision funnel are not necessarily aligned.

When I coach an individual on the job-changing decision, I ask him or her to focus on three core needs in the following order before pulling the trigger, those things that I think matter most in building a long-term career:

1) What you do—is the work itself compelling, satisfying for the sacrifices you will make, a set of diverse tasks that will lead to continual growth and learning?

2) Who you do it for—is your boss sane when it comes to managing authority, a reasonable mentor, and a decent leader?

3) How much will you be compensated—is it fair pay for what you produce, or would you be valued more highly elsewhere given conditions 1 & 2 are equal. Note that I put pay level in position 3 of 3, when it will almost always be the #1 tactic someone uses in trying to poach you. You are likely committing about half of your waking hours. Beware the trade, Mephistopheles.

In juxtaposition, here’s what I think most companies focus on in the final offer process, not necessarily thinking long-term, sometimes just filling a box with a warm body to knock down a set of tasks:

1) Are you competent—does the individual arrive with the necessary skills to do the job?

2) Are you affordable—will you create rather than consume value given how much you are paid?

3) Are you a culture fit—do your needs, work style, and world view remove or add friction to the work environment.

If you agree with those contrasting three points as a premise, you can see where loyalty can become an issue, because both sides don’t want the same thing, beginning with tenure and commitment. The individual is idealistic, human, fragile, creative, hungry, in search of self-realization and interpersonal relationships, emotional bonds that can be reciprocal. The company is pragmatic, an inorganic construct that is valued on metrics by objective third-party measures that are entirely unforgiving of missed opportunities in the form of creative destruction. Individual rewards can be intrinsic (good feelings) as well as extrinsic (take home pay), while corporations and their owners are rewarded on a much simpler scorecard by the optimized deployment of capital and management of risk, often avoiding complex human interplay in pursuit of a level playing field and legal fairness.

You can’t have a puzzle without puzzle pieces, but getting the puzzle pieces it fit in real-time is no small challenge. Hence the nuts and bolts that often don’t snap into place:

• You want interesting and fulfilling work. The company wants you to do what you have proven you do best. You may want to grow, they may want to pigeonhole you.

• You think you’re worth more. They want to pay you less, but more than that, not disturb the status quo for the pay grade into which you fit. If you get a raise, others will come asking, no matter how quiet you promise to be. Leaks are everywhere, because confidential knowledge exchange inside companies is a currency all its own.

• You want to be you, not wear a suit of conformity. They say they want out-of-the-box thinkers, but only if they play nicely. People are who they are, not who the company wants them to be. Both individuals and companies know they must change to survive, but naturally resist it. Creativity is not nice.

Starting to see the problem about how hard loyalty is on both sides of the equation? Now let’s think about some ways to close the gap. Let’s go outside the corporation for a proxy, to those we love rather than those beside whom we labor.

Any sense of loyalty within a family or among friends has less to do with a verbal pledge than it has to do with shared values. We don’t choose our families, but we choose our trust levels, often on the basis of belief sets. We do choose our friends, initially on the basis of common interests, but over periods of time those interests bridge to commonalities of caring. When values are shared and reinforced, bonding is enhanced, we have reason to heal more quickly from conflict. When values are misaligned, it is much less painful to sever a relationship, sometimes with notions or actions that can be punitive.

Values are not necessarily unique to people (and no, companies are not people, if you think that, you never worked for a real one). Too many companies state their values in their mission statement, then file it in Human Resources or post it somewhere obscure in the About Us or Recruiting sections of their website.

Believe it or not, some companies take their values very seriously. I have worked for companies where core values were a big deal and discussed all the time, and I have worked for those where they never came up except for copy approval in a brochure. You can often tell when you hear senior executives speak publicly about their companies, they lead by example and choose their words deliberately not for public relations, but for accurate representation of the company culture they champion. They know a company is just an artificial bureaucracy meant to produce profit, but they want it to be more and are willing to reach beyond the bounds of the normal to make that happen. If you don’t see a reflection of the values that matter to you in the vision of a company’s leading evangelists, I promise you it won’t get any better deeper in the organization.

Values—integrity, honesty, customer service, creativity, responsibility, intelligence, diversity, compassion, respect—can’t be faked. If a company treats its public image as a distinct entity from its actual operating behavior, turnover will be high. That might be okay for you if all you want is a paycheck for as long as it lasts, but just like a company cannot be something it is not, you cannot will it to be something it only pretends to be. You need to know what those values are, and whether they are words or realities. If you get a fit, there’s a chance that loyalty can happen. At the very least, the relationships you build will be more likely to follow you through your career than the accrued value of a pension.

A final word for now on values, loyalty, knowing when to stay and when to go—one of the first truly important maxims I learned in business was that given a choice, most employees don’t quit jobs, they quit bosses. Let’s end there.

Built to Launch?

I aspire in this post to be among the elite—one of the few business bloggers on the planet currently not commenting on Marissa Mayer becoming CEO of Yahoo. I have never met Marissa, but her reputation speaks strongly for her. I wish her well because I always want good people to succeed, and in this case I also want to see Yahoo succeed. I hope she reads my article about Yahoo from last year that predated her last two predecessors and figures out a way to restore much-needed competition to the landscape of search. Hmm, seems I’m writing about her. Okay, enough said. Got get ’em, Yahoo! Stop.

Now my real topic for the week—not surprisingly, also about succession.

Venture investors Marc Andreessen and Ben Horowitz have been steadfast in their support for keeping Founder/CEOs at the helm of the companies they back, from early blog posts on their site that state their philosophy to more recent comments in the Wall Street Journal that reinforce their sometimes contrarian assertions. Not only do they believe most deeply in the Founder/CEO success model, they have championed multiple class shares that keep CEOs in authority with majority control even without majority ownership. Their point of view is clear, consistent, and well-argued—and thus far their financial returns in aggregate have been extraordinary. They want vision, they want independence and long-term creative thinking, and they want continuity.

I am not sure I have an absolute opinion yet on absolute power for a start-up CEO; we’ll have to see how those play out over the next ten or twenty years. I do worry that without senior team loyalty and continuity, it may not matter whether a CEO stays or goes. Teamwork is what matters in today’s intellectual property centric companies, and if your team is not stable, I wonder if your company can remain so. Surely new blood is a great infusion when parsed appropriately, but it needs to be in balance, at equilibrium with a set of players we can count on.

What about the top-tier executives, perhaps a level down, who seem to jump freely from ship to ship, following their own personal muses, particularly after liquidity gives them the ability to set themselves free? Is this good for companies and long-term shareholder value, for companies with massive capitalization that are taking on investment—public or private—ostensibly with some hope of being Built to Last?

Clearly within our pressured and fragile economy, the bonding relationships between employers and employees have become increasingly tenuous. “At-will employment” is not just boilerplate in an offer letter, it means what it says, that jobs are temporal. Employees not under contract may depart a gig when they wish without much obligation, and employers may equally freely dismiss them (to the extent those decisions are not discriminatory) without much warning or explanation. Companies are predisposed to protect earnings and cost-cutting can be a tactic to achieve those goals, the favor of which gives employees good reason to always be in the market. Although there are any number of topics I can extract from that thread and will do so in the future, that is not my key focus here. This is not about everyday turnover and the anxiety it creates, it is about senior level turnover as a litmus test for investors.

Reality is, a lot of high-profile employees in high-profile start-ups seem to jump ship early these days. I am not so sure that they are cashing in as much as their attention spans or personal desires lead them from one thing to the next. Some examples:

• Two of Twitter’s co-founders who served as CEO left the job and their day-to-day roles, although one returned, not as CEO, but as head of product. The third co-Founder also left day-to-day responsibilities.

• Facebook’s most recent CTO, who joined the company in 2008, departed voluntarily almost immediately following the IPO. Facebook also lost an extremely high-profile CFO in 2009, and a number of other prominent C-level executives have churned through in the years leading up to the IPO.

• Groupon’s former COO, a Silicon Valley veteran brought in to steady the ship, spent about a year on the job day-to-day before moving to an advisory role.

• Yahoo continues to make headlines with five CEOs in five years, although the situation here is different. The last one to leave on his own timeline was media veteran Terry Semel, who preceded the five. Perhaps more curious at Yahoo is the level below CEO, where the turnover has been even more active, voluntary or otherwise.

• Google is now being celebrated as iCEO University, for which it has reason to be proud with strong executives like Sheryl Sandberg, Tim Armstrong, Dick Costolo, and now Marissa Mayer all willingly accepting significant challenges. My sense is this is sustainable as long as founders Larry Page and Sergey Brin stay on the job (guided by the advice of Eric Schmidt), but at some point the spinning off of entrepreneurs may take a toll as it did at once great legendary giants like Sun and Silicon Graphics (also keep an eye on HP).

It is hard to fault someone with talent and wealth for leaving a position with an “old company” to tackle a brand new start-up concept. They have the creativity, they have the yearning, and they can absorb the personal risk. Yet these aren’t exactly old, mature companies they are leaving, even in internet time. If talent retention is critical to continuity and leadership is demonstrated by example, what does it say about loyalty to the “rank and file” millionaires of Silicon Valley hungry to pursue their dreams when so many of the top dogs or near top dogs are endemically antsy?

Can you build a company that is Built to Last when many of your brightest employees—especially those made wealthy with capital they can reinvest—are thinking Built to Jump? Should shareholders in emerging high-valuation private and public companies be concerned with the New World of high turnover that is largely viewed as the way things are? There is already risk enough in holding stakes at the high valuations these companies will need to grow into, but if these are essentially knowledge-based companies where the key assets go home to their families each night, how much should owners worry whether they come back tomorrow or start a new company that’s more fun? Are these companies Built to Last or Built to Launch—launch themselves to early prominence, and launch the careers of the stars who emerge from their ranks?

Retention and the war for talent are surely talked about a lot, but I wonder if these are just buzzwords now, if key stakeholders really are losing sleep over the next spun-off employee or just prepared to roll with the punches. For anyone who has ever led a company, the notion of culture is no small issue, and companies where the culture is strong have a heritage of continuity that gives them a shot at longevity. Do we now assume Creative Destruction is such a powerful force that short-lived companies are a norm, regardless of culture and continuity? I wonder, and look forward to checking the Fortune 500 again for a few more decades to see how this plays out—not to mention the long-term trend on aggregate net job creation we so desperately need for our economy to go the distance.

I am not suggesting that employees should stay past their welcome or interest level, and in no way would I ever want (or tolerate as a manager) any form of stagnation in the form of tenure-based retention or retention for continuity’s sake. The case I am trying to make is for a tiny bit of balance in an Old World concept known as loyalty—which has been very good to me on both sides of the desk for most of my years on the job. It has been said that in today’s world loyalty is between individuals, not within companies, and there is every reason to understand how that has come to be. Yet if companies are not loyal to employees and employees are not loyal to companies, can these kind of companies really be long-term investments for shareholders? Said another way, if the system and talent are not demonstrating loyalty and commitment, should investors?