The Nation

DIFFERENT APPROACH

Employees First: A policy worth pursuing

Modern philosophy suggests putting staff morale above that of customers and shareholders

When Vineet Nayar, CEO of HCL Technologies, a global IT-services firm, published last year his book "Employees First, Customers Second: Turning Conventional Management Upside Down", it caused quite a stir. Nayar's mantra seems to reverse conventional business beliefs. In many companies, customer need is placed above all others - often at the sacrifice of employees. However, Nayar's seemingly counter-intuitive strategy even resulted in greater customer loyalty, better engagement and higher revenue for many years.The Fortune magazine even went to the extent of calling Nayar's leadership style "the world's most modern management style". And "Employee First" is a frequently-taught case study at Harvard Business School.But is this great concept really that new? Let me give you two examples of well-known companies who have implemented the "Employee First" - philosophy for many years.Herb Kelleher, the founder and former CEO of Southwest Airlines, believed from the very beginning in the "Employee First" - approach. He stated: "Years ago, business gurus used to apply the business school conundrum to me: "Who comes first? Your shareholders, your employees, or your customers?" I said, "Well, that's easy", but my response was heresy at that time. I said employees come first and if employees are treated right, they treat the outside world right, the outside world uses the company's product again, and that makes the shareholders happy. That really is the way that it works, and it's not a conundrum at all."Kelleher always stressed the point that competitors can buy tangible assets, but they can't buy culture. Southwest's "Employees First" strategy and culture made it the most successful airline in the US since decades.One more great example of a company that lives an "Employee First" philosophy is Starbucks. And again, it goes back to the founder and CEO of the company, Howard Schultz. He stated: "We built the Starbucks brand first with our people, not with consumers. Because we believed the best way to meet and exceed the expectations of our customers was to hire and train great people. We invested in employees."As in Herb Kelleher's case, Howard Schultz had realised that competitors can replicate Starbucks' products, but they cannot replicate the Starbucks people and the experience they give to customers. You might have noticed yourself when going to Starbucks that their employees make a great effort to connect with you, considerably more than most companies. Nevertheless, Starbucks seeks to connect first with its employees. Why? Starbucks knows that if employees are well taken care of, they will provide great customer service.I am also a strong devotee of the "Employees First" philosophy. During my 16 years at the helm of Merck Ltd, Thailand, we developed, implemented and vigorously lived our so-called "4 stakeholders - approach" centred around our core value "care". We knew how important people are for the success of a company. And the people that we considered the most important were our employees. Employees first!What our experience at Merck Ltd, Thailand had shown us was: If we take good care of our employees, they will take good care of our customers. Happy customers will buy again and again, which will generate profits for our shareholders. And happy shareholders will return profits to the society. In this way, everyone can be a winner.We had a wide range of measures for the benefit of our employees. From rather unusual things, like taking all 200 staff members to countries like Australia, Japan, Korea and Hongkong as a reward for the employees' contribution in particularly successful business years to smaller gestures like surprising newcomers to our company on their first working day with a flower bouquet.Some more benefits of our "Employees First" approach were:-to provide meaning and purpose to our employees through an inspiring vision and our 4 stakeholders approach-being part of a larger story, a winning team, giving a sense of achievement-open and respectful company culture offering personal growth and transformation opportunities-competitive compensation-flexible benefit plan-motivating modern office (including leisure area)-stable work place-great colleagues-fun-sports and leisure classes-employee volunteering opportunities, giving employees the chance to be "good citizens"-company outings (local and abroad)-long-term incentive plan (3 years) for all employees-a leadership team that is predictable in its actions and that can be trusted-regular communication events where the strategy of the company is clearly articulated and where company data like sales and profit are openly shared-regular sessions where employees have access to the managing director and the leadership team and where open and honest conversations are held

Putting employees first has proved to be a great recipe for success, not only for our employees, but for all our stakeholders. There were clear metrics in place to demonstrate that:a) for employees: employee satisfaction surveys (every six months), independent employee engagement studies by Gallup, employee retention rates, number of absenteeism days etc.b) for customers: customer satisfaction surveys (every six months), independent customer engagement studies with Gallup, customer retention rates etc.c) for shareholders: the usual financial figures like sales revenue, profit, return on capital employed, growth rates etc.d) for society: amount of donations, number of employees and customer volunteering days, accident-free operations in our warehouse etc.It shows the benefits of taking an ongoing, genuine interest in the well-being of your employees: if the employees come first, if you take care of your people, they will take care of you.

Heinz Landau is former chairman and managing director of Merck Thailand. He also writes a blog on caring leadership at www.thecareguys.com.


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