Great Expectations

With one tool that makes job expectations crystal clear, MTW Corp. has figured out a way to turn the softer side of managing people into something concrete enough to act on.

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The case
Many managers reflexively brag about how people are their company's key assets. Yet in a business culture that lionizes Neutron Jack and Chainsaw Al, corporate words and deeds don't always match up. In managing for the bottom line, the human factor all too often gets pushed to the sidelines.

But Ed Ossie has built MTW Corp. around one vital element: a people-first culture. MTW's fortunes rest on how well its "stakeholders" work together. To ensure that they do work well together, the company crafts an "expectations agreement" with every employee who comes in the door. It's a document that's intended to promote clarity, honesty, and openness. When those qualities are in place, Ossie firmly believes, the company unlocks its workers' potential. Turnover at MTW is nearly one-fifth the industry norm. Revenue growth has averaged 50% a year for each of the past five years. Is a company like MTW what the new economy is really all about?

Getting religion
Ed Ossie had a long and distinguished career at Texas Instruments, putting in 19 years of hard work, during which he helped build a software business for the semiconductor giant. Ossie grew his division from a start-up venture to an operation with 1,500 people in 25 countries and revenues topping $200 million.

But success, as it often does, came at a price. Ossie flew 2 million miles for TI, racking up points with the airlines while running a deficit on the home front. In 1994, in the midst of fighting the corporate wars, Ossie saw his marriage fail, leaving him a single parent with a son in grade school. Even as he triumphed at the office, his life tipped off its rails.

But not long afterward, in 1995, Ossie connected with Dick Mueller, an IBM alum who had gone off to start an information-technology company, MTW. MTW provided software services mainly to insurance companies and state governments. Mueller wanted Ossie to come join him and run a business that would break the mold in the area of human relations. MTW's defining characteristic would be that people mattered above all else. Their needs and ambitions would guide the company's growth. They would form its competitive edge.

Ossie, now 46, joined MTW in January 1996 as its president and CEO. In March 1997 he took a sabbatical to attend an executive management program at Stanford's Graduate School of Business. There he met Jeff Pfeffer, a professor and the author of The Human Equation: Building Profits by Putting People First. Pfeffer's thesis was simple. While most companies professed to value their employees -- their "key asset" -- they rarely practiced what they preached. Managers told employees what to do instead of allowing decision making to rise from the ranks. Managers also rarely shared sensitive financial information with their workers. And at the first hint of a downturn, pink slips would fly. Pfeffer believed -- in fact, his research showed -- that when employees felt secure, empowered, and listened to, they not only worked smarter but produced higher returns for shareholders.

Jeff Pfeffer says that there's "an enormous body of literature on management practices" endorsing the value of those "softer" considerations, yet they're ignored by most companies. Why?

Pfeffer thinks that there's a "knowing-doing gap" in many companies. The result is that "memory becomes a substitute for thinking." In other words, things are done a certain way because they always have been. "Senior leadership doesn't really believe in this soft stuff," Pfeffer continues. "There's a commonly held idea that you've got to be mean and tough. Fear is abroad in the workplace. And that does not turn knowledge into action."

Pfeffer's ideas resonated with Ed Ossie. This was just the encouragement he needed to push the people-centered approach at MTW even further. When Ossie left Stanford he was fired up and ready to go back to work. Ossie, in fact, was so taken with Pfeffer's teaching that he asked Pfeffer if he would join MTW's advisory board. Pfeffer replied that as a consultant he charged several thousand dollars a day; MTW couldn't afford him. But he believed in Ossie -- and in his commitment to MTW's philosophy. So Pfeffer made Ossie an offer he couldn't refuse: he'd advise MTW in exchange for stock options for as long as Ossie took his advice.

Why guess, when you could know?
Jeff Pfeffer's options have increased in value by 350% since he began advising MTW, in 1998. That's not surprising, considering that since Ossie joined the company, its sales have increased from $7 million to nearly $40 million. Last year MTW's net operating income was more than 14% of revenues. During Ossie's tenure the head count has grown from 50 to 215, and the company expects to add another 85 people this year.

Ed Ossie believes that the bedrock of MTW's success is the "expectations agreements" that he and Mueller exchanged when Ossie joined the company. Crafting such a pact between employer and employee is a practice borrowed from Stephen Covey's The Seven Habits of Highly Effective People. It involves the articulation of both professional and personal goals dear to each party. In Ossie's case they included his making significant time in his life to be a good parent to his son. They also included a mandate to grow MTW's value by shifting its focus from simply providing technology services to also developing proprietary software that would fetch higher margins.

Ossie explains that the value of an expectations agreement is that it involves "empathic listening," in which each party articulates his or her goals and then has them repeated back by the other person. "People want to be heard, and if you can communicate to someone that you not only heard him but you understood what he said, that's the greatest affirmation you can give another person," says Ossie. "If we hadn't done this, we'd just end up guessing what matters to each other."

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