Leaders of good companies aspire to create workplace heavens. Leaders of workplace hells face more daunting challenges, and many will be lucky to achieve purgatory. But how do you reform a bad culture? We asked Jeffrey Pfeffer, a professor of organizational behavior at Stanford's graduate business school and author of The Human Equation: Building Profits by Putting People First.
How do you know your culture is sick? Turnover is an obvious indicator. What else?
If you have any sensitivity—and many bad leaders don't—you can tell from the energy. How do you know the people at United Airlines are unhappy? They don't smile. How do you know they're having fun at Southwest? They smile. They laugh. There's positive energy. You can tell a lot about culture just by reading facial expressions. Are people scowling? Avoiding each other? Avoiding you?
If you have built a toxic company, and you want to reform, what changes must you make in how you lead?
First, you need to decide why you want to reform. The reason should be that companies with engaged work forces actually do better. Companies with loyal customers outperform their competitors. And loyal customers come from having loyal employees, who want to provide a high level of service and creativity. When you understand that you really do achieve competitive advantage through people, the rest follows.
Every time you make a decision, ask yourself a very simple question: Is this decision consistent with the view that people are the most important differentiator in my organization? If the answer is yes, you are doing the right thing.
How do you demonstrate to your downtrodden, cynical staff that you are serious about change?
You begin by giving them a credible story about why things are going to change. That's why it's so important to understand your own reasons for reforming. Tell them exactly how things will be different, and give them permission to hold you accountable for progress.
I had a friend who turned around a big paper plant. It was a horrible workplace. My friend came in and said, "We're going to work in a different way." And everyone said, "Yeah, right." But then the workers came to him and said, "The employee parking lot is crappy. It's unpaved. When it rains, it gets muddy. Will you pave the parking lot?" My friend called headquarters and said, "I need money to pave the parking lot." And corporate said, "We sent you down there to turn around the plant." And he said, "I've told them we're working in a different way and that I care about them. I have to fix the parking lot." So he did. And it was the first step of a real turnaround. If employees matter, should they be sloshing through a quagmire when it rains? No. Most companies have some version of an unpaved parking lot. Fix it and prove that you care about your work force.
It takes time and effort to heal a sick work environment. Are there things you should do quickly to lay the groundwork? More-flexible schedules? Increased vacation days? What will make the biggest difference?
I disagree that it necessarily takes a long time—not if you genuinely commit to doing it. That said, there are a bunch of practices that work in companies of all sizes. One is to let people make decisions. Two is to share the economic results with employees, through profit sharing or gains sharing. Three is to share information. Secrecy breeds fear. It also signals to people that you don't trust them or think they are competent to use the information. Give people data. They can't make decisions without data.
Four is to invest in people. Spending money on training is a great way to say, "You are important to me." For example, the retail worker in the United States basically gets treated like shit. Nobody invests in training. Then there's George Zimmer of Men's Wearhouse, who puts his wardrobe consultants—notice the title—through four days of training at Suits University. I sat in on Suits University for a case study. There were about 35 people in the room. And by the end of the first morning, after they'd heard about the culture and how important they are and how they are consultants—they were sitting up in a different way. They were feeling better about themselves. By the end of four days, they were like the Marine Corps of suit sellers.