People before profit? Really?

Randal Weidenaar, organizational psychologist and the founder of VP Culture, was interviewed by performance consultant, Marshall Henley, President of Beza Performance in 2022. The discussion led to a question regarding organizational disruption when the primary focus is on valuing people vs. lagging indicators of performance, like financial results.

Click here for to start the interview at 13:34 where this question is asked .

The transcript of this portion appears below.

Marshall:

...

So, we've got clear, fairly well-established brain science [indicating] the way a lot of us were taught to manage (being based in the 50s and 60s science of behaviorism) … was sub-optimal in that it works, but it just doesn't work as well [as focusing on valuing people.] [You’re saying] we need to create a culture that values people. I think everybody would vote for that, right? I don't have any executives I work with that thinks that's hoo-ha.

So that part isn't disruptive, and you've got systematic approaches to transfer skill set to all of management, from the first line all the way to the executive, to be better at this stuff and really tap into that that serotonergic brain function.

But I think we should talk about the idea of disruption at this point (from another view): one of the things you and I talked about is there's a lot of people listening to this [who] are saying,

“But I've got to have financial performance to be sure, and that's got to be at least equal this ‘valuing people,’ right? I can say I value people, but if we don't make any money around here I don't have a job where I can value people. And if I own the business, I can't employ the people to value them if they if we don't make enough money.”

So, this is where I think it would help for you to sort that out a bit… ?if our viewers can kind of buckle in that would be that would be great.

Randal:

Sure, let's talk about it. Yeah, the disruptive nature of this… oftentimes people look at two pathways and they think well I've got this financial pathway and then I've got this [other pathway].

“Sure, I'll value people while I'm [focusing on results or profit]”… and when you lead your organization [that way], you're saying, “Hey, we're going towards this financial [or results] pathway, and, sure, along the way we might value people.”

What actually happens when we do the scientific and business studies is that that that [organizational] orientation towards [the lagging indicators like] financial [performance] starts to cause the financial [performance] to diminish, and here's the interesting point: (it's counter-intuitive)… when we put valuing people first, that the financial aspect follows in lockstep after it.

So… that… that's the radical kind of disruptive thing. If you want to pursue financial [performance] only you will [lessen] it; If you pursue valuing people first, you will actually optimize your business to gain more in the financial realm. It's just like that longevity study where we showed when you have that optimal state of human thriving then the other categories will up-regulate as well. So that's kind of a disruptive thought.

Marshall:

Well, I don't think it's that disruptive though, yet [what you’ve described so far]. I want to really dig into what I think is [so disruptive]. I don't know if you've conveyed it at the level that you're really proposing, and that is that it's not just a means to an end. You’re not saying, “A great way to get financial performance, which is the main thing we want, is to use these methodologies.”

You're actually saying (and this is the disruptive part as I hear it) that “Financial performance is a lagging indicator of [valuing people first], and ultimately, your highest value must be valuing people.”

This is where I lose a lot of folks because, you know… they spend their days with financial performance as a primary way they think about the business. Great leaders are always [concerned about] people… concerned about people being well-led and well-managed. I don't have anybody I work with that I consider [to be a] great leader [who disagrees with treating people well], but this idea that [valuing people] is the primary [value]… I think we’ve got to unpack that a bit for folks.

Randal

Sure, sure that is the disruptive part of it.

Marshall

It’s above goals and above financial outcomes, but [in that] it's synergistic with them, I guess.

Randal

Correct. That's the key understanding… that you have the synergy between [financial and other outcomes] and valuing people, [and] that is very tightly connected. But it's interesting. It's like killing the golden goose we were talking about that Aesop’s fable… it's short-term gains [thinking], if I want to get everything that I can out of [associates].

You could, you can pressure [associates] and devalue them and get suboptimal output [with short term gains], but then you're left with that one egg instead of a long-term process. If we want to, we can get into…? how that sometimes happens with some sort of robber baron private equity firms that go in and they dismantle the culture they put [undue] pressure on the employees so that they start to leave or retire quickly. So the [financial statement] show all of this profitability… but they're left with this shattered culture of a shell of a culture, and they sell it and it looks great [on paper, but] they walk away with bank but you've just dismantled a culture.

And so… sure, on paper this company looks great, but you've just demotivated [everyone]… ?you've sort of ripped out the operating system of humanity that is running the business and you know now you've left with a shell that's not going to be functional long term.

Marshall

So the operating [system of humanity]… I like that that term… the operating system of humanity is the serotonin cycle in your brain… I'm not familiar with the science as you are…. in your brain, it up regulates everything, it decreases fear.

I think everybody who's listening could say, “Yeah, if I had employees that told me… they honestly told me they love their job, and they can't wait to get to work, and they love the people they work with.” That would be a good thing, and it probably would affect financial output.

Randal

Exactly.

Marshall

So, do we have any evidence that that sort of impact… brain function wise… actually translates to the… as you would call them… lagging indicators of the organization. [Those indicators are] important… it's not that we throw them away. They're just lagging indicators behind this other thing that we're focusing [as first priority within] our value system.

Randal

Definitely. So a great way to test that is to look at actual case studies… business case studies.

I like to point to Southwest Airlines who's had this philosophy for a long time. They were kind of like forerunners of this philosophy. Herb Kelleher, who started Southwest Airlines, always had this “people first” kind of mentality… valuing people first in his culture. And he's just known for the culture that he created in Southwest Airlines.

It's also a great picture because they're not [in] this unicorn industry, [unlike] Tesla, who's just so far ahead in the technology that people are all playing catch-up now.

You know [Southwest] entered into a mature industry 60 years ago, and that industry has such a tight margin of financial success that… as an industry… [the industry has] posted a net loss in [the last] 50 years. It's a very tight… industry.

But in that 60 years [Southwest] as an organization has thrived… with that primary philosophy of valuing people first.

They have the highest output, the highest productivity, they're one of the largest airlines in in the world today. Most airports that you go to has a whole terminal just for Southwest. That's because they so dominate the market through [this valuing people] philosophy.

You and might ask, “So what does that [people first value] practically look like?”

Well, there's stories [at] Southwest Airlines where when they pull up to the gate and they're 10 minutes late, the pilot (these are all unionized groups so there's a pilot's union there's a baggage union)… the pilot will actually get out of his seat go down into the cargo hold and instead of saying, “Oh it was the air traffic controllers that made us late, and… you know… we're not going to make our numbers.” …he gets down on into the cargo hold and starts shucking bags with the other guys, and the gate agents start working faster and doing what they can to make up the time. And that's been the secret of Southwest Airlines that everyone is engaged in feeling valued and valuing their teammates.

And there's just story after story that's like that that makes a difference on the ground level where productivity starts to increase because that serotonergic happening in the [brain] has shifted those individuals into “GO!”… every moment of of their working life.

[Southwest Airlines is in contrast to the epidemic of] what Gallup calls “disengaged employees”… who actually “down rake”… the operating system [in their brain] says, “It's not worth living.” So that's being under-valued… they sort of slow down… they physically slow down, they mentally slow down and become less creative individuals, and as employees they just don't produce as much.

Marshall

So, we'll get into employee engagement in a bit because I know there's some studies that have been done [linking engagement to valuing people]. But, we work internationally, but because I'm based in St. Louis… [Beza had worked with Barry-Wehmiller where the former CEO and owner is] Bob Chapman… a guy [who has literally] put his money where his mouth is [in this area of valuing people]. So why don't you talk about…

Randal

Yeah, Bob has written a book called Everybody Matters, and his/their whole philosophy since the 70s has been putting people first. He inherited his business, but it was on its last legs when he got it, and then they injected this radical idea [of valuing people first] as sort of a last-ditch method for turning companies around, first starting with theirs, and with all the other acquisitions that they've done over the years.

They go into companies (they don't fire people), ?they employ their techniques of valuing people and they've had tremendous financial success by pursuing this people first mentality. You know they're a great example at Barry Wehmiller. [They don’t just employ] a knowledge based [workforce] mostly, they usually purchase manufacturing organizations, and so it's not just [knowledge worker] groups. but it's actually hard-working line workers and managers of that nature that can pull this off and can work in this kind of manner and create these kind of cultures that that cause businesses to thrive.

So… they go into businesses that are kind of failing and they turn them around and up regulate that operating system of humanity, because it's the people that run organizations and give life to them.

Marshall

I know Gallup did some studies. Why don't we why don't we get into that, because [Gallup’s data and analyses] actually indicate some actual return on these kinds of efforts.

Randal

Sure… you might be a lot of your people might be familiar with Gallup's study using the Q12 survey. They tried to quantify employee engagement, and then they've also done tremendous work because they have such a high rate of survey that they have a high statistical value their outcomes and they they show things like…

·???????? 22% greater profitability,

·???????? 20% greater productivity, and I think it's like…

·???????? 37% lower turnover.

And then, there's been other groups that have studied “What is their overall stock value.” Generally organizations that have engaged employees have 11 higher stock value than their competitors.

So, like I said, this starts to translate into financial outcomes that follow this this valuing people proposition. That's why it's so exciting for us to see this sort of disruptive idea come into management and practice of building cultures.

Marshall

So, if I were to take what you've said so far and summarize…

There's some solid brain science that’s established this serotonergic [process] in our brain, when it's activated, it actually provides huge benefits for our functioning. We become optimal, and those optimal states can be achieved by [associates within] well-run businesses through leadership [and management] practices that are teachable and measurable.

But… the hard part is… you're going to have to put valuing people [as your first priority]. Whatever that means [to your organization] (and it's a pretty complex picture of what that looks like, because it also means valuing your customers, valuing the people that are your stockholders, and other stakeholders). But, valuing people has to be in front of everything else. And that's the disruption. Most people aren't willing to take that step. But if they do [take that step], they're going to get everything else [like improved performance and financial outcomes].

Randal

The other the other point that Gallup made was very interesting because the people that you serve are actually part of the picture. They're like the community that you're working with. You’re engaging with them, you’re not just working in isolation from them.

And when employees are engaged, Gallup’s research shows that your [customers] become engaged, and [those organizations that are engaged in valuing people] will have a 23% greater share of wallet… those organizations that are engaged in that symbiosis between [customer] and engaged employees.

There’s something that crosses that barrier, that says “I feel valued by this organization” – they become fans of the organization. We all have brands that we [feel] like, “Oh you got to go to this place,” or, “You gotta you know [this company].” Word of mouth just can't say enough great things about certain organizations.

If you focus on valuing people first, you'll be that that organization… that everybody says, “Oh, that place has a great culture you got to go work there… everyone loves working there.” And that draws in employees… it even draws in clients so that 23% greater share is a result of this whole [culture] that's created by the operating system of being valued as a human being. It reciprocates even into the the consumer [and B2B] world.

VP Culture is engaged in leadership and culture development focused on "the one thing that motivates all people" - the brain science behind optimal human behavior and management practice.

Beza Performance consults, coaches, and advises world class organizations in strategy, leadership, S&OP, Toyota-style lean enterprise practice, analytics, all integrated into the a system of "executive-connected organizational disciplines."

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