The Magnetic Advantage

by Pascha Kelley

  During the early stages of Chick-fil-A’s growth, Truett received a lot of pressure to do away with his closed-on-Sunday policy. In fact, Chick-fil-A was rejected by several malls. I’m sure that a lot of people told him how much more money he could make if he would open on Sundays. However, Truett remained true to his values – and to his people. Pretty soon, it became known to mall managers that Chick-Fil-A produced as much sales revenue in six days as the other food chains did in seven days. In fact, Chick-Fil-A frequently had the highest volume sales of all the tenants in the food court! (Turner, 2015)

  In Dee Ann Turner’s book, It’s My Pleasure — The Impact of Extraordinary Talent and a Compelling Culture, she says “Truett was often asked if he had calculated how much sales he lost by being closed on Sunday. He always responded that he was more concerned with how much sales he would have lost had he remained open.” Despite being closed on Sundays, Chick-fil-A is the top selling quick-service chain in the U.S. and exceeds their nearest competitor by generating twice the average restaurant sales. (Turner, 2015) Truett Cathy created competitive advantage by putting the needs of his employees first. He stood strong in his values and reaped the rewards.

  People are truly the most important asset of a company, so learning strategies to enhance that asset is critical to creating competitive advantage. The strategies that I will provide in this book are not for those afraid of change or lacking in moral character. The workforce has changed drastically in the past several years, and companies who are not willing to adjust to the needs of this new workforce will be left behind. Additionally, due to the rapid development of technology, the workforce will continue to change quickly. Business leaders who can adjust quickly, while holding true to their values, will be able to create competitive advantage in this new landscape. The best employees will go to and remain with the companies that understand what their employees really want and that are willing to meet those needs.

  WHAT PEOPLE REALLY WANT

  For more than forty years, Ziglar, Inc. has researched what people really want in life. It found that there are eight things that everybody wants (Ziglar, 2012):

  To be happy

  To be healthy

  To be reasonably prosperous

  To be secure

  To have friends

  To have peace of mind

  To have good family relationships

  To have hope

  You will notice that only one of these specifically lists money (reasonably prosperous). The others are non-financial. Business leaders frequently believe that employees are only interested in the financial rewards of work, but people’s needs are much more complicated. Leaders who understand this seek to understand the true desires of their employees and meet those needs as best they can.

  You can have everything in life that you want if you will just help enough other people get what they want.

  – ZIG ZIGLAR

  Zig Ziglar truly understood the importance of getting to know people and finding out what they really want. I think that Zig’s philosophy, “You can have everything in life that you want if you will just help enough other people get what they want,”(Ziglar Z. Z., 2012) is the heart and soul of good people management. Helping employees get what they want will eventually lead to the business getting what it wants – long-term success.

  CHAPTER 2

  The Power of Employee Engagement

  “EMPLOYEE ENGAGEMENT” HAS BECOME A buzz phrase in business over the past few years. However, most people don’t really understand what engagement means. Forbes defines employee engagement as “the emotional commitment the employee has to the organization and goals.” It is NOT employee satisfaction or happiness. Engagement is about a bone deep commitment to the company. Engaged employees are willing to go the extra mile. They have good attitudes and are willing to work as part of the team to accomplish goals.

  According to Dale Carnegie Training, engaged employees have four traits:

  Enthusiasm – Employees who are engaged are enthusiastic about work.

  Empowered – Employees are allowed to do the work their way.

  Inspired – Employees are motivated by their leaders.

  Confident – Employees are sure they can achieve success.

  Wouldn’t you like to see these qualities in your employees? What would that mean for the bottom line of your company?

  Companies with engaged employees outperform those without engaged employees by up to 202%.

  – DALE CARNEGIE TRAINING

  A study by Dale Carnegie Training found that companies with engaged employees outperform those without engaged employees by up to 202%.

  In Gallup’s 2016 State of the American Workplace survey, they found that businesses with an engagement strategy have better business outcomes. In fact, those that scored in the top quartile of employee engagement have nearly double the odds of success when compared to those at the bottom of the quartile.

  When compared with companies in the bottom quartile of engagement, companies in the top quartile showed improvements in the following areas:

  41% lower absenteeism

  24% lower turnover (high-turnover organizations)

  59% lower turnover (low-turnover organizations)

  28% less shrinkage

  70% fewer safety incidents

  58% lower patient safety incidents

  40% fewer quality defects

  10% higher customer metrics

  17% higher productivity

  20% higher sales

  21% higher profitability

  These findings show the significance of having an engaged workforce. What if your business could experience even one of these factors (e.g., 20% higher sales) with an employee engagement strategy? Would you be willing to create and implement such a strategy?

  Business leaders who truly understand the impact of engaging their workforce, and create and implement engagement strategies will be able to outpace the competition. You see, even though “Employee Engagement” is a buzz phrase, not all business leaders can accomplish this because they simply can’t or won’t acknowledge the importance of meeting the needs of their people. I believe this is due to self-centeredness, an unwillingness to really connect with people, and a lack of a moral compass.

  Those leaders who are able to get the “people” thing right have a long-term advantage over those who do not. Doug Conant is an example of a leader who gets it. Doug has turned around several companies including Nabisco Foods Company, Campbell’s Soup Company, and Avon Products. You see, Doug discovered the secret to advancing stakeholder value: employee engagement. Doug’s motto is, “To win in the marketplace, you must first win in the workplace” (conantleadership.com). Doug says that achieving high employee engagement was the primary reason he was able to turn around these struggling companies.

  We’ve discussed the upside of engagement. Now, we need to look at the implications of not having an engaged workforce. The Dale Carnegie Training study also revealed that 71% of employees are not fully engaged. Disengaged workers are typically less productive and tend to leave. In the next section, I will discuss the high cost of employee turnover.

  CHAPTER 3

  Cost of Employee Turnover

  EMPLOYEE TURNOVER HAS A HIGH cost to the company, and that cost has risen significantly over the past several years. This is due to millennials being the largest segment of the workforce, and they generally only stay at a job for one year. Plus, as mentioned above, employees simply have more choices now as there is a low supply of and high demand for skilled workers.

  The employee turnover rate is calculated by dividing the number of employees who have left the company by the total number of employees. For example, a company had 7 employees who left, and the total number of employees is 100. The turnover rate is 7% (7 ÷ 100). This rate is ge
nerally calculated on an annual basis using the total number of employees on January 1 divided by the total number who left the company during the entire year.

  $11 billion is lost annually due to employee turnover.

  The higher the turnover rate, the higher the cost to the company. A study by Dale Carnegie Training estimates that $11 billion is lost annually due to employee turnover.

  The cost of employee turnover includes the direct financial expenses, which are fairly easy to calculate, and the soft costs such as loss of productivity, time, and opportunity. Because of the difficulty of assigning a cost to some of these expenses and loss of revenue, it is challenging to determine the exact cost of employee turnover.

  There are many theories on how turnover costs should be calculated, but there is not a standard way of calculating the cost of employee turnover. However, all experts agree that the cost of employee turnover is high, even using the most conservative calculation methods.

  Turnover costs are generally calculated as a percent of salary. The percentages vary widely. In researching the topic, I’ve seen the costs reported as low as 33% of salary and as high as 400% of salary. The most commonly used measurements seem to range from 50% to 200% of salary. To give you an idea of the costs, I’ve provided an example below of the turnover costs for several different salaries at 50%, 100%, and 200% of salary.

  The reason turnover cost is so hard to pin down to a certain percentage of salary is because every job and employee are different. The actual cost of turnover for one employee depends on several factors, including but not limited to:

  Availability of talent in the marketplace. Jobs that are in high demand and low supply will cost more to recruit (e.g., advertising, recruiting services) and take longer to find a replacement. Incidentally, these jobs generally demand a higher salary.

  The higher the job level, the greater the costs to replace an employee. Generally, the greater the skill level, the longer and more expensive the recruiting process.

  The cost for those employees who leave involuntarily (i.e., fired) is generally greater than for those who leave voluntarily. When an employee is fired, the company may be required to pay out a severance package and other payments. The most expensive payments are given to executives. Frequently, executives have employment agreements with fat severance packages that require a payout of hundreds of thousands to millions of dollars upon termination. Ouch!

  Sign-on bonuses may be needed to hire a replacement.

  The time the position is left vacant impacts the costs. The longer the position is left open due to workload of those recruiting or difficulty in finding the right candidate, the greater the cost of turnover.

  Onboarding and training costs are greater for highly-technical jobs. They take longer to train because of the highly technical needs of the job. Plus, it takes longer for the new employees to become proficient at the job and reach full capacity.

  There is also the cost of lost opportunity, which is greatest in sales, marketing, and customer service jobs.

  As you can see, there is a wide variety of costs, which are difficult to place a price tag on. Any way you calculate the costs of turnover, they are costs that you want to minimize to achieve competitive advantage. There are many ways to minimize these costs.

  The Work Institute conducted an extensive seventeen-year study on why employees leave their jobs. This is reported in the 2017 Retention Report – Trends, Reasons and Recommendations by Lindsay Sears, Ph.D. The study involved interviewing 240,000 former employees to find out the real reasons they left their jobs. The Work Institute published the following top 10 reasons that employees left their jobs:

  Career Development (22%): Opportunities for growth, achievement, and security

  Work-Life Balance (12%): Travel and scheduling preferences

  Management Behavior (11%): Positive and productive relationships

  Compensation & Benefits (9%): Total rewards promised and received

  Well-being (9%): Physical, emotional, and family-related issues

  Retirement (8%)

  Involuntary (8%)

  Relocation (8%)

  Job Characteristics (7%): Ownership and enjoyment in manageable work

  Work Environment (6%): Physical and cultural surroundings

  The good news is that most of these reasons are largely preventable, meaning that companies can shore up the areas that are leaking. I’m not saying that the leaks can be completely closed, but the leakage can be significantly reduced.

  The Work Institute emphasizes the importance of knowing the unique needs of your workforce. Their research found that while there are common reasons across companies for turnover, the mix of reasons and priority of those reasons for each company they studied was different. For example, the top three reasons for companies A and B might look like this:

  Company A

  Work-Life Balance

  Career Development

  Well-being

  Company B

  Career Development

  Job Characteristics

  Management Behavior

  Therefore, effective retention strategies for Company A and Company B would be different.

  What this means for you is that you need to dig in and understand your workforce. Identify the real reasons employees leave your company and where the opportunities lie for you to reduce your turnover costs. Then create and implement your strategies. Don’t just take these top 10 reasons and start implementing programs. The Work Institute’s top 10 reasons is a good place to start in uncovering the underlying problems.

  Being able to contain turnover costs is not only a competitive advantage, it is now necessary in today’s employee marketplace to retain profits.

  Further, The Work Institute reports that making even small investments in the areas where a company is lacking can have a big impact on the company. In the study, they give an example of a company that invests $100,000 in retention strategies. Assuming a very conservative turnover cost of $15,000, retaining just seven employees would pay for the investment. When you consider implementing new programs in your company, make sure that you are looking at the return on investment – not just the investment.

  The Work Institute’s study concludes, “Being able to contain turnover costs is not only a competitive advantage, it is now necessary in today’s employee marketplace to retain profits.” (Sears, 2017)

  Hopefully, by now you are convinced that employees are truly your greatest asset, and you need to make people management part of your overall business strategy. So, where do you start? It all starts with leadership.

  CHAPTER 4

  Characteristics of a Magnetic Leader

  IT TAKES A CERTAIN KIND of leader to create an engaged workforce. I call these people “Magnetic Leaders.” These leaders walk the talk, and expect more of themselves than they do of others. They lead by example, and they are respected and trusted by their employees—not because these things are demanded by the leader, but because they are earned.

  In Zig Ziglar’s book Born to Win, he gives six personal qualities that are the “foundational stones” of success: honesty, character, love, loyalty, integrity and faith. I believe that they are also foundational qualities of a Magnetic Leader.

  Zig explains that these foundational stones provide the basis for making the right decisions that ultimately lead to sustained success. He says that success is found inside the person, not in the job. Many people think that having a fancy degree(s) gives them a foundation for career success, but it is a person’s character that ultimately determines how far he or she will go.

  I love what Jack Welch says about integrity in his book Winning,

  …integrity is just a ticket to the game. If you don’t have it in your bones, you shouldn’t be allowed to play.

  (Wel
ch, 2005)

  I’ve seen many bright and well-educated people come into our company only to be let go later due to a character flaw(s). What a waste of talent! I also know people who have thriving businesses who do not have a college degree, but they have good character. You see, being a Magnetic Leader starts with having a heart for people and the willingness to do the right thing.

  Charlie Wingett, Scandipharm’s founder whom I referenced earlier, was someone who modeled these foundational stones. One year, the company did not meet its revenue numbers, and the board of directors would not give the employees even a partial bonus for the year. Charlie felt so badly about this that he gave some of his personal stock in the company to each employee! That act of generosity had a profound effect on me and my view of leadership. Now, I’m not suggesting that leaders give away their personal stock. I use this example to show the heart of a Magnetic Leader.

  Magnetic Leaders can be found at all levels of the company. Beyond the foundational stones described above, here are some other characteristics such leaders have in common:

  They have the courage to do the right thing in all circumstances.

  They are genuine and authentic.

  They have an attitude of gratitude.

  They see the big picture and think strategically.

  They are able to find the root causes of problems, instead of just looking at the symptoms, and they create effective solutions.

  They are able to create and communicate the vision for their company or area.

  They are excellent two-way communicators; they give and receive information well.