Employee Entitlement: You Need to Know Your Cart from Your Horse

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Apr 3, 2013

Second of two parts

I once had a client – a large commercial bank – whose managers were fond of urging employees to “run it like you own it.

Employees didn’t own it, of course — shareholders did. Some employees had equity holdings, but those accounted for a small percentage of the institution’s total shares.

What the managers wanted was for employees not to act like, well, employees. They wanted people to behave instead as if they had a larger stake in the prosperity of the company and therefore a greater responsibility to go beyond the minimum daily requirement of effort to serve customers and husband the assets of the organization.

Companies take a Dr. Jekyll- Mr. Hyde approach

Every organization that has either customers or assets wants employees to behave this way. But too few reward the performance of those who behave as true owner-proprietors. Companies want the Dr. Jekyll of employee dedication, while offering the Mr. Hyde of rewards.

Among respondents to Towers Watson employee surveys, about two-thirds say the company energizes them to go the extra mile. On the one hand, this score isn’t as bleak as some of the attitude numbers we see. On the other, it’s hardly encouraging that a full third of employees express skepticism about how well their companies inspire and reciprocate the investment of owner-like effort.

Employee skepticism goes deeper than just the disconnect between the behaviors expected and the company response. Only 58 percent of the employees in our survey database agree that their organizations do a good job of living up to the reciprocal deal made with employees when they joined the organization.

Ask yourself: are employees entitled to receive the deal they signed up for, or is there no such thing as a promise a company must keep? “Things change,” you say, “and we can’t always provide the same pay or benefits or job security.”

The rules for change management

If change is inevitable, then first follow the well-known general rules for effective change management:

  • Call on senior leadership to make a clear and compelling case for change.
  • Involve employees in shaping the direction for change and articulating the challenges the organization will face.
  • Provide people with the knowledge and skills they need to understand and respond to change.
  • Monitor employees’ responses to change and react accordingly.
  • Preserve as much of the reciprocal organization-employee bargain as possible.

It‘s worth considering the final point in its strong form: don’t change any rewards that are central to the organization’s strategy or its values.

“That’s naïve,” you say. “Sometimes maintaining profitability and shareholder returns require us to cut reward costs or lay off employees.” It’s certainly true that few leaders can withstand the pressure to go for short-term cost savings and tout those to shareholders as value-preserving actions.

Reconsidering investors

But some high-profile leaders think differently about the situation. In their organization’s 2004 Founders’ IPO Letter, Google’s Larry Page and Sergey Brin told shareholders (and employees) they intended to adopt a long-term management strategy that might reduce short-term returns on investment.

Employees, they said (they called them “colleagues”) “will be able to trust that they themselves and their labors of hard work, love and creativity will be well cared for by a company focused on stability and the long run.” They went on to say that shareholders should expect Google to “add benefits rather than pare them down over time” and that doing so would “improve (employee) health and productivity.”

Trust? Cared for? Long run? Sounds almost like … entitlement.

Of course, Google has its imperfections and it certainly strives to reward for performance. Company executives would bristle at the notion of an entitlement culture. But they are willing to make it clear to investors that they don’t intend to make near-term cost cuts that harm the very people whose creativity and engagement produce shareholder returns.

“But we’re not Google,” you argue. “We don’t have the resources and market cachet, let alone the market capitalization, to make and keep that kind of deal.”

Another lesson from Southwest Airlines

Fair enough – perhaps your company has lots of competition, a big base of fixed assets, a risky supplier market, heavy cost pressure or a fickle customer base. But if you face challenges like those, then consider Southwest Airlines.

In a Fortune magazine interview, Southwest Airlines founder and chairman emeritus Herb Kelleher said that his organization had never had a furlough or a layoff. “We could have made more money if we’d furloughed people during numerous events over the last 40 years, but we never have,” he said. Why? ”We didn’t think it was the right thing to do … I think it’s a product of your values and your philosophy.“

What do these two organizations have in common? Not much, except their enviable financial performance. And one other thing: the realization that they have two important classes of investors to consider.

Financial investors put their capital into these organizations and are entitled to expect a return on that investment. Employees are investors, too. They invest their personal human capital – knowledge, skills, talents and behaviors – in their jobs and in the organizations that employee them. Should they not also expect concern for the return on their investment?

Two questions you should be asking

Company leaders must understand that constantly shifting value from employees to shareholders ultimately undermines the interests of both.

Are employees entitled to this kind of consideration? That’s the wrong question. Here are two better ones:

  • Doesn’t the investment of discretionary effort by employees precede and produce return on investment for shareholders?
  • If we do a better job of defining, delivering and preserving the valuable deal we’ve promised to employees (at the risk of having them feel entitled to that deal), could we perhaps keep and engage good people and deliver the higher long-term returns our shareholders crave?

This is really nothing more than a cart-and-horse recognition test. Would your organization pass?

Miss Part 1 of this? Read Employee Entitlement: Why You Need to Beware of Self-Inflcited Wounds here. 

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