Specialty Medical Chemicals

Specialty Medical Chemicals, a company known for developing chemicals that bind together drugs so that they can be taken/ingested by people, provides a case where employees’ behaviors and attitudes are blamed for the company’s problems when it really comes down to systemic failures. 

In 1997, a headhunting agency brought in Carl Burke to be the new CEO of Specialty Medical Chemicals.  Burke’s background consists of working in sales and marketing positions within large pharmaceutical companies, such as Merck.  As the new CEO, Burke wants to get to know his people and the business of the company, he also came in with ideas about stimulating growth by moving in the biotech direction.  In order to get to know his people, Burke focused on his leadership team, which consisted of the six managers overseeing the different segments of the business.  Burke would try to have meetings with the team every Monday morning, where he would try to get the team to be collectively responsible for the company by encouraging them to debate about different aspects of the company.  The CEO’s was faced with resistance as each person only wanted to comment on their own area, not others.

Although Burke’s rhetoric suggested that he cared about his people, he wanted them to fit into his leadership style rather than taking the time to really get to know the team to adjust his style and capitalize on their strengths.  Instead, at the suggestion of the headhunting agency, Burke hired Laura Wells, a consulting psychologist to come in and analyze the six leaders.  Laura used several methods to extract information on the leaders and provided Burke with an analysis of their strengths, weaknesses, and recommendations for their positions for the future.

What Carl Burke fails to see is that the issue is not his people, but the system.  At Burke’s former company, the leadership team worked together to be accountable for all areas because the environment supported it.  To walk into a company and expect the leadership team to fit into this type of leadership style, which is obviously not what they were used to, in three months is unrealistic.  It is clear that the leaders at SMC were coming from a different place, evidenced by their personnel history.  When Burke investigated the personnal files/review process of the leaders, he discovered that although they had an elaborate process, everyone had been given high ratings, thus it is safe to assume that their former supervisor did not provide honest feedback about their performance.  If they haven’t been told how they are performing, how can Burke expect them to feel confident in commenting about their areas as well as the areas of others?  Open dialogue and sharing of ideas was obviously not encouraged under the previous CEO, so Burke is wrong to expect the leaders to fit into his mold of what leadership looks like.  Since most of the leaders don’t fit into Burke’s mold, his solution is to realign and possibly hire from the outside. 

Bringing in Laura Wells didn’t help the situation because her job is to analyze people, which puts the focus on the employees as opposed to the system.  What is interesting about Laura’s assessment is that she tested the leaders and then compared them to “Exec Norms.”  Where do these norms come from?  Who decides what is the norm?  How is this information useful?  Measuring cognitive and intellectual functioning implies that these things are fixed, but a good leader understands that this is a self-fulfilling prophecy.  If we believe that our cognitive ability is fixed, we do not strive to achieve seemingly unobtainable goals because we are already convinced that we cannot meet them.  If Burke uses this logic, his leaders really will never grow because they will not receive the encouragement that they need to challenge themselves to be more strategic. 

I think that Burke needs to throw these assessments out the window and sit down with his leaders on an individual level and get to know them.  Burke needs to understand why these people are there, what motivates them, and what he can do to improve the system.

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Motivation

Motivation in the workplace is something that can be driven internally or through the environment.  The following articles illustrate motivation in different ways. 

In the Wall Street Journal article, “Two Football Coaches Have a Lot to Teach Screaming Managers,” two NFL coaches, Tony Dungy and Lovie Smith are used as examples of leaders who do not scream at their employees as a way of getting things done.  Although it is commonplace, systemic even, in the NFL for coaches to yell at players who make mistakes, Dungy and Smith go against the grain by motivating their employees through respect.  Yelling might accomplish the same goal, but it motivates out of fear, which can eventually break down an employee’s self esteem making them less productive.  Letting a player/worker know they did something wrong, but in a more constructive way is a better way to help employees grow.  There are still a lot of managers out there today who still believe that yelling and belittling their employees is an effective strategy, however, over time employees will get tired of it and move onto another position rather than being motivated to assist the company in achieving its goals.

In a second Wall Street Journal article, “Get Healthy – Or Else,” Scotts Miracle-Gro Company has decided to implement a health initiative policy for its employees to curb rising health costs.  Being healthy is a personal decision and though it may seem like the company is looking out for the best interest of its employees, the motivating factor behind the CEO, Jim Hagedorn’s, push to instill this initiative is to pay less money for healthcare.  This places the burden on the employees when the real issue of rising healthcare costs lies within the system.  While these health benefits would be great if they were optional for employees, making them a part of policies where people can be fired or punished for not adhering to certain health criteria seems like a slippery slope.  Where does this sort of intrusion end?  It might start with losing weight or quitting smoking, but what would prevent the company from moving into other areas of employees lives that could potentially increase their risk of needing health services (i.e. skydiving, running marathons, promiscuous behavior, etc.)?  In addition, to the question of whether it is right or wrong to implement such a policy, the CEO’s methods for motivation are degrading and unfair.  Hagedorn slaps employees’ guts, teases overweight employees, and makes employees who do not participate/comply have to pay extra premiums.  The company said that it tried carrots, but that method of motivation was apparantly not effective so they decided to take a much more demeaning approach to motivate employees.

The final article, “Jesica’s Story,” comes from U.S. News & World Report.  This article tells about the series of events that led to the tragic death of 17 year old, Jesica Santillan due to a medical mistake that could have been prevented if the proper systemic checks and balances were in place.  The story begins with Jesica and her family illegally crossing the Mexican border, motivated by the thought of Jesica’s heart condition being treated by Duke University’s Medical Center, a leading transplant center.  Dr. James Jaggers is the surgeon who performed both of Jesica’s transplants, and the person where the blame fell when the flaw in the transplant system, not checking for a match between the donor’s blood type and the recipients, finally caused a mistake that could not be covered up.  Although Jaggers took he fall as the lead surgeon, it is hard to ignore the fact that there were five separate entities in three states that could have caught the error, but did not because the systemic checks and balances were not enforced.  It is undeniable that Jaggers let his split second decision, motivated by finding viable organs for Jesica, cloud his judgment, but this situation forced the hospital as well as the national organ transplant network to reevaluate their procedures to prevent something like this from happening again.

Southwest is All About People

While reading this week’s case study on Southwest Airlines, I kept finding myself waiting for that point in the story where they reveal that the idea of the Southwest family is just a myth.  That point never came.  In fact, the description of Southwest’s family was further exemplified in part B of the case where a group of students randomly interviewed several Southwest employees at their local airport.  Why is it hard to accept the notion of a company truly being good to its employees?  I don’t mean the occassional incentives for a job well down, but a top down, systemic type of culture that says all employees are major contributors to a company’s success, so it is important to value them.  This seems like such a common sense idea: if your employees are happy, your customers will be happy; so why isn’t this value more prevalent in companies?

Most companies I have encountered through work or as a consumer, seem to only care about their shareholders and the bottom line.  What they neglect to realize is that in order to reach that bottom line, they need to take care of the top line, which includes employees and customers.    At Southwest, they not only talk about how important employees are, they show it from the Leadership team throughout the organization. 

Unlike the CEOs of Southwest’s competitors, Herb Kelleher interacts with all levels of his employees on a regular basis, as well being described as someone who knows how to have fun.  Herb has also been known to dress up in drag and as Elvis at company parties/functions, which exemplifies the relaxed management style Southwest cultivates.  Colleen Barrett, an Executive Vice President at Southwest, has a culture committee involving 65 employees from all different areas that meets four times a year to discuss how to keep the Southwest spirit going.  The leaders at Southwest also participate in a program called “Day in the Field,” which requires them to spend one day every quarter working in a front line job.

In addition to having leaders who are not afraid to relate to their employees and make them laugh, Soutwest has several other policies that illustrate the value of its employees.  First, they changed the name of their Human Resources Department to the People Department.  Rather than taking a reactive approach to employee motivation, the People Department at Southwest works hard to support the company’s growth by supporting its people.  In addition, Southwest takes employee recruitment very seriously.  Employees and even customers are involved in the hiring process because Southwest cares more about fit than skills.  In order to maintain their corporate culture, it is important to hire people who share Southwest’s attitude.  Hiring people who fit into the corporate culture ensures a better match and lower turnover.  Finally, because Southwest believes in finding employees who fit in with its culture, training is of the utmost importance.  Southwest understands that employees who receive the proper training are better able to perform their jobs, stay in their jobs, and make customers happy.

All of these elements, though risky, have proved to be successful for Southwest.  The bottom line growth that Southwest saw from 1972-1992 is shocking.  Their focus on the top line had a remarkable effect on their bottom line, with only Walmart even coming close to being as good of an investment during that time.  Although competitors of Southwest, such as Continental and United, are looking to compete with Southwest by offering lower fares and shorter haul flights, employee satisfaction is low at these companies.  What Southwest understands that their competitors have not, is that happy employees are willing to go that extra mile for the company and customers.  Therefore, it is a cycle: the company takes care of the employee, the employee takes care of the customer, the customer takes care of the bottom line.  If Southwest continues to make its employees their priority, their continued success seems immanent, no matter what cuts in fares their competitors are offering.  Employee satisfaction leads to customer satisfaction, which is what keeps customers coming back again and again.  It also leads to lower employee AND customer turnover, which can be very costly for a company.  Thus, it’s better to pay the costs upront in employee care and training in order to reap the rewards later.

If more companies take the time and money/resources to ensure that the top line is taken care of, the bottom line will take care of itself and that’s enough to make any shareholder happy.

The Bottom Line.

The bottom line for any company is profit.  However, the strategies a company uses to reach that bottom line vary greatly.  One strategy that is increasingly gaining popularity is through employee engagement.  Although this may seem like a no brainer to some, a lot of companies believe that higher profitability is what makes employees happy rather than engaging employees by helping them achieve a work-life balance.  What experience and studies are showing is that happy employees lead to happy customers, which has a positive impact on the bottom line.

In Sue Shellenbarger’s article, “Rules of Engagement,” she explores the increasing strategy of employee engagement to increase satisfaction, which in turn increases profit.  In recent years, companies, such as Xerox and Acuity,  have made changes to their workplace policies, which include allowing for flexible hours, improved training, town hall meetings, etc.  These companies found that by encouraging their employees’ well being, it enabled employees to be more creative in their job by making processes more efficient and providing better customer service.  In other words, if a company takes care of its employees, employees will in turn take care of their customers.

In the second article, “To a United Pilot, The Friendly Skies Are a Point of Pride,” Captain Denny Flanagan, a United Airlines Pilot, is highlighted for going out of his way to provide excellent customer service to his passengers.  Although this is an individual effort to increase customer satisfaction as opposed to the systemic changes mentioned in the former article, it nonetheless points to the importance that quality customer service can have on customers.  What is interesting to note is that while United supports Capt. Flanagan’s efforts by reimbursing him for buying food for passengers, providing him with business cards, and prizes for on flight giveaways, the company has not made these efforts part of their corporate culture.  Instead, an executive from United Airlines states that he “hopes” other employees will follow Capt. Flanagan’s lead. United Airlines is missing the message behind the positive buzz that Capt. Flanagan receives on websites, such as FlyerTalk.com, where passengers discuss their experiences.  When employees go out of their way to provide excellent customer service and employee creativity is encouraged, customers will return.

This makes me think about my experiences as a consumer and an employee.  As a consumer, customer service is extremely important to me.  I will not return to or give my money to stores and companies who do not value me as a customer no matter how fantastic their product is. 

As an employee, if I do not feel valued by my company, I am less likely to be productive.  I think the thought behind this lack of motivation is, “why should I invest myself into a company that doesn’t invest itself into me?”  Of course I will go and do my job, but going above and beyond that requires a relationship of mutual respect.  If you value me, I will do whatever it takes to help the company succeed. 

The bottom line is that profit may be the bottom line, but companies should not be so quick to forget that employees and customers are the essential ingredients to any company’s success.

Can We Train Ourselves to Become Smarter?

In Bob Sutton’s blog, “Work Matters,” he presents the idea that cognitive ability is malleable and that if people believe in the malleability of intelligence actually work to become smarter.  I do agree that as managers we should be promoting this notion that intelligence is something that can be worked on rather than some innate ability that is fixed and unchangeable.  Promoting the idea that intelligence is stagnant provides little to no motivation for people to continue learning, which is a sad thought because if we can’t learn then we can’t grow.

Similarly, Carol Dweck’s article, “Can Personality Be Changed?”, discusses the notion that although there are some aspects of personality that cannot be changed, there are also many facets of personality that are flexible and can be changed.  Personality is shaped by beliefs, thus a change in one’s beliefs can have an impact on one’s personality. Therefore, if people believe that intelligence is not fixed, they are more willing to learn to increase their cognitive ability.

I’ve been in work environments over the years where people were aware of the low expectations managers had set for them, so they had low expectations of themselves.  I think when people are taught that intelligence is fixed, they figure there is nothing they can do about so why bother.  This attitude has the effect of stunting one’s desire to learn.  Instead they convince themselves to be happy with the status quo because that is all they are capable of achieving.  I do believe in the power of motivation and I think promoting the message  to employees that they can increase their intelligence through continued learning serves as a motivator that if they are willing to learn they can become smarter even if it involves some initial failure.

The bottom line is that if we do not set high expectations of ourselves and others, then what is the incentive to try to reach and even exceed those expectations?