The Performance Improvement Blog

Starbucks Uses Training for Strategic Advantage

On February 26, employee training, usually relegated to second-class citizenship in the business media, came out of the closet. Starbucks (See Howard Schultz's letter.) closed its 7100 U.S. stores for three hours to retrain its employees in the art of coffee-making. Of course, Starbucks milked the public relations and marketing value of the event, making a big splash in the mainstream news. The Washington Post described the event as “part espresso tutorial, part pep rally.” Regardless, this event was an impressive investment in performance improvement. And it had its risks, too. Other coffee establishments used the opportunity to expose coffee-starved Starbucks customers to their own products.

The next day, Starbucks stores posted the following message: "Your drink should be perfect, every time. If not, let us know and we'll make it right." Clearly, this message was being publically linked to the previous day’s employee training program. The implicit message is that, because of employee training, customers should expect a better and more consistent product. This intentionally or unintentionally positions training as a critical tool for business success.

One, three-hour training event is helpful, but it is far from sufficient. Starbucks, and any company that has repetitive services, must continually guard against the “complacency syndrome” (See my blog post from 11/21/07.). Over time, all employees continue to need training and retraining. Companies don’t necessarily have to close down for three hours nor do they have to remove learners from the workplace, but they should continually use a variety of formal and informal ways to remind employees what they have already learned as well as instruct them in new knowledge and skills. This is how training becomes a strategic advantage.

What's Your ROP?

In an article in Harvard Business Review (March 2004) titled “How’s your Return on People?”, Laurie Bassi and Daniel McMurrer report their research showing that publicly traded companies that spend about twice the norm on employee training and education, outperformed the S&P during the years 1997 to 2001, and then again in the period from 2001 to 2003. They wrote that their study is in line with…

…a growing body of empirical research showing that organizations that make extraordinary investments in people often enjoy extraordinary performance on a variety of indicators, including shareholder return.

Bassi and McMurrer published another article ("Maximizing Your Return on People") in HBR in March 2007 summarizing their studies of human performance factors that predict organizational performance. They wrote:

When we researched the key HCM [Human Capital Management] drivers of organizational performance, we found that most traditional HR metrics—such as employee turnover rate, average time to fill open positions, and total hours of training provided—don’t predict organizational performance.

According to their studies, key HCM practices that do predict organizational performance include among others: managers eliminate barriers, provide feedback, and inspire confidence; work is well organized and taps employees’ skills; job-related information and training are readily available; high performance is expected and rewarded; employees have formal career development plans; and leaders demonstrate that learning is valued.

Through these two articles, Bassi and McMurrer have made an important contribution to improving performance of people and organizations by offering valuable tools for measuring HCM. However, missing is an explanation of how and why these indicators make a difference in each organization. I think we have to look to stories for an understanding of the link between HCM and increasing or decreasing performance. We need to create narratives around the actual events that link a specific management practice to high performance and then to improved strategic outcomes in an organization. We know there is a link; now we need to explain that link.

Embrace Diversity

Global companies are discovering cultural diversity in the workforce. According to BusinessWeek’s “Davos Special Report” on “Managing the Global Workforce”, companies are realizing that to attract and retain employees around the world, they must adapt their methods and procedures to what is culturally appropriate. For example, ITT employees in Shanghai showed their displeasure with being rated anything less than five on a five-point performance scale by not talking to their bosses or quitting their jobs. And in the democratic workplaces of Scandinavia, the idea of bosses rating workers was resisted by employees.

I find it fascinating that it has taken the demands of trying to survive in other countries to finally make U.S. business leaders pay attention to cultural differences and be willing to embrace these differences. James Duncan, Director of ITT Talent Development, said that people from all cultures just want to be “treated like an adult.” This has always been the case, whether companies are domestic or global. Cultural differences have always existed within all organizations and workers have always wanted respect. The point is that managers should not assume that every employee learns in the same way, wants to be managed in the same way, or will react to change in the same way. This is true even within groups defined by gender, ethnicity, or economic status. All people are the same in some ways and all people are different in other ways. Companies ignore these differences at their own peril.

Thinking Differently

How do people (front-line employees to C-level executives) learn in organizations? This is a question I have been thinking and writing about for years. Structured, leader-centered training and development programs are the usual default when individuals and groups need to enhance their knowledge and skills. These programs might be necessary but they are not sufficient. A recent issue of Bnet.com reminded me of a critical element: a learning mind-set. That blog cites a 2003 article by Jonathan Gosling and Henry Mintzberg in Harvard Business Review that indirectly contributes to our understanding of the dimensions of this way of thinking. Those authors were not talking about organizational learning per se, but I believe that their “Five Minds of a Manager”, represents the thought-process that all employees (non-managers as well as managers) need for continual learning in organizations. These mind-sets, as described in Bnet.com, are:

A reflective mind-set allows you to be thoughtful, to see familiar experiences in a new light, setting the stage for insights and innovative products and services.
An analytical mind-set ensures that you make decisions based on in-depth data--both quantitative and qualitative.
A worldly mind-set provides you with cultural and social insights essential to operating in diverse regions, serving varied customer segments.
A collaborative mind-set enables you to orchestrate relationships among individuals and teams producing your products and services.
An action mind-set energizes you to create and expedite the best plans for achieving your strategic goals.

A reflective mind-set and action mind-set are essential for learning. Reflection makes information and skills relevant and meaningful to the learner and action is the evidence that learning has occurred. But we can’t reflect without the feedback that comes from an analytical view of all of the various forms of data that bombards us throughout the day (analytical mind-set). And that data must be seen within the context of our world today, one that is diverse in backgrounds, cultures, ideas, and styles of working (worldly mind-set). Finally, a collaborative mind-set is what exposes us to new and better interpretations of information and helps us decide the best course of action.

Ask And You Shall Learn

A key factor in effective leadership development programs is the conversation that leaders have with their bosses and co-workers about what and how they need to improve. These conversations work best when they happen both before and after the training event, whether that’s classroom-based, online, executive coaching, or any other kind of structured learning experience. It’s the feedback and reflection that comes from conversations around leadership improvement issues that drives change in the leader.

Marshall Goldsmith says that leaders today need “learning agility”. He defines this as the ability to continually learn from others. He argues that leaders in the future cannot possibly know all that they need to know – either about themselves or the business. They need to get that information through interaction with others. Goldsmith quotes Peter Drucker: “The leader of the past knew how to tell—the leader of the future will know how to ask.”

Goldsmith and Harry Morgan in an article titled, Leadership is a Contact Sport, report on a study of leadership development practices in eight major corporations involving 11,480 managers. They conclude:

Time and again, one variable emerged as central to the achievement of positive long-term change: the participants’ ongoing interaction and follow-up with colleagues. Leaders who discussed their own improvement priorities with their co-workers, and then regularly followed up with these co-workers, showed striking improvement. Leaders who did not have ongoing dialogue with colleagues showed improvement that barely exceeded random chance.

Clearly, learning-focused conversations between learner and co-workers (and boss) makes the difference. I have found the same results in my evaluation of the impact of leadership development programs in a wide variety of organizations. However, most organizations continue to invest millions in training events and next to nothing in the preparation and followup that should accompany all leadership development programs.

Managing for Success

Managers who want to create high performing organizations can easily become overwhelmed by the hundreds of leadership qualities that the literature would suggest they should possess. However, actual workplace behavior indicates the need for a much narrower focus. I know from my own evaluations of employee training and development programs that a few competencies keep emerging as key to employee performance improvement. Now, a meta-analysis of studies of managers and employees supports this observation.

Jim Trinka, Chief Learning Officer for the FBI, examined a number of large scale surveys of manager effectiveness and employee performance in government and the private sector. Included in his review were studies by Corporate Executive Board’s Learning and Development Roundtable, the Gallup Q12™ analysis of responses from over 80,000 government employees, an Accenture survey of 1,000 CEOs, and a survey of 1,000 managers in one government agency. He concluded that managers don’t need to learn everything, only a few targeted behaviors. Trinka makes a compelling case for focusing managerial learning on improving “…performance management, employee development, and communication.” He wrote:

The results clearly show that managers have a much better chance of vastly improving employee performance by targeting their efforts on a much smaller list of activities. In fact, managers who set clear performance standards, become more knowledgeable about employee performance, and provide fair and accurate informal feedback on performance strengths can significantly improve individual performance.

This conclusion is quite significant. It means that to achieve performance improvement, managers don’t have to learn everything there is to know about leadership nor do they have to develop an elaborate performance evaluation and review system (categories, rankings, etc.). All they need to do is create a culture in which they pay attention to the strengths of their team members and, on an ongoing basis, communicate clear expectations for building on those strengths. It is this communication between managers and the people they supervise that will achieve important business results for the organization.

Whose Got Talent?

The McKinsey report, “Making Talent A Strategic Priority”, based on a November 2007 survey of business leaders, concludes that the most significant global trend affecting their businesses is the competition for people who can help them achieve their strategic goals. The report argues that demographic factors (primarily the retirement of baby-boomers and low number of qualified people entering the workforce) are creating a situation in which it is becoming more and more difficult to recruit, motivate, and retain talented employees. The solution, they suggest, is to be more strategic about developing people throughout the organization. The authors write:

Companies must therefore address the needs of talent at all levels of the organization. Unsung segments—frontline staff, technical specialists, even the indirect workforce, such as people who work for suppliers, contractors, and joint-venture partners—are often as critical to overall success as A players. Experience suggests that an exclusive focus on top players can damage the morale of the rest of the organization and, as a result, overall performance.

I agree, but I would go further in saying that these leaders should assume that everyone in their organizations has “talent” or the potential to be talented. The problem is that they can’t know what someone might contribute to organizational success based on an annual, perfunctory performance review, which is the typical MO of most companies. The typical worker doesn’t know how she/he fits into the future of the company, how her/his role is viewed by management, and what she/he needs to do to become a successful player in the wider organization. These gaps in information must be addressed first before you can match the right people with the right tasks. Not everyone will become a star, but everyone can help illuminate the path to organizational success.

What's the attraction?

Do employee training and development programs make a difference when recruiting and hiring employees? Tamara Erickson, President of the Concours Institute, thinks so. She says in the December issue of T+D in an article titled The Future of Learning and Work:

Learning will be an absolutely critical element of organizations’ abilities to attract and retain top talent. First, the opportunity to learn is the number 1 factor that younger workers consider when selecting an employer. Companies that can offer a broad-based learning program have a serious recruiting edge over firms with less robust programs.

However, other evidence appears to challenge this belief. A March 2007 online survey of 3,152 full-time, employed adults conducted by Harris Interactive on behalf of Spherion and reported in Workspan Magazine, asked respondents to rate the importance of eight different “drivers of retention”. Whereas in a similar 1999 study, “training and development’ came out as one of the top drivers, the 2007 study had “financial compensation” and “benefits” on top and “training and development” last among the eight. Retention is not the same as recruitment and training and development was still considered important by nearly half of the survey respondents, so the survey doesn’t necessarily contradict Erickson’s comment. I believe that the opportunity to learn and advance is still a major motivator for “Millenials”and “GenXers”, but, given the economy and the shifting way that companies view their loyalty to employees, compensation and benefits, especially health care, may have become stronger motivators than the opportunity to learn.

High Tech/Low Impact

According to the latest hype, all of your HR problems can be solved by installing a state-of-the-art LMS, TMA, HCM, or ERP. This is the message from an article in December T+D titled, Holistic Skills Management Comes of Age, promising software that can solve all of your performance management problems. Apparently, if you have the right application you will make quality hires, identify and close skills gaps, connect learning and development programs to key business objectives, identify high potential leaders, do succession planning, and connect pay to performance. The author writes:

The era of disconnected HR silos is officially over. Organizations can now create a true performance-driven culture by integrating the practices that attract, manage, develop, motivate, and retain key employees.

Wow! I wish it were so. I really wish technology could do all of that. I think most organizations have a few human problems to solve before they can use these kinds of systems effectively, starting with getting people to talk to each other. I find that most managers still don’t talk to their direct reports about their careers nor do managers actively help their direct reports with performance improvement. Managers don’t give employees the feedback they need to succeed in the organization. Work cultures don’t encourage cross-department sharing of information. Employees don’t have the really difficult conversations that they need to have with each other. I don’t see how a software application, as elegant and sophisticated as the new technology may be, can help an organization until these communication problems are solved.