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But enough about me, let’s talk about you… what do YOU think of me?

Bette Midler as CC Bloom in “Beaches” (1988)

I often get asked this question: what is the one thing which is most likely to prevent an organization from having an engaged workforce? I believe it is something which lurks deep in the hearts and minds of individuals: the ego. What is the ego?

We all start out in a pretty non-egoic state, but quite soon find out that “I” am apparently separate from the world; this passage of childhood  is something which everyone passes through, but where some linger.  Those who linger stay in an egoic state rather than reconciling with the broader world, in the give and take (part “me” and a bigger part “we”) which most of us experience as everday life.  The egoic personality usually comes about as a result of childhood trauma of some kind, where the child learns to dislike itself, and to push aside unliked and unwanted parts of itself into a hidden area, while building a false “ego” like a shell around the original, real person.  The ego-shell hides the unwanted self (what Debbie Ford in her excellent book”** calls the “shadow”) from the world and the person functions only from this false, egoic front.  Since the original trauma involved learning to intensely dislike parts of oneself, the ego-shell must be constructed of new objects which will project what its owner hopes will be a socially acceptable version of self, capable of being liked, admired, respected, even…loved.

In more extreme cases of ego-possession, the sense of simply (human) “being” almost disappears and is replaced by an egoic identity which focuses instead entirely on these objects (or what Eckhart Tolle*** calls “form”). In other words, we “identify” with things outside of ourselves, in the hope that this identification will improve our social standing in some way.  These things can include one’s house, the type of job or position one occupies, wealth, educational background and achievement, other status symbols such as cars and countless other “things” such as sports teams which enable the ego to pretend that it’s owner is “better” than others.  Of course, the deep down (and usually unconscious) fear inside this person is that they are far, far worse than others….but this is not what the world sees or what the ego’s host ever wants it to see. Know anyone who is not just disappointed but crushed when his or her football team loses?  They are under the grip of the ego, and when their team loses, its like a personal failure.

 The Princeton dictionary brings this into focus with a concise definition which is very aligned with how most people see and use the word “ego”:

An inflated feeling of pride in your superiority to others

So what does this have to do with engagement at work?  Plenty if you think about it.  Imagine the worst boss you ever had, was she/he loaded down with ego?  Here are some of the symptoms:

  • she takes credit for projects which you started and carried out
  • he never hires people smarter than himself
  • he “licks up” and “kicks down” in the organization structure
  • she cannot take criticism
  • he is a perfectionist and one can never “do it well enough” for him
  • she never allows anyone else to make any significant decision in her area

This is not a happy person.  The ego possession makes him/her feel extremely vulnerable because identification with all the “things” in life is like building a house on sand.  Those things have ways of going away, as all eventually do.  Money can disappear,  as can jobs, “trophy” spouses, and other status symbols.  Living on the knife edge means always having to make sure than nothing, nothing at all, upsets this fragile status-quo, which at work means always having to check up on you to make sure you will not show this person (often a boss) up in a bad light.

You can hopefully see the short step to engagement:   you are there at work to share your talents and skills and help the organization succeed.  You love your job, but your boss….oh dear, your boss is an ego-maniac!  You didn’t know that at first, your radar didn’t send out a code red alert when you had the interview, but you found out later that something was very very wrong.  All the things which I described above, started to happen.  You arrived at the job ready, willing and able to engage but now…now the thing you most want to engage in is finding a new boss there or perhaps leaving the organization for a new job.

One of the problems in the world of work is that ego-driven top management often picks those like themselves;  they call it a “nice fit”.  I call it, “extending the ego-model out into the whole organization“.  This means you are unlikely to get far by complaining about such a person, even if you describe what they do:  top management will laugh and say that that’s quite normal, healthy behavior.  From where they stand it is.

Speaking of top management, one of the most out of control aspects of CEO behavior is the arms race to get more and more compensation.  I have written at length about this because  I believe it erodes morale and engagement.  The ego loves the idea that “I” can make more than the next guy (or gal), and is horrified at the idea that I would ever make less!  The amount of ego-driven greed at the top of our organizations is staggering, with ratios of CEO pay to that of the average worker above 400:1 here in the US.  Of course the ego is canny, and needs to make sure that such excesses are guaranteed.  Heaven forbid that the ego would not receive what it is worth!  This means setting up their compensation in such a way that they are never affected by something as mundane as…performance.  Where do you think the “golden parachute” came from?   In these cases,  the ego’s ability to create real “separateness” makes it very able to totally justify this behavior and not allow its “host” to have a sense that others are affected in any way.  Only in some cases, like John Mackey of Whole Foods, or top management at BMW, have senior people transcended their egos and looked to the greater good in setting their own pay.   I love this quote from BMW’s press office, talking about how the company restrains top management bonuses in relation to what average workers receive :

“We don’t just want to build sustainable cars. We also want to have sustainable personnel politics. We think this is good for the company culture”.

As we saw with the list of management traits above, control is another sign that the ego is lurking.  Ask an ego-driven manager to give up some control, to delegate, to flatten the structure and let some teams manage themselves, for example,  and you will be met with a show of horror…..and logical justification as to why that should never happen.  But these aren’t the real reasons:  under the surface, the ego abhors loss of control because of its fragile nature and high levels of fear, and the sense that such delegation might lead to loss of status in some way.

So what can be done about this?  Certainly try and be a bit more like BMW and introduce a sense of fairness into the “personnel politics”, as they call it.  Fairness (which does not mean equality of outcome!) is a key to high morale and engagement at work.  Try to hire those with talent but less ego….interview for this trait, become acquainted with the signs, avoid it at all cost!  There is nothing wrong with self confidence and an assured manner, but that is not what I am talking about here.  As an excellent blogger Gwyn Teatro recently said, we need more humility in the workplace,  to which I say, amen, Gwyn.   Self confidence, yes by all means, but a basis of humility.  Then we can create the conditions under which our workers feel that they are part of something, that they are respected, that they are there to perform their best in the highest interest of the organization, not to feed someone’s ego!  Feeling and knowing that, they will gladly engage.


** Debbie Ford: “The Dark Side of the Light Chasers”

***  Eckhart Tolle:  “A New Earth”

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I’m very pleased to say that Huffington Post contributor Peter Smirniotopoulos has given our new book a great boost with a lengthy and in-depth review, which,  as its author, I am very happy to read.  Peter understands what Cary Cooper and I were trying to do in terms of looking for a new kind of capitalism, a way forward after the Crash of 2008 which might just bring us to…less Crashes!  Not just that but a capitalism which works for everyone, not just a few.  We approached this book with a fervent belief in the capitalist system, and its power to lift people out of abject poverty, which has been demonstrated around the world;  at the same time we had no starry-eyed view that it should be some kind of laissez-faire system, à la Ayn Rand.   This makes no more sense than football players running around the field with no rules and no referees.  In American football alone there is a big (and growing) set of rules and no less than seven people on the field to make sure those rules are followed…NOTHING laissez-faire about that!  No wonder it is so popular, nothing but performance determines outcome.  This is the way the capitalist system should be run.

Peter gets all this in his review, which is kind enough to praise our opening Chapter on the corporate culture of Wall Street which contributed to the mess which was created.  He says:

The High Engagement Work Culture may be worth reading just for the opening chapter, in which the authors summarize the causes of the collapse of the financial services, residential mortgage, and housing markets in the U.S. To my knowledge, no one has taken a look at the symptomatology leading up to the 2008 crash from the perspective of Wall Street’s prevailing corporate culture, with the insights only these two authors can provide.”

He does a great job of covering our case studies, of BMW and Whole Foods Market, which demonstrate that our vision of a new kind of capitalism is not just a pipe dream, but a reality being lived by the very best companies around the world.  The fact that their share prices have been at record highs in the last year attests to the wisdom of this approach, and demolishes any idea that it is simply too “touchy-feely”.  Like football, there is nothing “touchy-feely” to this way of running an organization;  on the contrary, this is an approach that the bravest leaders take on, those who are willing to put their own egos aside and work for the good of everyone.  That’s why we gave the book the title: Balancing ME and WE.

I hope you take a look at Peter’s review and see how his insights add to this discussion.  While you are there, take a trip to some of his links where he has discussed related issues before.  Indeed the reason I got in touch with Peter in the first place was because of such an article which he wrote, where the very first sentence pointed out that he is a 100% committed capitalist.  That is the only thing to be if we want to nudge this capitalist system of ours towards something better, more sustainable, and which works for everyone.

Once again, Peter’s review is available here:

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I have talked quite a few times in these pages and in my two books about CEO pay, especially in the US.  Why is this?  Because I believe the way it is set it is a fundamental building block for worker engagement, or a destroyer of that.  Why do I say that?  Let’s start with the basics:

–CEO pay in the United States is way way higher than anywhere in the world, in fact it is in a world of its own.  Fortune magazine* said in November 2011 that the ratio of CEO pay to average worker had climbed to 475:1 by 2010.  Yes that is not a misprint, it is a fact.

–It has not always been so, as the chart below shows:  using data from four different sources, you can see that there has been an “arms race” since the 1960s, in which CEO pay has gone from a ratio of about 20:1, then edged up to 25:1, went sideways for a while and finally began its incredible hike up to its current level. What makes this even more amazing is that these stratospheric ratios have endured in spite of the worst recession since the Great Depression, since 2010 was officially after the recession had reached its bottom. Had the 2008-2009 Crash devastated US CEO pay and brought it down to earth closer to that of average workers, we would see it by 2010…but we do not.

–While there might be some relatively small differences between the sources of data, there is no disagreement on the over trend we see here:

–By way of comparison, European CEO pay ratios are below 20:1 in most countries and we would see riots in the streets in they went any higher, especially in the current “austerity” climate which permeates that continent.  Lets see some of those numbers, also from the Fortune article*, and quoted in our book:
Hong Kong: 44:1
Britain: 22:1
Canada: 20:1
France: 15:1
Germany: 12:1
Japan: 11:1

Are executives really worth so much less in all these countries, or are we simply paying too much in the US? Its hard to imagine all the great CEOs that exist throughout the UK and continental Europe, in Canada and Japan, being totally demotivated by their pay yet running such great organizations as they do. Having consulted very extensively in the US, as well as throughout Europe, I can say that is NOT the case. So what are the justifications for high pay? John Mackey, Co-CEO of Whole Foods, demolished these one by one in a superb piece which is well worth reading. Mackey himself sets his pay and that of his Co-CEO at a maximum of 19 times the average Whole Foods worker, and its stock is at record levels…cause and effect? Yes, its just one sign of great management. Moreover, Graef Crystal, one of my favorite people in the esoteric world of executive compensation, and now retired, devastated the argument that this high pay was simply performance-driven. In an extensive study he showed that there was in fact zero correlation between pay and company performance! Instead it was driven by size of the organization regardless of performance. No wonder US CEOs strive to grow companies in the US through acquisition (most of which fail)…it is a path to personal riches simply by increasing size!

This is a big topic and one which I have covered in our new book in a chapter about the ego and in these pages at length.  Yes I think a lot of this is ego driven. The ego HATES it when the other guy…or gal…is paid more! Cooperative and captive Boards of Directors (ones that are too dependent on the CEO for their continued presence on that Board and lucrative stock options, etc.) are also a problem.

But now comes a new piece of research by Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, and Craig K. Ferrere, one of its Edgar S. Woolard fellows, which will really throw a wrench into the cogwheels of executive comp, as we call it. The researchers have demonstrated that one of the core mechanisms for high executive pay in the US, the comparison of the CEO with a “peer group” of such talent, is essentially deeply flawed. They show that:

–the skills of CEOs usually can’t be successfully transferred from one organization to another. ““It’s a false paradox,” Mr. Elson said in an interview with the New York Times’ Gretchen Morgenson recently. “The peer group is based on the theory of transferability of talent. But we found that C.E.O. skills are very firm-specific. C.E.O.’s don’t move very often, but when they do, they’re flops.”

In other words, you have no peer group, Mr or Ms CEO, you have only yourself and while you can do quite well here, you are unlikely to do well elsewhere….or even to be invited to work elsewhere.  This decreases your value!  On the subject of being able to work elsewhere, listen to Morgenson: 

“One study, a 2011 analysis of roughly 1,800 C.E.O. successions from 1993 to 2005, found that less than 2 percent had been public-company chief executives before their new jobs. Nevertheless, the notion persists that chief executives and their skills are transferable — and that they will walk if their pay doesn’t keep rising.” 

To add insult to injury, these authors point out that peer comparisons conducted by Boards or their consultants  often use extremely successful CEOs as the benchmark while not adjusting for the performance of their own CEO against this high bar.

At this point you might be wondering how I can connect this to worker engagement: well its actually quite simple and is the reason that companies like Whole Foods and BMW control this aspect of their culture so carefully. The reason is that these management teams wish to demonstrate to their workers that everyone is in this together, that they, the executive team, are not on another planet. As I found out when interviewing BMW for the new book, the carefully crafted “personnel politics” as they call it, the desire to “stand close to the workers”, proved to be a bonanza for the company when the 2008-10 “Great Recession” eased and the company found itself with overwhelming demand for its products in Asia. The workers pitched in with unprecedented levels of overtime. At General Motors, which had had typical “supersized” pay for executives, the only “bounce back” that they could manage was one which the bankruptcy court shepherded them through, a cruel comparison to their competition in Bavaria. The same was true for Chrysler, and Ford barely escaped with its life.

Controlling executive pay is important all the time, not just in recessions, its just that recessions reveal the damage which poor management practices have created in these companies. If you want to stand in front of your workers, in good times and bad, and say “we’re all in this together” you had better make that a reality with your pay practices…or risk their private scorn and resulting lower engagement. Boards should take this into consideration, along with the fact that, no matter what they say, CEOs really don’t have many other places to go!

* Fortune Magazine, November 7th, 2011, page 28
Chart is modified from one in The High Engagement Work Culture:  Balancing ME and WE (Palgrave-Macmillan), copyright 2012 David Bowles and Cary Cooper

Image courtesy of sheelamohan /

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Now released worldwide (Print/Digital)

June 12th, 2012

Dear Colleagues and Friends:

 It is with absolute delight that I am able to announce to you the release of my second book, co-authored as was the first with my friend of over 40 years, Professor Cary Cooper.

The book is entitled The High Engagement Work Culture:  Balancing Me and We (publisher: Palgrave-Macmillan), and is a journey which begins with the Crash of 2008, asking an important question:

Can’t we find a better way of running this capitalist system of ours?

Cary and I think we can, and not through the heavy hand of regulation which threatens to maim or even kill the one system which has brought prosperity to the world; instead, we suggest that our organizations need to make the decision internally to re-orient themselves away from selfish goals and behavior that ignore the world outside their walls, while at the same time building internal cultures which will drive the engagement of their workers to new highs.  This in turn will, as our previous book demonstrated, drive their performance to new highs.

 This is not pie-in-the-sky, it is being lived by some of the very best organizations in the world, two of which we have featured in the book:  BMW and Whole Foods Market live and breathe these ideas on a daily basis and have the performance to prove their validity.  BMW was good enough to provide me with an exclusive and lengthy interview with management board member and worldwide head of MINI and Rolls Royce brands as well as all motorcycles, Harald Krüger.  As a possible future CEO of BMW (he is now featured increasingly in the press as “Crown Prince”), Herr Krüger’s comments in the book might make some news in the UK with his extremely favorable views on its workforce there! (working at Mini, Rolls Royce cars and an engine factory in the West Midlands of the UK

Balance is a key concept in the book.  Not just, as the subtitle suggests, between the demands of “me” and those of “we”, but also between aspects such as competition and cooperation.   If we don’t take care of the balance between individual initiative and the needs of broader society, for example, we might kill off the animal spirits which have given us Steve Jobs, Richard Branson, Sergey Brin, Bill Gates and so many other entrepreneurial geniuses.

As we struggle with austerity versus government stimulus, veering from one to the other to try and revive the fortunes of much of the developed world, Cary and I believe there is a third way:  a re-birth of our capitalist system based on the principles we detail in the book.  It is a vision which works not just for a few, but for everyone, a tide which can raise all boats.  It is working now in the very best organizations!   

As David MacLeod, head of the very influential UK task force which examined all aspects of worker engagement for the government in 2009, has said of the book:

…..(we) “have written an important book, at an important time, on an vital topic.”

I invite you to take a look at our ideas in the book and see if you agree. Please send me your feedback, I will be delighted to hear from you!

It is available on Amazon in the UK:

From July 3rd it will be available in the US and other worldwide locations.  For example at

thank you, and enjoy the book,

David Bowles

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Like a lot of people I am excited to be going to SHRM’s annual conference and exhibition this year in Las Vegas, Nevada and to have a chance to blog from there as I did last year. With so many sessions, I have to focus, which is easy for me with my field of interest and the way the sessions are organized. So I can take in morale and engagement all day long, meet some of the great presenters, take their pictures and blog about their offerings. Having said that I want to make a plea for some breakthroughs this year, in that we need to go beyond the meat and potatoes stuff which has been done so many times. Let’s see if some of the speakers can reach down into their creative psyches to come up with answers to questions which this part of HR and general management needs to answer. Here are some of those which come to mind:

–we think of the US as a very open society in many ways, which is a basic building block for worker engagement; yet we only have average engagement levels according to most who measure this…..why is this?
–the UK is even worse, its engagement levels were recently described by my former employer, HayGroup, as “the worst in Europe”….why is this? Is this a sign that social class issues have a big effect on worker engagement potential in a given society? Do other societal and national cultural factors have a big effect on engagement of workers?
–even if there are societal factors which affect engagement, can universally applicable activities create work environments in which workers choose to engage at high levels, almost no matter the society in which those workers live and work?
–we have heard a lot about “happiness at work” lately; some even say we need that instead of engagement. But is “happiness” enough? Can you prove that it drives performance more than engagement? What happens when the “happy” worker meets the boss from hell?
–executive compensation levels, especially in the US, are back at strastopheric levels. Does your organziation consider this when it approaches worker morale and engagement, like Whole Foods and BMW do? Does your CEO truly get “paid for performance” like the rest of the workforce? What impacts do these things have on engagement levels and if so, what can be/is being done?
–trends in engagement are very tricky to tie down, with big differences between the “big guns” of research and consulting in this field, such as Gallup and TowersWatson. Does this mean that they each define engagement differently, and if so how do we deal with this?
–if we cannot agree on engagement’s definition (see above) how can we convince leaders to go to work enhancing the conditions to bring it about?
–similarly why do organizations still compare themselves with outside morale or engagement “norms”, given the big differences in those norms from one consultant to the next?
–there is a tendency for some people with specific skills in the morale and employee engagement (EE) business to think that they alone have the skill-set to handle things in this field; the internal communications people, the psychologists, the HR specialists, and so on. Is this one reason for all the differences in EE definitions, questionnaires and trend data? What skill or skill mix works best for those who are involved in this field?
–how does individual personality affect engagement? You can create the best work environment in the world…but some still will not engage. This is a personality issue, and we need to know much more about it so that we can avoid hiring such people and deal with the ones we inadvertantly hired.

I’d love to see our SHRM11 morale and engagement presenters cover these and other key questions. They dont have to tell us that engagement goes up when people are treated well at work; that first line managers are the key to engagement; or that morale and EE drive performance, all of which we have known for some time. Let’s go beyond the basics to see some new things, which people can really take home and use. I’ll be there asking these questions and more….and I hope to meet you if these are your interests. Contact me through this blog or on Twitter and add more question topics if you want….I’d love to hear them and can ask them for you if you cant make it to Vegas.

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(This is Part 2 of a three part series on executive compensation and morale).

Earth to CEOs:  Come Back Down Here with Us!

First a disclaimer:   this post is about a sub-set of CEOs, not all.  I am a business psychologist trained in social science research and understand full well that samples should not be generalized to the whole unless they are truly representative.   Many CEOs (and I have worked with a lot), are downright great people, generous, caring, and absolutely dedicated to the welfare of their workforce.  They dont have an ounce of greed in their bodies and they make sure they play by the same rules as those who work for them.   Perhaps you work for one of these people, or are one of them yourself.  This post is not about them/you!   This is a about a subset, enough of a group to make a difference in overall averages, and this subset has a mentality which is damaging US competitiveness.

I’ve been watching this new show on TV here in the US:  Undercover Boss.  Its about a CEO or COO going out in disguise and taking on some of the more difficult jobs which his (so far, all male) own people have to do.   In some cases he is so useless and the job so difficult, he gets fired after one day!  The show seems to be popular, partly because the CEOs have been humiliated.   Its also because most have so far reacted to this experience and shock at what people “out there” in the companies actually have to do, with genuine humility, often being really moved by the experience.  They are often moved enough to make changes, to promote lucky ones they come across, give raises, special gifts, etc.  Even to re-think the whole way their company does business.  I was thinking about all of this in the context of what we have been through in the last 2-3 years.  Is this the start of a trend?  Will we start to see a more real, personal CEO whose eyes are more open to what his or her people have to face every day?  Will that start to change the behavior of said CEOs?  Particularly in the area of compensation.  I know some of you are saying, dream on!  But I have a compelling reason for them to change, as you will see.

My hope is that we will indeed look back one day at this Great Recession and say, yes that was the time when we dumped this whole fad of glorifying some CEOs and brought them back down to reality.  Reality is that too many CEOs (usually, but not always men) were not all that their publicity machine puffed them up to be, but were paid as if they were.  I’m not talking about the Steve Jobs and Sergey Brins, the geniuses who founded the now-iconic companies which they lead and who deserve every bit of positive press (and dollar) they get;  I’m not talking about the hundreds of thousands of less well-known entrepreneurs who risk everything for their dream.  I’m talking about a different animal here:   the hired hands brought in as CEO.   They came in with a big blaze of publicity and then often had…mixed results.  I’m thinking of Bob Nardelli at Home Depot, Carly Fiorina at Hewlett-Packard and quite a few others.  Their Boards were acquiescent to the point of giving them a contract which no average worker could receive:  a fail-safe golden parachute which translated into “you win, you win; you fail, you win”.   Of course that is exactly what happened in my two examples; under Nardelli,  HD stock went DOWN by 8% in an up market but he made $240 in total compensation from December 2000 until his exit in January 2007.   His exit package was an additional $210 million.  That’s right, two hundred ten million dollars.  Under Fiorina, HP stock also went down, listen to Wikipedia’s summary:

“When Fiorina became CEO in July, 1999, HP’s stock price was $52 per share, and when she left 5 years later in February, 2005, it was $21 per share—a loss of over 60% of the stock’s value. During this same time period, HP competitor Dell’s stock price increased from $37 to $40 per share.”

For this remarkable performance, a 60% drop in share price, her exit package was $42 million.  At GM, Rick Wagoner’s planned $20 million pension was interrupted by the company’s bankruptcy;  his contribution to GM’s performance resulted in a drop of 96% in the stock price under his tenure.   Even Jack Welch, once untouchable as the glorified CEO of the American giant, GE, totally screwed up his image with his outrageous $8 million/year retirement package which even included flowers in numerous luxury residences.  This was only brought to light by his divorce, and created such an uproar that even the SEC got involved with GE and poor Welch was shamed into giving a big part of it back, mumbling that it was important to “manage perceptions”.  Thats right, perceptions, forget about values, right?  Apparently it wasn’t enough that he left GE with $880 million in stock…..

Now we see the public mood swinging heavily against such excesses:  no longer able to tap rising house values, and more scared of facing unemployment, if not already there, the view from Main Street towards the corporate world’s rigged compensation game is decidedly sour.  Who can blame people, when their taxes are being used to bail out some of those who are the main perpetrators?  Unfortunately, the heavy hand of government is starting to be used to fix things, as in an ominous sounding “special master” for compensation installed by the Obama administration.

If this sounds like I am pessimistic, I do not mean it to: as a result of this orgy of excess, the most recent wave of which perhaps Welch set off as early as 2002 and which culminated in this recession, I have a more optimistic outlook.  Maybe we can celebrate that this era might be coming to a close.  It’s certainly time that it did.  The US cannot continue to be the only country in the world where the CEO pay to average worker is 300-400:1, and where golden parachutes give CEOs advantages which none of their fellow employees receive.  In other countries, including those which are extremely competitive with this one, the averages are closer to 25:1.  It is my opinion, based on quite a bit of research, that CEO pay excesses are eroding morale and engagement in the United States.  Why do I think that? 

–First because its plain old common sense that if you run a company and your pay is so far off that of your co-workers, you have already “disengaged” yourself from them in a major way.  Don’t then pretend that you can have an engaged workforce when you yourself have made that less possible by accepting, even demanding something which none of your co-workers could ever receive.  Play the game on the same field and with the same rules as those you work with:   then you will have a chance to really engage everyone.

– Second, and very tellingly, the US is far, far from top dog in the morale world It is average at best (see Mercer’s website for worldwide employee engagement data).  How can this be when almost everyone who lives here says it’s the best place in the world to live?  (Some Norwegians, Dutch and Danes might disagree…but stay with me here).  So yes it might be the best place to live, but…..not the best place to WORK.  Part of the reason for that is…excess, and lets say the G word, Greed at the top.  Anyone who has spent as much time as I have (25 years) interviewing thousands of people at work and surveying hundreds of thousands, will tell you:  excesses at the top infuriate otherwise even-tempered employees.   They cannot understand why they have to play by the rules but top management does not;   they resent special “executive” dining rooms, special parking (GM at its peak had a heated parking garage with special elevator for the poor executives who could not stand the cold Detroit winters); employees  boil over when these individuals then come onto to the Intranet with a special message for the “troops” saying, “we’re all in this together”.  “No we’re not”, they say.  “You are on another planet”, Mr/Ms CEO.

Smart companies with smart and more reasonable CEOs understand this, in the US and elsewhere.  John Mackey of Whole Foods, someone for whom I have a great deal of respect..and not just for his views on compensation…is a good example.   At Whole Foods no one is paid more than 19 times that of the average worker. Munich-based BMW last year also became the first big company in Germany to implement bonuses based on reasonable ratios compared to the average worker’s bonus.  The company spokesman was quoted as saying “We don’t just want to build sustainable cars. We also want to have sustainable personnel politics. We think this is good for the company culture”.  Ahh how refreshing that he places personal, selfish interests lower than that of a sustainable culture for his workforce.   Is this one of the reasons why BMW has, and continues to make, such great cars?  I think so.

Will the intense pressure which comes with such a recession, which we still seem to be in, make diamonds out of coal?  I hope so.  I hope that public opinion, and yes even outrage, will shame those who are greedy into more reasonable behavior.  Lets be clear here:  I am not talking about more government regulation, salary caps, etc!  I hope that increasing understanding of the importance of employee morale/engagement as a performance driver will convince Boards, shareholders and CEOs that it is in the interest of their organizations that these baser instincts of the human spirit are tamed.  Boards especially need some backbone and certain other body parts which I wont mention here.  They need to stand up to these demands, refuse to buy the “arms race argument” that “the other guy is making this much”, and make a stand for something new.  Its 2010, and it’s not “me” any more, it’s “we”.  China, India and Brazil are already going down this road;  their worker morale is far ahead of that of the US or Europe.  Will we let them take away one of the few real advantages remaining to us by not facing up to those who would erode it in our organizations by their own selfishness?  I certainly don’t think we should.  Our future standard of living might depend on it.

Back in June of last year John Mackey, CEO of Whole Foods Market, an organic grocer headquartered in Austin, Texas, wrote a piece on the Harvard Business Review Blog about excesses in executive compensation and the effect these had on worker morale, among other things.  It was titled “Why Sky-High CEO Pay Is Bad Business”, is a great read, and can be seen here:

Mackey is an interesting character, having started this business 30 years ago and made a huge success of it (WFMI is the largest such merchant in the world, with stores in the US, Canada and the UK).  Lately he has become somewhat of a darling of the very people you might not associate with Whole Foods and its tree-hugging image:   readers of the Wall Street Journal.  The reason for this was his 2009 op-ed piece written about the Obama health care plan and how he, Mackey, felt that such a plan was too much government and too little common-sense actions which he and his company had already taken to provide cost effective health care to all his employees (or “Team Members”, as Whole Foods calls them).  The Journal had such a huge positive response to this that they interviewed him a few weeks later, further burnishing his image.  Some on the left side of the political spectrum, WF customers, were dismayed, and thought he had gone over to the dark side;  they took their business elsewhere,  but they seem to have been replaced by Journal readers who have found a new, organic soulmate in Mackey!

I was inspired by his Harvard blog to the point that I wanted to add my two cents and thought this would be worth bringing also to this venue.  Here is what I posted in reply:


I think this is as timely and well informed a discussion as I have seen anywhere on this subject. As someone who has a great deal of respect for John Mackey and who spent two years living in Austin and using his flagship store there almost as an office while researching my recent book (co-authored with Prof. Cary Cooper) on morale and performance, I had a chance to see the result of his management style and philosophy in action. I can say from that experience, as well at some of his other stores, that Whole Foods has a very high level of morale and that Mackey and his company live what he talks about here.  Not only that but Mackey’s recent offerings in this area and worker health care, for example in the Wall Street Journal, always use common sense practices instead of government regulation as their proposed approach.

The evidence for the corrosive effect of high executive compensation on morale may only be anecdotal but there is one related piece of data I can point out: the US has, at best, average worker morale on a worldwide basis. I observed this during 25 years of consulting around the world in this field, and Mercer’s recent data confirm it.  Not only that but our emerging competitors, India and China, are now way ahead in the morale stakes.  Gallup confirms that only a pitiful 29% of US employees are “engaged” at work (engagement being a behavioral by-product of high morale).  While this could be brushed off by those ignorant about morale’s effect on performance, or put down as something “touchy-feely” or “soft”, well informed managers now know that morale’s importance is far more than this, and is in fact “mission critical”.  The military has known this for years, but unfortunately the value of this information has taken a long time to reach some management ranks.  As my book shows, the evidence for morale not only correlating with but driving performance, is overwhelming; this includes such areas as profitability, productivity, customer satisfaction and even employee health.  Some here have also rightly mentioned that execution is the key to organizational performance, not just the underlying strategy: well, morale is one key measure of the shape an organization is in, as it prepares to execute its strategy.

Anyone who has done employee surveys or run focus groups will tell you that employees complain a lot about executive compensation. They roll their eyes when the CEO gets on a video presentation and tells them “we’re all in this together”, knowing that his 300:1 or greater compensation level belies that statement and puts him on another planet compared to the average worker.

One word which drives morale more than any other is “fairness”.  This does not mean French-style equality or any form of socialism, it is quite different. Fairness can mean a significantly different compensation level for two people in an organization, but based on job size and complexity, performance on the job, etc.  But when workers see someone at the top drain shareholder value to the extent of a Rick Wagoner at GM (96% drop in share price during his tenure), and the rewards which are given to those people even when they screw up so badly (Home Depot and HP also come to mind here for previous CEOs), no wonder they become cynical, and yes, de-moralized.  What would have happened to a GM worker in a paint shop whose work had a 96% defect rate?  Continued employment and a great retirement package?  I don’t think so. Nothing about this is fair, it is a game which is fixed so that some CEOs can win no matter the final score, and this is allowed to happen by too many passive and overlapping Boards and disenfranchised and apathetic shareholders.

We therefore know three things: 1) our morale is anything from really quite low (29% engaged) to average at best; 2) we have practices of excess and greed in the executive suite which we know from experience de-moralize our people; and 3) our emerging competition is kicking our behind in the morale stakes and this will bring them enormous competitive advantages over us unless we get our act together.  So we (not the government!) need to wake up and realize, we are in a fight for our standard of living and way of life here; lets get these excesses under control, and lets get our morale up to the world class level which it deserves to be, given the unbridled optimism and energy of the American people.  Yes that’s the same America whose early states used the word “Commonwealth”, with all that that means.  It means fairness.

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