Leadership Spotlight

Knowledge@Wharton: What can managers do to boost enthusiasm?
Sirota: First, provide security. Laying off people should be the last resort, not the first thing you do. Some companies use a ring of defense. If the business is having difficulties, they retrain workers or bring work inside from subcontractors. There are a number of steps you can take before laying people off.

Second, where there are difficulties in getting work done, we talk about self-managed teams. Toyota, which has been an incredibly successful company, is an example. In the 1970s, Toyota wanted to know how to enrich the job of assembly workers and thought about having groups of employees build an entire car. But that would have been so inefficient. Toyota said instead it could have a team of workers manage part of the assembly line. The team could look at quality and at what kind of maintenance and support were needed, and it could decide how to rotate workers. As opposed to the usual top-down management, this approach is tremendously satisfying for workers, reducing the need for bureaucracy because the people essentially are managing themselves.

Recognition is also important. Employees do not have to be told that you love them, but you want to be appreciative of good work. It sounds very corny, but people are corny. People need this kind of feedback. A lot of rewards don't work, including the employee-of-the-month one. Organization-wide awards should be like the Nobel Prize, where peers are involved in the selection of the individuals who receive the award for outstanding achievement, not day-to-day work. Some things are so basic it's embarrassing to talk about, but in many focus groups, workers—when evaluating management—will say, 'He comes in and he doesn't even say hello to me.' That's the kind of comment we get.

As for systems, we find the traditional merit pay systems with an appraisal and pay increase are quite negative. Workers feel no relation between what they do and their pay increase. A reward has to be felt as a reward. Research has verified a system such as 'gain sharing' in which a group of workers judges its performance over time. If productivity goes up 20% and the workforce increases 10%, then that means there is greater efficiency. That result should be shared with the workers 50% and management 50%. This has a tremendous impact on productivity and morale.

Knowledge@Wharton: All of these recommendations seem so soft-hearted. Are you ever criticized for being naïve?
Sirota: Yes, all the time, mostly by hardline managers and human resource managers. They are cynical about workers. But there are managers and CEOs who look at this and really run with it. They tend to be optimists and give people the benefit of the doubt.

Knowledge@Wharton: Given the evidence, why do managers continue to choke off enthusiasm?
Sirota: What I think happened is that in the 1980s and 1990s we had a reaction to particular forms of management. We talk about four kinds. First there is paternalism, where workers are treated as children. Then there is adversarial, where workers are the enemy. Then there is transactional, where workers are like ciphers. Management does not know what they are like as individuals. The attitude is, 'We paid you, now we are even. We don't owe you anything.' That's where most companies have gone today. Loyalty is dead.

The fourth is what we have been talking about, which is the partnership organization. It does not mean that because I paid you, we are now even. You don't treat partners that way because you might need them to help you out sometime, and they might need you. It's more like a relationship between mature adults—not like children or enemies, but allies.

Originally published by Knowledge@Wharton May 4, 2005