This past year has been a roller coaster, and there are no signs of letting up.
We are not in a recession, even though the majority of small businesses already think they are. Some economists say we’ll officially get there next year, while others think we might somehow avoid one.
Thus, the uncertainty continues. In my conversations with other CEOs, its effects on every aspect of work are undeniable. I’ve also sensed a refrain around two emerging constituencies: skittish clients and fragile employees. If you’re the person in charge, your brain (and calendar) feel torn between these competing priorities. Whither grow revenues or manage our teams?
As I’ve grappled with the answer myself, I recalled a controversial business philosophy emanating from India in the mid-2000s, where I happened to be working as a first-time manager in a news outlet. A large software company, HCL Technologies, made regular headlines by upending traditional sales and outsourcing strategy (think “The customer is always right”) by declaring its management philosophy to be “employees first, customers second.” Eventually, CEO Vineet Nayar published a book with the same title: Employees First, Customers Second: Turning Conventional Management Upside Down.
I recently tracked Nayar down; he’s retired and running an education nonprofit now. I asked whether the decade-plus gap since the book’s publication—filled with a pandemic, entrepreneurship, generational divides at work, a maybe recession and disruption from technology and artificial intelligence—had changed his mind about whether we can really afford to put revenue generation second.
If anything, he assured me, current economic conditions have only bolstered the idea. “Most organizations try to apply Industrial Age management principles to the Innovation Age,” he says. “So what changed? With innovation and ideas taking center stage, human capital was not a cog in the wheel, but the wheel itself.” In other words, prioritizing humans— supporting their creativity, fostering connection—is the most important part of a shift to selling experiences over products (think of what Starbucks represents beyond a cup of coffee).
As artificial intelligence and machine learning take over more industrial processes, “employee-centricity becomes more and more important,” says Nayar. “Unfortunately, modern thinkers are not coming up with those principles of how to get the best application of ideas and best ideas from the human mind. And if you don’t do that, you will not succeed.”
Converging action
HCL has a quarter-million employees, which I envision means layers of hierarchy charged with making money and plotting people’s career trajectories. Putting employees first feels somewhat possible in a matrix system of corporate management, but what about startups and smaller employers?
Nayar says that in fact, bigger companies can take lessons from smaller enterprises and entrepreneurs when it comes to managing their employees. Startups attract people attracted by vision and united in purpose. “That vision gets you to climb Mount Everest every day. I call this phenomenon ‘diverging vectors, converging action,’” he explains. “So that means all the people in a startup think differently. They diverge in their ideas, they diverge in their thinking. But because the purpose is so strong, they converge on action.”
When times get tough, the idea of identifying and rallying around a North Star of purpose feels concrete and focused. And Nayar cautions that a quick, lucrative exit is not enough of a mission. “More and more companies are built to sell, not built to last,” he says. “Money is cheap, but culture is expensive.”
So in a climate of softening sales and investment, Nayar advises looking deeply within and being clear about what you are trying to build. The greatest way to create value is to plan for the longevity of your work culture. Instead of thinking about how you’ll be different in three years, think about what you want to endure. “Instead of investing in people, we harvest them,” he says. “You need CEOs who are long term, and committed to building a culture and building a company.”
Everyone wants the CEO, though.
As I spoke to Nayar, I had a lot of aha moments. I’ve been guilty of much of the behavior he outlines as examples of short-term thinking and quick fixes. But what about all the demands pulling on a founder-CEO, I asked? What about clients and relationships that are dependent on the charisma of the face of the company?
Here, Nayar gave me two transformational pieces of wisdom. One, pull team members into these meetings and explain to clients why you are doing so, then really delegate: “I can be a good salesman, I can sell it to you, but I can’t deliver much. The person who will deliver to you, who is creating more value for you, is this person.” When he used a similar line with customers, he explained, most instantly got it. Often, they even celebrated their own needs coming in second to the talent. After all, a management culture committed to employees results in employees who commit to them as clients.
The other is to move to collective problem-solving. Oftentimes, as the economy weakens, leadership turns inward and holds closed-door meetings where everyone knows something is up, but they have no clue what. “We hire the employees. The employees get motivated by solving a problem. We don’t tell the employees the problem. Instead, we tell the employees how grateful you should be that you are part of this brand,” he says.
Nayar likened this to the tale of the plumber touring an extravagant home, only to emerge unimpressed and asking: Where’s the leak?
“We don’t tell the employee where the leak is,” he says. “Imagine a culture where we said, ‘We are in deep shit. Please come and solve the problem.’ You will attract the right kind of employees. In a recession, or when in trouble, you need the plumbers.”
The business of inspiration
Think about leaders you admire, Nayar suggests. What do they have in common? Chances are, they were approachable and innovative. “And they were in the business of inspiring people,” he says. “Not managing people, not guiding people, but inspiring people.”
Inspiring people is only possible if you focus on the collective success that’s possible, versus on an individual. “Organizations have to adopt the word ‘we’ rather than ‘I the CEO,’ or ‘I the vice president,’” he says.
If it sounds like a lot, it is. McKinsey research (and a subsequent book called CEO Excellence) finds that the key distinction for successful leaders is not just that they have the following traits:
- setting the direction,
- aligning the organization,
- mobilizing through leaders,
- engaging the board,
- connecting with stakeholders
- and managing personal effectiveness.
It’s their ability to display these traits all the time. “The key takeaway was that despite their different approaches, every CEO at every stage of their tenure meaningfully tended to all six responsibilities,” the authors conclude.
Importantly, even as uncertain times force leaders to focus on the bottom line, that is not a vision that motivates employees. In CEO Excellence, Allianz CEO Oliver Bate explains: “Nobody gets galvanized by ‘I need to double net profit.’”
This jives with the idea of a leader imparting inspiration to colleagues, who in turn can go and sell that to the marketplace. “The role of management is employee first,” Nayar reminds. “The role of employee is customer first.”
What starts to take shape as a result is that our goal as leaders is to render ourselves irrelevant. Achieving it might take longer, but it is also a much longer-lasting legacy.