A B O U T C J
Preface:
Paragraph 1
My business journey started when I turned sixteen. Finally I was old enough that I didn’t need to sweep parking lots for a pizza, paint gas station curbs, or mow lawns for spending money. I could join the comfortable ranks of the American employee. I started out as a dishwasher at a Sizzler steak house. I was a hardworking kid, putting in thirty-hour weeks at the start. When I learned to grill steaks, I was ready to move to the big-time, to the premier steak restaurant of the day, Steak and Ale.
Paragraph 2
I moved quickly through the ranks, making improvements along the way. I discovered a way to eliminate the mess that always surrounds restaurant dishwashers. I perfected a system by which the kitchen cleanup could be completed in half the time. I reduced the waste associated with baked potatoes and salad. I developed a process to ease maintenance of the salad bar. That store made a lot of money based on my contributions.
Paragraph 3
In a short time, I was promoted to steak cook. That job made me the lead dog of their kitchen system. I had authority to run the staff. After reducing waste from a high-volume grill with another of my systems, I reached the top of the kitchen ladder, becoming the kitchen manager. My new responsibilities would allow me to carry out other plans I had, altering systems and approaches to the various food service tasks —really making a difference.
Paragraph 4
The only resource readily available to me was the kitchen staff. These were mostly high school students, being paid, for the most part, minimum wage. The restaurant’s compensation policy prohibited me from using money as a motivator. What I learned during those early years had a tremendous impact on me. I learned that people had great capacity to take ownership of an area of their job and work in such a way that the entire business operation worked better. We reduced labor costs and waste. We improved the quality of our product and the cleanliness of our kitchen.
Paragraph 5
I discovered that not all employees are alike. Not all the people on staff naturally worked hard or took initiative. Not everyone cared about their jobs. Some people didn’t come in when they were scheduled, and after a few short months on the job, I found that a kitchen manager wasn’t the top of the operational chart for the kitchen — he was the go-for guy for the real managers. I began working all the time (I remember ninety-plus hour pay periods) — covering jobs for others and learning how to secure a suitable workforce of underpaid, entry-level employees. I would have continued on and become even more successful, except that one day I overheard a conversation I was not supposed to hear. It was a conversation between our general manager and his wife. It was about me. What I heard changed my life.
Paragraph 6
“I wish all my people were like C.J.,” he said. “He will work day and night doing whatever it takes, and I don’t have to pay him anything.” Wow. I couldn’t believe what I was hearing. I was giving my all for the good of the enterprise, and there was no reward, intentionally. Without another thought, I gave two weeks’ notice and left.
Paragraph 7
It’s a funny world. The restaurant was making fistfuls of money, and the kitchen was running better than ever. I was covering shift after shift, making life easy for my management, and management wasn’t able to recognize that much of their new success was due to the work of a group of people under the guidance of one particularly talented and committed leader. When I left, so did most of the people who worked with me, and with us went the outcome upper management had taken for granted.
Paragraph 8
I went to work in an entirely different kind of company: one that used union craftsmen and carpenters to decorate and build exhibits for trade shows. These workers were not minimum wage teenagers. They ranged from twenty to fifty-five years of age and had a whole lot more experience in their industry than I did. I expected to learn from them. So, as I had done before, I applied myself to be the most productive employee I could be. I arrived early and worked hard.
Paragraph 9
In this environment, however, I had no responsibility for operations or improvements. I learned that my co-workers weren’t interested in anything, particularly, except accumulating hours. The seasoned union workers actually discouraged my energetic approach, telling me to slow down. They made sure I knew I was entitled to a coffee break in the morning, a half hour break for lunch at noon, and another break a couple of hours later. Around 3:30 pm, the discussion about how we could work some overtime would inevitably begin.
Paragraph 10
Efficiencies were unimportant. We could do things, and, realizing we had done them wrong, do them again. That’s where I learned the expression, “We can’t afford to do it right, but we can always afford to do it again.” We wasted time, materials, energy, and effort. Five of us talked for ten minutes about something any one of us could do in two minutes. A half hour before we clocked out, we sat down to fill out our time cards and to discuss our personal plans.
Paragraph 11
If our employer made a nickel from the work we did, it didn’t concern us. We were labor. They were management, and nary the twain would meet.
Paragraph 12
I was promoted to sales and management at that firm, and spent the next twelve years there under an experienced and well-intentioned operator, who managed by financials, saw people as tools, and believed his company’s value was enshrined in his product. He reacted to problems, watched his costs, and gave little credence to such “soft” issues as company culture, communication, leadership, or innovation. He couldn’t see the powerful profit enhancer that great employees could be. My own contributions were often undone by the people above me, or were never allowed to be implemented in the first place. I was bored, underproductive, and itching to do something about it.
Paragraph 13
So in 1989, I walked into the small Administaff offices (today called Insperity) in Kingwood, Texas, ready and looking for adventure. My resume could have been condensed to a short paragraph that included this sentence: “I want to be a part of something big — bigger than myself, something that has never been done before. I want to change the world, along with others who also want to change the world.” That was also the vision of Administaff, which I heard recounted by the company’s founder, Paul Sarvadi, and my dreams, abilities, and ambitions fit perfectly.
Paragraph 14
In spite of my relationship with Paul, I had to undergo some significant pre-employment testing, which was a curious thing to me at the time. The result made a lasting impression. You see, I expected to become a manager of sorts. I had managed for years, and expected that kind of offer. The tests suggested otherwise. “You couldn’t manage your way out of a paper bag,” Paul told me, “but you can sure communicate, and that’s what we want you to do for us.” They offered me pure commission, with a production contract. It sounded like an opportunity made in heaven.
Paragraph 15
With little more than a dream, a belief, and a vague idea about how this unusual company worked, I started the adventure. It was as good a start as any for an entrepreneurially minded young man with a stay-at-home wife, three little kids, and a wealth of experience taking chances. To make this the life-changing experience I desired, I would need to achieve some pretty big results in a very short period of time. And there were two looming obstacles. First, there was no precedent for such success at Administaff in 1989. The company was barely three-years-old and hadn’t found its legs. Proven processes or systems or a guaranteed track to follow didn’t exist. Secondly, I was enrolled in seminary two days a week. I only had part-time hours available.
Paragraph 16
At this new job, I was determined to improve the lives of others. I believed if I followed the hint of a plan given me by Administaff, I would easily succeed. But I was wrong. In my first ninety days in that totally commissioned world, I sold absolutely nothing. I began to doubt myself. Young families can’t survive without paychecks. Nevertheless, I stuck with it and prayed.
Paragraph 17
Any wisdom I might gain would necessarily be learned on the streets, in the doing. My path would lead me to think, to experiment, to try, to fail, to fall down and get up again. I would have to listen. For the first time in my life, I did. I learned. I grew. Beginning in December of 1989, I sold at least a contract a month for more than two years. Before the end of my first year, I had accomplished entry into Administaff’s new “Million Dollar Club,” and had done so working less than thirty hours a week.
Paragraph 18
During my first decade at Administaff, my results were exceptional. I received countless awards and honors. For a number of years, the company actually offered an award named after me. Needless to say, this was gratifying. The foundation for the principles found in this book came from the very wisdom and knowledge I gained on the streets, selling to and interacting with the clients of Administaff.
Paragraph 19
During our first fifteen years, Administaff grew from a mid-sized to a respectably large company. We accomplished this during times when employee-related expenses (like workers’ compensation and health insurance costs) seemed to be out of control. Many of our clients bought our services hoping for some stability in these areas of high cost. At other times, when there appeared to be a lull in external conditions pushing clients toward us, we found that we had a tremendous amount of value for companies in a high-growth mode.
Paragraph 20
I had always wondered if Administaff was really so limited or so dependent on external market conditions for its success. Some of my peers were asking the same question. We knew that business conditions would constantly be changing. There would be good and bad economic times. Some politician would always be working to socialize healthcare. Energy costs could really put a crimp in profits. We wondered if Administaff could thrive given some of these scenarios. Was our value proposition inherently strong, or were we dependent on external conditions exclusively? These questions pressed upon us. As the company grew, the mechanics of selling and the intricacies of communicating value took on greater significance.
Paragraph 21
One of my collaborators was my manager at the time, Charlie Hartland. Charlie is not only one of the greatest minds I have ever known, but he is a fearless thinker, innovator, and an extremely practical man. Charlie held an annual “thinking retreat” at the beach in Galveston, during which he challenged his entire office to brainstorm. We sat around a fire and let our brains freewheel, searching for out-of-the-box solutions to difficult questions: How can we maintain our market share in a bad economy? How can we seize more of the market? What is the real impact value of what we do? Charlie challenged each of us to pick any of Administaff’s service offerings and consider how we might build a business around that service, creating a value offering for our clients. I picked connecting people to profit as my challenge.
Paragraph 22
The words “people” and “profit” usually link up with the phrase “skill equation.” I wanted to find another way to connect people to profits besides the traditional, hierarchical approach of slotting individuals into skill areas and hoping they would perform well, like cogs in a machine. I wanted to find a more organic way of producing profits in the company, using the people there. What if we could channel motivated imagination to produce customer understanding, or higherimpact productivity within our enterprises? What if every single employee could be understood and communicated with in such a way as to create a kind of combustion that generated growth and profit? The ideas were bouncing around in my brain.
Paragraph 23
Leaving that retreat, I felt as if a lightning rod had been hoisted and the electricity inside of me would not stop. I began to read everything I could find about connecting profits to the people in a company. I picked up the book, Contented Cows Give Better Milk. This was the first time I had ever read anybody who straightforwardly attempted to connect profitability with employees, and with employee happiness. Answers didn’t come simply. It was difficult thinking that required me to step outside of established paradigms.
Paragraph 24
Five years passed, and I still had not discovered simple answers to my questions. I began to hear people from other companies talk about profitability as they tried to explain how they saw their employees as profit impactors. I quickly noticed that their ideas were filled with the same incomplete and inconclusive language, illustrations, and connections that we at Administaff had experienced in our own conversations five years earlier. Overhearing their ideas made me realize that we had already completed the beginning stages. This gave me hope that we would arrive at practical solutions first.
Paragraph 25
The reason I believed my comrades at Administaff would actually do the thinking, and discover the practical truth, was that we had to prove our findings on the street. Administaff would have to intentionally offer something that could impact a client’s workforce, and then identify an obvious link between what we had enabled our client to do and their increased profits. That’s why I started pushing to find the connection, and why I keep proving it today.
Paragraph 26
People who invest in the stock market usually hope for a return of 10%. Administaff / Insperity client surveys show an average return on money spent on the workforce to be around 36%. This means that, dollar for dollar, it is smarter to invest in your employees than in the stock market with all its associated risk and viability. Accumulated evidence over a hundred years of industrial production in the United States points to the fact that an individual employee’s discretionary effort can and does impact a business’s growth rate, profit margins, and maintenance of market share.
Paragraph 27
This reality was brought to light in early 2006 Business Week Surveys. Business leaders across the U.S. agreed that perhaps the greatest threat to their businesses over the coming years was their inability to find and keep good people. Without good people deeply committing their talents, business owners cannot implement their business strategies. The same survey also reported that, of all systems believed essential to maintaining an enterprise’s health, people systems are the least developed. It is ironic: The very thing that business leaders and entrepreneurs fear most – lack of committed employee discretionary effort – has the least developed solution.
Paragraph 28
In his book What Were They Thinking? Jeffery Pfeffer says that business schools don’t teach a clear connection between people and profits. I agree. What’s more, the very people chosen to handle the relationships between employees and the company are usually ill prepared or without appropriate authority to accomplish any development tasks. In fact, management often relegates “HR” to secretaries, clerks, or other lower-level employees. Rarely does management think of HR personnel as strategic.
Paragraph 29
In my work today with Administaff (Insperity), I go into organizations and get introduced to the HR person. Interestingly, this individual is also the accounts payable person, or the receptionist, or the bookkeeper. The very title “HR,” which stands for human resources, has nothing really to do with developing any resource at all. It is a euphemism for the real work being done by the HR people in these operations, that is, the work of a personnel department. The personnel department exists merely to handle the paperwork and other administrative minutia made necessary by employment law over the years. It has no connection whatsoever with the strategic development of the human resource available to a company to better carry out its business initiatives.
Paragraph 30
Between 1924 and 1932, a group of Harvard researchers made a groundbreaking discovery. They found that productivity always increased after something as inconsequential as a change in illumination in the workplace, no matter what the level of illumination was. One of the researchers, Elton Mayo, was credited with the major findings of this experiment, which was called The Hawthorne Studies. Mayo summarized that the capacity of an employee consists of two things: (1) skills to perform the minimum requirements, and (2) engagement, or attention.
Paragraph 31
A simple equation emerged: TC (Total Capacity) = MR (Minimum Requirements) + DE (Discretionary Effort). In a sense, the employer owns the MR. The employee owns, and freely offers or withholds, DE. If the employees have stimulation and constructive attention, then they will give the employer the extra, the part they own. It is the ability to elicit employee discretionary effort that holds the greatest potential for profit.
Paragraph 32
The discretionary effort given by employees is not a hard number, something easy to identify and measure. There is no corresponding line item on a financial statement to reflect it. Nevertheless, the impact of that effort on profit margin is real, and is realized in very hard numbers. If you begin to recognize this as a leverage point, then DE can more easily be identified and measured. Then you can create strategies to impact discretionary effort and to increase it. Eventually, you can start to identify other hard-to-measure, profit-creating assets, such as your company culture. Teamwork, leadership, and creativity all become measurable and manageable parts of your ever-improving business.
Paragraph 33
The answers my team was looking for became solidified after years of consultation and documentation. I knew it was time to share our discoveries with the world. These needed to be spelled out and put into a form that would reach decision-makers, both current and future. It was time to embark on speaking engagements and to put the ideas down in a book. It needed to be a book that showed us the truth about ourselves: a story.
Paragraph 34
And that is how this book came to be written. Each chapter begins with a fictional letterdialog between Melvin Stuckworth and his nephew, Andrew Sparks. These letters show the inner workings of the family company, Paraflec. Here we learn of the relationships employees have with the company and how Stuckworth views employees in the broad scope of company economics, versus how his modern nephew perceives them. Stuckworth holds fast to the precepts he was taught, partly out of loyalty and partly out of a powerful assumption that he was, and still has to be, absolutely right.
Paragraph 35
Thinking back to our huddle around the campfire in Galveston, I recall that the answer to our questions was somehow related to the fire. The answer to the profit question in businesses filled with people is somehow related to the people. The answers can and will be found in the combustion, the creativity of employees. We need look no further, and we must see beyond our habitual preconceptions.
Paragraph 36
My hope is a missing middle, a white space, a layer of solution that exists but is absolutely unseen: the solution of people using their creativity to make their customers’ lives better and easier. “Profits through employee creativity” is the main theme of this book. I’m talking about placing people in positions and in teams so that all of their skill sets can be used as resources, not just those skills for which they were hired. I’m talking about harvesting innovations and feedback from employees on an ongoing basis and about relying on the expertise of outsourced people to broaden a company’s value and capacity to grow.
Paragraph 37
As you look in on this series of fictional emails, the transformation of Paraflec, Inc. from a
Mechanical- to an Organic Business Model, you may feel the fear and discomfort of these decision-makers. You may realize, as I did, that the most expanding value within any business comes through its people. It is people that bring that sweet discretionary effort that makes the difference between a scrap of paper and a paper airplane, a limited solution and a remarkable advance, an enterprise that shines its light and one that is forgotten in the shadows.
Paragraph 38
C.J. Coolidge
March 23, 2013
Paragraph 1
My business journey started when I turned sixteen. Finally I was old enough that I didn’t need to sweep parking lots for a pizza, paint gas station curbs, or mow lawns for spending money. I could join the comfortable ranks of the American employee. I started out as a dishwasher at a Sizzler steak house. I was a hardworking kid, putting in thirty-hour weeks at the start. When I learned to grill steaks, I was ready to move to the big-time, to the premier steak restaurant of the day, Steak and Ale.
Paragraph 2
I moved quickly through the ranks, making improvements along the way. I discovered a way to eliminate the mess that always surrounds restaurant dishwashers. I perfected a system by which the kitchen cleanup could be completed in half the time. I reduced the waste associated with baked potatoes and salad. I developed a process to ease maintenance of the salad bar. That store made a lot of money based on my contributions.
Paragraph 3
In a short time, I was promoted to steak cook. That job made me the lead dog of their kitchen system. I had authority to run the staff. After reducing waste from a high-volume grill with another of my systems, I reached the top of the kitchen ladder, becoming the kitchen manager. My new responsibilities would allow me to carry out other plans I had, altering systems and approaches to the various food service tasks —really making a difference.
Paragraph 4
The only resource readily available to me was the kitchen staff. These were mostly high school students, being paid, for the most part, minimum wage. The restaurant’s compensation policy prohibited me from using money as a motivator. What I learned during those early years had a tremendous impact on me. I learned that people had great capacity to take ownership of an area of their job and work in such a way that the entire business operation worked better. We reduced labor costs and waste. We improved the quality of our product and the cleanliness of our kitchen.
Paragraph 5
I discovered that not all employees are alike. Not all the people on staff naturally worked hard or took initiative. Not everyone cared about their jobs. Some people didn’t come in when they were scheduled, and after a few short months on the job, I found that a kitchen manager wasn’t the top of the operational chart for the kitchen — he was the go-for guy for the real managers. I began working all the time (I remember ninety-plus hour pay periods) — covering jobs for others and learning how to secure a suitable workforce of underpaid, entry-level employees. I would have continued on and become even more successful, except that one day I overheard a conversation I was not supposed to hear. It was a conversation between our general manager and his wife. It was about me. What I heard changed my life.
Paragraph 6
“I wish all my people were like C.J.,” he said. “He will work day and night doing whatever it takes, and I don’t have to pay him anything.” Wow. I couldn’t believe what I was hearing. I was giving my all for the good of the enterprise, and there was no reward, intentionally. Without another thought, I gave two weeks’ notice and left.
Paragraph 7
It’s a funny world. The restaurant was making fistfuls of money, and the kitchen was running better than ever. I was covering shift after shift, making life easy for my management, and management wasn’t able to recognize that much of their new success was due to the work of a group of people under the guidance of one particularly talented and committed leader. When I left, so did most of the people who worked with me, and with us went the outcome upper management had taken for granted.
Paragraph 8
I went to work in an entirely different kind of company: one that used union craftsmen and carpenters to decorate and build exhibits for trade shows. These workers were not minimum wage teenagers. They ranged from twenty to fifty-five years of age and had a whole lot more experience in their industry than I did. I expected to learn from them. So, as I had done before, I applied myself to be the most productive employee I could be. I arrived early and worked hard.
Paragraph 9
In this environment, however, I had no responsibility for operations or improvements. I learned that my co-workers weren’t interested in anything, particularly, except accumulating hours. The seasoned union workers actually discouraged my energetic approach, telling me to slow down. They made sure I knew I was entitled to a coffee break in the morning, a half hour break for lunch at noon, and another break a couple of hours later. Around 3:30 pm, the discussion about how we could work some overtime would inevitably begin.
Paragraph 10
Efficiencies were unimportant. We could do things, and, realizing we had done them wrong, do them again. That’s where I learned the expression, “We can’t afford to do it right, but we can always afford to do it again.” We wasted time, materials, energy, and effort. Five of us talked for ten minutes about something any one of us could do in two minutes. A half hour before we clocked out, we sat down to fill out our time cards and to discuss our personal plans.
Paragraph 11
If our employer made a nickel from the work we did, it didn’t concern us. We were labor. They were management, and nary the twain would meet.
Paragraph 12
I was promoted to sales and management at that firm, and spent the next twelve years there under an experienced and well-intentioned operator, who managed by financials, saw people as tools, and believed his company’s value was enshrined in his product. He reacted to problems, watched his costs, and gave little credence to such “soft” issues as company culture, communication, leadership, or innovation. He couldn’t see the powerful profit enhancer that great employees could be. My own contributions were often undone by the people above me, or were never allowed to be implemented in the first place. I was bored, underproductive, and itching to do something about it.
Paragraph 13
So in 1989, I walked into the small Administaff offices (today called Insperity) in Kingwood, Texas, ready and looking for adventure. My resume could have been condensed to a short paragraph that included this sentence: “I want to be a part of something big — bigger than myself, something that has never been done before. I want to change the world, along with others who also want to change the world.” That was also the vision of Administaff, which I heard recounted by the company’s founder, Paul Sarvadi, and my dreams, abilities, and ambitions fit perfectly.
Paragraph 14
In spite of my relationship with Paul, I had to undergo some significant pre-employment testing, which was a curious thing to me at the time. The result made a lasting impression. You see, I expected to become a manager of sorts. I had managed for years, and expected that kind of offer. The tests suggested otherwise. “You couldn’t manage your way out of a paper bag,” Paul told me, “but you can sure communicate, and that’s what we want you to do for us.” They offered me pure commission, with a production contract. It sounded like an opportunity made in heaven.
Paragraph 15
With little more than a dream, a belief, and a vague idea about how this unusual company worked, I started the adventure. It was as good a start as any for an entrepreneurially minded young man with a stay-at-home wife, three little kids, and a wealth of experience taking chances. To make this the life-changing experience I desired, I would need to achieve some pretty big results in a very short period of time. And there were two looming obstacles. First, there was no precedent for such success at Administaff in 1989. The company was barely three-years-old and hadn’t found its legs. Proven processes or systems or a guaranteed track to follow didn’t exist. Secondly, I was enrolled in seminary two days a week. I only had part-time hours available.
Paragraph 16
At this new job, I was determined to improve the lives of others. I believed if I followed the hint of a plan given me by Administaff, I would easily succeed. But I was wrong. In my first ninety days in that totally commissioned world, I sold absolutely nothing. I began to doubt myself. Young families can’t survive without paychecks. Nevertheless, I stuck with it and prayed.
Paragraph 17
Any wisdom I might gain would necessarily be learned on the streets, in the doing. My path would lead me to think, to experiment, to try, to fail, to fall down and get up again. I would have to listen. For the first time in my life, I did. I learned. I grew. Beginning in December of 1989, I sold at least a contract a month for more than two years. Before the end of my first year, I had accomplished entry into Administaff’s new “Million Dollar Club,” and had done so working less than thirty hours a week.
Paragraph 18
During my first decade at Administaff, my results were exceptional. I received countless awards and honors. For a number of years, the company actually offered an award named after me. Needless to say, this was gratifying. The foundation for the principles found in this book came from the very wisdom and knowledge I gained on the streets, selling to and interacting with the clients of Administaff.
Paragraph 19
During our first fifteen years, Administaff grew from a mid-sized to a respectably large company. We accomplished this during times when employee-related expenses (like workers’ compensation and health insurance costs) seemed to be out of control. Many of our clients bought our services hoping for some stability in these areas of high cost. At other times, when there appeared to be a lull in external conditions pushing clients toward us, we found that we had a tremendous amount of value for companies in a high-growth mode.
Paragraph 20
I had always wondered if Administaff was really so limited or so dependent on external market conditions for its success. Some of my peers were asking the same question. We knew that business conditions would constantly be changing. There would be good and bad economic times. Some politician would always be working to socialize healthcare. Energy costs could really put a crimp in profits. We wondered if Administaff could thrive given some of these scenarios. Was our value proposition inherently strong, or were we dependent on external conditions exclusively? These questions pressed upon us. As the company grew, the mechanics of selling and the intricacies of communicating value took on greater significance.
Paragraph 21
One of my collaborators was my manager at the time, Charlie Hartland. Charlie is not only one of the greatest minds I have ever known, but he is a fearless thinker, innovator, and an extremely practical man. Charlie held an annual “thinking retreat” at the beach in Galveston, during which he challenged his entire office to brainstorm. We sat around a fire and let our brains freewheel, searching for out-of-the-box solutions to difficult questions: How can we maintain our market share in a bad economy? How can we seize more of the market? What is the real impact value of what we do? Charlie challenged each of us to pick any of Administaff’s service offerings and consider how we might build a business around that service, creating a value offering for our clients. I picked connecting people to profit as my challenge.
Paragraph 22
The words “people” and “profit” usually link up with the phrase “skill equation.” I wanted to find another way to connect people to profits besides the traditional, hierarchical approach of slotting individuals into skill areas and hoping they would perform well, like cogs in a machine. I wanted to find a more organic way of producing profits in the company, using the people there. What if we could channel motivated imagination to produce customer understanding, or higherimpact productivity within our enterprises? What if every single employee could be understood and communicated with in such a way as to create a kind of combustion that generated growth and profit? The ideas were bouncing around in my brain.
Paragraph 23
Leaving that retreat, I felt as if a lightning rod had been hoisted and the electricity inside of me would not stop. I began to read everything I could find about connecting profits to the people in a company. I picked up the book, Contented Cows Give Better Milk. This was the first time I had ever read anybody who straightforwardly attempted to connect profitability with employees, and with employee happiness. Answers didn’t come simply. It was difficult thinking that required me to step outside of established paradigms.
Paragraph 24
Five years passed, and I still had not discovered simple answers to my questions. I began to hear people from other companies talk about profitability as they tried to explain how they saw their employees as profit impactors. I quickly noticed that their ideas were filled with the same incomplete and inconclusive language, illustrations, and connections that we at Administaff had experienced in our own conversations five years earlier. Overhearing their ideas made me realize that we had already completed the beginning stages. This gave me hope that we would arrive at practical solutions first.
Paragraph 25
The reason I believed my comrades at Administaff would actually do the thinking, and discover the practical truth, was that we had to prove our findings on the street. Administaff would have to intentionally offer something that could impact a client’s workforce, and then identify an obvious link between what we had enabled our client to do and their increased profits. That’s why I started pushing to find the connection, and why I keep proving it today.
Paragraph 26
People who invest in the stock market usually hope for a return of 10%. Administaff / Insperity client surveys show an average return on money spent on the workforce to be around 36%. This means that, dollar for dollar, it is smarter to invest in your employees than in the stock market with all its associated risk and viability. Accumulated evidence over a hundred years of industrial production in the United States points to the fact that an individual employee’s discretionary effort can and does impact a business’s growth rate, profit margins, and maintenance of market share.
Paragraph 27
This reality was brought to light in early 2006 Business Week Surveys. Business leaders across the U.S. agreed that perhaps the greatest threat to their businesses over the coming years was their inability to find and keep good people. Without good people deeply committing their talents, business owners cannot implement their business strategies. The same survey also reported that, of all systems believed essential to maintaining an enterprise’s health, people systems are the least developed. It is ironic: The very thing that business leaders and entrepreneurs fear most – lack of committed employee discretionary effort – has the least developed solution.
Paragraph 28
In his book What Were They Thinking? Jeffery Pfeffer says that business schools don’t teach a clear connection between people and profits. I agree. What’s more, the very people chosen to handle the relationships between employees and the company are usually ill prepared or without appropriate authority to accomplish any development tasks. In fact, management often relegates “HR” to secretaries, clerks, or other lower-level employees. Rarely does management think of HR personnel as strategic.
Paragraph 29
In my work today with Administaff (Insperity), I go into organizations and get introduced to the HR person. Interestingly, this individual is also the accounts payable person, or the receptionist, or the bookkeeper. The very title “HR,” which stands for human resources, has nothing really to do with developing any resource at all. It is a euphemism for the real work being done by the HR people in these operations, that is, the work of a personnel department. The personnel department exists merely to handle the paperwork and other administrative minutia made necessary by employment law over the years. It has no connection whatsoever with the strategic development of the human resource available to a company to better carry out its business initiatives.
Paragraph 30
Between 1924 and 1932, a group of Harvard researchers made a groundbreaking discovery. They found that productivity always increased after something as inconsequential as a change in illumination in the workplace, no matter what the level of illumination was. One of the researchers, Elton Mayo, was credited with the major findings of this experiment, which was called The Hawthorne Studies. Mayo summarized that the capacity of an employee consists of two things: (1) skills to perform the minimum requirements, and (2) engagement, or attention.
Paragraph 31
A simple equation emerged: TC (Total Capacity) = MR (Minimum Requirements) + DE (Discretionary Effort). In a sense, the employer owns the MR. The employee owns, and freely offers or withholds, DE. If the employees have stimulation and constructive attention, then they will give the employer the extra, the part they own. It is the ability to elicit employee discretionary effort that holds the greatest potential for profit.
Paragraph 32
The discretionary effort given by employees is not a hard number, something easy to identify and measure. There is no corresponding line item on a financial statement to reflect it. Nevertheless, the impact of that effort on profit margin is real, and is realized in very hard numbers. If you begin to recognize this as a leverage point, then DE can more easily be identified and measured. Then you can create strategies to impact discretionary effort and to increase it. Eventually, you can start to identify other hard-to-measure, profit-creating assets, such as your company culture. Teamwork, leadership, and creativity all become measurable and manageable parts of your ever-improving business.
Paragraph 33
The answers my team was looking for became solidified after years of consultation and documentation. I knew it was time to share our discoveries with the world. These needed to be spelled out and put into a form that would reach decision-makers, both current and future. It was time to embark on speaking engagements and to put the ideas down in a book. It needed to be a book that showed us the truth about ourselves: a story.
Paragraph 34
And that is how this book came to be written. Each chapter begins with a fictional letterdialog between Melvin Stuckworth and his nephew, Andrew Sparks. These letters show the inner workings of the family company, Paraflec. Here we learn of the relationships employees have with the company and how Stuckworth views employees in the broad scope of company economics, versus how his modern nephew perceives them. Stuckworth holds fast to the precepts he was taught, partly out of loyalty and partly out of a powerful assumption that he was, and still has to be, absolutely right.
Paragraph 35
Thinking back to our huddle around the campfire in Galveston, I recall that the answer to our questions was somehow related to the fire. The answer to the profit question in businesses filled with people is somehow related to the people. The answers can and will be found in the combustion, the creativity of employees. We need look no further, and we must see beyond our habitual preconceptions.
Paragraph 36
My hope is a missing middle, a white space, a layer of solution that exists but is absolutely unseen: the solution of people using their creativity to make their customers’ lives better and easier. “Profits through employee creativity” is the main theme of this book. I’m talking about placing people in positions and in teams so that all of their skill sets can be used as resources, not just those skills for which they were hired. I’m talking about harvesting innovations and feedback from employees on an ongoing basis and about relying on the expertise of outsourced people to broaden a company’s value and capacity to grow.
Paragraph 37
As you look in on this series of fictional emails, the transformation of Paraflec, Inc. from a
Mechanical- to an Organic Business Model, you may feel the fear and discomfort of these decision-makers. You may realize, as I did, that the most expanding value within any business comes through its people. It is people that bring that sweet discretionary effort that makes the difference between a scrap of paper and a paper airplane, a limited solution and a remarkable advance, an enterprise that shines its light and one that is forgotten in the shadows.
Paragraph 38
C.J. Coolidge
March 23, 2013
