Author: Patrick D. Cowden
_Patrick D. Cowden_
Reading time: 28 minutes
Synopsis
Neustart (2013) talks about the harm companies cause when they care more about growth and making money than about their employees’ well-being. These Blinks will show you why such companies fail as employers and also put their own financial success at risk. This is because only happy employees make a company strong.
What’s in it for you: Treat your employees fairly and help them grow.
How does a business owner motivate his team? He might think that a little pressure is always good. He uses a method he remembers from school: employees now get grades. Top performers get bonus payments. Those who perform poorly must work harder, or they will lose their jobs soon. But bonuses cost money. So, during the next cost-cutting, the owner might have an idea that makes his grading system silly: he stops giving top grades, even if many employees do very good work.
This example is not made up. Patrick Cowden, a former top manager, knows this and other unfair methods from big listed companies. He warns: treating employees this way hurts their motivation. It poisons the work environment and finally harms the company itself. The Blinks from Cowden’s book Neustart will show you what a smart company culture looks like instead. It is a culture that values employees, helps them develop, and so makes them more productive.
In these Blinks, you will also find out:
- that many people at Microsoft suffer from burnout,
- how big shareholders put a lot of pressure on company boards, and
- why Patrick Cowden lost his job as a manager at Dell.
Blink 1 – Patrick Cowden, an insider, can tell us about bad company cultures.
In 2006, Patrick Cowden was the manager for Dell Germany’s big customer business. He received an email that made him very proud. Michael Dell, the founder and CEO of Dell, wrote: „Patrick, I’m inspired by your work!“
One year later, Cowden was fired without notice.
It was not because he failed. His numbers were good, and his customers were happy. But one of his employees had a heart attack, and her family blamed Cowden. Looking back, he understood his mistake: „I had overworked myself and my staff with 80-hour weeks. I put success above everything else.“
After that, he promised himself that his employees and their needs would be the most important. As Vice President of Hitachi Germany, he stopped rushing things. Instead, he let his team make decisions. He learned to listen. He gave his employees more freedom and more responsibility. He also made their workload lighter.
This approach worked well for him. The company grew, even during the financial crisis of 2009 and 2010. Cowden was named the group’s most successful manager worldwide.
However, two months later, he was fired again. What happened this time?
Hitachi did not like that Cowden’s decisions sometimes went against the rules from the head office. For example, Hitachi had made sales staff handle invoices and other office tasks themselves. This was meant to save money on staff.
Cowden believed this extra work took time and energy from the salespeople’s main job: finding new clients and building customer relationships. So, he created a new department to handle office tasks. This meant new staff costs for a short time. But in the long run, it worked out well. The salespeople could then focus completely on their real work. Sales numbers went up very fast.
After he was fired, Hitachi reversed this change. Employees were let go, and staff costs were cut. But after a few months, sales dropped dramatically.
The next Blinks will give more examples of this kind of short-sighted actions in companies. They will also explain why a new start is needed and how things can be done better.
Blink 2 – Listed companies often give in to pressure from their shareholders.
When René Obermann became the CEO of Deutsche Telekom, he said: „I want my performance to be judged mainly by one thing: the company’s share price.“
This way of thinking is common for listed companies. They do not focus on employees or customers. Instead, they focus on their most powerful shareholders. This is often because of the huge pressure these shareholders put on the company’s board.
Patrick Cowden, the author of the book, knows well about complaints from company boards. A board member of a big German company once told him that many board members are truly „grilled“ by their big shareholders. Shareholders try to directly influence company decisions. They do this by making accusations, showing hostility, and putting pressure on company leaders. They continue until the leaders give in and simply do what they are told.
Most big shareholders want quick profits. How these profits are made often doesn’t matter to them. Employee well-being and customer happiness are less important. What matters is a rising share price and quick profits.
Their ideas for making more money usually come down to one thing: cutting costs and making things more efficient. Firing people, cutting salaries, or hiring more temporary workers are often the first choices to reach these goals. Outsourcing parts of a company’s work is also a popular way to cut costs.
Patrick Cowden saw this as the managing director of Hitachi Germany. His employees’ travel expenses were handled in Poland. Contracts were written in Malaysia, and product prices were decided in Holland. This cut staff costs for the company. But it also gave more work to employees in Germany, taking them away from their main tasks. For example, if there were misunderstandings in Poland, they could not be solved quickly in a face-to-face chat. Instead, they had to be sorted out with many emails, which took a lot of time.
The record for the most complex task was solving an issue about a hotel stay that cost 180 Euros. This needed 200 emails between Poland and Germany.
Blink 3 – Cutting wage costs saves money in the short term, but it is expensive in the long run.
In most companies, employees are the biggest cost. They make up about 30 to 40 percent of all costs on average. In the service industry, this can be up to 80 percent.
Many companies wrongly believe they can cut wage costs and still keep the same level of performance. How can they do this? For example, by giving more work to fewer employees, or by moving jobs to cheaper countries.
However, these cost-cutting steps are often too short-sighted. They make employees unhappy, annoyed, and overworked. This then badly affects the quality of work. Someone who has to do the work of two people, or who sees colleagues being fired often, will be overwhelmed. They will also lose their joy in the job and their motivation.
Companies risk losing their employees’ emotional connection. Eventually, employees don’t care if the company is doing well or badly. As motivation goes down, so does their performance. They offer fewer ideas and make their colleagues feel unmotivated too. According to the Gallup Institute, this lack of employee loyalty costs German companies around 125 billion Euros each year.
Even the most obvious result – that work slows down with fewer employees – is often overlooked by company leaders. For example, at Siemens, cutting 5,000 jobs in the industrial part of the company caused the delivery of 16 ICE trains to Deutsche Bahn to be three years late.
Patrick Cowden also saw how moving the finance department from Germany to Slovakia caused unplanned costs at Dell. The Slovakian employees were completely separate from the German customer business. They often missed important information. So, they created invoices that had many errors. The results were unhappy customers and extra work for both German and Slovakian employees, who had to correct the invoices many times.
Blink 4 – Company head offices often make decisions without thinking about employee needs.
Big companies that work all over the world usually have one problem. What the head office decides – whether it’s in New York, Tokyo, or Wolfsburg – often goes against what employees in different branches need and want.
Patrick Cowden experienced this himself as a manager at Dell Germany. When he started his job, Dell’s Human Resources department, which is in the American head office, gave him a guide for the „right“ employee interview. This guide had 27 standard questions. 27 questions that, Cowden writes, „are asked in Wanne-Eickel just as they are in Rio and Kansas City.“
The HR staff at the head office did not think about cultural differences. But this should be a top priority for global companies. It is amazing how different people are, even at work. In East Asian countries, it is normal to ask about the well-being of children, spouses, or grandparents. But in Western countries, asking about private life can quickly seem wrong and pushy. In Western countries, it is common to give direct feedback. But Japanese or Indian people always choose an indirect way.
Dell’s standard employee interview stopped personal communication that suited each person and their culture. This made some employees feel attacked, treated badly, or not taken seriously by their bosses.
Another example: At Hitachi, Cowden saw how the company’s head office forced all branches worldwide to use one standard system for making offers. With this new system, employees could no longer make offers that perfectly matched customer wishes. Many customers who liked this special service were unhappy after the change and went to other companies.
Usually, such actions are about the head office wanting to standardize things and be more efficient. A ready-made form for offers and a standard questionnaire for employee interviews save time. And so, they seem to save money. But they do not think about the big negative effects these standardizations can have. For example, they can hurt the work atmosphere or damage customer relationships.
Blink 5 – Grading employee performance like school marks creates stress and is unfair.
Many companies use an internal grading system. Bosses measure and judge their employees’ performance like school marks. An employee who performs excellently gets the best mark. Good performance gets the second-best mark. Those at the bottom get a bad mark. Employees with good marks get bonuses. Employees with bad marks must improve, or they might be fired.
Jack Welch, the former CEO of General Electric, started this system in the 1980s. Cowden says Welch’s goal was to „build a company that regularly punishes a part of its staff with bad grades. This creates a group of employees who can easily be fired during crises or when costs need to be saved, for example, to raise the share price.“
Many companies, including software giant Microsoft, followed Welch’s example and started a school-grade rating system. Microsoft still uses this system today. It is mainly why so many people working there report sick and why doctors diagnose them with burnout. The pressure to perform and compete is extremely high. It takes away their joy in work and negatively affects the work atmosphere.
Also, the system has a built-in unfairness. Even if all employees perform excellently, not everyone gets top marks. At Microsoft, for example, out of 100 people, at least five must get a ‘fail’ grade or a similar low mark based on the local school system. And at least ten people must get a ‘poor’ mark.
Microsoft is not the only case. For example, Marissa Mayer, as the new CEO of Yahoo, started an internal grading system as one of her first actions. Patrick Cowden also saw this strange practice at Dell. Because his employees impressed him with their good work, he gave them only good and very good marks. But for Dell, this would mean paying bonuses to all these highly-rated employees. So, Cowden was told to lower the grades – and thus the company’s costs.
Blink 6 – Smart companies do not measure employee performance only by numbers.
Many bosses believe they can measure employee performance using numbers. Here is a simple example: A salesperson for industrial printers is supposed to sell 1,000 units in a quarter, but they only sell 750. At the end of the quarter, the boss compares the goal and the actual sales. The boss sees the difference and thinks: The salesperson must have done a bad job because their sales numbers did not meet the target. So, the boss gives them a bad mark to make them work harder next quarter.
However, this is a big problem. Numbers never show the full work employees do. Many things are missed because such a system cannot measure them easily or at all.
It is possible that the salesperson did something else good that the quarterly numbers do not show. Maybe they spent a lot of time building strong relationships with their customers. These relationships will only bring results later. Or they were very helpful and so helped their colleagues do their jobs better and sell more printers.
So, even though the employee helped the company’s long-term success, they don’t get the thanks they deserve. Instead, they are put under a lot of pressure and fear losing their job.
A smart company takes a different way. Instead of just measuring employee performance by numbers, it values regular personal communication between bosses and employees. This includes monthly feedback talks, short weekly information meetings, and daily informal chats. Regular open talks are important. They make things clear and help both sides know and understand each other’s views. Only then can the true performance of each employee be seen and valued.
Blink 7 – Smart companies respect and use their employees’ rich experience.
In a typical company with, let’s say, ten board members and 100,000 employees, the total work experience of the board is about 300 years. But the employees’ experience adds up to an estimated two million years.
Patrick Cowden believes that smart companies should use the huge amount of experience their employees have. That’s why, in his career, he often went against decisions from the head office that his teams did not agree with.
He simply put Dell’s 27-question list aside. He continued to have his talks in a personal way that suited each employee.
He worked with his employees to change Hitachi’s standard offer system. They worked until they could use it to create offers that fit individual customer needs.
But there are also companies that understand they can benefit from their employees’ knowledge. They do not use full control from the top. Instead, they trust the skills of local employees.
One such company is the drugstore chain dm. Until the 1980s, dm also followed a central company policy. It had standard rules for everyone and everything. But this had a bad effect on employees’ self-motivation and their joy at work. So, the company changed its plan. From then on, the motto was: „Power to the branches.“ Employees could now, for example, decide how to organize their stores. They could order their products or arrange them in the shop. The idea behind this change was that local employees, with their real-world experience and direct customer contact, know best what their customers want. Also, they work with more motivation and joy if they can act with their own responsibility and freedom.
This approach has brought success to the company. While its competitor Schlecker, which relied on control and strict central management, went out of business, dm is now the most successful drugstore chain in Germany. The company also stands out because its employees are very happy.
Blink 8 – Smart companies encourage their employees’ inner motivation.
What makes employees give their best for their company?
It is not financial rewards, as many companies still believe. Financial rewards and other forms of extrinsic motivation, which come from outside, only work for a short time and then disappear quickly. For example: An employee got 2000 Euros in performance bonuses in 2013. The next year, they only get 1500 Euros. But instead of being happy about the new bonus, they feel it is less than last year. So, the second bonus makes them less motivated, not more.
Another point against extrinsic motivation is the idea of “Misstrauensabschlag” (mistrust discount), started by management expert Reinhard K. Sprenger. This means that a bonus payment suggests the employee is not working 100 percent. This is because they usually get the bonus for work they should be doing anyway.
It is smarter and more lasting if companies encourage their employees’ intrinsic motivation. The drive for intrinsically motivated employees comes from inside, from themselves. They do a task for its own sake. This means because they enjoy it, because it feels meaningful to them, or because it makes them feel they are helping the community.
For many people today, the meaning behind their work is the main source of their intrinsic motivation. We love it when what we do helps something bigger and more meaningful. Smart companies manage to show their employees this meaning. A smart car company motivates its skilled workers with the goal of building the best car in the world. A smart railway company inspires its conductors with the mission of bringing people safely together. And a smart water company motivates its employees to do good work by giving them the goal of providing clean drinking water to people.
Blink 9 – Smart companies value personal customer contact.
Once, Patrick Cowden was checking in at the airport. He asked an airline employee to rebook him on a later flight. The employee could only shrug his shoulders sadly. The employee wanted to help but could not. This was because the whole check-in process was already digital, and the system did not allow last-minute changes. Also, the employee at the counter generally could not change the booking. His only job was to look friendly and take the luggage.
Companies that ignore personal customer contact are in great danger. For example, they let standard IT systems handle it to save staff costs. They risk damaging their relationship with their customers. After all, services like careful personal contact, helpfulness, and friendly advice make a company appealing to its customers. These lead to a stronger connection. What we like about a company is – as Cowden says – mainly „the warmth of the exchange. The laughter when there’s a misunderstanding, but it’s cleared up together. The shared success when you figure out how to solve a problem together.“
Many leaders do not understand that these personal interactions between customers and companies are very important. They create extra value for the company. Instead, they cut staff and risk harming their customer relationships for a long time.
Blink 10 – Smart companies follow the values they preach.
Values are important for companies. They give employees a moral compass that guides them in difficult times. For example, if a manager knows that his company highly values „cooperation“ and „fairness“, then even when sales drop, he will not pressure his employees or threaten to fire them.
Also, values create meaning and make employees feel more connected to the company. As part of a community with shared values, employees come to work with much greater motivation. They feel they are doing the right thing and want to help the company and their colleagues do well.
But simply stating values is not enough. They must be lived every day. A well-known saying from the USA puts it well: „If you’re going to talk the talk, you’ve got to walk the walk.“ This means actions must follow words.
But this happens too rarely. It is now common to mention the values a company supposedly stands for in brochures or on its websites. But very few actually live by them. Patrick Cowden once heard a speech from the CEO of a company that described itself as tolerant, respectful, and open in its brochure. But the first thing the boss shouted at his team was: „I want to tell you three things. First: You all do bad work. Second: You are all too expensive. Third: I am here to change that.“
Another example: In Cowden’s neighborhood, there are two stores of the same supermarket chain. But when comparing the two, he noticed huge differences. In one store, the employees were very friendly and focused on helping customers. In the other, they were unfriendly and bored. The reason: The “good” store had a helpful boss who treated his employees equally, kindly, and fairly. The “bad” store, however, had an angry, unhappy boss who even spied on his employees. The same company owns both stores, but values are lived only in one – from the boss to the person who packs shelves.
Where would you prefer to shop?
Summary
The main message of these Blinks is:
Smart companies see and grow the potential of the people who work for them. They value their employees’ experience and give them meaningful tasks. They do this not just out of kindness, but because it helps them in the long run. Companies that ignore, pressure, or fire employees to save money and be more efficient only harm themselves.
What you can do:
Think long-term with every decision!
Too often, leaders make decisions that only help the company for a short time. Cutting jobs or moving work abroad might save staff costs. But they often make employees unhappy. And in the long run, this leads to lower quality work.
Build on your employees’ inner motivation!
Intrinsic motivation is the strongest drive a person has. Try to awaken it in your employees. For example, give them responsibility and show them the deeper meaning of their work!
And with that, we have come to the end of this Blink. As you might have noticed, it was read by an AI language model. We are excited to hear what you think about it. So, if you could take the time to leave us a rating or a comment, that would really help us make our content better. Thank you, and see you in the next Blink.
Source: https://www.blinkist.com/https://www.blinkist.com/de/books/neustart-de