By now it should be obvious to everyone that there has never been a job market like this in America. Unemployment is still astoundingly low, and jobs at all levels have never been easier to get. But while this wild seller’s market is a joy and a marvel to the individuals who are selling their services, it has created huge headaches for their employers, who must struggle to hire and keep talented employees. In the New Economy, where college graduates can expect four to five job offers and annual employee turnover is at a near-record 14 percent, an iron truth has emerged: You must keep your employees very, very happy. There is even a new management buzzword for it: “ROT,” or “return on talent.” Roughly translated, it means: the payback a company gets for investing in its workers. But these days throwing money at employees is no longer enough. Nor, in a world where stock-option plans are a dime a dozen, is the vague promise of future wealth. The companies that have been the most successful at drawing and keeping talent are the ones who have offered their employees the most progressive workplace.
Though the West Coast has long been considered the breeding ground for new management ideas in this country, Texas companies like Whole Foods Market and Southwest Airlines have come a long way toward closing the gap. What follows is a list of seven guiding principles for management in the New Economy, as practiced by a group of very different Texas companies. All have achieved success by changing the rules, often by sheer experimentation.
1. Foster openness: Give all employees full access to company information, starting with their boss’s salary.
Among aisles stacked with soy milk and Ginko Biloba, a new style of management is flourishing. Whole Foods sells organic products to the elite with a management attitude that is distinctly non-elitist. Using a radical version of “open-book management,” Whole Foods allows every employee, from a top executive to the newest cashier, unusually open access to the company’s financial information that specifically affects their ability to perform their jobs. That information includes everyone else’s salaries.
At each of the company’s locations, employees can peruse a binder that lists every worker’s combined salary and bonus for the previous calendar year. If an employee finds he is making less than someone else doing a comparable job, he has the right to a logical explanation from Whole Foods’ management. Company executives argue that an organization with no financial secrets is best able to create trust among employees. It keeps bad feelings over salary differences from festering and allows employees to know exactly where they stand in the company hierarchy. Whole Foods also has an egalitarian compensation structure, with the maximum salary capped at fourteen times the average employee salary.
2. Foster community: Instill in employees a concern for co-workers and society at large.
In San Antonio, Valero Energy Corporation is doing its best to challenge the stereotype of the big, faceless energy company, indifferent to the surrounding community. Valero has grown to be America’s second-largest independent refining company, yet the passion for philanthropy it had when it was founded twenty years ago has not changed. Valero’s community-service projects around San Antonio (as well as in Houston, Texas City, and Corpus Christi, where it also operates) are legendary, with nearly all the company’s workforce, from mailroom employees to CEO Bill Greehey, participating in the events. As Greehey puts it, “We make sure that the people we hire are dedicated to Valero’s commitment to community involvement.” To assist in the endeavor, the human resources department uses a test to measure the social awareness of all potential candidates.
Yet Greehey also knows that charity begins at home. At Valero, a “safe fund” provides money to employees in need. In 1999 Valero gave $5,000 checks to three employees’ families displaced by massive floods in San Antonio and sent teams of volunteers to clean up the wreckage and provide food and blankets. During the oil shock of 1998 and 1999, when the rest of the refining industry was laying off workers, every Valero employee got a bonus. The company emerged from the crisis stronger than ever.
3. Foster creativity: Allow workers to create their own work environments.
At hotshot ad agency GSD&M in Austin, they don’t like to think of themselves as being in the advertising business. They are in the “idea business.” This is not just management-speak. GSD&M allows each of its divisions to have a say in creating its own workspace. At the postmodern corporate headquarters in Austin, also known as Idea City, the account-service division has chosen to work in an open, newsroom-style setting, while the creative types have decided to work in a more solitary environment to allow for maximum flow of the creative juices. The creative team working on the Chili’s Grill and Bar account sits in an office adorned with Mexican decor and featuring actual booths and menus from the restaurant. Says GSD&M’s director of communications, Eric Webber: “We have designed a workspace that brings out the best in people.”
GSD&M competes with dot-com companies by selling its employees on imaginative office perks. Those who recently gave birth can use an office-provided breast pump machine. Children old enough to crawl can romp around in the office playroom. A Web camera inside the room allows parents to monitor their kids via GSD&M’s intranet.
4. Foster loyalty: Train workers extensively, then pay them generously for greater productivity.
How did a retail chain like the Container Store of Dallas, selling mundane things like storage containers and bathroom shelving, end up at the top of Fortune’s “100 Best Companies to Work For” list? The main reason is that the company doesn’t treat its employees the same way that other retailers do. Saying that it takes only the cream of the crop, the Container Store pays its workers a stunning 50 to 100 percent above the retail industry average. Company founders Garrett Boone and Kip Tindell believe that one great worker is three times as productive as a merely good one, so it makes economic sense to pay bigger salaries to fewer workers. Also, like Whole Foods, the Container Store makes a point to give each employee access to the company’s financial information. (It’s even more unusual for a privately held company like the Container Store to do it.) Says Tindell: “It’s a quirky, people-oriented, yummy, open culture.”
The Container Store also invests heavily in training to educate new workers and indoctrinate them in the ways of the corporate culture. New full-time first-year employees at the Container Store spend 235 hours in training during the first year. The industry average? Seven hours.
5. Foster responsibility: Put new workers in charge and move them quickly through the ranks.
Dr. James Truchard, the garden-tending, pickup-driving CEO and co-founder of National Instruments, has built an entrepreneurial culture out of youthful talent in North Austin. “Dr. T” (as he is known to his doting employees) annually hires top engineering students right out of college and gives them far more responsibility than they would have at many of Texas’ other technology companies. He then allows them to move into management positions in as short a time as three years. “We’ve built a culture here where young people know they can have an immediate impact,” says Truchard.
Truchard began the company in 1976 after working at the Applied Research Laboratory at the University of Texas at Austin. Since then, he has tried hard to ensure that National Instruments, which designs and manufactures industrial measurement equipment, maintains the atmosphere of a graduate-school lab. With more than 2,400 employees, National Instruments has had 23 consecutive years of double-digit growth and has never been forced into layoffs. Truchard gives employees constant contact with the boss by roaming the halls, practicing what he calls “sneaker management.” When the long hours get to be too much, a nature trail on the company’s wooded campus gives employees relief from their computer screens.
6. Foster individuality: Allow workers to do their own thing, no matter how wacky their thing is.
Anyone who has awakened from a fitful sleep to the sound of “The Yellow Rose of Texas” sung by an overly enthusiastic flight attendant has a sense of the corporate culture of Southwest Airlines. But it’s not just about peanuts and cheap gags. The Dallas airline that took the industry by storm has also developed a casual, egalitarian culture that has earned the company the lowest turnover rate in the industry. Employees are selected not only on the basis of how they look on paper but also whether they fit Southwest’s consumer-oriented philosophy.
Southwest has long been a pioneer in new-wave management techniques. Employees wore casual dress long before golf shirts and khakis became fashionable among the techie elite. It was the first airline to offer employees a profit-sharing plan. Southwest also encourages individuality: If a flight attendant has a good voice, then by all means he or she should belt out a song over the P.A. system. The attitude comes from the top; CEO Herb Kelleher is legendary for his devotion to Southwest’s employees. He encourages all employees to spend days in the field, and Kelleher himself is not above loading luggage or serving the occasional drink to customers on Southwest flights.
7. Foster teamwork: Throw out the old management hierarchy and encourage group over individual success.
Each summer, software maker Trilogy recruits an average of 150 freshly minted college graduates to work at its corporate headquarters along the banks of Lake Austin. It then puts them through a summer training course that lasts about eight weeks known as Trilogy University, meant to instruct them in the company’s team-based approach to corporate organization. “It’s summer camp for techies,” says a company spokesman.
With its “flat hierarchy,” the company eschews a rigid corporate structure for a system that rewards the success of an entire team. Trilogy was a pioneer of the flexible schedule that is now the norm among high-tech firms. For the most part, workers can set their own hours, answering only to their respective team leaders. Employees can even control how they are compensated. Logging on to the company intranet, they can determine (and then later adjust) how much of their salary ought to be in cash and how much in Trilogy stock.