Work Babble

STUDY: As CEOs Make More Money, They Treat Employees Worse

July 16, 2010

 

Forwarding an interesting finding posted by Veritas Executive Compensation Consultants…

Want to get an idea of how nice a CEO will be? You might want to sneak a look at their paycheck.

The more a CEO gets paid, the more likely it is that they'll treat their employees harshly, according to a new study.

The study, conducted by professors at Rice University, Harvard University and the University of Utah, found that "increasing executive compensation results in executives behaving meanly toward those lower down the hierarchy."

The authors believe that this increase in meanness is due to an increase in power: As executives get paid more, they get a heightened sense of power, and "more power leads managers to mistreat subordinates more and evaluate them more unfavorably," the findings suggest.

This meanness gets worse as the gap between CEO compensation and the pay of lower-level employees widens, according to the study, called "When Executives Rake in Millions: Meanness in Organizations."

"Higher income inequality between executives and ordinary workers results in executives perceiving themselves as being all-powerful, and this perception of power leads them to maltreat rank-and-file workers." the study found.

Should executives be paid less to try to create a kinder work environment?  The study concludes the issue should be weighed.

"We have argued that in addition to examining the links between executive pay and a firm’s financial success, it is important to consider a thus far unreported ethical implication of high executive compensation — that executives with higher income treat employees more meanly," the study concludes.

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Veritas Executive Compensation Consultants, LLC. (“Veritas”) is a truly independent executive compensation consulting firm.

We are independently owned, and have no entangling relationships that may create potential conflict of interest scenarios, or may attract the unwanted scrutiny of regulators, shareholders, the media, or create public outcry.

Veritas also believes that public company Boards of Directors and shareholders deserve higher standards of disclosure that verify the independence of the executive compensation advice that their companies receive from their consulting firms.  This disclosure will assist in curing the terribly negative views that government regulators, shareholders, employees, the media, and the American public have on executive pay.

Veritas goes above and beyond to provide unbiased executive compensation counsel. Since we are independently owned, we do our job with utmost objectivity - without any entangling business relationships.

Following stringent best practice guidelines, Veritas works directly with boards and compensation committees, while maintaining outstanding levels of appropriate communication with senior management.

Veritas promises no compromises in presenting the innovative solutions at your command in the complicated arena of executive compensation.

We deliver the advice that you need to hear, with unprecedented levels of responsive client service and attention.

Visit us online at www.veritasecc.com , or contact our CEO Frank Glassner personally via phone at (415) 618-6060, or via email at fglassner@veritasecc.com . He’ll gladly answer any questions you might have.

Radio Interview - 89.5 FM WSOU (Seton Hall Radio)

TGIM or Thank God It’s Monday is a radio show hosted by Greg Cellini out of Seton Hall in New Jersey. The show focuses on a variety of subjects related to business, personal development, and other related workplace issues. In this June 5 broadcast, I spoke about my book, bosses, and the job market in general. I want to thank Greg for offering some excellent questions and the WSOU staff for a great recording. Click on the header below to begin the broadcast (there is about a one minute music bumper - interview follows).

6.5.10 WSOU Interview - Tony Deblauwe

 For more information on 89.5 FM WSOU visit www.wsou.net

Note: the book offer for WSOU listeners extends through June 30, 2010.

Undercover Boss - Roto-Rooter episode

By Tony Deblauwe

Let me begin my review by saying I am a satisfied customer of Roto-Rooter. I used their service once a long time ago and everything went smooth – the call, the service crew, the timing, etc. These characteristics were well portrayed in the UB episode.

Now – what about the President and COO Rick Arquilla?

I never saw so much weeping at the drop of a hat from executive management.
I kept thinking – is he truly THAT disconnected from people in the rank and file that take these jobs, or should he have investigated his personal issues in more detail before agreeing to do this show?

I know for many people the human side of UB – no matter what form it takes – is the heart and soul of program. The thinking is - it shouldn’t matter if the leader walks away with things he can change for EVERYONE in the company versus just the folks he meets undercover. I disagree completely in this case. In the opening scene, Arquilla talks about the slow economy but mentions that New Orleans is a new a market that is growing rapidly. He specifically wanted to go undercover and understand why. So he had a purpose to find economic/marketing nuggets that he could use for the larger national operation.

 Instead, the entire show was about Arquilla connecting just with workers in different areas of the organization: residential plumbing, sewer maintenance, customer service, and manufacturing. I definitely learned more about the many aspects of Roto-Rooter’s operation as a consumer, but I didn’t see where any of Arquilla’s experiences translated into the broader changes he originally set out to find.

The best part was the dispatch center. He mentioned he was directly involved in the design of the system which is color-coded based on field status. He tells the manager he is training with that he’s color blind. Immediately I thought – ok, you have a system that can’t address the needs of people with an impairment and by itself seems a little tricky to understand – what’s he going to do to improve the system to make the interface more user friendly and accommodating to adults with disabilities? The answer: nothing. Apparently he didn’t see this as an opportunity to vastly improve point of contact with customers and make the lives of employees easier.

In the reveal, the “token gifts” element was all he had to offer:
-Investigating a bumbled disability claim

-Giving mortgage assistance and paying for special needs care of a child

-Asking an employee working through recovery to go speak to other employees
-A new van so the employee could better manage shuttling kids to basketball practice

-A garage so a few employees can restore muscle cars
So if I’m a Roto-Rooter employee who has any personal issue but wasn’t lucky enough to have the President meet me undercover – what do I get? Can I make a special trip to headquarters, meet Arquilla, get him to cry because of my struggles, and walk away with cash or an off-road vehicle for my therapy?

Again – let me be clear – every single person in the show deserved the help and I am happy they got it. This has nothing to do with the compassion imparted as part of this experience.  My gripe is that UB is about improving the perception that leaders have grown disconnected from their people. By going undercover you learn about your people sure, but you also take away larger operational changes as a result of meeting with a few high performing folks.

Joel Manby of Herschend Family Entertainment did it right. He helped some individual employees, but he largely got the takeaways he needed to foster policy change. I hope that behind the scenes Roto-Rooter takes the same approach as Herschend in understanding the profile of their folks and adopting policies that help employees over the long run.  

Undercover Boss – Herschend Family Entertainment episode

By Tony Deblauwe

This week, Joel Manby, CEO of Herschend Family Entertainment goes undercover in several theme parks to understand what happens at the line level. And unlike other episodes, there were no manufacturing or packaging jobs to fumble.

Right off the bat Manby recognizes that a tough economy has led to lower attendance at the parks and difficult corporate decisions like freezing wages. He realized this environment is ripe for people to be dissatisfied and for the potential of quality to go down.

His first stop was at Stone Mountain Park where he assisted Captain Howard of the Duck Boat rides. Captain Howard is a true showman and you can tell he really likes his job. In the reveal, Manby offers Howard a chance to cross-train operators at other parks via a New Captains Program. Not only is this a great example of career development, but it takes the best practices of great talent to up-level competencies in other areas.

Next stop was a Western themed area where Manby met Albert. Albert described his challenge of going to school at night and working fulltime during the day. Albert had an eye both on ride design but also being CEO. In the reveal, Manby does something pretty incredible. He creates a new scholarship program that will fund 100% of Albert’s tuition plus let him go to school full time and work the summers.   

When Manby visited Silver Dollar City he wanted to learn why the park was rated the cleanest park. He met Richard and soon found out why. Richard worked there for several years but hit a snag when his house was flooded and lost everything. He’s been stuck trying to renovate it with the little time (and money) he had. Manby was concerned why Richard didn’t apply for financial assistance which is a key program the company offers. In the reveal, Manby approves $10K in catastrophic fund assistance and gets volunteers to help complete the renovations.

Manby proceeded to the next job which was to serve passengers on a Mississippi Queen steamboat experience. He met Jennifer who struggled with the inconsistency of dine times and passenger load with child care. In the reveal, Mandy announces he expanded the financial assistance program to cover child care. Again, another good example of improving corporate processes as a result of undercover information gathering.

The final job was at the Adventure Aquarium where employee Mercedes showed Manby the ropes of the touch tank and that she was homeless prior to getting this job. In the reveal, Manby gave her a raise and offered to inventory her apartment and make sure she had what she needed to create a home for her and her child. 

Manby learned much for his experience. He felt how good the people are and how this experience will make him a better leader. Unlike other shows, the best part was when he addressed his management team about his learnings. He spoke in terms of actions – especially about how the company can support single parents – a big chunk of their population.

 

By far this is the best episode for me in terms of what I believe the premise of the show really is about. If you look at the summary of actions:

* Expand the financial assistance program to include child care

* Create a Scholarship Program to assist employees balancing school and work

* Create a New Captains Program to showcase the right competences for customer satisfaction

The leader goes undercover and comes back with broad changes in policies or process – for all employees – not just token good gesture gifts given to a couple of employees (well intentioned and deserved as they are). I felt Manby would have uncovered more if he had the time, but at least he tasked his management team to be aware and stay connected to people. Herschend has a great CEO in Manby and I hope future episodes will contain this level of action-oriented output.

Undercover Boss – GSI Commerce episode

By Tony Deblauwe

In this episode, CEO Michael Rubin of GSI Commerce, goes undercover in several fulfillment and packaging centers to observe what happens in the daily operations of the e-commerce giant.   

The usual process failures occurred with manual labor activities as in other episodes. Rubin tried to load a truck full of boxes but could not do it. He tried to get packages ready and was actually fired from the position in only four hours. He couldn’t keep up with the night shift sorting/fulfillment center, and he had difficulties taking customer escalations.

And the typical personal stories gripped his heart and he rewarded these folks with “gifts” including $5K to sponsor youth football, $10K for a call center manager’s wedding he could not have earlier, and 1K gift cards to the fulfillment center worker so his daughter could have something special for the holidays.

I do admire Rubin for deciding to go undercover as a seasonal worker during their peak time at the end of the year (which represents 70% of their revenue). I totally agree that leaders need to get involved and see what’s happening at the busiest times when crisis or inefficiencies are likely to occur.

Rubin did notice that in one case, the 3-week seasonal, Rochelle, had already improved her productivity by 25% through simply taping her arm with scan codes while going box to box for shipping. While the show did not capitalize on this in the reveal, it seemed like Rubin understood he needed to explore this technique further. Shannon got her wish because Rubin gave her a full time job.

The night shift piece was interesting because it showed how these laborious tasks could be made fun. Rubin had a time/sprint contest with Cameron to fill up his orders tray and prepare for shipping. Cameron had a great attitude and showed how he paced himself to get the work done quickly. Rubin enrolled him in a leadership training program so he could become a supervisor.

The best part of the show occurred at the customer call center. Here they dealt with customer service issues including escalations. Adam was the escalation lead and he had the best attitude ever. It almost seemed fake but he really shined in my opinion as the kind of employee where you can see the company nailed personality fit with job fit. When Rubin visited Danielle, the story was quiet different.

Rubin observed Danielle on an escalated call, and due to some policy about after credit returns, she completely shut down the customer who eventually hung up. To Rubin’s credit he said if they weren’t filming and there was no risk of blowing his cover, he would have walked Danielle out that day. At the end of the show it was revealed Danielle was no longer with the company.

I think this was the most important lesson – you have to take care of your poor performers quickly because your business could suffer. I’m surprised when the same reaction did not occur from the Hooters CEO when he witnessed a restaurant manager demean his staff.  

In terms of insight, Rubin stated that he wants to be more focused on human results not just business results. He has always been a driver, owned multiple businesses since he was young, and is very competitive (which means he had little time for anything else). We’ll see if his DNA changes as a result of his one week experience in terms of improving operational efficiencies.

On a personal note, I do hope the show gets back to the strong kick-off they had with Waste Management. If each episode is going to be about a handful of lucky people getting token gifts but no real dive into what changed in terms of workplace environment, policies, and processes as a goal to going undercover in the first place, then I think the show is missing something rather significant in showing America how leaders show true connection and authenticity to their people by making meaningful changes to their business.