Freedom, Purpose and Values
At the 2017 Beyond Budgeting Conference, Henry Stewart talked about why you should make your people the main focus of management in your organisation, and gave examples for organisations who have achieved that.
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Freedom, Purpose and Values - Henry Stewart (Full Video)
We have a basic principle at Happy, and I want to check if you agree with it. Our core principle is simply ‘people work best when they feel good about themselves’.
If that’s the case, what should the main focus of management be in an organisation? Making people feel good, making people happy.
Is that the main focus of management in your organisation?
Now some of you will be thinking ‘I wish it were’, some of you will be thinking ‘well, you can’t have it the main focus’. I was recently on a platform with the chair of one of Britain’s biggest retail organisations, 90,000 people, who said ‘yes, that is the main focus of management in my organisation’.
Anyone guess what company that was? It was John Lewis. I don’t know if those from outside Britain know John Lewis, if you were to ask an audience of British people who delivers the best customer service, they’d almost always come up with John Lewis, certainly of British companies. He went on to explain how at the last board meeting they spent 20 minutes discussing the numbers, and three hours discussing people and how to value and motivate them. John Lewis was set up in the 1930s by a guy called [John] Spedan Lewis, as a workers’ mutual. Back in the 1930s Spedan Lewis put as item number one in the constitution, every decision this company makes must be based on the happiness of its workers. They only had one or two stores then. They’re now probably the most respected company in the UK.
My question to you is, how would your organisations be different if the main focus of management was making people feel good? This is not a debate about whether that’s a good idea. I want you for the moment to suspend disbelief and imagine that has happened, that’s how your organisations are run. What would they look like, what would they feel like?
So, how would it be different? More connection between management and staff, better performance, simpler. How many think it would be a better place to work? How many think it would be more innovative? More productive? How many are going to go back and make sure it happens? Everybody, absolutely!
There is hard evidence for this. A guy called Alex Edmans at Wharton Business School decided to look at the great places to work and compare them to the ordinary places to work, i.e. the companies that had been in the Fortune Best Workplaces over 25 years. He compared those that were in the stock market with the standard stock market index.
Happiness or engagement? I would say they’re connected. I think happiness is a step beyond engagement, it’s actually feeling really fulfilled and motivated and having a sense of purpose.
But back to my research!
He found that the best workplaces had a four-factor alpha of 3.5%. What that means is 3.5% extra per year compared to the standard stock market. If you had a pension fund you’d invested in the standard stock market, if after 25 years that was worth £100,000, if instead you put it into these great workplaces, reinvesting each year as you could have done, it would have become work £231,000. That is the hard financial difference.
You might wonder, then, why people don’t invest in great workplaces. There is one fund, the Parnassus Endeavor Fund, which decided 13 years ago when it set up to invest in happy workplaces. It had $600,000. It now has $1.4 billion and has been ranked over the last 10 years in the top 1% of performers across the entire United States, which begs the question why more investment funds don’t do it because the proof is there, the academic research is there, the financial evidence is there.
It’s not just true in the private sector, this is from hospitals. The King’s Fund, which is a UK research organisation which looks at health, looked at mortality rates in hospitals where staff were highly engaged and happy, and where they were disengaged. For every 96 people that die in a hospital where staff were highly engaged and happy, 103 die in a hospital where they’re disengaged and unhappy. Happy workplaces save lives – and if you’re sick, make sure you go to a happy hospital!
Let me put a caveat on that, which is that one of our clients did get somebody to go away and make people happy. He brought in hula hoops and games and made them have fun. He measured happiness before and afterwards and happiness went down. Why? Happiness isn’t about the trivial stuff, and it’s not about being made to have fun. What they’re looking at now instead is making sure people have meaning and purpose in their jobs, they’re doing what they’re good at and they have autonomy.
Let me ask you another question. I want you to cast your minds back over your working career. Think of a time you were really proud of the results you produced. I know we all work hard all of the time, but think in terms of the results. It might be a particular project, a particular time. Does everyone have something in mind? Was it a time when you were really well paid? Was it a time when communication was particularly strong? Was it a time when you were challenged? Was it a time you were trusted and given freedom to do it your way?
I’ve asked that question now of thousands of people and you get a very similar response. About 1 in 10 were well paid. That isn’t what enables great work. 1 in 3 when communication was great. But 80% or more when people are challenged, and for just about everyone when they worked at their best was when they were trusted and given freedom – absolutely in line with the management principles Anders was talking about earlier.
Let me put that in context. We’ve all studied Maslow’s hierarchy of needs at some point. What was at the bottom? The basic things like shelter, safety, food. What was at the top? Self-actualisation. The idea being that if you haven’t got them, that’s what motivates you. Having somewhere to eat, sleep, some safety, but if you have those having more of that isn’t what motivates you, what motivates you is the higher needs of belonging, self-esteem, and being in control of your life.
Let’s translate that to a management hierarchy of needs. You need Communication and Reward, these things at the bottom, you need to be paid, to have some idea of what’s going on, but it’s the higher needs, Support, Challenge, Freedom and Trust that actually motivate.
Where are most organisations focused, the bottom or top of this pyramid? Bottom?
Where do you think the very best work places are focused? At the top.
The Googles, the Microsofts, the companies that win the great places to work are focused on how do we give our people the trust freedom to do a great job?
Would you like a quick tip on how to give people that freedom, that you can put into practise immediately? Do you in your organisation set people to solve a problem, come up with a solution, new idea or proposal and bring it back to you for approval? Is that something that’s common? The idea is that you miss out the approval. You approve the person’s solution before they’ve thought up the solution. We had a café area, and we had a 19-year-old in charge of it who wanted to improve it. Instead of asking her to come to us with a plan and submit it for approval, we agreed a budget and checked she understood the values of the organisation and left her to it. How do you think that 19-year-old, three months into her first job, felt every day walking in the room? Fantastic, she felt proud, she felt a sense of ownership, and she went on to do many other innovative things.
What gets in the way of doing this? I was sent an email by one of my trainers from years ago with three things that she felt I’d done to improve things. I looked at them and my first thought was that I’d had no idea they’d happened because they hadn’t come across my desk for approval. The second thing I noticed though, is that I would have rejected two of them if they had. I set things up here, I use my best thinking, I think my thinking’s pretty good – as do most managers! We are natural barriers to change. If it comes across your desk you’ve got to do something with it. How many of you have put your best idea up to your manager and had them ‘improve’ it? Not always a great experience. The best way to stop me doing that was for it to not come across my desk.
Let me give you an example of our website, which I used to be very involved in, because the website’s very important. I run the company and I know a bit about the internet, so I’d change this and that, and suggest things, but what effect do you think that had on the website manager? They didn’t really feel in charge of the website. This time we decided we’d pre-approve the website. That was a big thing! But it doesn’t mean we said, ‘do whatever you like’. Most people want freedom within guidelines, they don’t want to be told exactly what to do. The guidelines were, we did a branding exercise, so the look and feel of the company was clear. We agreed the metrics, how many people would visit and how much it would generate, would be how it would be judged. We sent Jonny, who was then in charge of it, on a Search Engine Optimisation course, so he would have the skills. We also made sure Jonny was talking to users, to make sure he was having those dialogues. I saw the website for the first time the night before it launched.
It wasn’t what I expected, it wasn’t what I’d have done, but if you truly delegate you don’t get what you would have done. You get what they create. The aim of delegation is not to be as good as you, it’s to be better. When we got the stats in a month later, business had trebled, and income had doubled, even without the benefit of my expertise!
Do you know how big Buurtzorg is now? Four people less than 10 years ago. And do you know how big it is? 10,000 nurses, in 10 years, with no managers. This team of 10 is self-managing. They have a Chief Executive at the centre and an IT team there, but these 10 decide everything that happens in their locality. You might think that if you wedded to traditional budgeting ideas, it must be more sensible to have an expert allocating the resources, so that they can get the best response and the most cost-efficiency. That was the whole point of doing that, that it was going to produce that. Ernst and Young did a study of the way Buurtzorg worked a few years back and reckoned it would save the Dutch healthcare system 2 billion Euros if the entire system switched to this.
Why is this better than the cost-effective allocation of resources they were using before? They’re spending more time with the patients; how can it be more efficient? People closest to the work are making the decisions, people are being cared for more, they’re spending less time in hospital later, less drugs later. We had one of the nurses at one of our conferences and she first of all said, “I have got my vocation back.” You can imagine the difference between being told there was another department deciding. The day before she’d spent the afternoon with a neighbour of one of her patients. Why? Because she was about trying to build community for that patient. That’s what happens when you start to trust your frontline staff.
A couple of other quick thoughts: what then should managers be doing if they’re not doing the command and control, if they’re not telling people what to do?
This is a survey from Google, Project Oxygen. These are eight positive management behaviours. Being Google, who I know are maybe not the best at paying their taxes, but they are a great place to work and have won lots of awards for that. Being Google, they looked at the data. They looked at tens of thousands of performance appraisals to work out in practise what should managers be doing.
You’ve got eight things: good communication, especially listening; express interest in your people; be productive, results orientated; empower people, don’t micromanage; help with career development; key technical skills; be a good coach; and clear vision. Which do you think are the most important?
Third most important is express interest in your people. Second was empower, don’t micromanage. The single most important behaviour of managers was to be a good coach. I did have one group of Chief Executives who said, “why is that part of our job?”
Think about if you’ve had a personal coach at any point in your careers. Did they tell you what to do, or did they ask you lots of questions and help you find your own solutions? Would you all like to have managers that did that? Yes!
Let’s say you get a note from your manager saying, “I want to see you at 12 o’clock”. Do you feel excited? Because actually, if your manager’s there to support you, you should feel excited!
How would your personal management be different if it was focused on these eight things from Project Oxygen, and in particular on being a good coach? If you dropped all the other stuff and focused on this? How many of you already see your main role as managers, as being a good coach? How many of you will now? Absolutely, if you’re going to trust and empower people, and you want to get the best out of them.
Let’s look at the framework for this. I have one friend who when they started a job was given a three-word job description. It was ‘do cool stuff’. It was an internet company, as you can probably guess, and I’m not sure they’re still around actually… He loved it, but most of us need a bit more guidance. We have a model, the job ownership model, which is about having principles. At Happy we try to avoid telling people exactly how to train but they’ve got to train in certain principles, which incapsulate within the phrase “don’t tell, when you can ask”. That’s what you’ll find in our training rooms. There are targets, but I’m going to come back to those, and there’s support, and there’s feedback. Let’s look at a couple of these.
Who should set the principles? The organisation or the individual? The organisation. That’s fair enough. One of our clients is Amnesty; if you’re starting at Amnesty and you go in on your first day and say ‘hey, this death penalty thing, I quite like it’, it doesn’t work! You have to accept the principles of the organisation.
Who should set the targets, the manager or the individual? According to research, who sets tougher targets? When are they more likely to be achieved? So, who should set the targets? The individual!
Let me give you an example of this from our friends in Cheltenham at GCHQ. I was listening to the director of IT speak at a conference recently, and at GCHQ it used to be the case that if you wanted to sign out a laptop it took two weeks. There are key security things to bear in mind. That wasn’t even to take it out of the building. The director thought ‘maybe this is a bit long’, because he was getting some complaints, so he said, ‘I think I’ll set it for a day’. But then he thought ‘hang on’. He’d read The Happy Manifesto, my book, and The Happy Manifesto says get individuals to set their targets. He went to his team and said, ‘you’re going to be doing this, so we’re changing it from two weeks, you set the target’. They set the target at five minutes, and they achieved it, so they set it to three minutes and achieved that. You can now get a laptop out in one minute at GCHQ. On the other hand, if the director had said ‘I want you to cut it from two weeks to a day’, what do you think the staff would have said? ‘No way, that’s unreasonable’. That’s the difference if you put people in charge.
Coming back to the whole budgeting thing, let me give you an example from here. We put Natalie in charge of credit control. At the time we were owed £135,000, which for a little company like us is a lot. Now, Natalie doesn’t mind me saying she can be a bit scatty, easily distracted, while being totally charming and good at getting people to pay up. So, what [target] should we set? What I asked Natalie to do is to send me a spreadsheet every two weeks with the three figures – how much owed in 30 days and 90 days, and her target for two weeks’ time. The first time she was ridiculously optimistic and didn’t come anywhere near it. The second time, she was very cautious, and she easily beat it. Over time, she became very focused, she was in control of what happened, she decided the target.
Now what’s different about that to your normal targets? She had a sense of realistic feedback and capability. It’s not set for a year, and you put it away in a drawer and find out at the end of the year whether you got it. It’s a rolling target in a realistic timeframe which they have complete control over. That’s what we try and do at Happy.
For instance, our main costs are the costs of trainers and resources around running courses. We don’t have any fixed budget for that. We have a ratio. Why would you have a fixed budget for something that could change from month to month? The person in charge of that knows that they’ve got to try and get all the costs below 50% of what the income is, so it changes month by month.
Everybody also knows, for instance, if a course goes wrong, if the evaluation puts average or below, there’s somebody who rings them up the next day. They have no rules or guidance on what they should do, except make the customer happy. They can decide to send them flowers, they can decide to refund the money, they can decide to book them on a course somewhere else! It’s entirely up to them because they’re cost-conscious, they know what’s needed, they know what happened. There are no rules about it, they just go and make sensible decisions.
So, that’s Happy. Happy is based on the idea that people work best when they feel good about themselves, that you can trust people. There’s a phrase that Richard Branson uses: “don’t set your rules for the 2% who are pissed off and come to work dissatisfied, set them for the 98% who have come wanting to do a great job, and can be trusted and empowered.”
If your people were the main focus of leadership at your organisation, how would your organisation be different?
Many successful organisations are now taking this approach – from Buurtzorg in Holland, to GCHQ and the John Lewis Partnership in the UK. A people-first approach has been a core principle at the John Lewis Partnership for over one-hundred years, and all of their leadership meetings are now focused on how they can help their staff to be happier and more motivated.
There have been several studies that show this approach works. Alex Edmans compared the shares of the Fortune Best Workplaces list to those that were not on the list over 25 years, and found that the best workplaces had a four-factor alpha of 3.5%. This is a huge impact – if you invested in a standard workplace and this was worth £100,000 after 25 years, in one of the best workplaces list, this would be worth £231,000.
In this 25-minute video from the 2017 Beyond Budgeting Conference, Henry discusses several ways that you can help to create a great place to work – such as pre-approval and letting your people set their own targets, and how they have been implemented at Happy.
What you will learn in this video
- About Happy’s core principle – ‘people work best when they feel good about themselves’
- Research by Alex Edmans into how workplaces that had been in the Fortune Best Workplaces list compare to standard workplaces in the stock market
- How you can enable freedom and innovation at work by using the ‘pre-approval’ method
- The eight positive management behaviours revealed by Google’s Project Oxygen
- A new way to set targets for your team – and make sure that they achieve them
- Short on time? Click here to watch the two-minute clip from Henry’s talk – Happy Workplaces Save Lives.
- The Happy Manifesto by Henry Stewart – click here to get your free eBook, full of great ideas for creating a happy workplace
- Click here to watch more videos from the 2017 Beyond Budgeting Conference
- How John Lewis Puts the Happiness of its Staff at the Core of its Business, an interview with Sarah Gillard, Director, Insight and Assurance at the John Lewis Partnership who goes by the user-friendly title of ‘Director at Happiness’.
- Pre-Approval in Practice at Talk, Listen, Change – in this three-minute video, TLC’s Managing Director Michelle Hill discusses how she has used pre-approval within the organisation with great outcomes
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