Chapter 3
How to Succeed in the New Business Frontier

The key is maximizing human potential, through leadership effectiveness, values, and trust. Get those right, and you will see innovation and financial growth.

We just covered the new landscape facing organizations. Thanks to social and technology changes, the bar has been raised—what was good enough to be great 20 years ago doesn’t cut it today.

Some business basics remain as true today as they have for decades. A successful company must have a sound business model, a smart strategy, and savvy financial management. But these fundamentals of a business school education are no longer sufficient. Leaders’ path to success is quickly evolving. Changes happen faster, information moves rapidly with more transparency than ever before, and technology gives any customer or employee the power to be heard worldwide in an instant. These are the unique challenges of our times. And the best leaders are responding.

So what’s needed to succeed in the new business frontier? The key is maximizing human potential, accomplished through leadership effectiveness, values, and trust. Get those pieces right, and you will see innovation and financial growth.

Together, those six elements make up the portrait of a Great Place to Work For All (see Figure 9). This chapter details what each means, how they address today’s business challenges, and how they fit together.

Figure 9
Portrait of a Great Place to Work For All

Lasting success today requires more than many leaders expect. It requires more than we ourselves once thought.

Maximizing Human Potential

Maximizing human potential is central to a Great Place to Work For All. It is pivotal to your success as a leader and a business.

What do we mean by this phrase? Let’s start with the “human potential” piece. We mean bringing out the best in your people. Enabling them to reach their potential as human beings—to be as creative, knowledgeable, and productive as possible. This means they are reaching heights they may not have thought possible in terms of projects they undertake, skills they develop, inspiration they feel. Work is not a deadening place or one that is stressful to the point of being debilitating. It is a place where people come alive, where they get in “the flow.” Where, in the framework of psychologist Abraham Maslow, they can “self-actualize.”⁴⁵

The business case for this is twofold. Being a workplace known for helping people develop into their best selves is becoming critical in terms of attracting talent. Millennials and job seekers of other generations are looking for organizations where they can grow personally and professionally. Beyond talent attraction, a human potential–oriented workplace also is vital in terms of boosting business results. In an economy requiring decentralized agility, constant innovation, and authentic encounters with customers, organizations need a workforce of employees bringing their best.

All employees. An organization where some employees are not bringing their best is leaving money on the table. This is where the “maximizing” piece comes in. If you are not maximizing the human potential in your organization—getting the most from everyone—you cannot realize the full potential of your business. And that spells trouble over time, as competitors are working to realize the full potential of their businesses.

Think of it as a ship. When you don’t get the most from everyone, you have leaks. Leaks where value, where potential revenue and profit, slip away. Benjamin Franklin once wrote, “Beware of little expenses, a small leak will sink a great ship.”

What causes those leaks? Gaps in the workplace experience—that is, people who don’t experience as great a workplace as others. Engineers having a different experience than non-engineers. Women who don’t have the same access to leaders or opportunities to advance. Frontline workers feeling less purpose and less control over their jobs compared to executives. When these groups have a less-than-great experience at work, they do not reach their full potential. Maslow had it right with his “hierarchy of needs”—to self-actualize, to bring your best, more basic needs must be met. Needs such as a sense that you make a difference, that you belong, that you have a measure of job security. In our 30 years of research in the workplace, we’ve found these needs boil down to relationships of trust, pride, and camaraderie.

Today, it’s common for some employees not to have such needs met as well as other employees. Gaps in workplace experience are commonplace. We find them even at the Best Workplaces. In many cases, these gaps have origins in our broader culture and history, in legacies of discrimination and bias as a country and a species. The gaps may not be caused by today’s businesses, but businesses that want to thrive will work to close them.

It may sound daunting, but you can frame the challenge as merely doing for everyone what you are doing for your employees who are thriving most. As lifting all your people up to the standard you’ve already set for some. When organizations close the gaps, they advance—rapidly. As mentioned earlier in the book, and as we’ll explore below and in greater detail in Chapter 4, companies with a more consistently great workplace grow faster. They also outperform rivals in the stock market.

Organizations that maximize human potential are like sleek speedboats. They zip ahead of rivals that are taking on water because of leaky gaps in their workplace experience. Propelled by people-power engines firing on all cylinders, Great Places to Work For All are winning. And leading them is thrilling.

Leadership Effectiveness

In order to maximize human potential, you must have effective leadership.

Effective leadership at a Great Place to Work For All involves toggling back and forth between two major ways of using the brain. Neuroscience has demonstrated the existence of a social cognitive system—the aspects of the brain that allow us to connect as humans and to cultivate meaning for our teams—and a more analytic, “task-positive” network—the portions of the brain that allow us to assess the market and set high-level strategy.⁴⁶ These two systems tend to inhibit each other, which means MBA programs that focus almost exclusively on quantitative skills like finance and operations can leave graduates deficient in people skills. Great Place to Work For All executive teams constantly cycle back and forth between these brain systems.

This cycle plays out across four key elements of leadership at a Great Place to Work For All. First, leaders are able to connect on a human, emotional level with employees, no matter who they are or what they do in the organization. They forge meaningful, respectful, caring relationships at work and do so in a fundamentally fair way. Fairness in relationships is particularly vital. It means being aware of implicit biases we all have as human beings. It also requires leaders to be mindful of “stereotype threat”—the way members of minority groups can feel anxious about confirming a stereotype, like “women perform poorly in math.”⁴⁷

This is not to say the C-suite team at a 100,000-person company has to get to know every employee on a first-name basis. But all their interactions should reflect humility, acknowledge the dignity of every employee, and demonstrate the organization’s values.

There is, however, one group of people with whom senior-most leaders should have strong ties: all the members of the executive team itself. This is the second key element. Executive teams—usually 6 to 12 people in size—must establish high levels of interpersonal trust and successful collaboration. CEOs must surround themselves with people they see as highly credible, consistently respectful, and fair to everyone they meet. The CEO must be seen in an identical way. High-trust, highly functioning executive teams are important in part for effective strategy and execution, but also to serve as a role model for how all teams throughout the organization should interact and perform. Each member of that senior-most team ought to duplicate its culture in their team of direct-reports, those direct-reports cascade the culture to their teams, and so on.

The notion of a positive culture cascading down from the top relates to the third key element of leadership effectiveness: forging and communicating a coherent strategy at every level of the organization. Leaders at the top must explain the company’s overall vision in clear and compelling language, and make sure that every business unit understands how it fits into the big picture. Especially when organizations are pushing decision making down to lower levels of the business, a lucid, logical, overarching plan is vital. Otherwise, chaos reigns and ruins employee empowerment efforts.

It’s a tricky balance. But when the executive team succeeds in conveying its strategy to lower-level managers and fosters a feeling of purpose, performance takes off. Consider the results of a recent study by researchers at Harvard, Columbia, and New York University on a set of our Best Workplaces. They found when middle managers in publicly traded companies had a strong sense of purpose combined with clarity about management expectations, the firms had superior stock market performance.⁴⁸

The fourth key aspect of effective leadership is a senior leadership team that reflects the demographics of the organization and the wider community. This is critical in part because diverse perspectives generate better decisions.⁴⁹ It also is vital because it builds credibility and hope in employees lower down in the organization; when people look up and see others like them in leadership roles, it convinces them they can advance and inspires them to give their all. Ideally, leadership diversity also cascades throughout the organization so that every leader looks to build a diverse team, and you find people from a range of backgrounds at every level of leadership.

When executive teams perform well in these ways, the payoff is big. We created an Executive Effectiveness index that measures how employees view senior leaders on matters such as strategic clarity, even-handedness, and authenticity in their relationships. We found the Great Place to Work–Certified companies with the highest scores on this index grew revenue three times faster than the companies with the lowest scores on the index (see Figure 10).

In short, effective leadership means connecting with your employees and teams on a strategic and personal level, unlocking the full potential of your people and your organization.

Figure 10
Executive Effectiveness Fuels Revenue Growth

Values

Values aren’t a new business topic. But what’s old is new again—or important in new ways when it comes to maximizing human potential and succeeding today.

When we talk about values at a Great Place to Work For All, we’re not talking about mere slogans on the wall or on the hiring page of your company website. We’re talking about principles that guide the day-to-day way people work together at your company. Smart companies today ensure those values and behaviors support their strategy.

Values also are what leaders use to make decisions that cannot be made using spreadsheets and data analysis alone. They are the bedrock principles that guide executives’ choices in complex, difficult matters. Matters like hiring, firing, geographic expansions, doing more for customers, and mergers. Values, for example, are central to whether technology giant Cisco pulls the trigger on acquisitions. Many mergers and acquisitions fail, often because of problems blending corporate cultures. But Cisco has a solid track record of effectively making close to 200 acquisitions, in large part by paying close attention to the values and culture of potential targets. “If their culture is dramatically different, we don’t touch it,” explains executive chairman John Chambers. One time, an acquisition target refused to own up to a stock-options back-dating problem. “If they’d just told me, I would have taken it straight to the government and fixed it. But because they didn’t tell us, when we found out, we walked away from the deal,” Chambers says.

Values also come to the fore when leaders are faced with what you might call For All decisions. In other words, with how much they are committed to standing up for an organization and a society where everyone is valued. A good example is the way AT&T CEO Randall Stephenson backed the controversial Black Lives Matter movement amid racial tension in 2016. His comments on the topic at an internal meeting were video-recorded—unbeknownst to him—and posted on social media, where they quickly went viral. Among AT&T’s values are “care about each other—inside and outside of work” and “do the right thing.”⁵⁰ In his remarks, Stephenson said his support for Black Lives Matter stemmed from a personal epiphany: he had learned only recently that his best friend, a black physician, had experienced discrimination on many occasions throughout his life. It struck Stephenson that if he and his close friend hadn’t managed to discuss these problems, America as a whole needed a more honest dialogue about race—and that opposition to Black Lives Matter could squash that conversation. “When a person struggling with what’s been broadcast on our airwaves says, ‘black lives matter,’ we should not say ‘all lives matter’ to justify ignoring the real need for change,” Stephenson said.

At our 2017 annual conference, Stephenson admitted he wasn’t sure he should touch this third rail of American life. After all, just 43 percent of Americans—and a mere 40 percent of white Americans—supported the Black Lives Matter movement as of mid-2016.⁵¹ But Stephenson felt it was the right thing to do. And he was surprised by how much positive support he received—from people of all races. Stephenson got so many comments that it took him months to finish reading through them. “It just gave people permission to do something I think they were yearning and dying to do,” Stephenson said. “It just picked at a raw nerve and said ‘go have a conversation about this.’”

By taking a risk to abide by AT&T’s principles and his own moral code, Stephenson not only helped employees—and the nation—have a more honest conversation about race. He also showed AT&T to be the kind of company that the public can be proud to do business with.

Many companies in recent decades have articulated value statements. And not all walk the talk. But rest assured, the public—employees, customers, and investors—eventually figures out what leaders and organizations actually believe. This can be seen in an intriguing study on our pool of Best Workplaces.

The 2013 study by scholars at the University of Chicago and two other research organizations found “proclaimed values” by companies appear irrelevant to their business results. But, the study found, a firm’s performance is stronger when employees perceive top managers as trustworthy and ethical—two concepts typically included in values statements. In particular, the research into nearly 700 companies that completed our Trust Index Employee Survey found high levels of perceived management integrity are positively correlated with “higher productivity, profitability, better industrial relations, and higher level of attractiveness to prospective job applicants.”⁵²

In essence, when companies live out strong values, employees buy in figuratively while customers buy in literally. Given shifts in the business landscape toward a more purpose-conscious public, heightened transparency into companies, and increased expectations that business leaders will lead on social issues, meaningful values are only growing more valuable.

A Foundation of Trust

The final key to maximizing human potential and creating a company built for success is a foundation of trust. Trust is what we discovered to be the cornerstone of great workplaces 30 years ago. And trust—specifically, a relationship of trust between employees and leadership—remains as important today as it was then. That’s because while business conditions have changed dramatically, people are still people. Trust is a universal requirement for positive interactions.

We also have discovered camaraderie among coworkers and a feeling of pride in the job are part of what makes for a great work experience. But trust, you might say, is first among equals. Without trust in leaders, camaraderie becomes an unhealthy us-versus-them bond, and pride in one’s work develops in spite of misgivings about the organization, as a kind of consolation prize in an otherwise unpleasant situation. Camaraderie and pride find their best, fullest expression when trust is present too.

How do you build a high-trust culture? We believe the key elements of trust are credibility, respect, and fairness. Employees trust leaders when they see them as credible, as respectful, and as fair. As we discussed earlier in the chapter, leaders must behave in a scrupulously fair way and demonstrate respect to everyone in the organization. They also must show themselves to be competent in running the business and consistent in living up to their word.

Over time, we have seen that one of the first steps leaders should take to improve trust is to listen to employees—to ask how they are doing, and to involve them in decisions that affect them. But we have seen that beliefs matter too. If an executive doesn’t believe that employees have worthy things to say, if they fundamentally believe they are better than those “under” them, if they think workers are at root lazy and duplicitous, it will be hard for them to cultivate trust. They may go through the motions of asking for employee viewpoints or recognizing their achievements but the leader’s actions will come across as half-hearted and people will likely sniff out the insincerity.

In recent years, we have explored the optimal set of beliefs around trust. We have identified what we call the For All Trust Mindset, where people extend trust deeply and broadly. Leaders with this mindset aren’t naïve. They don’t give endless chances to low performers. But they tend to have faith in people and view mistakes with curiosity as opposed to condemnation. They give people the benefit of the doubt, regardless of who they are or what they do in the organization.

With the help of a For All Trust Mindset, leaders can build trust. They create a culture where trust doesn’t just run vertically between employees and leaders. It also begins to flow horizontally among peers, which speeds up decisions and improves collaboration. Ultimately, trust fuels business performance. Decades of data prove the point. High-trust organizations enjoy high levels of employee engagement, stronger employee retention, stock market outperformance, and greater profitability, to name a few business benefits that we shared in Chapter 1.

In talking about Great Places to Work For All, the “For All” addition is about extending a great, high-trust climate and its benefits to everyone. By doing so, by closing the workplace gaps, organizations see an even greater business advantage. Trust fuels performance. For All accelerates it.

Innovation

When organizations maximize human potential through effective leadership, meaningful values, and a foundation of trust, good things happen. One of them is innovation.

At a time when new competitors can spring up suddenly across the globe, organizations today must innovate. Innovate constantly—in terms of new products, new business lines, and new internal systems to optimize efficiency and profitability. And innovation is not just for technology companies. Industries as varied as hospitality, retail, and financial services are facing disruptions. Financial services firms, for example, face competition from passively managed funds and “roboadvisors” attractive to many millennials, while the rise of cryptocurrencies and other alternative payment technologies are posing a threat to the biggest players.⁵³

So innovation is vital. But your grandfather’s approach to innovation won’t cut it. The prevailing wisdom over the past few decades has been an exclusive approach to invention: set up a research and development team or other “skunk works” group charged with formulating the next big thing. There’s nothing wrong in putting brilliant minds to work on innovation activities. But in recent years, it has become clear that listening to the “wisdom of the crowd” and seeking good ideas from everywhere leads to better results.

What’s needed today is what might be called Innovation By All. That is, tapping the insights and ideas of employees from every level of the organization. At Quicken Loans, for example, members of the technology team can take four hours of “bullet time” weekly to work on personal projects outside their normal responsibilities. Quicken also offers prizes at a company-wide pitch day to solicit ideas from employees—a practice more associated with tech than finance and one that fosters innovation to address current issues facing the firm.⁵⁴

Famed design shop Ideo has similar findings on how to cultivate successful innovation. According to Ideo, keys to an innovative, adaptive company include “empowerment” that affects “all corners of the company” and collaboration across business functions “to approach opportunities and challenges from all angles.”⁵⁵ These conclusions dovetail with other research on the power of diverse perspectives to generate better breakthroughs.⁵⁶

Our latest research also points to the power of a For All culture on innovation and business results. Using our Trust Index Employee Survey, we created an index of what we call the Innovation Experience. It measures the extent to which all employees participate in activities related to innovation, experience leadership behaviors that foster experimentation, and feel inspired to move the organization forward. The results are striking. When we examined several hundred Great Place to Work–Certified companies, those in the top quartile on the Innovation Experience index had revenue growth more than three times the revenue growth of those in the bottom quartile (see Figure 11). In other words, the organizations that best promote an Innovation By All culture leap ahead of the competition.

It’s also important to note what happens today if you don’t cultivate an Innovation By All climate. Those great ideas walk out the door. Sometimes the people with the ideas create their own start-up—possibly a new competitor. The agility of the modern worker to move from place to place means they don’t have to wait for their organization to realize the time is ripe for their idea—they can go make it happen when they’re ready.

So how do you execute a more decentralized innovation strategy? For one thing, it requires employees who feel encouraged and inspired to bring their ideas forward. This is best done in a climate of trust. Emma Seppala, a Stanford psychologist, has found a culture of trust, rather than fear, encourages collaboration and builds a creative workplace. If employees are afraid of being punished, they are far less likely to take chances, which is essential to innovation.⁵⁷

Figure 11
An Innovation By All Culture Fuels Revenue Growth

But companies today need to go a step farther than building trust overall if they want optimum innovation. For Innovation By All, organizations need to maximize all their human potential. They need to create a culture that is great For All—an inclusive, high-trust culture where everyone is having a great experience and buys into advancing the organization.

Examples from the sports world drive this point home. During the 2015 NBA finals series, the Golden State Warriors were searching for ways to counter the Cleveland Cavaliers’ star forward LeBron James. As discussed in Chapter 1, a pivotal idea came from one of the lowest-ranking members of coach Steve Kerr’s staff. Coaching assistant Nick U’Ren proposed starting defensive specialist Andre Iguodala in place of center Andrew Bogut.⁵⁸ The idea was unconventional—it left the Warriors without the traditional center big man. But Kerr tried it, and it paid off. Iguodala helped shut down James, winning the Most Valuable Player award of the finals series as Golden State won the championship.

During the 2017 professional football championship, the New England Patriots pulled off the biggest-ever comeback in Super Bowl history in part by listening to the players on the field. “We made some adjustments,” Patriot’s defensive coordinator Matt Patricia said after the game. “[Our defensive backs] do a good job of coming back and giving us feedback. I think those guys understand the game to a level that I don’t think anybody really comprehends. They’ll come back and say, ‘Hey, we see this, we think we can do this, maybe let’s make this adjustment,’ and that’s what they did.”⁵⁹

The kind of bottom-up innovation you increasingly see in the sports world is the same that’s needed in business today. And it’s what you get at a Great Place to Work For All.

Financial Growth

You also get to grow your business faster. A lot faster.

This may seem like crazy talk, given that most leaders do everything they can to increase revenue. But there’s a secret weapon that many business executives fail to use: people power. People power means truly tapping the full potential of all your workers, regardless of who they are and what they do for the organization. As we discussed in Chapter 1, when organizations create a consistently great work experience, they see revenue accelerate by a factor of more than three. That extra growth comes from people who are bringing their best to their jobs, thinking up new and better services in their spare time, and going out of their way—with a smile on their face—to serve your customers well.

In other words, through the power of your people you can make the revenue pie bigger.

This is crucial today because businesses need a surplus of cash. We live in an economy that is turbulent and, in the words of McKinsey researchers, “growing more unpredictable.”⁶⁰ In such a business climate, organizations without the growth to generate a prudent cash reserve are at significant risk. Companies need a buffer to invest in new products and services and to prepare for rainy days when revenues may take a sudden hit.

Businesses should be mindful of hypergrowth. There’s a calculation regarding an organization’s optimal “sustainable growth rate,” which refers to how quickly it can grow without borrowing more money.⁶¹ Organizations can get into trouble when they expand in such a way that expectations push employees past their breaking point and become unhealthy. Or when rapid growth excuses poor behavior. Look no further than Uber and how its “Always be hustlin’” value, combined with a macho culture and focus on growth, contributed to a toxic workplace internally and ultimately a backlash from customers and investors.

Still, an expanding revenue pie and healthy cash reserves are vital to all companies, and especially so for Great Places to Work For All. Growth is needed to pay to help people develop, to compensate them fairly, to show them respect and appreciation in the form of things like all-company celebrations. There’s a virtuous cycle at play: revenue growth helps create a great work experience for everyone. And by investing in people power, companies see strong business results.

A New Era, a New Definition of Greatness

This portrait of a great workplace marks a change for us. We haven’t lost our focus on the employee experience, but we realized we needed to widen our lens.

In the economy that’s taking shape, one in which more people expect to be included and expect more of companies, in which business agility is at a premium, and in which “hired hearts” are vital to success, we needed to update our definition of a great place to work.

We realized we needed to raise the bar. What was good enough to be great is no longer good enough. The gaps at the Best Workplaces aren’t great for the people experiencing a less-than-great culture. And they aren’t great for the organizations either. So we needed to add maximizing human potential to the foundation of trust. We also needed to call out values and leadership effectiveness as other key components. And note that innovation and financial growth are what you get when all these pieces are in place. Taken together, this is what we see when we talk about Great Places to Work For All; Organizations that are better for business, better for people, and better for the world.

While all six elements are vital to a Great Place to Work For All, maximizing human potential is at the heart of our new definition. It can make or break a company’s greatness in the emerging economy. Our data shows as much.

In the next chapter, we’ll explore just how much better business results can be when an organization truly is great for everyone: how maximizing human potential accelerates performance.