What's the secret to being a great boss? What are the best ways to motivate staff? How do you turn your business into an ideas factory? In the old days, it was all about providing employees with perks and rewarding the most talented with generous pay packets. Companies would delegate and empower but everyone knew the boss was in charge.
But the world has changed. With the recovery, more employees will be moving on and companies will need to work out ways of keeping them without breaking the bank. With the skills shortage, talent is hard to find. Companies are emerging from the worst financial crisis since the Great Depression and are looking for talent to drive new opportunities while keeping costs down.
The rules though have changed.
SmartCompany talked to entrepreneurs and business leaders about leadership skills for today's economy and the secrets to making good companies great.
1. Allow mistakes
You can't have creativity and innovation, trying things that have never been done before, without mistakes and failures. Ideas are fragile, you can kill them with silence or criticism. Success, as Winston Churchill famously said, means going from failure to failure without loss of enthusiasm.
Egg company Farm Pride encourages employees to come up with ideas. Some work and some don't, but it has a policy not to punish mistakes. Farm Pride's chief executive Zelko Lendich says attacking mistakes discourages innovation.
"If an idea doesn't work and you jump on it every time, people are going to become more reticent about giving ideas," Lendich says.
When ideas go wrong at Farm Pride, he says, the company analyses what happened and sees how to improve it. Often, the idea gets up once the problems are identified and sorted out.
Wesfarmers director Charles Macek says many Australian companies find it hard to tolerate failure.
"The hardest thing in fostering innovation is you must tolerate mistakes and that's very challenging because human nature always seeks to punish mistakes or to find fault and blame... innovation requires a long-term willingness to experiment – experimentation involves some risks."
2. Everyone in the company provides ideas
Peter Biggs, managing director of advertising agency Clemenger BBDO has established a creative culture where ideas can come from anyone, anywhere and at any time.
"I remember winning a piece of business because the receptionist came up with the idea,'' Biggs says.
The ideas are tested and if they work, they get up.
"Everybody should feel free to put ideas forward. But there has to be a rigor around those ideas, the place has to be both generous and vulnerable. I have put up many ideas and not one has got through. The managing director has to model generosity and vulnerability."
Macek remembers one company he was involved in where the chief executive decided that bright ideas come from bright people so he created a team of PhDs. That was a big mistake because, unlike the employees, these brilliant people had no experience and understanding of the industry.
"The best ideas come from the shop floor, they come from the bottom up,'' Macek says. "People who are interacting with customers and dealing with the realities of whatever the business is will always be the source of innovation."
That's the philosophy at Bakers Delight where 90 per cent of the ideas come from franchisees. Bakers Delight general manager Chris Caldwell says the latest is a passionfruit and white-choc scone. Like all ideas, the product was tested internally, and then tried out at a small number of bakeries as part of a pilot scheme before it was released through the 625 bakeries around the country.
"We have 3,000 bakers working day in day in and day out, they are hands on working with all the ingredients so they would know,'' Caldwell says.
3. Set up systems to generate ideas
There are many ways to do this. Over at printer vendor OKI Printing, the focus is on constant change. Managing director Graham Harman says employees are encouraged to give ideas to improve things, and even criticise. Responding to them shows them that their ideas are important and that their input is valued.
"Something in the business will change every week,'' Harman says. "That can be marketing plans, pricing, internal procedures or the times customers come in to pick up products. Employees see things are being changed, they see things being improved for the better because they have made an impact. If people see there is change, they know that they're being listened to. If you're not listening and if it falls on deaf ears, then they will feel there is no point giving you feedback. Then you don't attract the people you want to attract."
Bakers Delight has a system where area managers talk to bakeries every week. Every area manager has 25 bakeries, checking to see everything is working well and seeking their ideas. In addition, Bakers Delight holds regular forums where franchisees can raise ideas. Every franchisee would attend eight or 10 of these a year.
Macek said one company he had been involved with had a key performance indicator that required a certain amount of future revenue for the business to come from products that did not exist today.
"That automatically created a climate that forced you to innovate,'' Macek says.
4. Set goals and measure them
Every year, Nicola Mills, chief executive of franchise brand manager Pacific Retail Management calls in every employee to talk about why they want to come in to work every day, what they actually do and what their goals are. That is then broken up into quarterly and monthly goals, all monitored. The idea, she says, is to get to the emotional core of what each employee is doing.
For example, designers do more than just design, they put together visuals that wow the customers. A receptionist doesn't just answer the phones – they are the public face of the company and makes it look good.
"It just changes the thought processes for why you come to work,'' Mills says. "We give each team member a vision, a bit more of a reason to come to work."
Doing that, she says, ensures that employees are on task.
"I find people work best when they know what they have to do and when they are pretty much left alone to get the results."
5. Feed your staff
Sydney-based IT reseller Correct Solutions provides lunch for its employees every day. Founder and managing director Ryan Spillane says: "We have meats, we have cheeses, salads, and a fully stocked fridge. Now, on a Friday, we will go out and get some lunch. We might get Chinese, we might get Indian or sushi. Sometimes the company will pay, sometimes the staff pays. It's not set in stone, otherwise people would expect it. If it's random, it becomes a nice surprise."
Clemenger BBDO also feeds its staff. They have to pay but the meal is subsidised. A fully cooked meal at the agency costs about $6-$7. The menu includes a mushroom, bacon and spinach risotto ($7) and a Thai chicken and rice noodle salad ($6). There is also a fully stocked bar.
6. Face to face works best
Good leaders do not hide in their office behind emails. Zelko Lendich says that while some email is inevitable, the best way to reach out to employees and motivate them is face to face. Lendich is based in Perth which means he is on a plane every second day. The same applies to his managers who have to go around the country visiting the company's farms.
"I am not a big believer in lots of emails and I like face to face contact,'' Lendich says. "I always like to walk around and have a chat. It's really keeping things personal when you do that. You can never do enough face to face communication with people. So many things get out of control and miscommunicated if you rely on paper and email."
Caldwell agrees. He says about 70-80 per cent of the contact between area managers and their Bakers Delight outlets is face to face.
"I don't think it matters what business you are in, face to face communications is 10 times more productive and more influential than email or written communication,'' Caldwell says.
"If you are making sure franchisees have the right attitude and are driving the business, the only way you can do that is face to face communication. We are in constant two way communication."
7. Let people come and go as they want
Biggs says the only way to nurture a creative environment is to create a culture of generosity, kindness and tolerance. The ultimate focus should be on outputs, not process. And that means employees should be free to come and go whenever it suits.
"Right now, I don't know where these people are. They could be at coffee shops scattered around Melbourne, they could be at pubs, they could be asleep but as long as the ideas come in, I don't care,'' Biggs says.
"You have to have that because ideas happen at any time, anywhere. If somebody creates a huge idea in the shower and belts it out in script form by nine in the morning, and then needs to do something else, I don't care. The way we structure ourselves here is to not make it a workplace. It's to create an environment where this is merely an extension of people's lives.
"There is no home life, there is no work life, it's all just one. This is the place where people can come in and be themselves, be fulfilled and stretched but they should not feel they are coming to work. We have a minimum of structure and an understanding that your life is your work and your work is your life."
8. Manage underperformers with care
Many entrepreneurs say that with a strong culture, people who don't perform usually end up leaving because they realise they don't fit in. But some don't move. A strong culture will expel people who don't fit in.
Biggs says: "Everybody has to understand there is a rigor, we are tough on people who don't perform. Sometimes they self exit and sometimes you have to have an honest conversation with those who don't fit and are yet to realise it. We always do it with honesty, fairness and generosity. The way people exit says much about the culture of the company."
Harman says when he has to deal with underperformers, he first sees whether it's a problem with the system or their training. But when he sees that the person is not suited for the job, a delicate but important conversation will follow.
"I would say to them that they should start looking for another job and that I would be quite happy to be their referee," Harman says.
Often that might mean micro-managing the employee but that cannot go on. Sooner or later, they have to leave.
Lendich says this needs to be handled with care because it sends a message to the rest of staff. At Farm Pride, chronic underperformers are advised to resign but that only happens after many conversations.
"We believe that everyone comes to work to contribute and do the job and in some cases, they are not suited to that job so it's best they go somewhere else to try and engineer a win/win,'' Lendich says.
"What's really noted for those who are left is how you treat those who are going. As much as you are looking after the individual who is leaving, you are also sending a message to those who are staying."
But then, it might not be necessary if everyone is working to agreed goals. At Pacific Retail Management, the clear focus on goals at the end of each year forces people to perform.
Mills says: "It's very clear what everyone has to achieve and when they have to do it by. They come to you if they have an issue not achieving goals. I don't need to do much telling off because they're telling themselves off."
9. Encourage entrepreneurialism
Biggs says this is the way to foster innovation. At Clemenger BBDO, there are employees who run businesses designing lap top covers, selling bottled water and running fashion labels. There are film directors and artists.
"If you're going to attract creative people, you have to give them outlets for their creativity. It creates more ideas and more cross fertilisation and it creates people who are happy to come in to work. It also creates a better connection with clients because people in the agency run their own business and understand commerciality."
10. Keep the organisational structure as flat as possible
At Farm Pride, a listed company, there are only four levels of management. There is Lendich, his direct reports, supervisors and people on the shop floor. Any other layers have been wiped out.
"Everyone is as close to what's happening as possible,'' Lendich says. "Everybody feels they are on the same level. With my interaction with people, I am just another person helping them do things."
With middle management kept to a minimum, there is no HR department.
"Managers are responsible for their own people,'' Lendich says. "It's the manager's people, he has to look after them and it's not delegatable, so to speak. It's not rocket science. If we involve everyone in what's going on, they feel like a partner."
11. Openness and honesty at all times
Different companies approach it differently but most entrepreneurs agree you have to be 100% up front. The "office" that Biggs uses is just some seats at the back of an open plan office. His bar is open to everyone. When he is not seeing clients, he walks around in T shirts. The open conversations that Nicola Mills has with her employees ensure that everyone is kept on task and focused on the future.
Some entrepreneurs go even further. Spillane last year invited his employees into the board room and asked them to review his performance.
Spillane says: "They thought it was surprising but got into it. They gave me feedback on how to better communicate to each of them, and I have been trying to implement as much of this as possible."
Harman says openness and honesty keeps people creative and focused. "People want to be part of something that's bigger and feel they are contributing to the grand plan. I don't subscribe to the mushroom effect of not communicating what's happening, whether that's good or bad. It means being open and honest about everything."
Macek says from his experience, honesty is what sets great companies apart from their competitors. Leaders who are honest will get more out of their employees.
"People react better to leaders who encourage openness and who are honest in their communications, rather than using spin,'' Macek says. "At the end of the day, it is a contract and that sort of relationship works best when there is trust. If they see leaders who don't walk the talk, that immediately undermines the credibility of that leader."
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