Results or People… Which is more important?

Episode #215 Results or People… Which is more important?

I have to tell you, I really like Adam Grant. He comes up with some really thoughtful, intelligent, and insightful opinions on leadership and organizational behavior. His podcast, WorkLife, isn’t on my high rotation list, but I do try to catch the odd episode. Whenever I do, I find myself thinking two things:

1. “Wow! That is so good… but it would be so easy to misinterpret.”

2. “Wow! I agreed with you 100% – right up until the point that you said X.”

The crunch for me always comes when there’s the inevitable trade off between doing the things that make people happy and getting outcomes for your organization. The underlying philosophy seems to be that if you simply care for your people and treat them well, you’d be surprised at how well they perform. Now, this is dangerously true – but the cracks start to appear when this approach becomes the ends rather than the means.

I think it’s absolutely critical to think about this in the right way. If you want to both get results and make your people happy, this is absolutely not an either/or. As I was scrolling through LinkedIn, I came across a particular quote from Adam Grant that I’d like to explore in detail. It said:

“Employees are not resources to manage. They are humans to value. 

Bad managers only care about results. Good managers care about your wellbeing. Great managers care more about your wellbeing than your results. 

We do our best work when leaders put people above performance.” 

To be fair, you can only put so much detail and clarification on a quote card – the object of the exercise is to challenge people’s thinking, not to comprehensively explain complex principles of leadership and organizational behavior. My intent is not to be in any way critical of a man who so clearly brings so much value to so many people. This is just my No Bullsh!t spin to make sure those very useful principles aren’t misinterpreted – because they can be unbelievably dangerous.

A NO BULLSH!T PERSPECTIVE

“Employees are not resources to manage. They are humans to value.” 

I have a slightly different spin on this: employees are both. They are absolutely humans to value, but they’re also resources to manage. I think that the human element has to be the primary focus, but this opens the door for weak leaders to say to themselves, “Oh, good! To be a really good manager I just need to keep my people happy.” This leads to all sorts of ills: that weak permissive leadership style, where ambition is low, results are poor, and performance is mediocre.

Leaders are paid to achieve results for their organization. They are not paid to run a daycare center, hold group therapy sessions, or to program the entertainment schedule for the team each week. You simply can’t ignore results only to rationalize this by saying to yourself, “I’m valuing my people instead.” That is the fast path to failure.

“Bad managers only care about results. Good managers care about your wellbeing. Great managers care more about your wellbeing than your results.” 

There are a lot of reasons why bad managers are bad managers. In my experience, bad managers aren’t so much focused on the trade off between results and their people’s wellbeing… They’re more focused on their own self-interest which severely impairs both results and people’s wellbeing.

The paradox here is that unless you:

• Care about your people

• Put the good of the team above your own narrow self-interest

• Connect with people the right way and lead them with empathy (not sympathy!)

• Put the long term results of your team ahead of expediency and short term gratification

… then you won’t be able to get results anyway – and you certainly won’t be the best leader for your people.

It’s been my experience that achieving the best results possible is intrinsically linked to leading your people with care, empathy and compassion – while also leading them with the strength to:

• Hold them to account for the choices they make

• Enforce a high standard of behavior and performance

• Put the good of the team above the good of an individual who makes a choice to behave or perform poorly

This is why the statement, “Great managers care more about your wellbeing than your results” is so dangerous.

“We do our best work when leaders put people above performance.”

In my mind, that’s just not true. In actual fact, leaders are at their best when they understand the synergy between people and performance.

We know that as humans, we are not particularly good at working out what’s best for us. We constantly struggle against our drive for short-term gratification, which – deep down – we know isn’t in our long-term best interests. Our behaviors become entrenched well before we see the long-term detriment that those behaviors can bring. And in the long-term, happiness is elusive.

There’s a quote from Rosalynn Carter that I reference from time to time: “A leader takes people where they want to go. A great leader takes people where they don’t necessarily want to go, but where they ought to be.”

THE TENSION OF LABOR VS CAPITAL

We are still part of a centuries-old struggle between these two forces. Who takes the lion’s share of economic profits from production? Is it the labor – that is the people who are employed to do the work – in the form of wages and perks? Or is it capital – the people who create and fund the businesses and provide employment for those people – in the form of shareholder returns (capital growth and dividends).

Trying to strike a balance is a natural tension that’s been with us for a really long time, and it’s not going to change anytime soon. Historically this struggle has its roots in the technological progress in innovation of our forefathers. The first industrial revolution in the mid-18th century saw the transition from making goods by hand to using machines. The second industrial revolution in the latter part of the 19th century continued this trend as production lines, electrical grid systems and advanced machinery became prevalent – making it even more efficient to produce goods.

Now, in this phase of economic prosperity, the balance of power was very clearly in favor of capital: the owners and investors of the businesses. More often than not, labor was treated poorly–not just in terms of the employee share of the profits, but also in terms of what was, in some cases, a callous disregard for people’s wellbeing and safety. This provided the catalyst for the labor union movement.

In those days it was a turning point. The ability to bring the collective power of employees together in strike action for better wages and safer conditions was fundamental to getting to where we are today. These days, the problems that existed in the late 19th century are pretty much gone – at least in the developed world.

In this day and age, if you don’t treat your people well, they’ll simply vote with their feet. It’s a completely different ballgame because of the high liquidity of employment markets and the mobility of labor. Most of the evils that the owners of capital used to visit upon their employees have disappeared, and the playing field is much more level.

The environment is also much more complicated. For example, employees still receive wages, of course, but they’re also holders of capital either directly through share market investing, or indirectly through the investments made by their superannuation funds and 401Ks. So optimizing one will detract from the other – sort of interesting, right? If a company overpays its employees – which, let’s face it, sounds like a noble cause – those same employees may have less retirement funds available due to reduced profits. And if a company isn’t able to compete well, it’ll eventually go broke, and those same employees who we want to pay more may be out of a job.

So, perhaps ‘people before profits’ works in the short-term, but the long-term picture may be a little different. Now, of course, I’ve oversimplified this to make a point, but you get what I mean, right? The modern world of share markets, innovation, and legislative protection for workers has really changed the landscape we operate in. We need to be aware of this delicate balance in both the short-term and the long-term.

To bring this argument up to date, I just want to touch on a really interesting article that I came across recently in The Economist, it was entitled, Labor v Capital in the Post-lockdown Economy. Economic output must flow either to owners of the capital in the form of profits, dividends and rents, or to labor as wages, salaries, and perks. So, which of the two has the upper hand in the post-lockdown economy?

Employees are fighting for higher wages, in part to combat inflation and in part because… they can! Businesses are being squeezed by the higher prices they’re forced to pay for almost every one of their inputs – including their cost of labor. Prices are rising for pretty much everything we buy. The increase in prices, and the flow of money into the economy creates inflation, and the cycle continues.

WHEN THE SCALES TIP

In 2020, the scales moved radically in favor of labor. Businesses continued to pay wages, while output and profits declined. And this was only made possible by government stimulus payments, which is where we start pumping up the inflation balloon. Since then, many countries have swung back to pre-pandemic norms. So for example, wages growth is still low in countries like Australia and Japan, but businesses there aren’t reaping extraordinary profits either.

In the US though, wages growth is strong – somewhere around the 5% mark – but it seems that companies are also retaining their profit margins. Perhaps the stimulus spending has been large enough for long enough to keep everything ticking along. But it’s going to be really interesting to see whether the two consecutive quarters of negative GDP growth in the US (which the government insists does not constitute a recession anymore), is the start of a continuing trend.

What does this have to do with anything? Well, the people before profit sentiment that we see writ large in almost every piece of information we consume, suggests that people (meaning employees) should take precedence over profits (the owners of the capital who make business possible).

It’s rarely as simple as we are led to believe though. The problem here is the nobility of the virtue signal. “People before profits” is almost impossible to dispute, and 99.9% of people won’t dispute it. If they did, they might be seen as being callous, uncaring, or unempathetic. But when I hear this, it just raises more questions for me: what people are you talking about when you say, “People before profits”?! It’s designed in most cases to mean employees, but every organization in every sector has a wide range of stakeholders.

Imagine for a moment that you’re running a not-for-profit organization, which provides social services to people in a low socioeconomic community. When you take the people before profits path, you may be focused on pleasing your employees, so you allow them to operate to low standards, with low levels of productivity. This inefficiency effectively robs the people in the community that you are trying to serve. How about those people?

Or let’s say you massively increase your wages bill, because you want to give your employees more money. Your prices rise, and that hurts your customers. How about those people?

Or if you decide to keep prices static, but you take a big wages hit on your P&L, the shareholders, who – as we know – are often also employees, make lower returns on their investments. How about those people?

The moral of the story is stay awake, and question everything – even when it seems too sensible or noble to question. The world isn’t black and white, it’s an annoying tapestry of a thousand shades of gray.

BRING A SENSIBLE BALANCE TO PEOPLE VS RESULTS

Long-term vs short term benefits

For many organizations, short-termism dominates thinking and decision-making. As we know, this doesn’t necessarily produce the best results. Making people happy in the short-term isn’t really hard. You can easily make your employees happy – for example, you can:

• Double their wages;

• Move them onto a 30-hour week;

• Rent state-of-the-art office space with a six-star green rating and everything that opens and shuts;

• Give them free meals from an allocated menu whenever they’re on site;

• Fill the fridge in the break room with ice-cold craft beer.

That’ll work… But unless you’re a tech unicorn with seemingly endless capital to squander, you won’t be in business for long. You’re competing with other businesses, and if they’re operating with the lower-cost base, regardless of your strategy, you’ll get into strife eventually.

When we hear that we should put people before results, it opens the door to weak and permissive leadership. As I said, many leaders conveniently interpret putting people first as an excuse for simply satisfying their immediate wants – of course, at the expense of results.

What makes people truly happy?

Let’s look at the same scenario from your employee’s perspective… This stuff will give them a short-term, sugar-hit type of happiness, but they won’t ever feel a deep, long-term satisfaction that only comes from leading your people to achieve difficult things. In my view, this is the source of all self-esteem: attempting and achieving difficult things. Without it, you’ll never be truly happy.

I’ve worked for more than one company where the workers were grossly overpaid yet strangely still completely miserable. Can you imagine being paid over $200,000 a year as a truck driver and still feeling miserable and unappreciated?

It’s not that hard to understand once you realize that there’s more to it than those temporal, superficial incentives. If you really want to put people first, then paradoxically, the only way to do it is to achieve results, stretching every individual to be their best, leading them to produce outcomes that they can be proud of – giving them a boost of self-esteem that they wouldn’t ever get if it weren’t for your support, encouragement, and drive.

You have to have ambition for them. You create opportunities for them by running a company that grows and prospers, where they’ll always have an option to be employed if they want it, and holding a high standard of performance so that your best people don’t become demotivated or discouraged.

This sounds like a little bit of a chicken-and-egg thing. Does people-stretching come before results, or do results come first and then people stretch? Think of it this way: do you get really motivated and then decide to go to the gym? Or do you go to the gym and work on it until the motivation comes when you start seeing results? It’s absolutely the latter in my mind.

But the concept of putting people first – even if you only look at the narrowest view of people being ‘employees’  – is still complicated. Your high performers want you to build a team where results have primacy. They want to be on a winning team and they want to play with A players. They don’t want to be held back by recalcitrant teammates who are choosing not to do the right thing. The question for you as a leader is: which of these do you want to serve?

It’s a hell of a lot easier to just go with the flow, and believe that “People before results” is the great leader’s mantra – but the truth isn’t quite so simple. It’s absolutely vital to differentiate between individuals.

The ‘autonomous collective’ as Monty Python called it, simply doesn’t produce results. High performers become disgruntled, and low performers know they have a safe haven to behave or perform however they please. Results don’t live in this world.

If you really care about your people, you’ll put their long-term satisfaction and self-esteem ahead of your own self-interest, and you’ll lead them with empathy and compassion to where they ought to be.