The best place FOR WHOM, and the best employee FOR WHAT? Know more about this internal business strategy!

Tuesday: Return Driven Strategy FROM THE DESK OF MILES EVERSON: As someone with over 30 years of experience in the business and consulting world, one of the things I've found to be a game-changer in managing my team is Return Driven Strategy (RDS). RDS is a pyramid-shaped framework that’s composed of 11 tenets and 3 foundations. When applied properly, these principles enable businesses to achieve high levels of performance. In today’s article, we’ll delve deeper into the 9th tenet of RDS: Engage Employees and Others. Excited to learn more about this RDS tenet? Keep reading to gain useful and helpful insights regarding this internal management and recruitment strategy for businesses. Stay tuned as well because I have a special announcement at the end of this article. I hope you’ll take the time to read that too! CEO, MBO Partners Chairman of the Advisory Board, The I Institute

The best place FOR WHOM, and the best employee FOR WHAT? Know more about this internal business strategy! Do you believe that employees are the lifeblood of businesses? Well, the answer is partly YES and partly NO. —yes, because it’s true that without employees, there would be no one to run a business’ operations; no, because employees are not the only crucial element that’s needed for a business to sustain its operations. However, this doesn’t mean that just because employees are not the only important factor, firms should no longer give careful consideration into the hiring process. In fact, Professor Joel Litman and Dr. Mark L. Frigo wrote in the book, “Driven”: “It would be difficult to over emphasize the importance of getting the top tenets [of Return Driven Strategy] right, before recruiting, hiring, and engaging employees.” Let’s take a look at a case study they mentioned in the book… One management team misunderstood how stock markets value companies. They thought near-term quarterly revenue and earnings estimates were the primary drivers of the market’s valuations of the firm. As a result, such a belief permeated the firm’s ranks. One senior vice president running a large project thought that if he and his team could reach certain billing milestones by the quarter’s end, they would impact revenues reported for the firm. This in turn would allow the company to reach its forecasted quarterly estimates. Considering this, the manager drove everyone involved in the project to work extremely looooooong days, nights, and even during weekends. He was devoted to the “big push” to the end of the quarter. Not surprisingly, this short-term goal succeeded. Because of that major project, the firm reached billing levels and revenues that were in line with estimates. Here’s the thing: That type of “push” on employees had other ramifications. Some employees—very talented ones—quit immediately after and some during the project. … and while the company met its revenues for that period, the stock still fell based on the long-term prospects of the firm, not the short-term revenue management. Not only did that quarter fail to save the company’s stock price; the “push” also sacrificed long-term prospects by losing great employees unnecessarily. The Best Place for the Best Employee According to Professor Litman and Dr. Frigo in “Driven,” there are two types of considerations when recruiting or hiring workers for a firm: The BEST PLACE, but for what type of employee? There are many different studies with lots of press and fanfare that rank the “best companies” for employees to work. Many times, these rankings are based upon benefits and compensation studies, or along employee work and lifestyles. BUT… These types of studies also become problematic and may cause a firm to target employee engagement in a vacuum, devoid of linkage to the overall strategy of a particular business. Think about this: All employees are NOT created equal—meaning, employees with different skill sets and personalities will apply different values to the same benefit, environment, or compensation level. For example: During the periods leading up to the late 1990s, both Charles Schwab and Merrill Lynch exhibited very high cash flow returns. Both firms enjoyed high stock price valuations as well. Both firms also received accolades for being “best places to work” in one study or another. However, the differences between these firms were stark. Merrill’s reputation as a “typical” Wall Street firm was directly counter to Charles Schwab’s “Anti-Wall Street” brokerage reputation. Brokers at Merrill were paid by commissions, whereas Schwab employees were salaried with a bonus. Even the geographical differences help to describe how the firms’ cultures differed: Merrill is based in New York and Schwab is based in San Francisco. Yet, both firms received rankings as “best places to work.” So… which is which? According to Professor Litman and Dr. Frigo, the key question here is, “Best place FOR WHOM?” Imagine if Merrill’s and Schwab’s employees would switch places in terms of location, lifestyle, and compensation. How different would the experience be? You see, what’s best for one employee is not what’s best for another. After all, it’s not about hiring the “best” employee; it’s about creating the “best fit” given the types of employees needed in a firm. While employees clearly require some level of monetary compensation, seldom is this enough to generate the type of engagement that propels firms into the highest levels of cash flow performance. So, as a business owner, manager, recruiter, marketer, etc., keep in mind that the highest levels of cash flow driving employee performance stem from non-monetary sources. This should go without saying that non-monetary means of motivation contribute even further to monetary success. The BEST EMPLOYEE, but for what type of place? The following statement is heard regularly when recruiting for firms: “We look to hire the best and the brightest.” The phrase is simply a cliché, and it’s generally not meant to carry much weight as it can refer to the general hiring practices of a firm. However, this raises a problem when the description for the candidates doesn’t go deeper. Worst, the cliché sometimes serves as a placeholder even when describing the right candidate for a particular job. This often happens because a more specific description of the ideal candidate has not been thought out in alignment with the role of that candidate in the firm’s overall strategy. Recruiters should think about it this way: Should our business hire… … detailed-oriented people or big thinkers? … expressive personalities or analytical? … creative thinkers or task-oriented project managers? Just as one employer could be great for one person but terrible for another, so could an employee be perfect for one firm but a terrible fit elsewhere. The key initiative for the firm is to first determine what type of employee is needed, long before developing a strategy for recruiting, hiring, or compensating. This is because employees should be thought of as customers too. However, instead of exchanging cash for products and services, employees provide their time and effort for the right employment offering. The bottom line? Bad strategy drives bad employee management. If you want to achieve the higher tenets of Return Driven Strategy for your firm, Professor Litman and Dr. Frigo believe you should set in place proper strategies to also propel proper processes for recruiting and hiring people who would be part of your workforce. Ask yourself: What kinds of skills and services are required from employees to innovate, brand, and deliver unique offerings? What employee offering can be provided to create high engagement from the RIGHT employees who can provide those skills and services? By answering these questions, you’ll be one step closer to achieving your business goals and properly engaging your workforce. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. — SPECIAL ANNOUNCEMENT: Tenet nine of the Return Driven Strategy framework teaches us that “bad strategy drives bad employee management.” But in the midst of higher rates, increasing corporate debt, and a tightening business environment, what strategy should you implement or keep in mind? How can you make sure you keep your organization afloat? Join us on Thursday, April 11, 2024, at 12 p.m. EDT, for the “Massive Equity Gains from the Strategic Buyers’ Market: Powered by a Wall of Debt” event. Here, my friend and colleague, Professor Joel Litman, will talk about the risks and opportunities in equities as a result of the coming debt turmoil. Register here to know a key opportunity for growth in the ONE sector that Professor Litman and his team think will take advantage of Corporate America’s upcoming rush to raise capital. Attending this event will help you understand the current debt landscape and identify where upcoming maturities risk putting some companies in hot water. There are only two days left for you to register. I hope to see you there!     Hope you found this week’s insights interesting and helpful. Skills gap, talent scarcity, and an uncertain economic situation, aren’t the only problems the U.S. labor market is currently facing. Learn more about the causes and effects of worker disengagement in next week’s article!