Friday, May 5, 2017

What? Employees are supposed to LIKE their company?

I've commented on this story, but wasn't moved to post something about it until now.

The story ISN'T about how American Airlines decided last week to offer higher wages to its workers roughly two years in advance of scheduled contract negotiations.

The story IS about how Wall Street reacted:

“This is frustrating. Labor is being paid first again. Shareholders get leftovers,” Citi analyst Kevin Crissey wrote in a note to clients.

And Crissey wasn't the only investor who was disturbed. American stock fell after the announcement.

I'd like to share two relevant items. The first is something that I originally shared in January - a debate about whether companies should strive to satisfy customers, or should strive to satisfy employees. (No, Mr. Crissey, putting shareholders first didn't enter into this particular conversation.) Let's return to what Richard Branson said on the topic:

"It should go without saying, if the person who works at your company is 100 percent proud of the brand and you give them the tools to do a good job and they are treated well, they're going to be happy."

Well, I recently ran across another article that made a similar point. This particular story resonated with me because of what I've been doing over the last week for my day job. I may say more about this at another time, but for now I'll just say that I was involved in a marketing effort that required cooperation from my coworkers - not just in marketing, but in other departments within the company. And I got that cooperation, which paid dividends.

Back to the article that I found. It is entitled "3 Reasons Why Your Employee’s Personal Brands Are Your Biggest Untapped Resource." Now I'm not going to discuss all three reasons - check the original article for that - but I'd like to mention the first one - word of mouth. Let me quote a bit:

According to the 2016 Edelman Trust Barometer, employees are the most trusted source of information when it comes to how companies treat both their staff and their customers. If employees are excited about the work they’re doing and align with your office culture, they can be your biggest advocates.

And the reverse also applies - if employees aren't excited, they're not going to advocate for you at all, regardless of what you do. This is something that American Airlines CEO Doug Parker noted last year.

American is spending $3 billion on customer service improvements and buying hundreds of new planes to replace its aging fleet. But Parker said the investments will be meaningless if employees aren’t proud of the airline.

“If we don’t have our employees engaged and excited about being at American Airlines, it’s all for waste,” Parker said.

Time well tell whether Parker's pay raise move last week will affect American Airlines' culture. Just about all of the major airlines, including American, have made the news over the last few weeks because of poor customer service issues. But let's look outside the airline industry. Here's an example:

Bank of America has the worst customer satisfaction score of any bank in the ACSI. In a 24/7 Wall St.’s annual customer satisfaction poll, about 44% of those surveyed said they had a negative experience with both BofA’s banking and credit card operations, among the worst of any company surveyed. In addition to unhappy customers, the company has also has dissatisfied employees. The bank agreed to pay to settle a racial discrimination case involving 700 employees in August 2013 as well as a gender discrimination suit the following month.

"Uh, John," you may be saying, "people probably hate banks more than they hate airlines. Well, unless you're Dr. David Dao." OK, let's look at retail. While retail is certainly impacted by new competitors such as Walmart and Amazon, retail usually isn't passionately hated. Unless you're Sears.

Sears department stores are disliked by both customers and employees. Sears has nearly the lowest customer satisfaction rating of any department store reviewed in the ACSI. Additionally, Sears employees give the company far lower than average marks on workplace review site Glassdoor, and fewer than one in three Sears employees would recommend a job with the company to a friend. Multiple reviews cite low wages and unprofessional upper management as major drawbacks of working at the company.

Think about that one in three statistic. If you're company isn't recruiting the best and brightest, it's recruiting the worst and dumbest. And how do you think THAT will affect profitability, Mr. Crissey?

I can also cite anecdotal evidence. I've written about Sears in the past, and I don't think I've ever found anything good to say about the company. Not surprising, since the people who actually work at Sears apparently don't have good things to say either.

Even some people in the investment community realize that Sears has a toxic culture and isn't a good place to work.

So why are some on Wall Street angered over American Airlines' moves to spend money on happy employees?

I guess everyone on Wall Street flies Spirit Airlines. Or WestJet's newly-announced budget offshoot.
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