21 January, 2015

Shareholder focus kills employee engagement.






Corporate view of motivation
The modern era of HR is predominantly dominated by a Maslowian view of motivation: The individual is driven by a motivation to ffulfill increasingly higher needs depending on the completion of a lower level of motivation. Although still useful, the Maslow Hierarchy, used in an organisational setting, creates a division between the employee and the company. The company has to deliver a lot of elements to the employee or risk the employee leaving. This creates thinking where every dollar that is given to the employee is seen to come out of the shareholders pockets - a zero sum game. This has become evident in the pre Financial Crisis age where companies relentlessly have reduced headcount to meet cost targets, completely ignoring that the same employees had a positive impact on revenue. If the logic of employees only affecting cost was true, corporations should have no people at all.




Purpose driven motivation
A more useful model for human motivation is what is known as the 3rd Viennese school of psychology based on Viktor Frankls work on Logotheraphy.  In opposition to the first two – Freud’s view of human motivation as search for pleasure and Adler’s search for power, Frankl work points towards humans being motivated by a search for meaning. Rather than seeing people’s motivation as a result of external stimuli he believes that motivation comes from within and is based on your subjective view of what meaning is. Despite meaning being subjective and situation bound, Frankl suggests that meaning is often associated with doing good for others, with love and with the freedom to choose your attitude in any given situation – even in hopeless situations.

A survivor of the Holocaust, Frankl got plenty of experience of humans in hopeless situations and found that the people surviving rarely where the physically strongest but more often somebody that had a strong purpose and a reason to survive. He captured it in the phrase:

It is not what you expect of life that is important; it is what life expects of you.

Frankl’s motivational model is becoming increasingly more relevant as corporations are starting to understand that employee engagement is crucial to the creation of sustainable competitive advantage. The traditional employee satisfaction surveys show the same and predictable results independent of it is conducted in successful companies or the opposite. Employee engagement is strongly impacted by purpose – both the purpose of the individual’s contribution to the corporate purpose and to the corporate purpose itself. And a good purpose isn't about making money!

Corporate purpose is important
The financial crisis killed the real and initial purpose of many corporations – a purpose often focused on bringing value to one or more of the company’s stakeholders. Instead a relentless shareholder focus took over in a way that would have made Milton Friedman proud. Making bosses and owners wealthier is not a noble purpose that engages employees and unlocks productivity. Jack Welsh ex Ceo of GE calls shareholder focus the dumbest concept he has ever heard of and Kip Tindell of Container Store says that shareholder focus alienates all other stakeholder groups including employees and customers.

A new and engaging way of creating value
Leading companies have found that creating strategies that serves the needs of many stakeholder groups simultaneously in what Tom Gardner, CEO of Moetly Fool calls super-alignment creates a strong purpose that engages stakeholders to support the company in a way that creates competitive advantage. The beauty of stakeholder alignment is that it also increases the value for the shareholders – a company loved by its customers and employees will not fail completely.


Talking against shareholder value is often seen as an attack on capitalism and the free market and a defense of totalitarian systems. Reality is that no company became great because they wanted to make money – they became great because they created value for others. Somewhere down the line it was forgotten that capitalism is a social experiment focused on value creation for others and not ugly exploitation of often powerless stakeholder groups to satisfy the greed of a few.

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