About this Episode
The Essential Podcast is edited and produced by Kurt Burger.
Transcript provided by Kensho.
Nathan Hunt: This is the Essential Podcast from S&P Global. My name is Nathan Hunt.
What does it mean to be a good company, meaning a company that is ethical and responsible? Some people think that ESG metrics give us a benchmark. Some people believe that trying to be a good company is meaningless, a distraction. Some people believe it is central to the purpose of a corporation.
By any measure, a good company would necessarily be one that treated its employees with dignity and respect, but this gets into the murky realm of corporate culture and begs the question how the largely unwritten rules of corporate culture come to affect the success of the business, its profitability.
Today on the podcast, I'm joined by Ben Michaelis. Dr. Michaelis is a PhD trained psychologist who helps corporate clients navigate challenges from rapid growth, to employee satisfaction, to management tension by fostering community and creating environments where people feel safe, supported and invested.
Ben, welcome to the Essential Podcast.
Ben Michaelis: Thanks for having me on the show, Nathan. I'm grateful to be here with you.
Nathan Hunt: Ben, in your opinion, what makes a company good?
Ben Michaelis: I want to say, for the record, I appreciate you starting us off with such a mild kind of softball question like that. That's really so generous of you. No, but seriously, I love that question. What makes the company good is not unlike what makes a person good. I consider people good who look out for the well-being of others. And so companies that actively seek to promote the well-being of their employees from top to bottom are good companies.
Nathan Hunt: So with apologies to Senator Mitt Romney, are corporations people?
Ben Michaelis: Corporations are not people, but they are comprised of people, and it is the people that make the decision that decide whether a company is going to be good or not.
Nathan Hunt: Does it matter to be good? I've read about companies with pretty toxic corporate cultures that seem to be financially successful.
Ben Michaelis: That's 100% right. From a purely financial standpoint, you can make a lot of money by being less giving. I'm not going to tell you otherwise because that would be a lie. There is evidence that suggests that companies that take the time to build cultures of trust are more productive than low-trust companies.
There's research out of the Center for Neuroeconomics at Harvard that described a lot of the upside for this, for companies in terms of more engagement, fewer sick days, higher productivity, less burnout. But in fact, there was a study from LinkedIn that just came out that employees are willing to accept 20% less salary for a greater sense of autonomy and community at work.
These are hard numbers, but the question is, what kind of company do you want to be? What kind of life do you want to live? If you're a leader at a company, what kind of legacy do you want to leave? For most people who run the cultures that are not healthy cultures, the stress tends to burn them out, too. It really does come down to what kind of life do you want to lead and what kind of legacy do you want to leave.
Nathan Hunt: You mentioned burnout there. And I'm wondering if some of this is a timescale question. So a good company might do better in the medium to longer term, whereas a company with a low level of respect in consideration for its employees might do better in the short term. Would you agree with that assessment?
Ben Michaelis: I would agree with that. I've seen -- working in New York, working with individuals as well as companies, I've seen people who are just purely transactional in nature, who do, again, do very well. The problem is that, again, as you were saying, over time, your reputation does catch up with you. And if you generate negative feelings from people that you do business with, that will catch up and you will, over time, you'll get cut out of more deals than you can get cut into.
It is a time thing. There's a reason that historically, charlatans would go from village to village, right? When you behave badly in one environment, you need another environment to behave badly and because your reputation precedes you.
Nathan Hunt: So Ben, back in 2019, the Business Roundtable took the extraordinary step of redefining the purpose of a corporation for its members. The new definition placed emphasis on delivering value for all stakeholders versus just shareholders.
One of the main points concerns employees, and I want to quote from that definition. The companies involved committed to "Investing in our employees, this starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect."
In your experience, Ben, how are companies doing on this front?
Ben Michaelis: Companies are changing, at least the ones that want to be around long term. And the people that are driving the change often are actually millennials who are just no longer willing to give up their lives or energies for companies that don't treat them with respect. And if you look at the data behind the Great Resignation, very little of it has to do with money. It is about humanity and the "little things" or the soft things that companies do to let people know that they are part of something larger than themselves.
That's what companies really are. They're an endeavor of a group of people that are trying to do something that's larger than any individual. And when people sort of at the top are making life just punishing for people below them, it really gets in a way of thinking, oh, we're all in this together.
In the last, I'd say, 18 months, my company, thegroup.io, has been inundated with requests to help reshape company culture with some of the companies that have grown tremendously during this pandemic because culture is changing, and figuring out ways to provide employees as stakeholders with, as you said, dignity and respect are changing as well.
Nathan Hunt: So Ben, let's suppose you and your team are walking into a company, a brand-new company, brand-new client, is it possible for you to know at a glance the difference between a company with a healthy culture and one with an unhealthy culture?
Ben Michaelis: Absolutely. You just go to www.glassdoor.com/reviews, that does not require a PhD to figure that out. People talk and that is -- it's a -- look, it's a good -- Glassdoor is a great service, it really is. It does provide a lot of information for people.
But seriously, actually, my partner, Dr. Stacey Steele, and I, the first thing that we do when we're working with a company is we actually look at the people who are 1 or 2 levels below the top. That is our entry point because if those people are burning out, if their quality of life is low, if they are overstressed, overworked and underappreciated, then we know that you have an unhealthy company culture.
And the reason for that is that stress tend to collect there. It comes down from above, from the people at the very top and then it's coming up from below. And so if there is a bottleneck of stress at that level, like again 2 or 3 levels below the top, then we know that the company culture is problematic.
Nathan Hunt: What is the one thing that any company could do to improve its corporate culture? Is it better snacks? Is it ping-pong tables? What's the key?
Ben Michaelis: It's definitely better snacks. Most of what we do is figuring out the snacks that we're going to need. I would say 90% to 95% of my time is spent in the snack aisle. Better snacks is a start, but it's not a finish. That's not even table stakes.
The one thing that companies can do is listen to their employees and truly listen and welcome their input and decision-making. They don't even need to be -- necessarily always have a say, a final say. But if they welcome their input, that is putting weight and action behind the idea that their employees are part of a team and not just functionaries meant to execute on tasks. And when this is done correctly and properly, the sense of community within company that's built is significant and durable. And when it's not, it breeds resentment and hostility.
I mean I literally, just yesterday, got an e-mail from someone at the partner level of her company who told me about a decision of major significance that was communicated to her via e-mail. She said in her e-mail, she's like, this is not a partnership. This is a dictatorship, and I need to leave. And this is a top member of this company who's been with the company for decades.
So remediating that and working to enhance the internal communication so that people and teams are communicating openly and transparently and, frankly, more often so that, again, you feel and you are a part of something bigger, a true community. There's a lot of research. You mentioned earlier the concept of development. And that is actually one of the greatest things if you look at millennials and surveys of millennials, they want to be developed.
When companies take the time to develop their teams individually to say like, okay, we're teaching you how to do these things, it indicates an investment not just in the short term, but in the long term into those people, into those human beings. And one of the things that we've been doing is, I mentioned my company, thegroup.io, one of the things we've been doing is creating these off-sites that do this first goal of creating development programming, whether it's teaching people how to have difficult conversations, how to manage up and how to manage down, how to mentor, how to align teams so that everyone is moving towards the same goal.
But the second thing that we do, and this is one of the differences, is we're so intentional about the human aspects and the community aspects of each of these experiences that what we're finding is that when companies come out of these retreats, these off-sites, they're working together and they don't even know why. They're working together more effectively. There's more positive emotion between them. And the reason is, is that we're sort of we're really carefully trying to enhance the sense of humanity between people so that they're looking out for each other. And that is what makes an experience of working at a company much better for everyone.
Nathan Hunt: A lot of these issues around culture seem to center on communication between colleagues. Why is communication so challenging?
Ben Michaelis: I like that question. And I think that the answer is that when people are having a conversation, they're actually -- they're not having the conversation that they think that they are. People think they're talking about what they're talking about, but the content of a conversation is really only 1/3 of a conversation that's actually taking place. So in any conversation, there's the kind of manifest content or the task, whatever the issue at hand is, we're talking about what snacks we need for the company, for example.
The second thing that's happening is the relationship, the kind of emotional bond that exists between 2 human beings in a conversation. And let's say, you think that we should have the SkinnyPop Popcorn, and I think that we should have Baked Lay's Potato Chips. Suddenly, we're in this conversation that is related to feelings around power and affiliation. We're not just talking about snacks anymore. We're talking about, do we respect each other? Are we aligned? Can we trust each other?
And so the first -- again, the first level is the task. The second is the relationship. And the third one is the self. So this has to do with our identity, our self-esteem, how we're seen in the world. And the questions that tend to sort of go on, a lot of this is subconscious, is, what are you going to think of me? What is my position for my behavior? How does that reflect my social standing? Should I speak up? Should I remain silent? If I acquiesce to you, does that mean I'm a pushover? If I try to push my own agenda, does that mean I'm a bully?
And so by working with people on understanding that a conversation has these 3 fundamental parts, the task, the relationship and the self, we're able to actually drive better outcomes for conversations, and that's why communication is so challenging.
Nathan Hunt: Looking at the 2/3 that aren't the topic of the conversation, so that would be the self and the relationship, have you seen this change? Have you seen it become more challenging under the circumstances of the pandemic?
Ben Michaelis: Yes, absolutely. The shift to remote work or hybrid work has vastly changed the interpersonal landscape of work. If you make an offhanded rude comment or you're mildly insensitive to me, and then a few minutes later or an hour later, we see each other in the conference room and we're starting to talk about -- or somebody is talking about a television program that we all like, suddenly, you don't seem so bad. There's something that changes in the dynamic. Whereas right now, all you're getting is you're sort of on screen with people. And so if someone says something rude, there's nothing to balance that out.
And so this is an evolving process. As the evolution of the work environment continues, our approach to culture needs to change. So for example, one company hired us to create these quarterly, I won't say the name of the company, but these quarterly days where people get together in person, a lot of this has been done outdoors, and where people are engaging with each other. They're doing sort of development experiences because they're not seeing each other in person otherwise, and the tension has reduced, but it's definitely been harder during the pandemic.
Nathan Hunt: When you and your partner, Dr. Steele, work with companies, how do you know if people feel, as you say, safe, supported and invested?
Ben Michaelis: So the answer is -- the first thing that we do is everything is opt-in. Nothing is mandatory. And we make this very clear to the people that we're working with that the last thing that people need is to feel forced into talking to other people. If they don't want to be there, they should not be there.
When you mandate anything, it intensifies a sense of disempowerment that a lot of people are already feeling during this time. And we try -- admittedly, we're not 100% successful, we try to take people out of their work environment to connect with one another to have conversations. It's really hard to feel safe in the same environment where you had a conflict with a colleague.
The next thing is just being really open ourselves. And showing up very fully provides, a, it says, I'm here with you and being in it with people; and it also models that behavior. So those are the ways that we try to enhance the sense of emotional safety and a sense of investment in some of the things for these programs we're doing.
Nathan Hunt: Assuming you found there was a problem in a corporate culture, what can you or anyone else really do about it? After all, culture is bigger than any of us as individuals.
Ben Michaelis: So it's a great question, and I think about it like turning a large ship. It takes a while to change anything because you're right, culture is created over years. The answer is a little bit at a time and building a sort of longer-term relationship with the company so that it's not just like a one-off because one-offs don't work. But over time, you can affect things. It's just literally one thing at a time and aspiring for a large change, but sort of recognizing that it is a kind of a game of inches, so to speak.
Nathan Hunt: One of the reasons I imagine companies would care about being good is retention. It's a big issue when people decide to leave, and we are going through this cultural phenomenon that the press has termed the Great Resignation.
I want to dive into a couple of statistics. So the labor force participation rate in the U.S. is at 61.9%, which is far below pre-pandemic levels. Much of this has come from Americans over 55 who are dropping out of the labor force permanently. 4.5 million Americans quit their jobs in November alone, representing 3% of all employment, 3% of the total labor force. Is this good news or bad news from your perspective?
Ben Michaelis: I think this is good news for a few reasons. One, what I'm about to say may get me in trouble. I'm aware of that, but so it is. I think it's particularly good news for people that are on the latter part of their careers. And I don't mean people who are closer to 55, but I mean people who are 70 or closer to 70 or older, who have been hanging around in their jobs because they're afraid to leave due to issues of identity and other factors.
One of the largest reasons that's not spoken about for tension within these large companies is that these -- I want to be very clear, the older baby boomers, so I'm not talking about people in their 60s, I'm talking about people in their 70s and older who just simply won't leave, which has led to more tension at the top ranks of companies and prevents everyone else for moving up. This glut at the top has led to more anger and resentment within companies, and it's not spoken about openly. And this anger and resentment floats down through the ranks.
With regard to the younger workers who are leaving, I also actually think it's a good thing because the power has begun to shift from the corporations to the workers who are acting with greater agency over their careers and over their lives. And although, obviously, no one wants the employment rate to be where it is, I think that over time, this will actually benefit individuals and companies because people are going to make more active conscious decisions about where they choose to work, and there will be a better alignment between values and actions. And I think that, that will actually ultimately accrue to the benefit of the companies.
Nathan Hunt: When you look at those numbers, 4.5 million Americans quitting their jobs in November, doesn't that seem to indicate that something has been wrong with our work culture for a long time?
Ben Michaelis: Absolutely. That's why we're seeing these changes happening, and companies are so -- they've become more focused on their cultural hygiene. It's because the pain that individuals have been experiencing and suffering for so long has now shifted towards the companies. And so the leadership of the companies, and many of whom are suffering as well, are seeing that they can't retain top talent because their cultures have become toxic, and so the bottom line is now being affected.
And I think of this as a good thing, not just because it's my business to help companies change their cultures, but because in life, pain is a good thing if it's seen in the right way. Pain in the body is a signal that something is not working as it should be, and pain is a messenger that change needs to take place. It's the same thing with companies, companies that are experiencing pain need to change to adapt. And those that are -- and again, many are taking this very seriously. Now those companies are going to succeed longer term, and those that don't are going to have their prospects diminished.
Nathan Hunt: In the 1960s, we had The Organization Man, The Man in the Gray Flannel Suit, who went in and dutifully, stoically labored in a company whose culture was not very much about any kind of self-actualization. It feels like we have, over time, evolved away from that. What do you see being the future?
Ben Michaelis: I love that, as the question, the image to -- the sort of sailing image of the kind of "Man in the Flannel Suit" because it's such a monolithic image. And I think that the answer is we're moving to cultures that are less monolithic on a number of different levels, where we're actually recognizing that what people bring to the job is far more than like kind of obviously measurable skills and learning to lean into that where we say, okay, this person actually has a lot of the sort of intangible qualities that are harder to find, but we are celebrating what those qualities are and the more we can move towards appreciating that. I think that those companies are going to be more flexible and more productive in the long run.
So the answer is moving away from monolithic cultures towards more diverse, not just in terms of ethnicity and other factors of that nature, but more diverse in terms of ideas and creativity and approaches to work.
Nathan Hunt: Ben, one final question. Part of the whole ESG movement in finance is taking things that were once considered externalities or, to put it another way, intangibles and making them part of the way in which we measure companies and our investments. So let's say that I, as an investor, become convinced that companies with healthy cultures deliver higher long-term value, is there a way to measure such a thing? Or to ask another way, what might tip me off that a company has a bad corporate culture?
Ben Michaelis: It can be hard to isolate that. But some ideas, where you mentioned the obvious ones, right, turnover, retention, and we're seeing a lot of turnover. That's a pretty big red flag. There are -- there's evidence to suggest that employee satisfaction is highly, highly correlated with revenue generation over time. So actually looking at culture diagnostic surveys, looking at employee surveys, how are people feeling, especially when they're not -- they don't have identifiable information and there's sort of anonymous surveys, that's a great one.
The other one is looking at how long it takes to recruit employees. Are we getting the top people? Are we seeing people leave? Another one, which is actually people -- it's a variable that you can look at is when people decide to leave, where are they going? Are they going to competitors? Are they leaving with less notice? Those -- I look at those as acts of, in some ways, aggression, and they are indicative of people that are really angry with the corporate culture. So looking at those variables, that tells you a lot about how healthy the culture is internally.
Nathan Hunt: Ben, I want to thank you so much for joining me on the podcast today.
Ben Michaelis: It was absolutely my pleasure. And really, thanks for having me. I really enjoyed our talk.
Nathan Hunt: The Essential Podcast is produced by Kurt Burger with assistance from Kyle May and Camille McManus. At S&P Global, we accelerate progress in the world by providing intelligence that is essential for companies, governments and individuals to make decisions with conviction.