Archive for the ‘Maslow’s Hierarchy of Needs’ Category
GETTING MORE MOJO FROM MASLOW: In Order to Survive the Struggles of the Economic Recession, We Need to Reframe Difficult Business Experiences as Opportunities to Find Meaning in Our WorkWednesday, November 24th, 2010
Viktor Frankl, the Austrian psychologist who was imprisoned in a Nazi death camp and wrote the influential tome Man’s Search for Meaning once lamented, “People have enough to live by, but nothing to live for; they have the means, but no meaning.” This is a predicament of modern man. Once we’ve addressed our basic needs in life, what do we strive for?
Modern man is a worker bee. To us, business means busy-ness. We work 25 percent more hours per week than we did a generation ago, not counting the time we spend e-mailing colleagues from home or while we’re on vacation. As we toil away to keep up with the cost of living, we often fail to recognize the high spiritual price we pay for being more focused on means than meaning. But why? Research shows that this approach can be counter-productive. Gurnek Bains, lead author of Meaning, Inc: The Blueprint for Business Success in the 21st Century, says that meaning directly drives employee commitment and engagement. Industry-leading companies like Google, Genentech, and Southwest Airlines—which regularly appear on lists of great places to work—have learned that the key to raising performance levels is to create a sense of real meaning for employees. “This has a tangible and demonstrable impact on business results. Now that other forms of competitive advantage have become commodities, creating a sense of meaning for people will be what makes the difference for most companies in the future.” It is critical, then, to transform the economic challenges of the recession into opportunities for us to understand and infuse meaning into our work.
When I started my company, Joie de Vivre Hospitality, nearly a quarter century ago, I decided that the name of the business should also be its mission statement. Joie de Vivre has since grown into America’s second-largest boutique hotelier, based on our commitment to “Creating Opportunities to Celebrate the Joy of Life.” We distilled our credo into a two-word mantra, “Create Joy” which is stamped into the blue rubber bracelets that all new employees receive during orientation and that many veteran staffers routinely wear.
But one learns the difference between a glorified mission statement and a belief system that guides behavior when a company faces a “once-in-a-lifetime” economic downturn— and, really, we’ve faced two of these in the San Francisco Bay Area in the past decade. In late 2001, I was struggling. I had 1,000 employees, and I didn’t know how I was going to make payroll. The combination of the dot-com crash, 9/11, and a worsening economy had put Joie de Vivre at risk. One afternoon, I walked into a local bookstore in search of a business book that would help ease my financial pains—or at least give me a clue about how to survive. I quickly realized that what I really needed was some serious personal guidance. So I moved from the Business section to the Self-Help section of the bookstore (conveniently located next to each other), where I reacquainted myself with Abraham Maslow’s Hierarchy of Needs theory, one of the most famous psychological concepts to explain human motivation.
I suppose that a guy who names his company “Joie de Vivre” should naturally gravitate toward self-actualization. Maslow is known as an early leader in the human potential movement; he believed that psychology was too obsessed with our worst behaviors when a lot can be learned from our best practices. He first popularized the axiom, “If the only tool you have is a hammer, everything starts to look like a nail,” aptly describing his peers’ over-emphasis on neurosis in the mid-20th century. Re-reading Maslow helped me to see one of the most neglected facts in business: the fact that we’re all human. And, no matter what our role—CEO, line-level employee, customer, investor— in a particular business is, we each have a hierarchy of needs that determines what’s important to us. Late in his life, Maslow started applying his hierarchy of needs to organizations and businesses. Unfortunately, he died in 1970 at the age of 62 before he could closely examine how his theory might shift from the individual to the collective.
During that downturn nearly a decade ago, I started “channeling Abe” to see how I could apply his theory to my company. I figured the worst that could happen is we’d go bankrupt, so why not learn something along the way? I distilled the Hierarchy of Needs Pyramid from five to three levels, or key themes, which make up what I call the Transformation Pyramid: survive (safety and physiological); succeed (esteem and love/belonging); and transform (self-actualization). These themes aren’t just relevant in business; they’re fundamental in life. I looked at how to apply them to the three most important stakeholders in Joie de Vivre: employees, customers, and investors. For the purpose of this blog, I’ll focus on employees.
Maslow concluded that individuals’ deepest motivations sit at the top of the pyramid—and take on an inspirational quality. For example, in his research on people’s relationship with their work, he asked dozens of nurses, “Why did you go into nursing?” “What are the greatest moments of reward?” and “Tell me a moment so wonderful it made you weep or gave you cold shivers of ecstasy.” The nurses answered by describing peak experiences that were virtually life-altering. Nurses who were most able to express a peak experience seemed most “called” by their work.
In A Simpler Way, Margaret Wheatley and Myron Kellner-Rogers wrote, “People do not respond for long to small and self-centered purposes or to self-aggrandizing work. Too many organizations ask us to engage in hollow work, to be enthusiastic about small-minded visions, to commit ourselves to selfish purposes, to engage our energy in competitive drives. Those who offer us this petty work hope we won’t notice how lifeless it is … when we respond with disgust, when we withdraw our energy from such endeavors, it is a sign of our commitment to life and to each other.” Maslow helped me understand that my Employee Pyramid was defined by money (survive), recognition (succeed), and meaning (transform).
We all have basic needs that need to be met, and our work compensation package is the means to that end. But Gallup has shown in multiple surveys that money is not the primary reason that people leave a company (in fact, it usually comes in fourth place). People join a company, and they leave their boss. Recognition, which addresses people’s success needs and usually taps into one’s sense of social belonging or esteem needs, is what creates loyalty in the workplace. But money and recognition are external motivators for doing any job. Those who are engaged in something they’re passionate about—such as the nurses Maslow interviewed—have transcended the bartering relationship that defines most relationships between employer and employee. They have tapped into an internal motivation that fuels them. They are inspired by what they do. They have moved from just focusing on the tasks they do each day to imagining the impact of their work. As they become more aware of that intangible we call meaning, employees move to the transformational peak of the pyramid.
Most companies get a little lost in the ether at the top of the pyramid, because it’s easier for bosses to “manage what they can measure,” and it’s simpler to do a benchmark compensation survey than to try to gauge meaning. Someday we may have a “Corporate Meaning Index” just like we have a Dow Jones stock index, so that we can quickly scan who is playing at the top of the pyramid and who isn’t. In studying my own company and dozens of other meaning-driven businesses, I’ve come to realize that workplace meaning can be dissected into meaning at work and meaning in work. Meaning at work relates to how an employee feels about the company, their work environment, and the company’s mission. Meaning in work relates to how an employee feels about their specific job.
I believe that meaning at work is far more important than meaning in work. When employees believe in the work of the company, the whole Hierarchy of Needs is satisfied. Those employees clearly have their basic needs met because they have confidence in the financial stability of the company, which means they have job security. Believing in the company’s mission also typically creates deeper alliances among employees because the sense of being part of a connected crew and the pride that comes from group success satisfy our social or esteem needs. Finally, their self-actualization needs can be met by feeling that we are part of an organization making a difference in the world, plus there’s a halo effect that may render the work they do day-to-day even more meaningful.
One of the most profound decisions I made during the depth of that last downturn was to start managing the business based on meaning and to start measuring meaning in various ways, from asking questions on biannual work-climate surveys to querying line workers in monthly staff meetings, “What’s the best experience you’ve had in the past month here at work?” The question I really like to ask our employees goes something like this, “Most of us think of our job in terms of ‘What am I getting?’ What if you asked yourself daily, ‘What am I becoming as a result of this job?’” Helping our employees reframe their work, changing their tasks to make their jobs more meaningful, and creating a democratic culture in which employees help define our business strategy has helped Joie de Vivre’s turnover rate drop to one-third the industry average. We were recently crowned the “second best place to work” in the San Francisco Bay Area, a remarkable feat for a service company that’s full of people cleaning toilets in a region full of high-tech companies famous for plush corporate campuses.
I learned quite a bit about meaning in business during the last downturn, but this downturn has been full of lessons, too. During the dot-com bust, my desire to learn tended to be organizational, but the worldwide Great Recession has led to more personal lessons. I’ve found myself on an emotional roller coaster the past couple of years. I’ve had five friends or colleagues commit suicide, primarily due to stresses at work, and I’ve seen countless companies in the travel and design industries dissolve under the pressure of this relentless economy. My greatest epiphany resulted in a series of what I call “Emotional Equations” (also the title of my next book, due out in 2011) that help remind me how the world works. The most profound equation that I’ve used for myself and for the managers in my company has been despair = suffering–meaning. I learned this from reading Frankl’s Man’s Search for Meaning.
As teenagers, we learned algebra and found there were constants and variables in an equation. That’s true in life, too. The constant in a concentration camp, or in a recession, is suffering. There will always be suffering. Yet, the variable in life is meaning: How do we find a sense of meaning, even in the most difficult times? This is a question that I’ve asked my employees and myself, because if you can find meaning in the rubble, you will lessen your despair. That’s how this equation works: more meaning equals less despair. Yet, most of us in a difficult time put our attention on the suffering. Life and business are all about where you place your attention. If Frankl can live through a death camp by rediscovering the importance of meaning in our lives, we can live through a painful recession by reframing difficult economic experiences.
SOUTHWEST MEETS AN UNRECOGNIZED NEED
A few months ago I dialed Southwest for some assistance and heard a recording “Your wait time will be 10 minutes. If you would like, you can leave your number and we’ll call you back.” I was so surprised and utterly delighted to get that message. Finally some company respects my time! An unrecognized need of mine was met…because I hadn’t ever imagined that a call back could be an option. All of a sudden, I had flashbacks of all the horrendous waits I’ve had on the phone over the years (don’t ask me about Dell or Time Warner).
RAISING THE BAR FOR ALL
Southwest has raised the bar for customer service hot lines. I predict that because Southwest customers will now recognize this as a need, it will now become their desire that other companies follow the same suit. This is how innovation works in the marketplace – someone raises the bar, others follow suit, and before long, it becomes a price of entry.
This is what we call “the pull of gravity” in thePEAK Customer Pyramid (scroll down on page)
WIFI Availability. Years ago it became expected that WIFI would be available at hotels. Six months ago, McDonalds starting offering WIFI at some of their locations, and in the past week, Starbucks announced they will provide it for free. (Before just their card-carrying loyalty members had access.)
Movie Theatres. The new movie theaters have stadium seating, the ability to reserve specific seats, and even eat dinner and drink wine. People who have had this experience may now see these amenities as a desire (because not all movie theaters offer this). For those who don’t have access (and/or knowledge of), these amenities will remain as unrecognized needs.
During our strategy sessions, we work with companies to identify the gravitational forces affecting their company and industry.
About a month later, I phoned Southwest and was disappointed. They announced the wait time (around 9 minutes), yet I didn’t hear the offer for a call-back. Last month I hadn’t even known that I had a need for an automated phone system to respect my time – yet thanks to Southwest for fulfilling that fantasy last time – it became a recognized need. My expectations for service were raised and then not met. Would I have been better off not knowing what I could have had?
As a consumer, when unrecognized needs are met, they then become a recognized need. When that need is repeatedly fulfilled, an expectation is born.
A/ Please think of an example where a need was met that you didn’t even imagine was a possibility.
B/ Can you think of an example when you felt “teased” by a company/service fulfilling an unknown need, and then subsequently not delivering it consistently?
C/ If you have raised the bar for your customers, how are you ensuring that your delivery will be consistent so that they won’t feel teased and disappointed?
D/ How long do you think it will take automated call backs to become an expectation across service hot lines? Any guesses?
Within an industry, category or in services, an unrecognized needs will eventually become a point of entry.
A/ In your industry, think about what bar has been raised. Are you behind or ahead of the innovation?
B/ What do you anticipate will be the next innovation and are you working on fulfilling it now?
We would love to know what you are thinking out there – so let’s start a dialogue!
[originally posted Feb. 16, 2009 on the Huffington Post]
Abe Maslow is probably turning over in his grave. The creator of psychology’s most popularized theory of human motivation (the Hierarchy of Needs) would be shocked to realize that we’ve become utterly confused by the difference between wants and needs. During the four decades since Maslow passed away, modern man has begun to redefine his need as an unsatisfied 48-hour-old want (thanks to George Will for that thought). Will suggests that this confusing of wants and needs leads to a “tyranny of the unnecessary.” Author Gregg Easterbrook suggests, “The blurring of needs and wants is important because needs can be satisfied. A person needs food, clothing, shelter, medical care, education, and transportation; once attained, these needs are fulfilled. Wants, by contrast, can never be satisfied. The more you want, the more likely you are to feel disgruntled; the more you acquire, the more likely you are to feel controlled by your own possessions.”
This quandary of affluence is at the root of why our modern society can become more prosperous, yet still be “wanting.” Wants tend to be truly personal and individualistic, while needs are more universal to man. Most observers seem to suggest that needs are sort of basic and wants are the icing on the cake. It is clear that some of today’s most successful companies are those satisfying basic needs (McDonald’s, Wal-Mart). But, my sense is that needs are more fundamental to who we are as humans. They’re not just the boring basics of life that we do before we move on to the exciting and aspirational wants. As Maslow suggested, we all have physiological needs at the base of our Hierarchy of Needs pyramid and once those are partially met, we move up to safety, social-belonging, and our esteem needs with self-actualization (best defined, ironically, by the U.S. Army ad: “be all that you can be”) being our predominant need once those lower needs have been met. When someone experiences self-actualization, they realize why they were put on this earth, whether that peak experience comes from being a giving grandmother, a passionate political activist, or an engaged entrepreneur.
But, during the hyper-consumer era that seems to have just passed, we became a society more defined by our Hierarchy of Wants. We became possessed by acquiring possessions, consumed by being consumers, and, yet, the hangover we’re feeling today isn’t due to just the lack of funds in our bank account. It’s also a function of feasting on cotton candy for too long. I remember one day as a child at the carnival, I overindulged eating three pink afros of spun sugar only to spin out in tantrums the rest of the afternoon. This isn’t a far cry from the emotional rollercoaster that we’ve been on. In search of our personal wants, we gorged thinking it would make us gorgeous only to realize that some of our fundamental needs weren’t even being met. Credit pushers made it easy to fill our shopping carts with Hummers, timeshares, and flat screen TV’s in the laundry room, but our primary purpose for going to the carnival wasn’t to eat cotton candy. It was to experience the social interaction of a great afternoon with the family. Somehow we lost sight of what is truly important and universal in our lives.
If you believe that happiness is truly more about wanting what you have as opposed to having what you want, you realize that one of our most fundamental needs as humans is to feel and express gratitude. Maslow suggested, “Gratitude is an extremely important but badly ignored aspect of emotional and organizational health.” Gratification is the result of satisfying your wants, but gratitude comes from appreciating that your needs are being met. Today’s successful companies will understand that their customers are no longer consumers. They are people looking to have their higher needs met and who will feel deep gratitude when that company taps into an unrecognized higher need that the customer may not have even imagined they were looking for.
If you’re a businessperson and you’re baffled by this, draw a pyramid with Maslow’s five levels of his Hierarchy of Needs (underlined above). Ask yourself, how are you delivering on your customers’ various needs in such a fashion that they feel grateful to you for the experience you’ve delivered? We did this with our customers and were profoundly impacted by imagining what would make a self-actualized hotel guest at one of our 38 boutique hotels. There’s no doubt that some of America’s most successful companies – whether it’s Apple or Netflix – have closely analyzed how they move their customers up this pyramid such that their most evangelical cheerleaders feel a sense of being self-actualized just by coming into contact with the company. As a recent Harvard Business Review article suggested, “The aim of Management 2.0 is to make very organization as genuinely human as the people who work (or shop – my addition) there.”
When I was growing up, one of my favorite songs was Peter, Paul and Mary’s “If I Had a Hammer….” Who knew that, as an adult, I would be playing this song to corporate groups as I opened their mind to the idea of how Maslow’s Hierarchy of Needs can be applied to our business relationships? You’ve probably heard the following quote before, but you had no idea that it came from Abraham Maslow: “If the only tool you have is a hammer, you tend to see everything as a nail.” Abe Maslow coined this wise phrase when he was talking to his fellow psychologists in the mid-20th century suggesting that the psychology profession had a tendency to focus on the “worst practices” in human behavior as opposed to the “best practices” because the kind of people shrinks see in their line of work are those who are in a challenged place in life (this is one of the reasons I tell young people to choose their profession thoughtfully as, over the course of time, this occupation will color your perception of the world). Maslow’s breakthrough came from his study of 1,000 fully-functioning humans (from Socrates to Eleanor Roosevelt) to understand the best practices in humankind with his eye on how we can create conditions for these best practices to prevail. Maslow chose to have much more than a hammer in his toolbox.
In what way are you looking at the world in a myopic fashion? With your employees, do you think the only tool for creating loyalty is money? Have you thought broadly about the kinds of products or services that your valued customers would love to have but hadn’t even imagined? With your investors, do you think that all of them are purely focused on Return on Investment? Conventional wisdom is often wrong, partly because traditional thinking tends to be linear and myopic. One of the key messages I developed in my book PEAK is that the greatest value (and certainly the most differentiation in business) comes from imagining people’s intangible needs, not just their obvious tangible needs. MasterCard has proclaimed in their award-winning commercials, what’s most “Priceless” in life isn’t the tangible stuff. What’s truly priceless are the peak experiences we find when we’re in a self-actualized state, whether in our role as an employee, a customer, an investor, or, for that matter, a mother, a political activist, an artist, or an athlete.
Certainly, Southwest Founder and former CEO Herb Kelleher didn’t look myopically when he realized that his secretary Colleen Barrett was a talented and smart professional with great potential. Thirty-five years later, Colleen is the President of America’s most successful airline. Steve Jobs has far more than a hammer in his toolbox when he’s considering what new products Apple will unleash on their evangelists. While Maslow’s legacy was derided as “hot tub psychology” in the 1970’s after he passed away, the fact is that his message of “being all you can be” and understand the potential in humans is certainly a relevant concept for business.
So, how do you move beyond myopia? Ask Hank Paulson, our U.S. Treasury Secretary, and formerly the CEO of Goldman-Sachs. This is a very savvy and experienced guy. He’s also quite a competitor and coincidentally was named “The Hammer” in the Ivy League when he played football for Dartmouth. But, I have to say The Hammer got hammered last week because his myopic pair of $700 billion glasses (the “bailout”) was a narrowly-defined solution to an unwieldy problem. The nail Paulson was trying to hammer was the evaporating credit markets and the financial industry’s confidence in the fundamentals of the economy. Yet, Hammerhead Hank forgot that the American people and the 535 members of Congress had a stake in this game also and, while the U.S. Treasury Secretary tried his darnedest (and you truly have to give him credit for how much work this was), he quickly realized that his myopia led to the House of Reps reprimanding him. In the end, a deal was done but it certainly took a few more tools than The Hammer.
So, in sum, one of my favorite Harvard Business School case studies of all time was Theodore Levitt’s groundbreaking “Marketing Myopia” published two months before I was born. Levitt told the story of how the American train industry had lost the transportation game because they thought of their business way too myopically, and, hence, buses, cars, trucks, and airlines pecked away at their market share over the course of a few decades until trains were just the cute things you gave your kids for Christmas. Beware of thinking too narrowly and make sure your toolbox is equipped with more than just a hammer.
I’m not one to hang out at séances, but I do need to remind the world that today, April Fool’s Day, Dr. Abraham Maslow would have been 100 years old. Not many people can attest to having an IQ of nearly 200 (those who do attest to this should save the info for their Mensa meetings), serving as the President of the American Psychological Association, and creating a self-affirming philosophy of life that the US Army translated into an effective advertising campaign (“be all you can be”). Abe reminded us of the power of pyramids and the purity of potential.
When in doubt, create a gratitude list, right?! If Abe had never joined us on this earth, we might never have:
- understood that more can be learned from the “best practices” of human beings than the “worst practices” (his psychologist brethren tended to focus on the latter)
- fully appreciated that self-actualization is a state in which we ironically transcend ourselves and connect with the oneness of something bigger than us
- realized that “being out of our minds” can actually be a good thing from a psychological perspective
- understood how important it was to find the intangible, “deep satisfiers” in life as opposed to the tangible base needs (think MasterCard’s Priceless commercial)
- been able to re-interpret “being-ness” for the “busy-ness” world as I’ve tried to do in my book PEAK.
The metaphor that I imagine when I think of Abe and self-actualization is the idea of a runner. Self-actualization isn’t easy. It’s not something that just miraculously appears and gives you a magic carpet ride. It is the difference between wearing a pair of ill-fitting running shoes that diminishes your ability to run as fast and as far as possible versus wearing just the right shoes. Self-actualization does mean you sweat and labor, but you do it in a manner that taps into your endorphins rather than sapping your energy. Living your calling produces a high that allows you to have a high threshold for pain as well as a high capacity for love. Happy Birthday, Dear Dr. Maslow, and thank you for introducing the world to the powerful idea of human potential.
We haven’t seen such a mess on Wall Street since my grandfather was a teenager. Fortunately for these titans of capitalism, our activist Federal Reserve has stepped in to – at least temporarily – stem the tide of a bank run that threatened to collapse more than one investment bank. Bear Stearns didn’t dodge the bullet and ended up trading for little more than 2% of what it was worth a year ago. Cynics are suggesting that the whole investment banking culture and the very nature of capitalism is at fault here, but I beg to differ. I believe Dr. Abraham Maslow and his iconic and idealistic human hierarchy of needs can shed some light on why some investment banks are peak performers and others are now virtually out of business.
As I outlined in my book, PEAK, there are three essential business themes that come from my interpretation of Maslow’s humanistic hierarchy: SURVIVE at the base of the pyramid, SUCCEED in the middle of the pyramid, and TRANSFORM at the peak of the pyramid. This “Transformation Pyramid” helps explain why some companies like Toyota with its eco-hybrids or Apple with its revolutionary iPods transform their industries while others like Sears or General Motors languish barely in a survival state. Investment banking would seem to be an industry that is deeply divorced from the feel-good humanism espoused by Maslow. But, a PEAK-focused comparison of the industry leader, Goldman Sachs, with the virtually bankrupt, Bear Stearns, proves that this legendary approach to human behavior can even be predictive of which investment banks flourish and which fail.
Just a week before the Fed and JPMorgan shocked the market by taking over a crippled Bear Stearns, Goldman Sachs announced to the world that they were making a $100 million donation to give at least 10,000 women a business education and, more broadly, to develop and enhance business education programs in the developing world. Amidst all the wealth on Wall Street, no firm has generated more charitable foundations than Goldman Sachs. This gift – which was the largest U.S. corporate donation since 2000 – is a reflection of why Goldman Sachs was recently profiled by Fortune as the #1 Admired Company in the Securities industry. Furthermore, the company is consistently listed on the “100 Best Companies to Work For” list and was the first investment bank to adopt an environmental policy back in 2005.
No doubt, investment bankers are motivated by money. But, unlike most of their brethren, Goldman Sachs has created a culture that has transcended that bottom of the pyramid goal in life. The company has nine key leadership principles (not one of which uses the word “money”) including “act with a profound sense of integrity and fairness” and “promote meritocracy by welcoming and leveraging differences.” So, those are just words, right? No, Goldman has used these principles to create a transformative culture that has allowed the company to outshine its industry the way few companies do. Stephen Friedman, former co-chairman of the firm and now a director, says, “There is no mystery, no secret handshake. We did a lot of work to build a culture in the 1980s, and now people are playing on the balls of their feet.”
This culture – while competitive and money-driven like the rest of Wall Street – has focused on creating a collegial environment, serving their clients with an eye to long-term relationships, and making a difference in the world. The company creed has not purely been about making money. Goldman has become a breeding ground for successful leaders from the current US Treasury Secretary Henry Paulson to the White House Chief of Staff Joshua Bolten to the head of the World Bank Robert Zoellick to the Governor of New Jersey Jon Corzine. Goldman isn’t just transforming the industry, they are creating a culture that breeds leaders who want to change the world.
And, in a “karmic capitalist” kind of way, this transformative approach to investment banking has led Goldman to get it right in the recent credit meltdown when the rest of Wall Street got it desperately wrong. Goldman Sachs just experienced its best year ever. While their competitors are awash in losses, Goldman’s revenues grew 22% and they had record profits. Their most recent quarterly earnings represented the 11th quarter in a row that Goldman exceeded analysts’ estimates of how successful they would be. Like Southwest Airlines, Harley Davidson, and Whole Foods Market, Goldman Sachs has proven that they can be the leader of their industry by transcending the base survival needs that most companies never get beyond.
Bear Stearns is a company that never transcended the base of the pyramid. Even on ultra-competitive Wall Street, Bear Stearns was an outlier with sharper elbows than most. Money wasn’t just important. It virtually represented a religion. Bear Stearns’ legendary Chairman Ace Greenberg said they were looking for people with PSD degrees – poor, smart, with a deep desire to become rich. William Smith, a former Bear Stearns employee, in an NPR interview, recently suggested what happened to the firm was karma as it was the only Wall Street firm that didn’t assist in the 1998 bailout of Long Term Capital Management. Smith says, “Bear Stearns operates on their own…and they don’t believe in the greater good. They believe in Bear Stearns and that’s ultimately what brought them down. No one came out of the woodwork to help these guys. As a matter of fact, it was the exact opposite.” In fact, in the wake of the dot-com crash in 2000-2001 when Wall Street took a tumble, Bear Stearns was the first firm on the Street to lay off staff, ultimately giving pink slips to nearly 1,300 people.
Bear Stearns wasn’t a bad place. In fact, there was a diverse family there of misfits from all demographics, as they weren’t as WASPy as the old blue blood firms like Morgan Stanley. They were a scrappy underdog. Sure they had the occasional scandal, but possibly not any more than any other Wall Street firm. But, what was missing was a sense of firm aspiration that helped Bear Stearns execs see beyond the base goal of just making money. People are comparing the firm to Enron with their hyper-focused mercantile culture and psychologist Alden M. Cass, who counsels many Wall Street executives, says “Among employees, I am seeing a similar sense of distrust as we witnessed after Enron.” Not a surprise. These Bear Stearns employees lost their life savings over the past month and when your sense of value as a human comes down to how many zeroes you have on your personal balance sheet, it’s got to be disorienting to wake up and realize you’re broke – in more ways than one. That’s part of the reason why – to their credit – the firm has hired a set of grief counselors to help their employees get through this troubling time.
It’s hard to imagine an idealist like Maslow having a message that could resonate on Wall Street, especially during these times of fear. But, one need only look at two companies – one that aspired to longer-term, higher goals and one that got trapped in the transactional trenches – to understand that peak-performing companies are not full of robots. Investment bankers will never be confused with saints, but Goldman Sachs proves that transformative companies that seek their peak look for ways to “be all they can be” (as Maslow and the U.S. Army used to say) in a manner that creates long-term profits and sustainability.
I became a born-again Maslow nut during the post-dot-com, post-9/11 period that we Bay Area hoteliers like to refer to as the “five-year hangover” starting in January 2001. After five years of phenomenal times for Bay Area hotels, we experienced a bubble burst heard round the world. Suddenly assets became liabilities. Someone once told me that all businesses have a start-up phase, a throw-up phase, and a grow-up phase. My goal in 2001 was to graduate to the grow-up phase as quickly as possible.
Burning the midnight oil reading Maslow and his iconic Hierarchy of Needs gave me the confidence to take a contrarian path in the hotel industry wreckage that was 2001-2005. Rather than purely living in trench warfare for half a decade, we decided to focus on the higher needs of our employees, customers, and investors. Creating peak experiences for these three constituencies helped us to create peak performance for my company. And, almost exactly seven years later, our annual revenues are triple what they were back then.
OK, how does this relate to residential real estate? I was scooping sun-dried tomatoes on my spinach salad at the new Whole Foods Market that moved into my ‘hood (thank you John Mackey!) when a business colleague came up and slapped my back. Given that I don’t have too many back-slapping friends, I immediately recognized the fraternizing embrace as a real estate developer I’ve known for years. He told me he hasn’t been sleeping well for months because all of his residential real estate developments were going “sideways.” Wasn’t that a movie a few years ago about drinking a lot of wine? Now I understand the reference. But, and this is the honest to God truth, he said he’s been reading my book PEAK and he’s now sleeping so much better. I wasn’t sure how to take this. I have a few books bedside that are my trusted version of Sominex. Fortunately, that wasn’t what he meant. He said, “Now I understand the pain and suffering you were going through a few years ago and why the Hierarchy of Needs was your savior. I’m applying your Maslow theory to my little debacle and it’s amazing how relevant it is and how easy it is to teach everyone in my company about this.”
Suddenly, I realized that what we’d experienced in hotels seven years ago was being repeated for home developers, investors, brokers, and, certainly, home owners. The bubble bites, doesn’t it!? But, my conversation with this developer was truly enlightening as it’s one more piece of evidence to suggest that this PEAK theory is relevant to all kinds of industries. Let’s first examine the problem.
The problem is the bubble has burst, which means that home buyers have moved from the fright of not buying quickly enough (for the last few years, waiting six months could cost you 10% in a price increase) to the fright of whether buying a home in this marketplace is a prudent investment. So, based upon the idea that people need their base survival needs addressed first, smart home developers are first and foremost figuring out ways to communicate the safety and intelligence of making the investment. One clever developer I know created a forty year line graph showing the ebbs and flows of Los Angeles residential real estate values and then the specifics around their neighborhood. What this graph demonstrated was the idea that values do go up and down – this isn’t the first time there’s been a marketplace devaluation. But, the neighborhood graph of values showed that this particular area had held its values historically better than the overall metro market. So, in essence, this developer was trying to allay the survival fears of the home buyer to say, “I know you have worries about home values, but this is a safer bet given that this neighborhood has performed better over time.”
But, just addressing a buyer’s survival needs isn’t enough. As my developer friend told me, “We have become much better listeners. The second level of your Customer Pyramid suggests that customers make a commitment when they have both their expectations AND their desires met. Rather than dropping our prices like all of our competition is, we’ve chosen to add value or provide upgrades to the homes that specifically address the desires of the customer. A year ago, we might have charged them an extra $10,000 for hardwood floors. Now, we provide it for free. We try to have our salespeople come up with three desires per customer that we can translate into value. We show these prospective buyers just how much they’re saving on these upgrades, but it also means we aren’t cheapening the values in the neighborhood. In fact, we’re improving the values because we’re creating better homes.”
So, I asked my colleague, “I understand how you address the two lowest levels of the Customer Pyramid – expectations and desires – but how do you address the “Unrecognized Needs” of the customer to create the self-actualized experience that is found at the peak of the pyramid?” He said he was still trying to figure that one out. Since then, I’ve given it some thought. Why not make a special offer to the prospective buyer: as icing on the cake, we will offer you $5,000 to be used in one of the three following ways: (a) we throw you the most over-the-top housewarming party, anniversary, or birthday party for you and all your friends in your home, (b) we give you a $5,000 credit at Best Buy for you to buy whatever kind of home entertainment system or technology you want, or (c) we donate $5,000 to the charity of your choice in your name. While other developers will drop prices at the drop of a hat, you can create a memory or something of real value by “investing” your $5,000 in a manner that truly makes a difference for the buyer.
If you’re in the residential real estate field or just own your home or condo, just remember Winston Churchill’s line (although Winston wasn’t particularly Maslovian): “When you’re going through hell, just keep going.” As I learned with the hotel biz, “this too shall pass.” Rather than fighting in the trenches every day and just dropping prices as your solution to get sales traction, consider how you can appeal to the higher needs of your prospective customers. I promise it will differentiate you in the marketplace. In a time when everything has become commoditized, differentiating yourself and your product is the sign of a peak performer.
This weekend I had the opportunity to peek into the Green Festival here in San Francisco. Years ago this public tradeshow was primarily full of folks wearing tie-die. Today the crowd is as mainstream as a crowd can look in hippy-dippy San Francisco. I saw guys in suits and soccer moms with their kids in tow–all there to learn a little bit more about the burgeoning green marketplace.
Given that I’ve got Maslow’s Hierarchy of Needs on the brain (the foundation for my new book, Peak: How Great Companies Get Their Mojo from Maslow), I started wondering, “How does ‘living green’ address the higher needs of employees, customers, and investors?” Strangely enough, the more I considered it, the more I realized that the green movement is a perfect example of how any company can genuinely address the higher needs of their key constituents as it can have a transformative effect on people (the reality is that there are many companies today who are not “genuinely” or “authentically” doing this but they’re just providing “greenwash” to make themselves look environmentally responsible).
So let’s consider each of these three constituencies in relation to the key themes of the Hierarchy of Needs pyramid, which progresses from SURVIVAL needs (physiological/safety) at the bottom to SUCCESS needs (social/esteem) to TRANSFORMATION needs (self-actualization) at the top. The Employee pyramid’s progression is MONEY, RECOGNITION, and MEANING. So, do employees have their Meaning needs addressed when they work for a company that’s genuinely taking an environmentally sustainable approach to their business? Absolutely. Creating a Green Task Force at Joie de Vivre was a magnet for proactive problem solving, especially from many of our younger Gen X employees. For many of us, making a difference creates greater meaning in our lives than making a buck.
What about the Customer pyramid? The progression there is from MEETING EXPECTATIONS (survival) to MEETING DESIRES (what could be defined as “success” for a customer) to MEETING UNRECOGNIZED NEEDS (when a customer feels transformed by buying from the company). The initial purchasers of the Prius were definitely self-actualized customers who were having their unrecognized needs met. Four years ago, how many people could say they were helping the planet while buying a car? The core customer for the Prius used to be an eco-minded person who wanted to have a transformative effect based upon the car they chose to buy. What’s interesting is with time the largest market segment for the Prius has become the customer who is looking to save money due to the car’s fuel efficiency. And, the number one reason that people buy a Prius today? 57% of Prius owners say they bought the car because it “makes a statement about me” (this was just 34% nearly four years ago) while lowering emissions (which used to be a primary reason) has fallen to fifth place in the top seven reasons why people buy a Prius.
While many of us wonder whether some investors are truly human as opposed to just being Return On Investment robots, I do believe the Hierarchy of Needs has relevance here, too. The survival and success needs of investors have to do with being in TRANSACTIONAL and RELATIONSHIP ALIGNMENT with the entrepreneur or company in which they are investing. An investor who is looking to experience transformation from their investment is what I call a LEGACY INVESTOR, someone who sees that their role as an investor can make a difference in the world. When a legacy investor invests in a green company or in a company that is at least operating using environmentally sustainable principles, there’s no doubt that investor is feeling a little more self-actualized and proud of how they are making the world a better place.
In sum, companies that focus on transcending the bottom of the pyramid–the survival needs of employees, customers, and investors–are able to address the higher needs of these constituencies. We all have roles in the world of business, whether that role is being an employee or a customer or an investor. Whatever our role, most of us want to feel good about how we make a difference with the actions we take. Companies that are “living green” create inspired employees, evangelistic customers, and proud investors by giving them a sense that they are transforming the world in their own small way.
We live in a promiscuous era, don’t we? America is experiencing a divorce epidemic and the future of the American family is at stake. Is this statement a myth or reality? Turns out it’s a myth. The divorce rate in America has dropped for more than a quarter century and is now one-third lower than it was in 1981.
OK, if that’s the case, then maybe all these stories we hear about employees, customers, and investors being short-term oriented and less loyal are also myths. Actually, while marriage may be making a comeback, sorry to say loyalty in the workplace is become a quaint old notion. The average length of tenure of an American employee has dropped by 6% in the past twenty years (it’s dropped by 17% among men and actually has gone up among women as they have stayed in the workforce longer). In the era of the Internet, customer brand loyalty has plummeted, especially amongst products that are seen as commodities in the marketplace. If employees and customers are defecting, it’s not surprising that investors have decreased their loyalty as the average length of holding a public stock has tumbled from more than six years to approximately one year. Promiscuity (or at least divorce) may be on the decline in homes across America, but the workplace seems to have become a “rent-a-relationship” kind of world.
Fred Reichheld has written a number of books on the value of loyalty in the workplace and he’s proven that building lasting relationships with employees, customers, and investors creates a more sustainable business model for any company. One of his most illuminating studies found that a 5 percent increase in customer retention rates led to increased profits between 25 and 95 percent depending upon the industry. So, if “Loyalty Rules” (as one of Fred’s books is named), why do companies put so little attention on the quality of the relationships that are being created in the workplace?
I’m a bit of an Abraham Maslow junkie and have long marveled at how his “Hierarchy of Needs,” introduced more than fifty years ago, seems to have universal relevance. Most of us are familiar with the idea that we all have base, survival needs like food, water, sleep, and safety and, as we satisfy those needs, we can focus on our social/belonging or esteem needs….in essence, the way we connect with others and see ourselves in the world. For a lucky few, self-actualization is that transformative need at the peak of the pyramid that allows certain people to have continuous peak experiences in their lives. Being a Northern Californian, all this kind of inspirational talk is familiar. What’s ironic is that many business leaders are introduced to (or reacquainted with) Maslow in business school or in corporate universities.
My own reconnection with Dr. Abe occurred when my company was on the verge of bankruptcy. In the post-dot-com, post-9/11 world, being a San Francisco Bay Area boutique hotelier was a struggle and, if I didn’t learn a thing or two about loyalty during that time, I knew I was going to be out of business. Each day during the early part of 2002, when there seemed to be no limit to the depths the Bay Area hotel industry could fall, I would come home from work weary and a little battered and crack open another Maslow book. His theory of human motivation has an awful lot to do with actualizing potential or, as the U.S. Army says “be all you can be” (the phrase came from their internal Task Force Delta team which sort of ripped off Maslow’s quote: “what man can be, he must be”).
I’ve always believed a great leader knows how to tap into potential and actualize it into reality. What Abe Maslow helped me realize is that a great business leader deeply understands the motivations of their employees, customers, and investors. And, from that I started to realize that there was a Hierarchy of Needs pyramid for employees, customers, and investors. But, unfortunately, most companies get so caught up with the base survival needs in these relationships that they lose track of the higher needs of each of these three groups. Business has a natural tendency toward the tangible which impedes many companies from moving to the priceless (to use a MasterCard word) intangible elements at the peak of the employee, customer, or investor pyramids.
I’m thrilled to further the discussion of how creating “peak experiences” can create peak performance for any company. At the very least, I might be able to help reduce your company’s divorce rate with these three important constituencies: employees, customers, and investors. Psychologist John Gottman created a landmark study on marriage and found that successful relationships averaged a 5 to 1 ratio of positive to negative interactions. Other studies in the business world have put this ratio at 3 to 1 with respect to what drives productivity in employees. If your workplace is more focused on giving feedback only when something is going wrong, as opposed to celebrating what’s going right, you may end up with a high divorce rate with your employees (I’m proud to say that at Joie de Vivre, our employee turnover rate is one-fourth the hospitality industry average). These same ratios can also apply to your relationships with your customers, and, miraculously to your investors too (although I know many of you don’t believe a human Hierarchy of Needs may have anything to do with the Return on Investment Robots we call investors).
Maslow posited that studying healthy functioning humans told us more about psychology than studying unhealthy dysfunctional humans (Freud). Similarly, most of us believe that studying best practices in business teaches us more than studying worst practices. I believe there’s a qualitative difference between a human not being sick versus actually feeling healthy or truly alive. Similarly, this idea can be applied to companies. Think of a company that’s not sick but not really alive. Then, imagine a company that’s living up to its potential and is full of a spirit of being alive. If humans aspire to self-actualization, why can’t companies – which are really just a collection of people – aspire to this peak, too? The self-actualized company creates deep relationships with its employees, customers, and investors, and, in so doing, develops a workplace that has a remarkably low divorce rate. The health of any organization is simply the accumulated health of the individual relationships that constitute it. This is true for families and it’s true for companies.