While working in the accounts-receivables department of a local equipment distributor, Melissa Price wanted to expand her skills by learning IT during her lunch breaks. When her boss questioned why she wanted to do such a thing, Price knew it was time to leave. “It was a terrible, stifling culture with constant turnover, no communication, low energy, drab offices, and a place where everybody was out the door at 5,” she recalls.
Seven years after tendering her resignation, Price couldn’t be happier. At 32, she’s the director of facilities and purchasing at Livonia-based Quicken Loans, the nation’s largest online mortgage lender, which, for the sixth year in a row, was cited on Fortune magazine’s “100 Best Places to Work for in America” list (No. 29). Southfield-based accounting and business-consulting firm Plante & Moran (No. 42) and Zeeland-based office-furniture manufacturer Herman Miller (No. 89) are the only other Michigan companies cited in 2009 by Fortune and its project partner, the Great Place to Work Institute.*
With an increasingly competitive global market mired in a severe economic downturn, many companies are struggling to survive while also facing the need to retain and attract talented employees for the next economic expansion. Yet despite the current economic challenges, companies that have painstakingly cultivated a more positive, humanistic corporate culture, such as Quicken Loans, Plante & Moran, Herman Miller, and numerous other Michigan companies, are expanding or holding their own while buried in résumés from eager job-seekers looking for a “great place to work.”
So what’s the magic formula for a successful corporate culture? Experts and leaders from several progressive-minded companies offer explanations and examples that should open the eyes of corporate leaders and human-resource departments eager to attract and retain highly productive and innovative employees.
It’s clear that just offering a great place to work, where architects design slick offices complemented by well-appointed break rooms and gathering places, doesn’t mean that talented workers will bust down the doors to get in. Progressive places to work need to be complemented by a strong corporate culture that instills trust and responsibility. Need proof? Just ask the national experts.
Up until the 1980s, most businesses in America were fairly drab places to work (a somewhat natural extension of the Industrial Age). But as baby boomers began to move up the corporate ladder and tap their managerial powers, they began examining their work surroundings and coming away unimpressed. This undertow for workplace improvement was finally substantiated in 1984, when The 100 Best Companies to Work for in America quickly became a bestseller and caught the attention of corporate leaders, job applicants, business schools, and people like Amy Lyman, who, in 1991, co-founded the Great Place to Work Institute.
“When I was attending the University of Pennsylvania in the 1980s, there was this intense focus on making as much as you can and ‘don’t worry about anyone else,’” says Lyman, the institute’s director of corporate research. “But even then, there were some high-trust companies that treated their employees well and were financially successful but didn’t always get the recognition they deserved. So we’ve provided a platform.”
According to Lyman, the common thread among the 100 Best Companies to Work For is that they’ve established a “trust-based culture.”
“These organizations have developed mutual trust and respect between the management and employees and a spirit of cooperation,” Lyman says.
“Typically you’ll find fair hiring and promotion practices, pay equity, training and development opportunities, and other benefits.”
The rewards for the organizations are plentiful. “Our survey and financial-performance data demonstrates that great workplaces with high levels of trust outperform their peer organizations as a group,” Lyman says. “There’s a stronger, long-term financial performance, lower turnover, more job applications, and an integrated workforce in which diverse groups of people create and contribute to a common workplace culture of benefit to all.”
Recent empirical evidence bolsters those claims. An annual analysis by Russell Investment Group found that, from 1998 to 2008, a hypothetical portfolio of publicly-traded 100 Best Companies outperformed — over time — both the S&P 500 and the Russell 3000.
That’s music to the ears of Bill Hermann, managing partner of Plante & Moran, which has made Fortune’s Best Companies list for 11 consecutive years. “It’s reaffirming that we’re doing the right thing within the firm,” he says, “but in my 38 years with Plante & Moran, I’ve never known it to be any different. There’s no question that there’s a direct correlation between our … culture and our success in tripling revenue and doubling staff over the [last] 11 years.”
Plante & Moran’s business philosophy, Hermann says, is based on the golden rule — and on a culture defined in two simple words: “We care.”
The firm also isn’t afraid to let down its hair once in a while. For example, its Web site proclaims it has a “relatively jerk-free” environment. (“Because anybody can have a bad day once in a while,” Hermann says.) To help avoid hiring “jerks,” Plante & Moran uses behavior-based interviewing techniques. To help retain “team members,” the firm offers numerous perks, including reimbursement for half of an athletic-club program, free financial consulting, an annual staff conference, generous paid-time-off benefits, and numerous tax-season relievers such as massages, partner-prepared breakfasts, and miniature golf in the office.
“We have the lowest turnover rate of any major public accounting firm, which allows us to be consistent with our client service delivery,” Hermann says. “And our clients have said, ‘If they treat their staff so well, they’ll probably treat us as well.’ We also typically get 25,000 applications for maybe 200 to 250 openings per year, which gives us a pretty nice recruitment selection option.”
To help spread the word, a few noteworthy colleges have begun promoting a positive corporate culture. Kim Cameron, a professor of management and organizations at the University of Michigan’s Ross School of Business in Ann Arbor, has closely studied the efficacy of positive corporate cultures since the mid-1990s, after researching the effects of corporate downsizing.
“The key finding was that most organizations that downsize deteriorate in performance as quality goes down, morale tanks, innovation deteriorates, conflicts go up, and the best leaders leave,” says Cameron, co-founder of the school’s Center for Positive Organizational Scholarship. “But I discovered that 15 percent to 20 percent of organizations that downsize don’t deteriorate, so the question was, why not?”
Cameron found that those companies most often had a positive corporate culture.
“They were virtuous organizations that displayed kindness, gratitude, institutional forgiveness, and did not hold grudges or punish people for making mistakes,” he says. “There is compelling empirical evidence that when a company focuses on positive phenomena, it obtains extraordinary performance with higher profits, productivity, quality, innovation, customer satisfaction, and higher employee retention.”
In terms of facing a severe economic downturn, Cameron strongly believes more positive organizational cultures are “unquestionably better-positioned to deal with the challenges. If you can reinforce a positive culture, even in trying times, it’s going to help the company get through it better because a foundation is created where employees are willing to say, ‘Yes, I will invest in this place.’”
Preaching a positive attitude works wonders, says Quicken Loans CEO Bill Emerson. Dressed in standard business casual attire and sitting in the company’s Farmington Hills cafeteria, Emerson fits right in with the other employees who walk through a colorful maze of comic-strip-like characters who spell out the 18 principles that serve as the fundamental doctrine that forms the company’s culture. (E.g., No. 7: “It’s not about WHO is right, it’s about WHAT is right.” Or No. 15: “Innovation is rewarded. Execution is worshipped.”)
While the company was listed at No. 2 on the Fortune list last year, it now stands at No. 29. Still, it was the only mortgage company honored this year. Emerson, who joined Quicken as a mortgage banker trainee in 1993, says making the list is “a great byproduct” of what they do. “But when you think [about] what’s happened in the mortgage industry in the last 18 months, and then to be No. 29 on the list … [it’s] a validation to us that we’re doing the right things.”
Wasting no time, Quicken starts promoting its corporate culture on Day One. For example, every month, 100 to 150 new “team members” (not “employees”) are indoctrinated into the company culture over a three-day orientation. The session includes an eight-hour presentation by Quicken founder and chairman Dan Gilbert, who covers the company principles, or “ISMs,” while Emerson addresses the importance of good communication. Both give out their work extensions, cell-phone numbers, and e-mail addresses, along with an open invitation to call at anytime, from anywhere.
“Our greatest asset is our people, and anything we can do to make their day-to-day work life better, we want to do,” says Emerson, who, like Gilbert, sends personal birthday and anniversary cards to staff and their families (kids get a fresh $10 bill with their birthday card).
“In essence, our culture is entrepreneurial in that we want people to think, to challenge assumptions, to show us what’s wrong, and to come up with solutions,” Emerson says. “I think a typical corporation has many, many layers where senior leadership lock themselves away in executive areas and don’t intermingle with the folks who do the work every day. Our senior leaders sit with their team out in the middle of everybody.”
When Emerson joined Quicken Loans in 1993, there were 150 team members. Today, the company has 3,000 people working at offices in metro Detroit, Cleveland, San Diego, and Scottsdale, Ariz. Quicken closed $19 billion in home loan volume in 2007 and, while he wouldn’t disclose figures for 2008, a company spokesman says it was “a good year.”
Based on the company’s reputation, attracting talent has never been a problem. “We believe in the law of attraction, and great people attract other great people,” says Emerson, whose colleagues have referred more than 50 percent of new hires.
Some companies, meanwhile, have never stopped growing. As founder, president, and CEO of Strategic Staffing Solutions, a Detroit-based provider of information-technology consulting services, Cynthia Pasky has watched her company go from three employees in 1990 to more than 1,700 workers (in 25 cities, including two in Europe). In turn, the company has had 19 consecutive years of growth and posted revenue of $160 million in 2008.
Pasky has yet to participate in Fortune’s Great Place to Work survey, but locally the company is well-known for its positive corporate culture and active participation supporting charities and the community at large. “We’re very different in that our organization is very flat — without layers — and even without doors in our offices,” she says. “I’m always surprised when some people come here to work from other companies and they don’t realize that everybody here really helps each other, and that we don’t have, nor allow, office politics or back-stabbing.”
Although her employees are expected to take a business call at, say, 9 o’clock on a Sunday night to close a deal, Pasky points out that workers can also attend a weekday school play at 2 o’clock in the afternoon. Because Pasky’s a firm believer that good businesses also actively support their communities, she and her employees aren’t afraid to plug themselves into various charities. “Besides being very rewarding, I think it’s also a good opportunity for people to grow, maintain perspective, and remain grounded,” she says. “I can’t prove it, but I … think that our culture has played an important role in our success.”
Foreign companies that have a significant presence in metro Detroit see the benefits of promoting a strong corporate culture, as well. A division of Daimler AG, Daimler Financial Services Americas, in Farmington Hills, continues to improve its corporate culture despite the serious economic challenges within the auto industry and the ramifications of its parting with Chrysler LLC.
For the last five years, the company has been conducting internal employee-satisfaction surveys while working with the Great Place to Work Institute. As a result, each year the percentage of employee satisfaction has increased. (Eighty-four percent of Daimler Financial’s employees recently called it a “great place to work.”)
Under the direction of president and CEO Klaus Entenmann, the company has adopted a number of initiatives to bolster communication, morale, trust, loyalty, and innovation, including a periodic newsletter that can make light of some workers’ unusual work habits or hobbies. “The newsletter is all in good fun, it gets the message across, and no one is spared from being covered, including Klaus,” says communications director James Ryan. “That’s what makes it work.”
What’s more, every employee is offered a flexible paid vacation, alternative work time policies, and an annual incentive bonus plan, all within the confines of a cutting-edge office design with glass interior walls that help make top executives more visible. There’s also a rotating art-display program, in partnership with the Cranbrook Academy of Art; numerous coffee bars; and a cafeteria that includes foosball, ping-pong, and high-definition TV. The company also works closely with nonprofit group Beyond Basics, which links certified tutors with Detroit Public Schools students to improve reading and math comprehension.
Other organizations are conferring with companies known for being great places to work in an attempt to discover the secrets of their success. Plante & Moran’s Hermann says he’ll never forget perhaps the best compliment of his firm’s culture.
“A representative from a large public company asked to meet to see what we were doing, but when we met in our conference room he said, ‘I’m not sure we need to meet.’ He said, ‘When I got here, the only assigned parking was for handicapped, visitors, and expectant moms. When I walked to the door, someone opened it for me and [asked] how [I was] doing. When I came in, people were smiling and asked if they could help.’
“He said, ‘I can already see the difference between our places.’ To me, that says it all.”
Perhaps within today’s complex and challenging world of business, the secret to success is simpler than we thought.
SIDEBAR: Q & A with Daimler Financial Services Americas President and CEO Klaus Entenmann
DB: I understand that at a senior leadership meeting six months after assuming your position in December 2004, you outlined high-performance goals for the areas of profits, operating ratio, customer satisfaction, dealer satisfaction and as a great place to work. Why is the last goal so important to you?
KE: If you want to achieve those first four performance goals, you can only do it if your people love to come to work. If they are unable to come to work with a smile on their face, it will be difficult to handle a customer in a good way. But if you handle the customers well, and have operational excellence, in the end you will have profits, that’s an easy calculation. But first you have to create a workforce that is willing to go the extra mile and to do that you must first create trust with your leaders and people. You want them to be passionate and enthusiastic about the company, the job they are doing, and in the end, they need to say, I love to come to work. You can pay a lot of money, but at a certain point, it is just money. You need to create other factors such as having pride in the company.
DB: In what ways can you create pride in a company?
KE: One example is by being a socially responsible company and supporting the community as we do.
DB: How important is it for senior leadership to set an example of the culture you are trying to create?
KE: You can only influence a company and the employees if you as the boss are willing to go first. If you are talking about cost savings, as a leader you have to make sure you are doing the same things, otherwise you will lose credibility. With challenges, you need to “be with your troops” as Lincoln would say. You have to walk the talk.
DB: Why do you suppose many companies don’t have your corporate value of striving to be a great place to work?
KE: The traditional approach is perhaps easier. But will it get you great company results? I don’t think so.
DB: Given the difficult economic conditions, do you believe that you are in a more advantageous position given your corporate culture and values?
KE: I am convinced we are better positioned to work through the financial crisis because our people are aligned with our core values and targets and because we have open communication and trust.