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Managing the healthy association.

In celebration of the ASAE Foundation's 30th anniversary, ASSOCIATION MANAGEMENT features this special interview with Robert Rosen, author of The Healthy Company.

Robert Rosen contends that an organization must invest in its people, or the organization--and its bottom line--may suffer. The clinical psychologist says so from the vantage point of someone who has dedicated years to studying how companies "manage and mismanage 'human capital.'" Along the way he has observed companies like Federal Express, Merck, and Herman Miller ("companies that are managing their human capital differently"), and he has written a book, The Healthy Company, that, in part, describes a distinguishing quality Rosen has observed in entrepreneurs who have successfully expanded their businesses. "They had a deeper understanding of themselves, their human enterprises, their customers, and their employees," explains Rosen. "They were able to tap the talents and aspirations and needs of employees and customers."

Rosen's interest in and research into organizational health began in the department of psychiatry at George Washington University, Washington, D.C., and he continued his work for eight years with the Washington Business Group. Since 1991, he has been president of Washington, D.C.-based Healthy Companies, which evolved from a three-year, MacArthur Foundation-backed study of the relationship between employees and employers.

The research, conducted by a team of academics, consultants, chief executive officers, and union leaders across the United States, identified high levels of employee stress and feelings of alienation; costly mismanagement of human capital at a time when the American economy was moving toward a knowledge, service, and information economy requiring "social and intellectual capital"; and more tenuous and more unpredictable relationships between employees and employers.

"The MacArthur Foundation concluded that a new vision of organizational health focusing on the management and development of America's human capital was needed," says Rosen. "And that's what Healthy Companies does--we help to change the way we lead and work by focusing on a values-based strategic system for managing and investing in human capital."

Rosen's ideas are enlightening, and that quality is precisely what attracted the ASAE Foundation Research and Education Committee, which has identified changing workplace trends as one of the key issues facing associations in the coming years. The foundation invited me to visit with Rosen about his research and its implications for association executives.

Crandall: You seem to have integrated the ideas of other writers in the management field, including Tom Peters and Steven Covey, into a new framework. Any comments?

Rosen: A number of people have done very important work over the past 40 or 50 years on the importance of people in the workplace and on the management of human capital. The real challenge now is to integrate all that knowledge into some kind of coherent body of thinking that will help us manage human capital. The total quality management movement is teaching us the importance of the process of work, of the importance of eliminating fear in the workplace, of the importance of quality jobs, and about looking after the customer. The human resource management field is getting us to focus on innovations in managing human capital--from working family programs to investments in education and training to the importance of people and technology. The field of social responsibility teaches us that companies cannot exist independently of their communities and the environment.

We are also learning a lot about what makes employees sick. If you offer jobs that don't provide meaning, that don't provide a sense of purpose, that don't give them information and some control over their work, that don't offer healthy work environments, people don't make commitments to their jobs and to their companies. And ultimately they get sick. We also know what kind of jobs will stimulate and inspire people.

We have developed progressive practices in all aspects of business except human capital. Typically, the personnel function is not linked to the overall strategic direction of the firm. We don't even know how to measure the costs of managing or mismanaging the human capital asset in our organizations. We haven't done a very good job of showing that if we make investments in people, it produces good financial outcomes. So our job at Healthy Companies is to push management of human capital up to the board room so that chief executive officers see that they must manage human capital just as they manage research and development, finance, marketing, and manufacturing.

Crandall: Do you feel that too many of us seize upon one element of management--like TQM--and become blinded in our zealotry? What you seem to be saying is we have to take a holistic approach to managing people--that TQM in itself is not enough.

Rosen: You are hearing me exactly right. One of our big challenges is that we deal with the issue of the year rather than creating a comprehensive, systemic approach to managing human capital. What we've done at Healthy Companies is develop a values-based system, an organizing system for trying to get our arms around the whole array of human capital issues in the workplace. Why? Every organization needs to tap the talents of its entire team, from the secretary all the way up to the CEO. You tap and inspire and involve everyone in the organization by creating opportunities for meaningful work. Realistically, not all jobs are good jobs. But I am convinced that every job can be made meaningful by showing a relationship between that job and the organization as a whole. It's the job of the CEO and managers to make that job meaningful to that worker.

Crandall: Part of the challenge facing managers today is change in the demand for the services we provide. The award-winning newsletter of five years ago isn't good enough today; members want information more quickly. The trade show that was financially successful is now in jeopardy because of alternative purchasing practices. How are we to manage change?

Rosen: The key is continuous learning. Continuous learning means creating a work force of lifelong learners who are constantly upgrading their talents and skills. It also means creating an environment that allows people to learn so that they make mistakes, fall down, learn from their mistakes, and grow. If an organization wants to grow 15 percent every year, then every single person in that organization needs to grow at the same pace. But our investments in education and training are on average half of 1 percent of our total operating budgets. In Japan and Germany, companies often invest 6, 8, or even 12 percent of their operating budgets in training and education. We undereducate our people.

Key concepts

Crandall: What are the primary principles of human capital management?

Rosen: One is fair treatment. I believe that fair treatment is the glue that holds people together in an organization--and in our country. Increasingly, our workplaces are perceived as being unfair. They're seen as unfair because executives are making too much money when we're in a recession. They're seen as unfair because companies are asking employees to make extraordinary commitments to quality at the same time that friends are being let go in insensitive ways. They are seen as unfair when people feel it's not safe to disagree or to question company policies. Healthy companies understand that you need an institutional culture where people feel safe to resolve conflicts and to express dissent--a place where compensation is perceived as equitable and there's some semblance of economic security. Even though a company can't promise a lifetime job, fair companies invest in an employee's learning and education so that if he or she is let go, the employee has tools to take to a new opportunity down the street.

Another focus is diversity. We are an amazingly rich country, yet in many ways we are very ethnocentric. One thing companies will need to do in the future is understand that their workplaces are an amalgam of individuals with different lifestyles, genders, races, and values. And the challenge for an organizational leader is to pull all that rich diversity together around a central purpose, respecting those individual differences. Healthy companies manage diversity in a very positive way.

Crandall: You discount the melting pot concept, saying that it might have been viable in earlier days but that it shouldn't be our model for the 21st century. You celebrate the concept of a fruit salad, where we enjoy the mix of grapes and cherries and melon. But doesn't that complicate development of an institutional identity?

Rosen: We need to balance respect for and celebration of individual differences and at the same time create a company culture. Aligning all of those differences around a single purpose--that's a real challenge.

We are also exploring what we call "people-centered technology." Americans have a fascination with technology, but we often don't realize the need to balance the human side--the people side--with the technological side. Much of our investment in technology doesn't bear fruit as it should, because we don't take people into account. I think the really good companies have done a terrific job of involving their employees in the implementation and application of technology. |For example, Federal Express is~ one of the most sophisticated companies technologically. Its employees have been fully involved in the development and implementation of that technology.

A final area of exploration for us may be the most important of all: balancing the interests of all stakeholders. A business leader needs to manage government and the community, the environment and customers, a board of directors, and employees and their families. Often, those stakeholders have no shared vision.

Really good CEOs are able to establish a balance, getting those stakeholders to work together and understand that separately they may have individual needs, but together they need to collaborate for the benefit of the organization as a whole. The organization suffers any time one stakeholder gets too much attention at the expense of the others. If you spend too much time focusing on customers at the expense of your employees, employee problems will come back to haunt you and eventually will chisel away at customer service. Many American companies have spent far too much time focusing on short-term profits and earnings per share. A recent study at Harvard Business School showed that the most successful companies are those with a strong culture and balance among shareholders, employees, and customers over a long period of time.

Crandall: For associations, one of our key stakeholders is the volunteer, who must be treated differently from an employee. We can't reward volunteers financially, as we can employees. What have you learned in terms of working with volunteers in healthy organizations?

Rosen: A volunteer responds best to the social mission or the societal vision of an association--|when you~ tap an individual's desire to become part of something bigger than him or her and to make a contribution. Articulating that vision very clearly becomes important.

A second important tool is the meaningfulness of the work. One thing that not-for-profits often do is trade off lower |staff~ compensation for more meaningful work. However, that puts increasing responsibility on the organization to be ethical and credible. Certainly the United Way of America controversy made that point loudly and clearly. Not-for-profits have to practice what they preach. Not doing so jeopardizes volunteer relationships by violating the spirit of fairness, by suggesting to volunteers that the organization is taking advantage of them. It's a very, very delicate relationship.

It's also important to give the volunteers a voice in organizational decision making. One key reason people become volunteers is to make contributions in ways they can't in their "real jobs." I've heard from many managers who discover one of their employees who undertakes no initiatives in the office is running a complex organization as a volunteer. This just underscores the talent that goes wasted because we're so focused on telling our people what to do rather than on discovering their real talents.

Opportunities for associations

Crandall: Do you agree, though, that except perhaps in philanthropic organizations, societal causes can be much harder to sell than business issues?

Rosen: I feel that many associations are missing tremendous opportunities to lead their industries. I know it's tough to do, but American businesses are grappling with how to do business in the 21st century. How do we deal with global competition? How do we deal with managing human capital assets? How do we deal with new technology? I think that associations have a real leadership role to play here.

Naturally, I hope association executives will focus on new ideas about human capital resources--promoting and employing new models of leadership that work. And then together we can change the image of those companies from mavericks to leaders. We're using the examples of Levi Strauss, Wal-Mart, Merck, Federal Express, and Herman Miller. They're managing their human capital differently. Association executives have real opportunities to find innovators within their industries and to write about them and to showcase the ways they are utilizing their human capital. I also believe that we need to work across industry lines. The auto industry needs to learn from the hotel industry, and the recreation industry needs to learn from health care organizations, because we are all innovating. Associations can push the envelope for their members with more education, with more vision. I see a few associations doing that well.

The other point is that an association is a company. Whether there are 2 people or 500 people, the issues we've discussed are just as applicable as they are to Ford Motor Company. All organizations are dependent on their social and intellectual capital, their brain power. If you don't cultivate that talent inside your organization, you can't achieve your association's long-term objectives.

Crandall: We also need to consider the application of your concepts to associations of differing sizes. Many ASAE members lead small organizations, with staffs of 10 or fewer, and the human resource function is just one of the responsibilities of someone, often the CEO. It's hard for these people to really spend much time being human resources managers, because they are being pulled concurrently in many different directions. Any ideas for getting started?

Rosen: The first thing to do is recognize that human resource management cannot be delegated. The CEO has to be the chief human resources officer of your organization. And it starts from the inside, by being very clear about who you are as a person: your values, your philosophies about life and about the organization. How do those things translate into a work environment that taps the full potential of your people?

As we interview leaders, we're finding a couple of things. First, healthy leaders are the first to express their real values. They talk about the importance of honesty, and they tell the truth. There's an authenticity about who they are as people. They understand reality--reality about the state of their business, reality about the problems that exist in their organizations. And they are open to listening and learning and talking about reality in an honest and truthful way. I find that it's probably the most important quality that these leaders have.

A second consistent quality is that these leaders have the courage to communicate what they care about. They speak a lot about the importance of learning and renewal, the importance of quality, and the importance of good business practices. I find that good, healthy leaders are enlightened pragmatists. They're the first to recognize tools that don't work, and they're ready to move into the unknown to help move their businesses in a better direction. They know that their real challenge is balanced leadership. They balance the short term with the long term. They balance customers and employees; they balance their staffs and their boards. They understand the competing factions within their memberships or stockholders. They also have a deep understanding of people. When they listen to their employees, they listen for things beyond words. Is a person saying that he or she is having problems at home? Are staff members saying that they don't have enough information to do their jobs or that they want to have more participation?

Healthy leaders are also very flexible and adaptive and responsive. Good, healthy leaders are people who have made a commitment to learning personally. They're able to understand their own mistakes and to learn from them. They're able to listen to people and to get feedback from everyone around them. They're able to create an environment so that the organization is able to learn and adapt and renew itself over time. They manage difficult times well. The great challenges come not when things are going well; the tests come when things aren't going well. Good, healthy leaders recognize that those times are opportunities to pull people together to deal with real life pressures and to take the organization to another stage.

I also find that healthy leaders have a much different understanding of power. Traditionally, we've thought about power in terms of how much status or how much authority we have. But healthy leaders understand that power is not seized but earned by being a credible leader. It's the followers who define whether you are a leader--not you. These new leaders recognize that their power comes from sharing power, and they give people more responsibility and more control. They allow self-management teams, and they let people make decisions at lower and lower levels. They get leveraged in the process because they build strong, thoughtful, initiative-taking and responsible adults around them.

A new model for leaders

Crandall: Can we train association executives who aren't employing the practices you suggest to be organizational leaders in the Healthy Companies style?

Rosen: We've been taking leaders through a one- or two-day healthy leadership seminar, focusing upon these important internal, psychological issues. We're hopeful. However, not all leaders learn by looking inside themselves and discovering new insights. A whole group of leaders will not change until and unless we demonstrate that it's good business. So we're forming a network of leading Fortune 500 companies that are measuring the results of better human resource management. How do we account for human capital? We have typically measured people as costs. When costs get too high in the short term, we get rid of people. We stop investing in training and education. We need to look at people as assets that can and should appreciate in value over time. Typically, when an employee leaves an organization, it costs between 1 1/2 and 2 times the cost of his or her salary for a replacement--not to mention all the corporate memory that leaves with the person. And there is a cost to its reputation when an organization lets someone go inappropriately or in an untimely way.

Other leaders learn by observing other organizations. And associations have some good models. Finally, some people don't learn until they get scared, when they're going under or at least facing very difficult times. Ford Motor Company is an example of that. With everything going wrong in 1980, Ford took a very different tack from Chrysler or General Motors. Ford invested in its relationship with the United Auto Workers. It now has a very strong relationship with its unions. Ford invested in participative management, and now its factory workers are much more informed and much more involved in the making of cars. Ford began sharing profits with employees, and the results has been increased market share.

As we talk to leaders from all kinds of organizations, we find a continuum with those who "get it" on one end. They have the right values, and they understand deeply the importance of human capital. Then as you travel across the continuum you find managers who focus on these principles most of the time. However, during a difficult period, they are prone to losing their focus and reverting to unproductive techniques: They become dismissive or disrespectful, or they don't empower people, or they don't ask for help. As you move further to the left, you see leaders who talk a good game but whose actions don't support their words. The rhetoric is there, but the day-to-day experiences are not right.

Next are large numbers of people for whom the principles of healthy companies are lying dormant. I blame our models in society. Our heroes have been astronauts, cowboys, and quarterbacks--not the team player, the person who asks for help and who admits mistakes. We really haven't rewarded those with a commitment to being honest, those who talk about the importance of diversity. The tools for healthy leadership are lying dormant inside most people. We need to get people to recognize that their best leadership experiences have come when they have used these values and insights.

Finally, at the end of the continuum are people who just don't get it. They don't have the right values, and they have little interest in learning. I will say that many of these people could still be very important contributors to society.

People ask us to demonstrate that healthy companies perform better in the marketplace. We're going to do our best to try to show that strong investments in human capital pay off at the bottom line. Our research seems to suggest that. But I would recommend that we look at it a bit differently. I think we have to show that healthy companies perform just as well--that companies investing in the human side are not penalized for that investment. I'm afraid that sometimes we set ourselves up by saying that we can demonstrate success in the short term. This is a long-term investment.

Crandall: How can an association start learning to be a healthy company?

Rosen: First, ask the question: Are we a healthy company? Bring the executive team or the entire staff together and ask the question. If there is no conversation and everybody says yes, then you can rest assured that you have a problem. A healthy company talks openly about what it's good at doing and what it's not so good at doing. There's a sense of honesty and reality.

Second, conduct an anonymous survey to get feedback from employees. And then bring people together to talk about the findings. If you do a survey, it's very important that you get back to people and talk about it.

Third, form an employee task force--perhaps just two people--to focus on the top three issues of concern to employees, and get the people in the belly of the organization to come up with new ideas. These ideas then need to get to the decision-making body of the association so that movement can begin. You don't have to create a complete healthy company overnight--just keep the end in focus and keep asking the question of staff: "How are we doing?"

Crandall: "Are we a healthy company?" How can we know the answer to that question?

Rosen: We're working on a sophisticated "map" to help you locate your own organization relative to a healthy company. The clearest measure comes from looking at a company's policies and programs and comparing those with the perceptions of employees. Is there a gap? Companies can have great policies on paper but then ignore them in practice.

Crandall: That brings to mind a story about one of my members. Its early products were movies about animals and the environment; it has grown into a respected multinational company |called the Walt Disney Company~ with a firm commitment to environmental protection. And yet it found itself on the wrong side of environmental regulations several times in the late 1980s, costing the company substantial fines and a public black eye. The actions causing the fines were violations of corporate policies. Some employees just didn't care that pouring paint thinner into an unsafe disposal area violated federal laws and the corporate culture. Although the company suffered for these acts, its response was not to fall back on its policies and blame the employees. It created an ambitious new program called "Environmentality" instead. The company hired a vice president for environmental affairs and instituted a new mandatory training course for every one of its 75,000 employees. Completion brings rewards: T-shirts, mugs, and pins. Disney showed us that it really had a commitment to the environment. On solely economic grounds, it would have been far cheaper to simply pay fines.

Rosen: What a great story. That example shows that in the face of a crisis, Disney's leaders lead. Many companies pretend that the crisis doesn't exist, or they engage in public relations rather than using |the crisis~ as an opportunity to renew their commitment to core values. Americans are terrific at policy development, but we often fail at implementation. I've heard more CEOs tell me, "I stood up and said all the right things. But my people didn't hear it." Communication isn't just speaking words--it's making sure that they're heard. Disney created an institution for communication to make sure that the company's values and vision get into the hearts and hands of every Disney employee.

A cultural balance

Crandall: Some of America's most successful companies are companies with distinct corporate cultures: Disney, Federal Express, Wal-Mart. Each uses spirit and dress to create some uniformity. When you sign on to be a Disney "cast member" you are told how you will dress, wear your hair, and use makeup. Yet there is also respect for the differences among people. So even though the appearances and certain elements of the business practices are by the book, there's a willingness to welcome people who may be brown or yellow or white or red, or who may be old or young, or who may vary in other characteristics. How do you balance in these forces? It seems to me that it's a very difficult thing to know when to emphasize the need to cut one's hair if your customers expect a well-groomed appearance versus letting people be free to show themselves so that they are empowered and excited.

Rosen: Balancing a strong organizational culture involving clear expectations of employee dress and actions with the cultivation of a diverse, sensitive, and empowering environment certainly isn't easy. You start with a clear articulation of the organizational culture and an explanation of why it's important to ask employees to dress and act a certain way--relating it to your customers. But at the same time, the organization trades off things that the employees want. For example, employees may want flexible time because their lives are complicated--they're balancing kids and other jobs and leisure activities. Employees want to be sure that they will be treated as individuals, even if they wear uniforms. When you find the balance point, progress results.

Flexible benefits--benefits designed to meet the changing needs of the work force--is another area. People are willing to share health care costs if they know that benefits are designed in a way that meets their individual needs. Working parents are willing to pay for more costs of health care if they know the company helps out with child care. People are willing to move around to help the company if they're learning and developing and their careers are being enhanced in the process. It's about two adults--the employer and the employee--coming together. They both have needs, and the challenge is how to create a work environment that meets both needs simultaneously. Years ago, companies took care of workers in a paternalistic way. So it's really a new kind of partnership. And I think that's why Disney, Ford, Wal-Mart, and Herman Miller are succeeding--they understand that partnership.

Crandall: You stress the important role of a manager in helping those who work for you to define personal goals realistically. Isn't that hard to do? You point out tensions in the work force as baby boomers confront hard realities--that their ambitions of being a CEO or continually increasing their salary for the rest of their lives may not jibe with reality. What can association executives do to help employees set realistic goals for themselves?

Rosen: We can get started by putting on our CEO strategic planner hat. All organizations need to have good short-term and long-term plans. The next step is to ask what the human capital needs are for that strategic plan. Develop a human capital strategic plan at the top of your organization and for each department. Have each department define goals in the next six months, the next year, the next three years, and then forecast the people resources needed. As you move down the organization, the last level is the individual level, involving a manager and his or her employee. The manager needs to have a conversation with that employee about both organizational and individual goals--and compare and contrast those goals.

A competitive position

Crandall: Your book has little positive to say about competitiveness in the work environment. Yet America finds itself in a very tough international economy. As we gear up for intense international competitiveness, we're talking about eschewing competitiveness in our offices and factories in favor of more team-based, collegial work styles. Does this make sense?

Rosen: It's one of our great challenges. First of all, individuals are motivated both out of self-interest and out of mutual interest. We need to figure out how to tap both. People like to shine, they like to excel as individuals, and they like to be recognized as good performers. And at the same time, people like to be connected to something bigger than themselves: a team, a company, a country, a cause. But one of the death signs of an organization is competitive one-upmanship, which creates hostility within. At the same time, companies need to compete effectively with each other. I think that we need to be clear about who we're competing with. We don't want to compete with ourselves internally.

Innovations in human capital management are going on in different countries. The Swedes have been quite good in understanding the importance of healthy work and the importance of balancing work and family. The Japanese have been good at understanding the importance of economic security, of building teams, and of understanding the process of work. A recent study of Japanese and American managers found that one distinguishing criteria of the two groups was that the Japanese saw their employees as assets, and the American managers saw their employees as costs. We need to learn from those innovations--not blindly--and carefully incorporate them into the context of American culture.

Derrick Crandall, CAE, is president of the American Recreation Coalition, Washington, D.C. @ @
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Title Annotation:Annual Meeting Issue; interview with Robert Rosen
Publication:Association Management
Article Type:Interview
Date:Aug 1, 1993
Previous Article:Managing democracies.
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