By Rick Andrade, food industry investment banker at Janas Associates
As of mid-year 2019, the U.S. unemployment rate is at a record low of 3.7%, the lowest in 50 years. And the food industry, which employs more than 20 million workers, is struggling to keep them. While a tight labor market is great news for job seekers, it is tough finding and keeping food workers happy these days. To make matters worse, as wages rise, employees are increasingly tempted to jump ship to a competitor. But a higher wage isn’t always the number one reason staffers make the switch. Often the jump will stem from culture clashes and, more notoriously, a company’s management team’s failure to properly recognize the delicate balance between an employee’s perception of their individual contributions to the company and their weaknesses as perceived by their managers.
According to researchers, when an employee’s performance is out of step with their employer’s expectations, the misalignment at some point compels a change. Either the employee improves or is asked to find another job. And it doesn’t take much to create a ticking time bomb either. For example, in many cases, a quick review of a company’s mismatches can be found on the website GlassDoor.com, where former employees can rate their former employers and voice their experiences, good and bad, and their reasons for switching jobs. A common negative refrain emerges, wherein former staffers argue their case for why they were not appreciated as expected and why they were not promoted. “It’s management’s fault,” they say. True or false, in today’s labor market, business leaders can’t afford to second guess even the slightest of potential HR issues. Rather, they should be looking closely at how to prevent turnover and unhappy staffers and drilling down to the root causes of the problem.
Not surprisingly perhaps, the number one gripe in my experience over the last 10 years in the food industry from former employees is not low wages. It’s getting proper feedback. It sounds easy enough, but according to recent studies, trying to implement a robust and effective employee feedback system into an effective “employee engagement” program takes trial and error to perfect. Each company and culture is unique, and a one-size system does not fit all. Still, if your employee engagement program needs a tune-up, here’s the latest on what works and what doesn’t.
The problem with negative feedback
In early August 1943, General George S. Patton, commander of the U.S. Army forces in Sicily, visited the 93rd Evacuation Hospital tent to check on his wounded soldiers. The fighting was tough and the injuries severe. There, he encountered Private Paul Bennet, age 21, shaking nervously. “It’s my nerves,” he told the general when asked. At that moment, history recorded perhaps the most notorious example of negative employee feedback. Sickened by his sense of cowardly injustice, Patton slapped the young private across his neck with his glove and screamed at him, “Your nerves, hell. You are just a Goddamned coward, you yellow son of a bitch.” And with that, the boy sobbed as doctors and nurses looked upon the scene in horror. Needless to say, this example of feedback was not an effective approach, and Patton was later severely reprimanded by Gen. Eisenhower and forced to make a public apology for his actions.
I cite this infamous example as the extreme case for using “negative feedback” to improve a subordinate’s performance because it’s easy to see why the approach does more damage than good. Today, with the exception of military-style training, negative feedback is the least attractive way to improve performance.
The positive approach
In a recent Harvard study, researchers Francesca Gino and Bradley Staats concluded that company culture also takes a hit from negative feedback reviews. Their study asked participants to write a short story, after which they partnered with a researcher who gave them feedback. “People who received negative feedback, we found, were far more likely to seek a new partner for their next task than those who received confirming feedback. People who received criticism from peers looked for new relationships.” It’s a kill-the-messenger response. It turns out that if an employee does not feel their employer values their work overall, negative feedback in any particular area will seem harsh and unjustified, and will cause them to seek other employment at first chance. To stem a negative tide, however, business leaders will have to walk a fine line to get the highest production from their troops.
In May 2019, I wrote an article: Want to Save Your Company? Just Say No – CEOWorld Magazine. In it, I focused on the downside of becoming a “yes-man” organization, wherein managers and staffers never hear “no” for an answer. I argue that a yes-man culture that eliminates critical feedback damages an organization’s ability to take on more risk, the kind that produces new products, new markets, new sources of revenue, and, yes, failure. In my view, corporate culture needs an effective balance of give-and-take to survive in the long run. Researchers, on the other hand, say that we can have it both ways: a softer, gentler, more positive-thinking peer-to-peer company culture that avoids the ill effects of negative feedback and succeeds.
In a Fortune Magazine interview earlier this year, CEO of Mondelez Dirk Van Der Put divulged his formula for the company’s recent success: “I need to take away any barriers so employees can move fast. I need to take away blaming or fear of failure or not accepting being different… then it’s up to the people.”
The reason negative feedback causes such a reaction, researchers argue, is notably because the recipient takes away a negative self-impression from the experience, resulting in a damaging blow to their developmental self-confidence going forward. In the military, this may be overlooked. But in business, the troops tend to quit as a result and look for a new commander with a softer touch. So, how do we fix this?
Linking feedback to culture
Many new hires will quickly recognize how peers get promoted. They will learn if their company has an “HP way” (or not). Coined by the founders of Hewlett Packard back in the 1970s, which was way ahead of its time, the “HP way” was fundamentally focused on a more holistic approach to their employees’ motivation to work, which included children’s scholarships, stock options, and profit-sharing incentives, to name a few. And it worked. But incentives today need to go even deeper and wider into employee engagement to be as effective. Employees need annalmost cult-like emotional buy-in to stay and thrive, and while not all companies are as adaptable, many are learning fast.
Food companies that made the top best places to work recently include Wegmans, Publix, and The Cheesecake Factory, according to Fortune’s top list for Millennials, and In-N-Out Burger on GlassDoor.com’s top list.
According to GlassDoor’s annual 2019 Best Places to Work as rated by employee surveys, linking culture and feedback works best when everyone sees the same goal as reachable and personal. And the results speak for themselves. Top employee engagement companies, according to the survey, had four pillars of success in common:
- A mission to believe in: A motivating mission that inspires quality work. Employees have a sense of purpose and understand the impact they make.
- A strong culture: A clearly defined and shared set of values that fosters community. Engaged leaders see positive culture as part of a good business strategy.
- People-focused: Employees are engaged and empowered to do their best work. Emphasis on employee growth and development.
- Transparency: Open and clear communication, from the top down. Honest feedback is valued and encouraged.
Look familiar? Still, the food business has a long way to go. A look at LinkedIn’s 2018 Best Places to Work shows only two of 50 that made the list, Starbucks and PepsiCo.
Developing an effective employee engagement program
In June 2019 at their annual HR conference, the Society for Human Resource Management (SHRM), the world’s largest HR membership organization, showcased a workshop by Brad Karsh, wherein he advocated for companies to create a culture of continuous feedback on an ongoing basis.
Normally, most companies provide for an annual performance review looking back over the year and measuring performance against targets achieved or missed. The trouble here, as Karsh points out, is the changing composition of a younger workforce, and, in particular, meeting the expectations of the 80 million-strong Millennial generation looking for a faster, more personalized way to gauge and engage their individual performance. And the best and fastest tool to get you there, especially if you’re starting over or need a serious makeover of your existing employee engagement program, is new software.
Among the list of leaders in the growing “employee engagement” arena is OfficeVibe.com. With the help of Deloitte Consulting, OfficeVibe developed a program that provides input from regular employee surveys, and then groups their responses into performance scores. This is essentially a modern digital version of a 360-degree review, whereby all worker performance is evaluated by other workers and management. Performance scores are developed and linked to agreed-upon targets, such as an increase in the number of happy customer comments or a reduction in the number of unit production errors, etc. This approach is like having a live GlassDoor or Twitter comments exchange for employees to reach out and help each other succeed and to vent anonymously about anything that bothers them, from boring meetings to helpful tips on improving a new production line. Managers can then anticipate a problem or shortfall beforehand, which is not a common benefit found in the old-school annual review feedback method.
If there’s one thing most common in business, it is that nothing stays the same for long. And that includes the nature and nurture of your workforce. What’s clear today is that, while nobody likes to hear bad news, most younger workers are not comfortable with negative review feedback that is not couched in a positive way that values and warmly appreciates each worker’s positive overall contribution to the mission of the company. Annual reviews that include negative feedback remarks are rapidly falling away as Millennials prefer affirmative guidance more from employers today. The consequences of failing to adapt to this culture shift are a higher employee turnover rate and a potential loss of key talent, which is harder to replace in a tight labor market.
So, if you find yourself somewhere behind the curve on creating a modern feedback and positive employee engagement work culture, I suggest you take a minute and ask your HR executive for a best practice review, and then act quickly. Giving no action on an old-school annual review feedback program that still includes negative feedback comments as the “stick” with no “carrot” component is a company killer. In other words, as Ric Alvarez, CEO of Richelieu Foods, puts it, “If you don’t have anything nice to say, keep it to yourself.”
Rick Andrade is a food industry investment banker at Janas Associates in Pasadena, where he helps food CEOs buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at www.RickAndrade.com on issues important to middle-market business owners. He can be reached at RJA@JanasCorp.com. Please note this article is for informational purposes only and should not be considered in any way an offer to buy or sell a security. Securities are offered through JCC Advisors, Member FINRA/SIPC.