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Giving Employees a Stake

People who have a stake in the outcome tend to be more engaged and productive at work. They’re also happier. I’m sure there’s research out there to back me up on this belief, but I can tell you from personal experience that it’s definitely true.

At Intertech, we have long offered such benefits as equity participation to all employees, bonuses tied to performance, paid overtime and annual dividend payments on equity shares (even though we are a privately held company). These benefits allow all of our employees to share in the rewards when we do well. It also creates a culture where everyone – has a stake in our success or failure. (For me and the rest of the leadership team, we take significant hits to our personal compensation if Intertech isn’t hitting targets.)

Beyond compensating people competitively and making sure they have a stake in our success, I believe it’s also important to create a culture that values the contribution of everyone. That’s not just lip service. We invest in a process to make sure all of our employees have a chance to speak their minds. It’s called our annual town hall and it is held without the presence of any senior managers present to encourage candor.

The feedback from this half-day session, which costs us about $15,000 to host each year since billable employees are “idle” for those hours — is formally presented to the senior leadership team as part of our annual company planning retreat. Many ideas from employees have been incorporated over the years. When we can’t use employee recommendations, we make a point of letting them know why not.

Creating a work environment that values the contributions of every employee also can mean deflating the egos of senior management. After years of toiling in the spare bedroom of my first apartment and then moving to a serviceable retail strip mall location as we built this company, we have finally moved to a first class building of our own. As the plans were worked out for our fine new space, we had to make choices about those two coveted “corner offices.” It wasn’t tough to decide that the people handling our finances and hiring should have them because of their need for confidentiality and filing space.

You’ve probably guessed by now that even though I’m the founder and CEO, I won’t be putting my feet up on a desk in a swanky corner office. That’s ok by me! I know that my people appreciate working in a company that makes decisions based on fairness and logic, not ego.

Next Post: What the research shows.

Don’t Worry. Be Happy.

The Gallup-Healthways Well-Being Index, which has been polling more than 1,000 adults every day since January 2008, shows that Americans now feel worse about their jobs – and work environments – than ever before. People of all ages, and across all income levels, are unhappy with their supervisors, apathetic about their organizations and detached from what they do.

Could it be that companies have forgotten about the importance of keeping employees engaged and productive at work? While the tough economy may be distracting managers, those that have invested in employee engagement are most likely to retain star performers even as the economy continues to improve and employees start exploring their career options.

Still not convinced that employee happiness should matter, particularly during challenging recessionary times? Consider the results of a 2010 study by James K. Harter that found that lower job satisfaction foreshadowed poorer bottom-line performance. And Gallup estimates that a staggering $300 billion is lost annually due to “employee disengagement.”

In my next several posts I will share some of the current research on the topic of employee happiness and its impact on business culture, productivity and profit. I’ll also share some of the strategies we employ at Intertech, which contribute to our high level of employee satisfaction, employee retention and increasing profitability.

Happy reading!

Who can help with your transition?

When vetting vendors, make sure to heed the lessons of the dot-com boom and bust. During the 1990s, IT vendors sprouted up out of nowhere. Often these so-called vendors were inexperienced at best and charlatans at worst. I’m afraid the cloud might herald another era of fly-by-night opportunists hoping to cash in fast on a hot opportunity. Don’t be their victim! Always take time to identify a group with a proven track record. At the end of the day, you want a trusted partner with expertise. (I would be remiss, of course, if I didn’t take this opportunity to mention that Intertech was hired by Microsoft to write Microsoft’s Azure courseware!)

MIT’s McAfee also has this advice:

“Talk with your core enterprise software vendors to understand their plans for the cloud. Many, if not most, of their offerings are currently available only on-premise. When are they going to release cloud versions of their applications? How are they going to help current customers migrate to them? As you take steps into the cloud, you’ll very likely be working with your company’s IT department and CIO. Their attitude toward to cloud computing will be critical and highly revealing. In my view, a CIO’s lack of enthusiasm about the cloud these days is about as red a flag as a factory manager’s disinterest in electrification would have been a century ago.”

McAfee also suggests that companies start running experiments with software-as-a-service and that they do their next development project in the cloud. He notes that the cloud “contains powerful software resources that developers can plug into. Google Maps and Chart Tools, for example, can be easily integrated with a company’s data to produce a wide range of visualizations.”

The bottom line, as stated by Andrew McAfee: “Over time, more and more of the business world’s software is going to live in the cloud. You probably want to be part of this trend sooner rather than later.”

I couldn’t have said it better myself!

What are the drawbacks of the cloud?

Here are some honest, straight forward limitations to cloud-based apps:

Space: While cloud computing is not totally new; it’s new enough that there are limitations. For example, Windows SQL Azure (the cloud-based storage option for Azure-based apps) has a limited database size. There are recommended techniques to get around the limitation, but it involves more work by programmers (i.e., time and money) to get a larger application up and running. That’s why we advise customer sticking with your existing server or data center if your goal is simply to add new features to an existing application.

Legacy Spaghetti: I’m not going to mislead you: moving an enterprise’s legacy IT to the cloud can be difficult. As Andrew McAfee at MIT has written, “it forces tough decisions about consolidation and standardization. Most organizations that have been around for awhile have a hodge podge of hardware, operating systems, and applications, often described as ‘legacy spaghetti.’ It can’t simply be transferred to the cloud but first must be untangled and simplified.”

Conversely, it’s the perfect time to move to the cloud if you need to completely rewrite an application or develop a totally new one. Ditto when hardware is getting old. While it’s true that connecting cloud-based applications back to legacy databases or other information inside a company’s walls is doable, but it requires extra steps/work. In many cases, it’s often more cost-effective to move to the cloud instead of investing in expensive new hardware for your data center, which leads me to:

Cost: Another concern about moving to the cloud can be the cost. There have been conflicting calculations from such respected organizations as McKinsey and Microsoft on the costs of putting an organization’s entire data center in the cloud. However, MIT’s McAfee believes the focus on cost is misguided for two reasons:

(1) Most companies don’t spend massive amounts on technology, so even substantial changes in the IT budget won’t make a large difference on the income statement (Gartner estimates that for S&P 500 companies, all IT-related costs amounted to just 3.2 percent of revenue, on average, in 2009.) and,

(2) Over time, the economics of building and running a technology infrastructure will favor the cloud.

On point number two, McAfee reasons that economies of scale can be realized by cloud providers in the areas of hardware, bandwidth and power. He also writes that, “because they buy gear all the time, they can take continual advantage of the computing cost declines predicted by Moore’s Law,” citing Amazon Web Services and its dozens of price reductions in the past three years, “even though it does not face intense competitive pressure.”

Security: I’ll share McAfee’s response to security questions, which I find to be completely compelling:

“The security of the cloud is frequently questioned. It’s true that transmissions can be intercepted; firewalls can be breached; viruses, worms and other forms of malware can invade. Perhaps most unsettling, the people responsible for digital infrastructure can steal secrets or get sloppy and let thieves in. However, this is true for every computer network, including the ones that companies run themselves. . . .The only way to have 100 percent computer security is have zero computers. The next best approach is to constantly monitor the threat landscape: buy or build the best technologies to protect devices, networks and transmissions; and hire and retain top digital security specialists. Cloud computing vendors are better able to do this than all but the very largest and most security-conscious organizations.”

Bottom line: there are definite pros and cons related to cloud computing. My next (and final post on this topic) will look at who can help with cloud computing questions and transitions.

What are the possible benefits of cloud computing?

Organizations should approach the cloud prudently, like the adoption of any new technology: investigate the pros and cons and then proceed only if/when it makes financial sense. That said, there is a lot of confusion about cloud computing. A good rule of thumb is that the best cloud-based applications are those with dramatic usage spikes.

Why? The cloud is perfect when you don’t want to waste a lot of space on your own server with data your organization only occasionally uses. Think of tax-related operations, from private tax preparation companies to government-related services such as business registrations. Most of the year, the applications needed to power these operations lie dormant – until the annual activity blizzard begins!

In these situations, servers go from no or very little use for about nine months of the year to very heavy use for three months of the year. Using the cloud to run seasonal applications and data storage takes the annual burden off a company’s or governmental agency’s in-house data centers. It also allows IT staff to continue focusing on bigger, strategic goals instead of trouble-shooting during the annual data stampede. The obvious exception to this rule is for small organizations, such as Intertech, which use off-the-shelf software like email (Exchange), CRM (Microsoft CRM), or online collaboration (e.g. Microsoft SharePoint) on an everyday basis. For these organizations, a year-round hosted solution makes a lot of sense versus buying and maintaining a server.

Big, international organizations can benefit from using cloud-based solutions that are hosted in or near the countries where they have operations. For example, if a global firm wants people in Russia to use its application (either employees or customers), the cloud-based solution could be hosted in or near Russia because proximity to the cloud-based server makes the application faster to access and use. In a similar way, if you have data intensive applications like video, they can be served using a Content Delivery Network (CDN) to improve performance.

One expert believes the cloud represents an ideal solution for organizations whose IT departments are “stretched thin with maintenance activities, leaving precious little bandwidth for development and new initiatives.” MIT’s Andrew McAfee argues that “the cloud offers a way for companies to pursue opportunities nimbly, and, in many cases, cost effectively.” He goes on to suggest that, “many unanticipated cloud benefits arise after a project is launched and employees discover novel ways to use the technology.”

Among these unanticipated benefits catalogued by McAfee: making individuals more productive, facilitating collaboration, mining insights from data, and developing and hosting new applications. His article, “What Every CEO Needs to Know about the Cloud,” in the November issue of Harvard Business Review gives an excellent overview of these benefits, replete with real-world examples of how companies are realizing them today including Netflix, Zynga, eBay and Minnesota’s own 3M.

Next post: what are the potential cloud computing pitfalls?