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Are You A Level 5 Company?

In his famous Hierarchy of Needs, American psychologist Abraham Maslow argued that people must meet their basic physiological requirements and needs for safety, love, and esteem before they can reach a fifth level he called "self-actualization." As an entrepreneur who helped start what has become the world’s largest co-ed fitness chain, I’ve come to believe that a similar Hierarchy of Needs exists for small to midsize companies. To survive and thrive, it’s critical that you find which level you sit at today, then work to reach a form of corporate self-actualization that benefits employers, employees, and even society at large. Here’s where the path begins…

Level 1: The Standard Pay and Benefits Company
The most common relationship between employers and employees is a simple transaction of money for effort. The employer basically rents the employee’s brain or body as if it were a machine. It's a fair (if passionless) exchange. But it’s no surprise that when employees complete their shifts at a Level 1 company, they seldom think about work again until they punch the clock the next day.

We’ve all worked these jobs. Hopefully as employers, we offer something better.

Level 2: The Enhanced Benefits Company
In this relationship, the employer provides better than average pay and additional benefits beyond health insurance, vacation time, and retirement plans. Maybe it’s a worksite campus that offers an internal fitness center, dry cleaner, day care, coffee shop, or employee cafeteria. Or it’s a company that provides flexibility in working remotely to accommodate raising children or avoiding painful commutes. Level 2 employers may also allot time for employees to work on inspirational personal projects in hopes that the resulting ingenious service or idea will ultimately benefit the company.

It’s a good deal, especially in a stubborn economy. But it still only meets Level 2 needs.

Level 3: The Purpose-based Company
More and more companies have come to understand and embrace what I call the economics of passion. If employees are fueled by a feeling of purpose beyond simply earning a paycheck, then that passion will translate into greater creativity, inspiring them to work harder, longer, and with more energy. This is why so many employers spend more time communicating the "why" behind their companies—and why they actively seek to share inspirational stories about how their employees are changing the world. If the effort is sincere and effective, employees respond with a greater sense of gratification, which in turn fuels fewer turnovers and improves the company’s ability to attract better talent.

This is Level 3. And unfortunately, too many companies are content to stop here.

Level 4: The Reinvestment Company
Level 4 companies move beyond purpose by actively reinvesting in their people. Notice that I didn’t say "employees" because at this level, employers see people first, employees second. They reinvest their resources to improve people physically, mentally, emotionally, and spiritually. In addition to offering resources directly related to an individual’s job, they may also provide classes on gardening, personal finance, cooking, or relationship building, or provide experts on various hobbies so their people can be better outside of work. Anytime Fitness has sponsored many such activities. For example:

  • We paid for a personal finance expert to help our people create financial roadmaps that ultimately lead to wiser choices and less stress at home and work.
  • We hired a coupon expert to give a presentation that helps people save hundreds of dollars a month when shopping for groceries.
  • We paid for a behavior-change expert to consult with each employee on both business and personal issues to help him or her be a better spouse, parent, and human being.
  • We provide time each day for employees to take part in physical fitness activities like yoga or boot camps to improve their fitness, as well as team events, which create bonds that can really pay off when a business project goes sideways.

These kinds of techniques are a dramatic evolution from the Level 1 company, where an employer simply says, "I pay you, and you make the company better during this time period." A Level 4 company says, "I do expect you to improve this company. But in turn, I want to make you better as well." This influences the entire workforce by creating a culture of personal growth. If employees learn new activities and challenge themselves, the feeling carries over into learning new activities and challenging themselves at work.

Perhaps our most dramatic Level 4 success story involves an Anytime Fitness leader who suffered from two fears most people can identify with: heights and public speaking. Thanks to a little company-sponsored "push," she recently did the unthinkable and jumped out of an airplane at 13,000 feet in the air. Getting over that hump bred newfound confidence, and now she’s a strong public speaker who also tackles speaking for company activities. Who knows where else that courage may pay off in her personal life?

Level 5: The Enlightened Company
Once a company has worked through these four initial levels, it can finally reach Level 5 and become an Enlightened Company. What marks this important transition? An intense and magical chemistry that blurs the lines between home and work. In a Level 5 company, two employees with equal rank will work together better without needing a higher-ranking executive to mediate or resolve conflict. More significant, you'll actually hear the term love—as in "I love my job," "I love the people I work with," or "I love this company and what we do."

In this relationship, the employer isn't renting a brain or body—and it’s even going beyond purpose and reinvestment. Employees think about work during personal time, not because of extreme pressure or unreasonable demands, but from a genuine satisfaction in performing purposeful work. Internal silos are flattened. Teamwork fosters trust, communication, problem solving, and innovation. Employees give not just their time and expertise, but their very heart and soul. In this company, it's about the music, not the musician. (Which reminds me of how U2 singer Bono responded when asked why he has never released a solo album. To paraphrase a man who has never been accused of a lack of ego, he said, "I know I’m better with the band.")

Has Anytime Fitness reached Level 5? We’re certainly on the journey. And as a CEO, I can strongly attest that the benefits we’ve seen to date far outweigh the obvious costs. Normal intracompany friction points are minimized through a culture of learning, trust, and teamwork. When we have to pick one department’s priority over another, the "losing" department doesn’t try to sandbag their colleagues to win the budget next time; they rally around the project because it's the best for the company.

This is a far cry from the cut-throat management practices sometimes found in Fortune 500 companies. "Stack ranking," for example, requires the head of each business unit to rank employee as "top," "good," "average," "below average," or "poor" performers. Such Darwinian, bell curve-influenced tactics only pervert incentives, inspiring a self-preservation insecurity that actually motivates people to avoid working with brilliant colleagues who could raise their IQ, because they’ll also push down their rank. (Stack ranking is pure genius—if your goal is to stifle innovation and increase turnover.)

Becoming a Level 5 company isn't easy. It takes work, a committed leadership and an investment in resources that won't always seem relevant or provide a direct ROI on a company’s balance sheet. It’s certainly fair for a CEO to ask, "How will offering a gardening class make my company better at selling and producing widgets?" But the truth is, it doesn't matter what your company does. If you have employees, you’re in the "people business." And if you see your employees first as mothers, fathers, brothers, sisters, sons, daughters, and citizens, it's an easy decision to invest in more than their paycheck.

—Author Chuck Runyon (@chuckrunyon) co-founded Anytime Fitness in 2002 and is now CEO of the world’s largest co-ed fitness chain, with over 1 million members in nearly 2,000 clubs on four continents. Anytime Fitness was voted the best place to work in Minnesota by [i]Minnesota Business magazine in 2012.[/i]

[Image: Flickr user Grant Hutchinson]

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  • limelite

    My point is really that to make a good culture rub off on customers in a way that actually sustains good results is not a magic effect of just taking care of employees. It requires as much effort, structure, intelligence and perseverance as does the running of a level 4 or 5 organisation. For science on this, check out Marcus Buckingham and other writers who have worked Gallup databases of standardised employee surveys, customer surveys and related business results. Good and inspiring statistics that point at the most important factors. Surprisingly, the best correlation seems to be with this simple assertion "I have a best friend at work who I know is looking out for me" -- it does not have to be a manager, it seems.

  • coachingleaders

    To me Level 4 as described just looks like Level 2 taken a bit further - and I'm not seeing how it's above or beyond the purpose Level 3. You could easily imagine companies with no purpose beyond making a profit doing some of the Level 4 stuff - I suspect some cash-rich organisations like retail banks, which certainly didn't have a sense of purpose, did some of this in the 80s.

  • limelite

    Are customers not people ? I am amazed how often would-be-gurus oversee this simple ingredient in running a succesful business. If you can do so many great things to your "people" in terms of motivation and retention and growth, why not extend that to your customers ? It is not a given that "people" will pass on the joy to the customers. In some companies they react to all the HR antics by thinking they must be the most important people in the World and THAT is felt by customers.

  • David Bradley

    completely disagree with you on this one. Happy employees breeds happy customers every time. Someone with an overinflated ego who thinks they are "the most important person in the world" isn't happy. It's a mask of happiness shrouding deep seeded insecurities that manifest in the anti-thesis of what this author is trying to say.

    I challenge you to find one company with extremely happy employees and a bunch of angry customers running around. Good luck!

  • Ryan Luthi

    Stephen, so quick to criticize…, where’s your blog?  I would love to read some of your thoughts,
    they must be genius. 

    The DNA of a
    company cannot be forced on people through textbook policies, nor do a majority
    of people effectively learn that way. 
    Thus the need for constant metaphors in any management or leadership
    role.  As you would probably agree, there
    are very few original ideas at this point in society with information so easily

    There is a good analogy out
    there, good writers write, great writers steal. 
    Who cares if Chuck modified an old, antiquated model that is incredibly
    dry and boring.  The success of Anytime
    Fitness has been through a huge team effort, not one person or idea.  That success is living proof that his ability
    to transfer his vision and bring others to the same cause, likely through the
    use of constant metaphors, was a large part of the reason why they have made it
    this far.  In fact, isn’t that what every
    great leader does, take huge ideas and simplify them down using stories and metaphors
    to share the larger vision?  Have a great
    Labor Day weekend; I hope your boss gave you the day off. 

  • Stephen Stanley

    Oh, wow.  You've reframed CMMI.  What a contribution to management science.  Actually it is a pretty good metaphor for the organizational maturity levels CMMI or ISO describe but let's be clear:  It is a metaphor.  You've merely replaced processes with people.