Change Management: What's the Divorce Rate in Your Company?

We live in a promiscuous era, don’t we? America is experiencing a divorce epidemic and the future of the American family is at stake. Is this statement a myth or reality? Turns out it’s a myth. The divorce rate in America has dropped for more than a quarter century and is now one-third lower than it was in 1981.

OK, if that’s the case, then maybe all these stories we hear about employees, customers, and investors being short-term oriented and less loyal are also myths. Actually, while marriage may be making a comeback, sorry to say loyalty in the workplace is become a quaint old notion. The average length of tenure of an American employee has dropped by 6% in the past twenty years (it’s dropped by 17% among men and actually has gone up among women as they have stayed in the workforce longer). In the era of the Internet, customer brand loyalty has plummeted, especially amongst products that are seen as commodities in the marketplace. If employees and customers are defecting, it’s not surprising that investors have decreased their loyalty as the average length of holding a public stock has tumbled from more than six years to approximately one year. Promiscuity (or at least divorce) may be on the decline in homes across America, but the workplace seems to have become a “rent-a-relationship” kind of world.

Fred Reichheld has written a number of books on the value of loyalty in the workplace and he’s proven that building lasting relationships with employees, customers, and investors creates a more sustainable business model for any company. One of his most illuminating studies found that a 5 percent increase in customer retention rates led to increased profits between 25 and 95 percent depending upon the industry. So, if “Loyalty Rules” (as one of Fred’s books is named), why do companies put so little attention on the quality of the relationships that are being created in the workplace?

I’m a bit of an Abraham Maslow junkie and have long marveled at how his “Hierarchy of Needs,” introduced more than fifty years ago, seems to have universal relevance. Most of us are familiar with the idea that we all have base, survival needs like food, water, sleep, and safety and, as we satisfy those needs, we can focus on our social/belonging or esteem needs….in essence, the way we connect with others and see ourselves in the world. For a lucky few, self-actualization is that transformative need at the peak of the pyramid that allows certain people to have continuous peak experiences in their lives. Being a Northern Californian, all this kind of inspirational talk is familiar. What’s ironic is that many business leaders are introduced to (or reacquainted with) Maslow in business school or in corporate universities.

My own reconnection with Dr. Abe occurred when my company was on the verge of bankruptcy. In the post-dot-com, post-9/11 world, being a San Francisco Bay Area boutique hotelier was a struggle and, if I didn’t learn a thing or two about loyalty during that time, I knew I was going to be out of business. Each day during the early part of 2002, when there seemed to be no limit to the depths the Bay Area hotel industry could fall, I would come home from work weary and a little battered and crack open another Maslow book. His theory of human motivation has an awful lot to do with actualizing potential or, as the U.S. Army says “be all you can be” (the phrase came from their internal Task Force Delta team which sort of ripped off Maslow’s quote: “what man can be, he must be”).

I’ve always believed a great leader knows how to tap into potential and actualize it into reality. What Abe Maslow helped me realize is that a great business leader deeply understands the motivations of their employees, customers, and investors. And, from that I started to realize that there was a Hierarchy of Needs pyramid for employees, customers, and investors. But, unfortunately, most companies get so caught up with the base survival needs in these relationships that they lose track of the higher needs of each of these three groups. Business has a natural tendency toward the tangible which impedes many companies from moving to the priceless (to use a MasterCard word) intangible elements at the peak of the employee, customer, or investor pyramids.

I’m thrilled to be blogging for Fast Company about this subject of how creating “peak experiences” can create peak performance for any company. At the very least, I might be able to help reduce your company’s divorce rate with these three important constituencies: employees, customers, and investors. Psychologist John Gottman created a landmark study on marriage and found that successful relationships averaged a 5 to 1 ratio of positive to negative interactions. Other studies in the business world have put this ratio at 3 to 1 with respect to what drives productivity in employees. If your workplace is more focused on giving feedback only when something is going wrong, as opposed to celebrating what’s going right, you may end up with a high divorce rate with your employees (I’m proud to say that at Joie de Vivre, our employee turnover rate is one-fourth the hospitality industry average). These same ratios can also apply to your relationships with your customers, and, miraculously to your investors too (although I know many of you don’t believe a human Hierarchy of Needs may have anything to do with the Return on Investment Robots we call investors).

Maslow posited that studying healthy functioning humans told us more about psychology than studying unhealthy dysfunctional humans (Freud). Similarly, most of us believe that studying best practices in business teaches us more than studying worst practices. I believe there’s a qualitative difference between a human not being sick versus actually feeling healthy or truly alive. Similarly, this idea can be applied to companies. Think of a company that’s not sick but not really alive. Then, imagine a company that’s living up to its potential and is full of a spirit of being alive. If humans aspire to self-actualization, why can’t companies – which are really just a collection of people – aspire to this peak, too? The self-actualized company creates deep relationships with its employees, customers, and investors, and, in so doing, develops a workplace that has a remarkably low divorce rate. The health of any organization is simply the accumulated health of the individual relationships that constitute it. This is true for families and it’s true for companies.

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13 Comments

  • Denise Corcoran

    Chip, you pose great insight and a great question about the lack of loyalty and "why do companies put so little attention on the quality of the relationships that are being created in the workplace?" In my experience, I have found that the external mirrors back the internal. With regard to your question about companies not putting more attention on quality of relationships, I strongly believe to do so requires top leaders to have a strong relationship with themselves. And few leaders have strong self-awareness, that kind of strong relationship with themselves. You can't respect, value or appreciate another, if you don't respect, value or appreciate yourself.

    I also find that many executives get caught in what I call double bind thinking -- ie., "either/or" thinking, rather than "both" thinking. In the line of work I do, we call that "values conflicts." It's their internal psychology that trips them up. They get trapped into thinking either they can have strong performance/output or strong relationships within their organization but not both. I remember coaching an executive a few years ago who believed that if he was more empathetic and appreciative, he would not get the same level of performance from his team. There are many ways to shift those "either/or" paradigms. One of those being more visibility of leaders and companies (like Chip's) that are doing "both."

    I also found interesting comments made by others regarding tapping into employees' potential. I often use NLP tools in my work and one of the models I use provides a framework in how to move individuals from guide/teacher/coaching roles to mentoring/sponsoring/awakener roles. In my experience, most execs are still operating in the teacher/guide/coach roles because more emphasis is placed on their managerial capabilities. "Potential" by definition means something is latent or dormant. Which means, if a leader truly wants to maximize the potential of their team, they must start seeing their roles as "awakeners." not managers. Every individual has the resources within them to succeed. The only thing stopping them is part of them is still "asleep" as to what they are capable of. All true visionary leaders are awakeners, holding the space of what a person can be rather only see them for who they are now.

  • Arthur Burns

    I am a decorator in window treatments,a one man shop. I agree with your insight. I knew from instinct,that the get go was treating the customer as my employer and how to reap the awards of that relationship. My clients/customers were not only loyal but beat the tom toms for me with others and,sent me referrals' I would say to colleagues do I make it look to easy !!
    Art

  • Tom Gourley

    Thank you for your insight. Peter Drucker spoke of this when he said "Management is about human beings. Its task is to make people capable of joint performance, to make their strengths effective and their weakness irrelevant." There is an organization development philosophy/practice called Appreciative Inquiry, that involves the art of crafting and asking unconditionally positive questions that elicit affirmative possibilities. It builds relationships and builds on the positive core.

  • Evan Blanco

    Great article on how you created internal loyalty to generate external loyality at Joie de Vivre. Your staff retention rate is really admirable as well as the focus on celebrating the good things.

  • Abiol

    Hi,
    Great write up. I read a lot of business magz but this article is so on point, it gave me chills! Business leaders/managers simply need to treat their employees like great companies treat their business: "we care about what you care about, here is why (low prices, green products, etc.)" and employees like customers will stay loyal.

  • Carlos Hernandez

    Mr. Conley's viewpoints are inspiring! It reflects the type of leadership that is centric to our society's well-being. Thank you!

  • Suzanne JA

    As a Project Manager transitioning knowledge accross physical borders and cultures I support Chip's basic premise of Maslow's theories being as relevant today as yesteray accross all the places I have worked (virtually and physically). However, I note that the pyramid theory is the reason that the retention rate is falling in US based companies. Are the persons leaving because they want to, or because their work was transitioned? Are the companies tehmselves not as guilty of not being loyal to their employees by transitioning their labour to persons who are lower down on the pyramid - givng non-US workers an opportunity to rise?

  • D DANGLER

    Chip- great insights. I am one that naturally see's the potential in many, but that has had it's downfalls, as the investment ended up being far greater then the benefits. As I get older, my wisdom increases helping me to walk that yin-yang line bet. investing in potential or cutting bait. Unfortunately, today's organizations have swung to only looking for immediate benefits, without taking the risk of investing in potential. Maybe over time, organizations will gain the wisdom needed to know when to leverage the potential that already sits in their laps.

  • t. donovan

    It's interesting that this writer would tie divorce rates and company loyalties. I personally do not believe that divorce is trending downwards or that people are sticking together; I see a trend in the ending of long term marriages as individuals believe they've put in their years,(reached the top of their 'pyrimiad') there must be something more. Apply that same thought to business. In the past the companies themselves demanded loyalty from their employees, but they were loyal back or at least willing to compensate for that loyalty rather generously. Today, without the carrot of a defined benefit pension plan, the threat of taxation on 401K plans, shaky health insurance plans, pay for performance tied to impossible numbers to be achieved - well, its a recipe for disloyalty. And disloyalty is probably a big factor in the dissolution of long term marriages as well - something AARP should study. I have also read about the work v. labour and again, marriage requires a lot of work, but it ends up demands more mindless labour!

  • Glen Drummond

    Before Maslow, during the industrial revolution in England, there was a particularly perceptive observation published on the distinction between work and labour. Roughly hewn, the observation is this: "Work" - is production interfused with your identity. "Labour" by contrast produces outputs that are not qualitatively distinguished by one's personal contribution. After participating in various leadership development courses, and reading quite a number of the widely regarded contemporary books on leadership, I still find this distinction to be most relevant in creating a working environment where people find meaning and fulfillment. The source of this cogent business advice?... That's not for the irony deficient.

  • Melissa W. O'Mara

    Chip, if you are a fan of Maslow, take a look into the research of Clare W. Graves, who was a friend of Maslow, and did extensive research, and identified another model of emergent, cyclical, levels of existence, a.k.a Spiral Dynamics. Very intriguing and worth some review. Google Spiral Dynamics, Clare Graves, Don Beck or Chris Cowen...

  • Michelle Malay Carter

    Chip, I resonated with your line: "I’ve always believed a great leader knows how to tap into potential and actualize it into reality." Within organizations, I think executives, managers, and HR are clueless about where to find potential and what it looks like.

    Organizations hire and promote for achievement, not potential. It's a safe strategy, but it's not risk free.

    It's ironic that while organizations are in a supposed war for talent, research shows 20% of employees within organizations are currently capable of delivering higher-level work.

  • Prem Rao

    Thanks for an excellent article. I am a big Maslow fan myself. The key to managing performance is to understand the key drivers for each individual.Maslow was relevant in the past, is relevant now and will be relevant in the future.