Joseph F.

Michlitsch
Joseph Michlitsch is an associate professor of management at Southern Illinois University Edwardsville, where he
teaches strategic management. Dr Michlitsch consults in the areas of strategy formulation and strategy implementation
for businesses and not-for-profit organizations.

Abstract Strategy implementation is best accomplished through
high-performing people. Every organization must develop and retain
its high-performing employees who are focused on giving target
customers what they want. Key performance factors are explored
including clear mission and strategy, selection and training,
corporate culture, communications and information, and rewards.
Keywords Strategy, High-fliers, Employee relations,
Corporate Culture, Loyalty
benefit. However, this conclusion assumes that the
overarching strategy is being well implemented.
Herein lies a dilemma. While a company's leaders
may devise the strategy, it is employees ± all of them ±
who will implement the strategy. It is ironic that, even
though more people now agree that employees are
important, company leadership continues to focus on
only some of its employees ± the managers. There still is
a wide separation between managers and the rest of the
employees, reinforcing an ``us and them'' attitude.

I
Managers often have private dining rooms; employees
t is obvious that every company needs a mission
do not. Managers sometimes get stock options;
and strategy that are right for its customers and its
employees do not. Managers get bonuses; employees do
owners/stockholders. By identifying target not. Successful implementation of strategy requires a
customers and giving them what they want, the company
rethinking of this dichotomous paradigm.
will be successful in the long run, and owners will

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The importance of high-performing, loyal employees companies for as little as 10 percent more pay. More
Chief executive officers like Herb Kelleher at Southwest than 50 percent would leave if they could earn a 20
Airlines and Fred Smith at Federal Express have been percent increase. These data indicate all-time lows in
quoted as saying something like, ``Our people come first, company loyalty, which is mostly attributable to people
even before our customers.'' They can hold this belief believing that they are working more but enjoying it less.
because they know their employees take care of An America@Work study from 1995 to 1998 found
customers in the ``right way'' ± they understand what that[4]:
customers want and deliver it. This completes the circle. ^ the percentage of employees working more than 50
A company must develop long-term relationships that hours per week doubled, rising from 13 percent to
are profitable for both the customers and the company. 26 percent;
It is essential that employees be able and willing to foster ^ the percentage of employees reporting burnout rose
these relationships over time. from 39 percent to 53 percent;
Employees who do this are valuable and, hopefully, ^ the average number of workdays lost to job-related
loyal. They like their jobs and plan to stay with the stress rose by 36 percent, from 1.1 to 1.5 days per
company. Some turnover is desirable, of course, as it year; and
removes those who are not able or willing to serve ^ over the past three years, workdays lost to care for
customers as the strategy requires. For example, Cisco children or elderly people because daycare was not
Systems trims the bottom 5 percent of its employees each available rose from 3.5 to 4.6 days.
year. The ones who go are those who do not add value In light of these data, how can you build a workforce that
(based on objective performance measures) or do not fit is valuable and loyal? There are many factors, strategies,
the culture. At Southwest Airlines and Nucor Steel, tools and behaviors that interact to create high-
people who do not perform well or do not fit the culture performing, loyal employees. Key among them are:
leave either voluntarily or are forced out by peer pressure. mission and strategy, selection and training, company
Cultivating loyal employees who serve customers well culture, communication and information, and rewards.
is financially sound. Studies have shown that companies With the right mix of these factors, you can develop a
that emphasize developing and retaining employees have workforce that has the skills and commitment to help
better results than companies that do not. They have your company succeed (see Exhibit 1).
higher stock price to book value ratios, market values per
employee that are $41,000 higher, five-year annual
Mission and strategy
returns of 27.5 percent compared to 17.3 percent, and a
In his book, The Loyalty Effect, Frederick Reichheld
higher five-year survival rate of initial public
makes a compelling argument for the indispensable
offerings[1,2].
There is other evidence that loyal employees add to
the value of a company. Attracting and retaining the very
best people is one of the eight most important things that Exhibit 1 Ð Developing high-performance loyal
investors use when judging the value of a company, employees
according to research by Ernst & Young. Looking at it
from the other side, over 50 percent of the respondents
in a Mercer Management Consulting study said that
poor customer service and lost customers are the result
of not being able to attract and retain the right people.
From a broader perspective, Andersen Consulting found
that three-fourths of the executives it surveyed listed
human performance as more important strategically
than productivity and technology. Attracting and
retaining people will be the No. 1 issue in strategy by
2010, according to 80 percent of these managers.
Internet companies say that attracting and retaining the
right people is the primary issue for them already[3].
Contributing to the increasing importance of, and
difficulty in, attracting and retaining the right people is
the decreasing loyalty and commitment of employees in
every age, income group, job classification, and industry.
Loyalty, or commitment to the company, has been
decreasing through the 1990s. In a 1998 study, 25
percent of US workers said they would leave their

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interaction among loyal customers, loyal employees, and developing them over time. But the first step is to define
loyal investors/owners[5]. The foundation for these what ``right'' people means for a given company.
interactions is creating value for customers ± selecting a Companies like Southwest Airlines, Dell Computer,
good target market and turning that market into loyal and Enterprise Rent-A-Car have done much research to
customers by understanding what they want and then by determine what it takes to succeed within their
delivering it better than anyone else. This means companies. In addition to functional and technical skills,
developing and implementing the right mission and these companies identify the personal characteristics and
strategy. interpersonal skills that are related to success. Among
It is clear that successfully implemented strategy will, other things, Southwest Airlines employees must be
in the long run, result in attractive financial returns, creative and thrive in a team atmosphere. Employees at
hence loyal investors. However, this factor is also Dell Computer must be able to work well on teams, have
inextricably connected to having committed, high- a high tolerance for ambiguity and change, and be able
performance employees. to learn rapidly. Enterprise Rent-A-Car uses an
A clear, compelling ``enterprise quotient,'' or
mission and a strategy EQ, to test for emotional
backed by constancy of intelligence. The 15-
purpose has a very item EQ uses situational
high probability of questions to assess self-
being successful. awareness, persistence,
People prefer to work
for companies that are ``It is ironic and empathy. Supplies
Network, a very
consistently successful.
It gives them that, even though more successful and growing
wholesaler of supplies for
satisfaction to be a part
of that success. A clear people now agree that employees printers and copiers,
wants its new hires to be
mission and strategy
also help employees to are important, company leadership ``extroverted, so they will
pick up the phone and
better understand their
roles in implementation. continues to focus on only some initiate a conversation
[with customers];
Goals are easier to set,
and accountability for of its employees ± the impatient, so they will
ask for the sale; [and]
individual and team
goals is easier to managers.'' non-conformist, so they
will be creative in solving
establish and monitor. customers'
The America@Work problems''[6].
study concluded that a Interestingly, the
company's ability to companies mentioned
stay competitive, or here, plus many others,
become more including Microsoft,
competitive, is a major factor in increasing the commitment Anheuser-Busch, IBM, and Nordstrom, all have a
of employees. There usually are positive financial outcomes reputation for being successful financially as well as
for employees if a company continues to be competitive having a distinct, strong, company culture. This kind of
and successful. If employees are allowed to use their skills a reputation goes a long way in attracting the people
and to participate in making the changes that maintain these companies want. Because these companies have
competitiveness, personal development and increased clearly defined mission and strategy and understand
motivation will result. what it takes to succeed, they can identify and recruit
There are many examples of companies that have candidates more successfully.
been able to get everything right and have achieved a Pay is usually relatively good at these companies; if
long-term ROI way above industry averages: Lexus, not beginning pay, then opportunities for advancement
MBNA Bank, Chick-fil-A, Leo Burnett, A.G. Edwards, are available and pay is tied to performance, so a new
Southwest Airlines, Wal-Mart, Dell Computer, hire can earn significant total compensation. For
Starbucks Coffee, and Federal Express. example, new hires at Enterprise Rent-A-Car start with a
relatively low salary of about $25,000. Then they are
Selection and training given opportunities to make decisions and are rewarded
For a company to be successful, it must have the ``right'' for their performance. It is common for a new hire to be
people. That means attracting them, training them, and

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promoted and earn total compensation approaching Exhibit 2 Ð Creating flow
$50,000 within a year and a half.
In all of these companies, the culture includes high-
performance expectations. This fact alone may be
unattractive to potential employees who would not fit
within the company. It will, however, be very attractive
to the ``right'' people. For example, new hires at
Enterprise are expected to work ten-hour days. At Dell
Computer, new hires are given specific performance
goals that they must reach within the first 30 days.
All the companies that have succeeded in developing
high-performance employees spend significant time and
money on training. Training takes many forms,
including formal presentations and workshops, informal
monthly chat sessions, one-on-one exchanges with a
supervisor, mentor or knowledgeable person, and
performance appraisals. Federal Express's training
accounts for 3 percent of its total expenses ± six times as
much as similar companies. All employees are included
in training, not just managers as is the case at many
companies. And its emphasis on training has earned the
workforce. When differences between organizational
company the title of the ``ultimate corporate university.''
levels and job specifications are de-emphasized, it is
Finally, companies that have high-performance
easier to achieve true teamwork and honest interactions
employees continually encourage, even demand, growth
between people. Communication and information flow
and improvement. Enterprise Rent-A-Car, A.G.
more effectively without barriers. John Chambers, CEO
Edwards and others routinely offer opportunities for
at Cisco Systems, notes that, when he was a manager at
making decisions and for promotions. Managers act as
IBM, he was expected to get sodas or carry the bags of a
teachers informally, as well as through formal, periodic
superior. He says, ``You never ask your team to do
performance appraisals, in order to identify
something you wouldn't do yourself''[3] (emphasis
opportunities or need for development. Dell Computer
added.)
promotes 8-10 percent of its managers into ``stretch''
The cultures of many of the high-performing
assignments to encourage development.
companies include ``having fun.'' The antics of
The net result is that these companies challenge their
Southwest Airlines' Herb Kelleher are legendary. He has
people and, at the same time, help them develop the
dressed as Elvis, as M*A*S*H's Corporal Klinger in
skills needed to meet those challenges. Combined with a
drag, and others. He has arm-wrestled the executive of
clear mission and strategy and supported by a strong,
another airline for the privilege of using the phrase ``Just
positive company culture, good use of communication
plane smart.'' He has appeared in print ads dressed in
and information, and the right rewards, a company can
blue jeans and a T-shirt and sporting a tattoo that said,
achieve what Theresa Garza, a vice president at Dell
``Born to ship.'' These pranks are designed to keep the
calls ``hum'' ± energized, enthusiastic employees.
fun atmosphere alive. It seems to work. Southwest's
Mihaly Csikszentmihaly offers research evidence for
pilots have been known to utter in a deep voice, ``Whoa,
the same idea[7]. What he calls ``flow'' is really the right
Wilbur!!!'' when bringing the plane to a stop after
mix of skills and challenges (see Exhibit 2.) When skills
landing. Flight attendants sing the safety instructions to
are greater than challenges, boredom produces
passengers, tell jokes, and conduct contests. And the
uninspired, non-productive employees. When
passengers love it.
challenges are greater than skills, anxiety interferes with
Southwest is not alone. Theresa Garza at Dell has
performance. It takes the right combination of skills and
appeared in various costumes, sung songs to employees,
challenges to develop and inspire a workforce of
attached herself to Velcro walls, and encouraged
competent and productive employees.
employees to dunk her in a water tank. She does these
things to create fun, to generate enthusiasm, and to
Company culture make herself more accessible. Chief executive Kevin
All of the high-performing companies we have discussed O'Connor of DoubleClick, a new Internet company,
have strong cultures that embody values, expectations, plays laser tag during part of the company's orientation
and required behaviors. With that as a foundation, session for new employees.
incorporating egalitarian management techniques will
help encourage and support a high-performing

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 It is not only the young computer and Internet
companies and ``weird'' Southwest Airlines that include
fun as part of their culture. A.G. Edwards is a very
successful, well-respected, financial investment
company. Ben Edwards, the company's CEO, said that
one of their corporate goals is to have fun[5,8]. He
believes that fun helps to build respect and, when people
treat each other with respect, they work well together.
Fortune magazine listed A.G. Edwards as one of the 100
best companies to work for and cited Mr Edwards as
kindly and accessible. John Chambers of Cisco Systems
has breakfast once a month with employees whose
birthdays fall in that month. Enterprise Rent-A-Car
rented Busch Stadium in St Louis for an employee party
complete with circus performers, food, and games.
The end result is that egalitarianism and fun break
down the barriers between people. Managers are more
accessible, and communication improves. As part of the
culture, they contribute to enthusiasm, to a sense of
urgency in pleasing the customer, and, ultimately, to
company success.
Communication and information
People need to know what they are supposed to do if
they are to have any chance for success. They need to
know what the customers want and what steps to take to
satisfy them. They need information! Jan Carlzon, the
successful former CEO of Scandinavian Airlines, put it
this way: ``An individual without information cannot
take responsibility; an individual who is given
information cannot help but take responsibility.''
Beyond communicating the company's mission and
strategy, managers must set goals and performance
expectations, provide feedback and direction, and hold
people accountable for achieving their goals.
A number of organizations use continual interaction
between employees and managers to communicate and
share information. The Michigan Retailers Association
holds a catered, staff breakfast after its board of directors
meetings to pass on information about policy actions,
results and developments. Theresa Garza at Dell makes
sure to articulate her group's objectives on at least five
occasions during the first two weeks of each quarter. She
argues that not only does this help people to achieve
their goals, but it reduces frustration and ``politics.''
People need to know what they are expected to do
before they even begin. Then, information about both
positive and negative outcomes helps employees to
understand accountability. Knowing the positive results
of their actions can be motivating, while information
about negative outcomes can help them learn. And in a
culture where they are rewarded based on performance,
employees need accurate and up-to-date information in
order to make good decisions.
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Rewards
Companies with high-performing employees ``put their
money where their mouth is.'' They pay employees for
performance.
Some companies, but certainly not all, pay beginning
wages and salaries that are above-market. Supplies
Network does this, as do some of the fast-growing
Internet companies like DoubleClick and Cisco
Systems. Even though these companies pay relatively
high beginning salaries, much of an employee's total
compensation comes from bonuses based on
performance. Edward Jones, A.G. Edwards, Dell
Computer, Cisco Systems, and Supplies Network pay
bonuses three or four times per year, which keeps
everyone focused on performance.
An increasing number of companies use stock options
as a financial reward, and they award stock options to
employees other than the top management team. In a
recent study of 350 large US companies, Mercer Inc.
found that 39 percent of the companies had a broad-
based, stock-option plan in 1999 compared to only 17
percent in 1993. A broad-based, stock-option plan
means that half or more of employees are covered. This
trend is in line with the expectations of the current
workforce. As John Chambers, CEO of Cisco Systems,
says: ``People used to work for wages. In the new
economy, they work for ownership''[9].
The trend of extending stock options beyond senior
management suggests that there is at least a symbolic
egalitarianism in a growing number of high-performing
companies. Other forms of egalitarianism can be seen in
the trend in executive base pay. For example, Andy
Taylor, CEO of Enterprise Rent-A-Car, receives a base
salary of only $35,000. This does not mean to suggest
that everyone, regardless of position, should be paid
equally. It does mean that everyone in the company can
be rewarded according to his or her achievements and
that a lower-level employee will not be excluded from
certain rewards just because of the lower rank.
There are also rewards other than financial. Many
people believe that simple recognition is a reward sought
by many employees. Rosabeth Moss Kanter says that
money is not necessarily motivating because many see it
as a ``right,'' whereas recognition is a ``gift.'' The founder
of Mary Kay Cosmetics, Mary Kay Ash, agrees, saying
that people want to feel important based on the work
they do. Frances Hesselbein, president of The Drucker
Foundation, says people want to feel that what they do
makes a difference and only recognition can give them
this feeling[10].
Reward employees for doing a good job ± for
engaging in behavior that achieves the mission and
strategy of your company. Find out what motivates your
employees, and then give it to them. It could be money,
but it could also be things that do not cost anything
except time, concern and recognition. Above all,
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remember that you get what you reward, so be sure you
reward performance that is aligned with the mission and
strategy.
Conclusion
High-performing, committed employees who serve
customers well are valuable to your company. You can
increase the probability that you will have such
employees in several ways. Develop a clear, compelling
mission and strategy. Select and train the right people.
Explain the mission and strategy to your people and give
References
1. Friedman, B., Hatch, J. and Walker, D., Delivering on the
Promise: How to Attract, Manage, and Retain Human Capital, The
Free Press, New York, NY, 1998.
2. Grant, L., ``Happy workers, high returns'', Fortune, 12 January
1998.
3. Byrne, J., ``The search for the young and gifted: why talent
counts'', Business Week, 4 October 1999, pp. 108-16.
4. Strum, D., ``Workforce commitment: strategies for the new work
order'', Strategy & Leadership, January/February 1999, pp. 4-7.

them the information they need to understand 5. Reichheld, F., The Loyalty Effect, Harvard Business School Press,

performance requirements. Give them feedback and Cambridge, MA, 1996.

information so they can do a good job. Embed 6. Finnie, W., Hands-On Strategy: The Guide to Crafting Your
Company's Future, 2nd ed., Grace & Company PLC, St Louis,
company goals in a strong company culture. Reward
MO, 2000, p. 143.
people for doing what you want them to do ± for
7. Csikszentmihaly, M., Flow: The Psychology of Optimal Experience,
successfully achieving the company's mission and
Harper & Row, New York, NY, 1990, p. 74.
strategy. S&L
8. Dalin, S., ``Three workplaces here on `best list''', St Louis Post-
Dispatch, 22 December, p. C6.
9. ``Compensation: potent hiring tool?'', Industryweek, 6 September
1999, p. 12.
10. Nelson, B., ``The ironies of motivation'', Strategy & Leadership,
January/February 1999, p. 26.

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