Stefan Meyer (3:09)

Thank you so much for having me here.

Alfred Marcus (3:11)

Alfie, let's start with the big picture. What prompted you to write the employee advantage? What is the central argument you're making about why putting workers first is not just nice, but strategically smart?

Stefan Meyer (3:26)

Thank you so much. Yeah, so it really started with, like, combining two parts of my life and what is the teaching part? And one is the research part. I would do teach competitive strategy. And in that course, you know, we focus a lot on, like, one particular stakeholder or two. One is the customers that create and shareholder value, so a shareholder being the second one. And then I'll go back to my office after the classroom and think about, like, what motivates actually people? Why do they work? Like, and then I go back to the classroom and think about customers. And so only during. After the pandemic and seeing kind of 10, 15 years old, really bad engagement numbers for employees, I kind of brought the twos together because in the framework that I teach my students, they there were always also other suppliers in it and suppliers. And the really important part of the suppliers are employees. So I kind of brought those two aspects together to think about. Can we actually create a competitive advantage by taking care of that particular stakeholder being the employees? And the evidence was, in my view is clear that you can if you do it right. But again, you have to think about. And that's where my office work or my research work kicks in, thinking about what actually motivates people at work. And so that's kind of the combination then of kind of behavioral economics with business strategy, with future of work as well. You know, what can technology do in order to help in that matter? So that's where it really started right after the pandemic. The great resignation was a big topic. And then I saw that that's not after the pandemic issue. In fact, people are miserable at work for decades almost. And we can actually change something each strategy.

Alfred Marcus (5:26)

And I completely agree with you that the emphasis is on customers and shareholders, particularly on shareholders. What is the evidence that engagement is really low? I'm a little surprised that you've said that because we often see Fortune 5, Fortune magazine lists the best companies for employees and so on. And it seems like some companies seem to be doing a good job, some

Stefan Meyer (5:51)

are actually doing it better. But if you believe kind of in the Gallup engagement survey numbers, I think the numbers are about 60, 65% of people are disengaged at work. And that's not a new phenomenon. That's true for about the last 10, 15 years, where since they started measuring that engagement numbers. Now, of course, they are companies that stand out, that do it better. And that's kind of the whole point of my book. You can actually do better and have engagement numbers that are higher and get benefits by doing so. But it's not so easy. I mean, as we all know as strategists, if it's easy, it's not a competitive. It has to be hard in order to actually be a competitive advantage. And that's true when you think about differentiating with customers. That's also true when it is. If you want to differentiate by taking care of your employees.

Alfred Marcus (6:50)

Is that across the board, is it the disengagement greater among lower level employees versus higher level employees?

Stefan Meyer (6:58)

I mean, that's what I just stated as kind of the average number. I'm sure there is like differences across the income distribution. You know, I have work where I, for example, look at kind of meaning at work. You know, how much do you actually have meaning? There is a huge difference across the income distribution. You know, lower paying jobs are also not as meaningful and higher paying jobs are more meaningful. Now it's interesting, like if you take those account, probably the inequality is even greater than if you just look at income because the people on the lower end of the income distribution don't make that much money and the, and the jobs really suck, while the one who are on top of the distribution get paid more and have jobs that are better. So kind of thinking about that, it's just a compensating wage differential. Is it that simple sense just not true. People who make a lot of money have also good, not just benefits, monetary benefits, think insurance and whatnot and days off. But also they actually have jobs where they're respected, where they have autonomy, where they can actually use their skills to the fullest extent.

Alfred Marcus (8:09)

Do firms understand this? Do they know that there's massive disengagement? I know a lot of firms do these surveys, but are they, do they take them seriously?

Stefan Meyer (8:18)

And so I'm not so sure they do take them seriously. Because, you know, I've also never met an executive and I teach a lot of them. Who wouldn't say, oh, my most important assets are my human, my people right Now I've never heard somebody say, you know, I don't care about my people, they all do. But. But the engagement number just shows either they're lying, which I don't think is true. They really care, I think, about their people, or they haven't completely figured out how to do it right. And the analogy could be about another stakeholder, which I stress in the book a lot, if you think about customers. I also never seen or heard an executive word say I don't care about my customers. Of course they do, but. But they're only a handful. Well, not a handful. There is only small part who are really customer centric. And by doing so then get an advantage on that side of the competitive advantage by really differentiating on the customer and figuring out what the right customer experience is and providing that experience better than their competitors do.

Alfred Marcus (9:32)

Like professionals in hospitals, for example, doctors. You would think that there's kind of some intrinsic meaning in carrying out that work, but they also seem to be constrained so much by various institutional factors and economic factors that they too may become disengaged.

Stefan Meyer (9:55)

Absolutely. I think, like, it's actually interesting, you know, one of the factors that really motivates people beyond money is purpose. You know, having meaning. Now, I couldn't imagine. I mean, I like being a doctor. You know, that must be like really high on like the per. You literally save people's lives. But in the end, you know, there are like bureaucracy stack again, there is like, you become jaded. And so some organizations do that better. But like others, you know, then get people who are disengaged. They don't have the purpose on top of mind and are really miserable in their job. And that's a real pity because there is an opportunity to actually change and get people motivated and engaged by figuring out what they really want.

Alfred Marcus (10:45)

It may be a matter of priorities. And I'm sure that some executives in a token way say, you know, I care about customers and I care about my employees, but what they really care about is shareholder returns and their options. So what distinguishes the companies that really genuinely care about employees from conventional firms that just have their typical HR practices?

Stefan Meyer (11:15)

Yeah, I mean, the first problem, I think for those who don't is like to assume that, you know, HR is taking care of it. You know, and that's again, if you think about the analogy to the customers, you know, customer centric organizations, they would not say, you know, that's like marketing's problem. I mean, the marketing department is taking care of it. It needs like, everybody needs to be aligned. All the division, all functions need to be in support of being customer centric. And I think the same is true for employee centricity. You know, if you look at. It's actually an interesting statistics. If you look at the number I just told you about the engagement level, and then you can see, you know, what explains that variance. Because some organizations, as you mentioned, are actually Better and some are worse is this they have a better HR team than not. It turns out about 70% of the variance has to do with the individual manager and not with the organization. I mean there is of course better and worse organizations, but in the end it has to do with individual managers. And then that saying of like nobody leaves whatever a job but they leave a boss becomes now reality. Now that makes it harder. If it were just hr, it's an easier problem to fix. You fix HR and then that will take care of the rest. But if it is every single individual managers that actually need to be aware of being employee centric has like the right tools and mindset in mind. That's a much harder problem. And again, heart is not necessarily bad because those companies that figure that out and have sustainable competitive advantage over those

Alfred Marcus (13:01)

who don't please so disengaged. What is it about their work? Is it the drudgery? It's their lack of being felt, treated as human beings. I mean what they're treated as things essentially what is we use in their resources, productive resources. The way we talk about in strategy.

Stefan Meyer (13:25)

Yeah, I think it's all of the above. But I put it in kind of four different factors that really motivate people beyond monetary aspects. One is what we already talked about, kind of purpose. You know, having a. Why understanding this is like more than just a paycheck. I'm actually doing that and have a better, you know, have something to do that is really meaningful. I call it shoot for the moon. Because that's kind of the notion, you know, you have like something, a greater goal, meaning you. There is very few people who wake up in the morning and says like today I'm going to, I'm going to work hard to increase the return on invested capital for my firm by like half percentage point. That's just not particularly motivating. So purpose is the first one, or what I call shoot for the moon. The second is autonomy. And the flip side of autonomy is trust. I call it the matter of trust because in order to get autonomy you need trust and respect and whatever that's kind of in that bucket of I trust you. And you then have the discretion to make choices and be autonomous in doing so. The third one is what is competence? That's kind of what the psychologists call it. I call it just right tasks. That's kind of having a task that is just right for your skill level. That is not boring, but also not overwhelming. Actually, a lot of people quit their jobs because they're stuck. They don't learn anything new. They don't make, you know, they don't develop. And the fourth one is relatedness, or I call it working together works. It's kind of the social component to it. You know, as Michael Jordan says, you know, individuals win games and teams win trophies. So there is something about like having a positive social interaction that can be very motivating and very engaging. And so those four kind of are what drives human motivation. And now firms need to figure out how to leverage them in the right way.

Alfred Marcus (15:38)

To get into this notion of sports teams, we could go very far with that because it doesn't always what leads to a team gelling and, and working together well and, and, and the disaffection not being there. I mean sometimes certain amount of conflict is actually good, you know, and, and even sometimes, you know, to get extraordinary effort. You can like I think in, in the finance area, people give extraordinary effort. They're going to work 16 hours a day. But it's all for the, the monetary reward and the prestige. It's maybe not completely healthy in the terms I think that you're talking about.

Stefan Meyer (16:19)

I mean, I think. So there are two things that I want to respond here. One is maybe start with the last point again. As in competitive strategy, you can differentiate. You can actually have a quote unquote culture that is a certain way that attracts a certain type of people. We would never say let's do a customer product that like everybody. No, not everybody. You need to focus on a segment or not. The same I think is true when you think about culture. Now the other part is like when you say like what makes it jive or whatever corporate culture, I mean it's hard but like the beginning probably as like positive social interaction. Now I'm completely on board with you that, you know, just being nice is not, that's not what it is. It's being respectful, you know, having toxic interactions and, and having some empathy where I kind of understand where you come from. And I think that creates then positive social interaction. It's actually interesting, you know, you mentioned in the introduction hybrid work or kind of that we changing the way we work. And when I talk to executives about hybrid work, they always mentioned, you know, we're losing the culture. And now I remind them then, you know, when we were full time in the office, I guess 50% or 40 to 50% of workplace had toxic work culture. Just because we're together doesn't create a positive environment. In fact, I can be a real asshole in person. Much more so than on zoom and so you need to deliberately create those interactions that are positive. And it has very little to do that. We are just in the same room. You have to be very active in creating those positive interactions that then create kind of the team to, you know, jive or really thrive as a result.

Alfred Marcus (18:26)

I remember my younger son used to work for Spotify, now works for Netflix completely online. But when he worked for Spotify, he worked in an office in downtown New York. And I remember we visited him once and I said, this reminds me of a kindergarten. There are balloons in the air. They're colorful things. There's snacks all over the place. There's a ping pong table sitting there. And then I looked around and Everybody was under 30 years old. I said, where are the adults? But even besides, besides all of that, I mean, there is also a heavy amount of supervision. I think supervision the way it's conducted and the kind of fear that sometimes it creates among people also are disenabling for positive cultures.

Stefan Meyer (19:16)

Absolutely. I think like surveillance goes way into the face of the culture, but also in the face of kind of the trust aspect, that is a real motivator. If I feel like somebody is micromanaging me all the time, that like kills motivation tremendously because trust is such an important part. And again, trust is kind of the flip side of autonomy. You know, I trust you to do your work and that gives you then flexibility. I want to say something about the ping pong tables as well. I actually have a chapter in my book on like ping pong tables. I call some of those perks. I call those ping pong table solutions. And there is two problems with ping pong table solutions. And I call ping pong, you know, free snacks, nap pots, free yoga classes, whatever. They're all in my book, kind of the ping pong table solution. And the first problem is that let's say ping pong tables are really the kicker. If you have a ping pong table, innovation goes through the roof. Now if that were true, everybody has a ping pong table. Ping pong table costs like 500 bucks. You know, it can't be a competitive advantage.

Alfred Marcus (20:30)

Right. It's like having a computer in your table.

Stefan Meyer (20:33)

Exactly. But the second problem is like ping pong table in itself are not doing. You know, nobody leaves an office. I'm almost certain your son didn't chose to work for Spotify because they have a ping pong table or free snacks. In fact, he might have hated the free snacks because he gained like 10 pounds by just having access to all that crap. And so that's not the reason people are engaged or motivated or not. And you see now tech companies in particular, like scaling down on those. And it's often interpreted as like, you know, maybe they're not as employee centric anymore. I think like that was just. They're, they were never motivated. There were never, never real motivators in the, in the first place. I can see that if we have like a good culture and we go play ping pong or like, you know, go for a bowling evening or whatever kids these days do, that's probably a good thing if it's intentional. But. But just having access to it doesn't create that positive environment.

Alfred Marcus (21:37)

Way in the, in the late 1970s, I worked at Battelle in Seattle and we had ping pong tables.

Podcast Host (21:42)

It was fun.

Alfred Marcus (21:43)

Like, my ping pong game improved a lot.

Stefan Meyer (21:48)

Yeah. Don't get me wrong, I have nothing against ping pong tables, but ping pong tables or all those perks as kind of an employee centric solution. I don't think that's right.

Alfred Marcus (22:02)

One thing I think that's very important is the lack of favoritism and the idea of procedural fairness, I think. And that gets to the notion of

Podcast Host (22:12)

trust and respect for each person.

Alfred Marcus (22:15)

When you have a system that seems biased and that there's cronies around, they get benefited more than others. That's very problematic and creates disaffection.

Stefan Meyer (22:32)

Yeah, I couldn't agree more. And the research that, that, that, you know, probably much better than I do is like, you know, people are not opposed to unequal outcomes if the process is fair. You know, I think employee centricity. Exactly. Is also not like, everybody should get the same. And like, no, you know, if I'm, if I know that you put in more effort, I could have. But like, you put more effort. Yeah, you should get more. People are perfectly fine accepting unequal outcomes if they know was fair and understand why there are differences in treatment and Absolutely. And like. But that requires that you first need to understand, you know, kind of the psychology of the employees and are willing to take the effort to explain, to be transparent about it. And that seems to be not so easy. And I can understand, you know, there's so much to do for leaders, you know, it's not so easy. But if you're really, really serious about being employee centric, as with customer centricity, you need to be, you know, needs to be top of mind all the time.

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Stefan Meyer (24:20)

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Alfred Marcus (25:11)

is there, but there's some really odd practices like Ray Dalio and radical honesty or even Jack Welch. And I think Amazon was doing this for a long time. You know, the, let's say the top five, the worst 5% of employees are let go automatically. These kind of brutal evaluations. Does that help engagement?

Stefan Meyer (25:39)

I don't think so. I think in the end it depends a lot how it's implemented. But if you have kind of a tournament situation here, that creates a whole lot of different issues where I don't want to be in the 5%, I want you to be in the 5%. So if we are on the threshold, I sabotage. You know, there is like toxicity kind of creeps in there almost by design. Now I have no, you know, managers have to make tough decisions about people who don't perform. I understand that, but, but that kind of simple, simplistic rule that, you know, like all the five, the lowest 5% have to go, that just creates this, this rivalry between people who are actually supposed to work together that I think is very unhealthy.

Alfred Marcus (26:29)

You said before about managers being. The key part of it is the managers, you know, in business schools we try to train them, we give them ob courses up to the, up to their ears and. But do you think that they are not. They don't really aren't really getting it or why is it that the typical manager has problems with this?

Stefan Meyer (26:52)

Yeah, well, first of all, not all of them come to our classes, Alfie. So which is a problem. So here's a little plug for all the managers to take our classes.

Alfred Marcus (27:03)

Yeah, there are a lot of people like in IT who just become managers or scientific people who've never really had any management training.

Stefan Meyer (27:09)

I mean that's kind of the typical kind of PETA principle. You know, you get promoted based on the performance of the task that you just did. You know, you're a good salesperson and then you get promoted to be the head of the sales team. But the performance you did as a salesperson has says absolutely nothing of whether you're a good manager of that. Of that group. So I think there probably some of the promotion decisions go wrong and. Or then we have to seriously train people to do that. People are joining our teams, classes, leadership classes, but maybe not enough. And again, that I think goes back to. Is it really top of mind, you know, does everybody on the organization. Some organizations are much better where they actually do send basically everybody to leadership classes. But if the message is not this is really a critical skill that you need to learn, you know, whether the leaders are actually incorporating it, taking the time to implementing what they learned, that's a very different question.

Alfred Marcus (28:21)

A somebody get out of such a course and what. What would constitute in your mind a good. I mean we're talking basically about middle managers and above somebody who has these good skills where they can motivate employees and make them feel needed and engaged.

Stefan Meyer (28:40)

Yeah, I think like the. What I always tell people, you know, when they say like where should I start? Which is kind of a reframing on what you just asked. So like, you know, again, think about the customer, the employees, the new customers. What would you do with customers? And I think the first thing we do with customers is listen, getting insights, understanding what do they want. And I think the same has to be true. And there is evidence on that with teams, you know, listening what does John really want and what does Rebecca really want and listening and really engaging with them. Showing, I guess that's a part of empathy, you know, showing what is. I'm interested in you as a person and I want to make your life work, life better in order for the company. You know, it's not about you. It's about like I'm interested in the organization and the team, but you're a critical part of that team. And I want to understand what is really what does Better. And I think that's then the beginning of, you know, transformation where the team really does better. And as a result, then there comes, you know, psychological safety where it's, you know, you mentioned before where it's. It's good to be tough. It's like, yeah, we should have an environment where I can tell you once I, I, you know, that I respect you and I'm really on your side now. I can also tell you, like, Alfie, that was. That was not ideal. You should have done better. But you. You should be able to tell me if I'm your superior. The same thing. And that then is then a cultural shift that really leads to a really positive environment, and as a result, I think will lead to better performance of the team and then the organization.

Alfred Marcus (30:26)

I really agree about listening, but I think it has to be real listening versus token listening. Because were you just. I was department chair for about six years, and I think I lacked that quality completely. I thought if somebody came in, they presented something, I would say something and get them out of my office quickly and give them an answer. I don't think they wanted an answer. I think they just wanted to unload what they were feeling.

Stefan Meyer (30:56)

Yes, I think there is, like. So I just stepped down as the division chair that I was for five years last year before my sabbatical started. And, you know, it's hard. It's difficult, you know, as academics, than to lead people. Now, I could not agree more with you that listening has to be real listening. Now, real listening has a couple of aspects. So one is, you know, to really be there and, like, for them to either offload and tell you what they're thinking about. But the listening part also requires that there might be criticism in the. In the listening, you know, what have been said about how you're showing up as a leader. And that's the uncomfortable part. You know, what is easy is, like, what is easy is to listen. And everybody says, like, you're doing a fantastic job. I'm so happy. And let me tell you about my dog and my hobbies that, I mean, that's. I mean, that's the easy part. The hard part about listening is like, you know, I'm not happy here. This is not working. Well, I do think you're not being the right leader at the moment, or there's room for improvement in your leadership style. That's the listening that is difficult because it then requires change and requires actions afterwards. But this is required in order to make the team better. Otherwise, I completely agree. I think you Said token listening. I mean, then you don't need to listen in the first place.

Alfred Marcus (32:27)

You could have an AI system sitting for.

Stefan Meyer (32:29)

Exactly, exactly. Speak it into whatever and Claude will give me the summary.

Alfred Marcus (32:35)

Right. And get it out of your system. Okay, let's go on. How do you really encourage that, though? I mean, how do you create constructive feedback? Do you have specific sessions where people can raise their concerns? Is it a way you conduct meetings?

Stefan Meyer (32:54)

So there was an interesting experiment done in Sandon. So this is the Novartis company, so pharmaceutical company. And what they did is they did a real A B test where, you know, half the managers, everybody was encouraged to meet with their. With their team members as a middle managers. But some actually got a specific script and the script was about make this meeting about the team member, really listen, as if your life depends on it being empathetic, and let them tell you and ask them, you know, what is on your mind and what actually bothers you. It's all about, like, the other person than yourself. Because often those listening sessions, and I've been there, you know, I'm not much better. Often, you know, like, listening session always turns into, like, you tell them what do you actually. What do you hear? You defend yourself and whatever. And so. So Sando really changed the script. And then they followed up. They did that for about six weeks. They were encouraged to meet their team members once a week with either that script or just let it go. And then they measured psychological safety, engagement, how the team members see the leaders. And these are remarkable changes, especially for teams that were bats. If I remember the number correctly, I described it in the book. But if I remember correctly, for bad teams, I think psychological safety, or the perception that it's psychologically safe increased by about 19%. So there was a huge, huge difference in how the culture kind of shifts by just really listening,

Alfred Marcus (34:45)

is that I think this also is reflected in the way teaching, you know, when you first start off, at least when I started I was teaching, I thought I was supposed to impart into them. But really what teaching is actually about is listening much more and raising questions and conducting productive discussions. But it's the mechanism ultimately about psychological safety so that people feel that they can actually constructively make criticisms which will lead to improvement. And if they don't have that, they're not listened to. But then they won't make these recommendations and they'll sort of tune out, they'll become alienated and they'll feel that what's the use? Even if I raise these issues, nobody's Going to listen to me anyhow?

Stefan Meyer (35:38)

Yeah, yeah. I think the psychological mechanism is like you feel respected and you get, you know, you actually have discretion, you can entrust it. The performance outcome is like there's actually improvements. I think you know that you actually then improve the processes the way it's done. It's a little bit like the, you know, almost the Toyota way where like, you know, people on the assembly line could, you know, there they listen by pulling the hand on cord and then say like this is not working but it requires I think you know in the book I describe, I love that story where like GM knew that and installed kind of those andor cords in old and nobody pulled the cord and was suggesting any changes because you actually need now the people skill that like somebody comes and say like yeah, you just stop the assembly line which is a multi thousand dollar per minute decision. But thank you so much. Let's figure out how to deal with that problem. And I think translating this into, you know, everyday office life is exactly that. You listen on the other side they feel respected and trusted and as a result they actually come up with stuff that can be done better. And obviously if you don't change those, it's a dead end. I mean that's frustrating. You figure that out very quickly. I tell you how to do stuff better and you don't change. That's even more frustrating than asking me in the first place to coming back to the token listening. But if you actually change stuff that has implication on the psychological motivation of the employees and the teams are going to get better.

Alfred Marcus (37:26)

Absolutely true. If somebody makes a suggestion and there's action based on that suggestion, they really feel valued and they feel valued. They'll be become, they're, they're, they will come more engaged rather than less engaged.

Stefan Meyer (37:40)

Absolutely, absolutely.

Alfred Marcus (37:43)

Let's say you had a, a, a top leader and he said, ah, this is all bunk. How would you, would you listen to him? How would you, how would you try to convince them that employees really do matter for the bottom line? I mean in a real way rather than just okay, they matter for the bottom line. So I have to make some changes. But it's still the changes are manipulative changes rather than genuine ones.

Stefan Meyer (38:14)

So I've never heard anybody say exactly that. But I've all experienced many times that they were thinking that they were saying yeah, that's kind of nice but like, yeah, screw that, get real.

Alfred Marcus (38:27)

You're a college professor.

Stefan Meyer (38:29)

Yes, exactly. You don't know what you're talking about. Now what I showed Is, you know, empirical evidence that supports that. And I think there are like at least three type of evidence that I show now whenever I talk about this to executives. The one is just a correlation between, you know, being employee centric and performance and those firms. Now it's a correlation because it could also cause ALTI might also go the other way. Then there are just shining case studies, examples of companies who are going to do better, like Costco is, is one of them. But there, there are many others who are really doing well. And the third, which I think is also interesting, you know, if I'm right about it, you should be able to invest in companies that are employee centric and do better in the returns. Now kkr, the big private equity firm who private equity is not the industry really known or being

Alfred Marcus (39:41)

fuzzy, nice and fuzzy.

Stefan Meyer (39:43)

Not really. But KKR is starting to invest by now. I think they invested in like hundred pl millions and millions of dollars into what they call ownership work. So they didn't start with employee centric. They started with thinking about, you know, let's give people stock options. And what they, what that will do is make them, you know, get them an ownership mindset that will reduce quit rates, which is a huge problems and will also get engagement up. Now over time they figured out that's not enough. There is something more. Not all the companies that they invest in, they have ownership structures are actually performing better. And so they're doing now more research. Pete Stavros is kind of the partner in charge. And they now saw there is actually another aspect, that other aspect they call it at the moment, like leadership, apparently empathy. But what it basically is is all the rest that we just talked about that is in my book, like deal, you know, respecting the people, listening to them and so on and so forth. And that now makes their huge difference. And so they now try to measure that as well and then investing in those companies. So that's kind of the best I can do to convince those skeptical executives to think about, you know, employees. And in my book, in my view, there was shareholder value only, then there was customer centricity as the next phase. And I think now we're moving into employee centricity.

Alfred Marcus (41:25)

Are you aware, I think Dan Ariely was trying to correlate better employee engagement with stock shareholder. Are you aware of that? I think it was Steve.

Stefan Meyer (41:35)

Dave. I've never looked in, I mean I've heard that he did that. I actually, I didn't look at, you know, what, what the data says. So that I'm. But, but that would be probably the ultimate goal. But for companies, I mean, what I, I try to encourage executives is like, you know, I do really think most believe that their people are important. They have to see that on a daily basis that like, you know, engaged, motivated talents are important. They just don't. It's not top of mind. It's a little bit like the customer centricity again. Everybody cares about customers, but only a small percentage are really customer centric and they're killing it. They're doing better, I think, than the rest of the companies in a skiff in the industry.

Alfred Marcus (42:29)

Some of your examples are like Costco and DHL bestblock. Could you talk about those companies a little bit? I know I often compare Costco and Walmart. That's a regular comparison. And Best Buy A little bit. A little bit surprises me because I've studied Best Buy and I don't know if those associates really, I've had them in my class too. Are they really feel, do they feel loved? I don't know.

Stefan Meyer (42:56)

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Stefan Meyer (45:16)

Well, I don't. I mean, you know, it's retail, after all. I mean, you know, it's. We have to compare it to other companies within the industry, but, like, let's start with Costco. I think Costco was really, early on, employee centric in the sense that they really cared about their. I don't know, what do they call them associates, but their partners or whatever they call their employees. And. And a big part in that particular industry is like, you want to actually make progress within your career. It's an important part there to feel, I'm really good in shelving, putting the shelves in. And then I see kind of there is a career path. And I think Costco does a fantastic job in doing so. They tell them very clearly that's kind of how you can make progress. That's how you be celebrated when you're doing better. And I think that's a really important part. I mean, Costco also pays above wages. They have health insurance when many of their competitors did not, which also matters. But I think it's kind of how they treat and see their employees and sort of those other things are not unimportant, especially at that level of income where people, you know, that's the lower end of the income distribution, where income matters a little more than once. You get to a different level in the income distribution, and then you can look, how are they doing? And they're doing fantastically well. You know, their turnovers are much lower. They have a loyal. You know, the customers are so loyal. And part of it is like they're making good choices with their customer. Part is also the employees are actually positive. You know, you go into a Costco and you meet people who seem to want to work there. Well, not every organization has that. And that creates now loyalty. And then the loyalty creates. You buy more likely to buy private label, where the margins are higher and so on and so forth. So it has. Then Actually really positive implications on, on the performance of the company.

Alfred Marcus (47:38)

There are other companies, you know, I think about right now, like Trader Joe's seems to have a great culture. Although I, I, I, I've had friends whose sons work there. You know, there's still nothing's perfect, I'm sure.

Stefan Meyer (47:53)

And I mean absolutely. I mean, yeah, there is, it's actually interesting that there is a bunch of retailers or even grocery stores who are doing really well. So Wegmans is another one. In Texas there is heb, which has like the cult following and they're very employee centric as well. A big part in those higher end grocery stores is that, you know, the customer experience depends a lot on like how engaged the employees are. If you're walking into a store and the people are miserable, it's, well then I rather order online to be honest. And you know, if you think about bad examples like the postal office, you know, you go into the postal office and you like get depressed by just walking in there. And it's not because it's not, you know, the latest furniture. It's because just the atmosphere is like so depressing, including how the people who work there feel. And that makes me really want to buy the stamps online than to go in an office.

Alfred Marcus (49:08)

Whole Foods I think has a tough culture though, as I've read in the past.

Stefan Meyer (49:14)

I think Whole Foods started out to be, they got bought by Amazon and

Alfred Marcus (49:19)

then they like yeah, almost cult like at the beginning and if you weren't part of the culture you felt excluded

Stefan Meyer (49:25)

and yeah, which is, you know, again to the point I made before. If you differentiate, you know, it's okay to have a culture that I personally would not want to join but others want. That's kind of what, what you see in differentiation on when you think about customer segments. And I think that's true for employee segments as well. Now Amazon took over and the Amazon, you know, my book is like the prime example is kind of Amazon is extremely customer centric and not so employee centric. And why can't they take some of the lessons that they have from the customer centricity and then apply it to the employees interested?

Alfred Marcus (50:07)

Working in the warehouse at Amazon is not supposed to be a great experience and even their management teams are bated pretty severely I think from what I've heard.

Stefan Meyer (50:19)

Yeah,

Alfred Marcus (50:22)

I think it's also very interesting. Like a Target right now is trying to reemerge. You know, it's had troubles and even Starbuck is trying to reimagine themselves and a lot of the emphasis in both of the companies, the CEOs are saying is that the employee on the ground who sees the customer has to. The baristas. The baristas became is affected at Starbucks.

Stefan Meyer (50:48)

Early on in the new Starbucks CEO's tenure, I wrote an op ed which I think nobody, including the CEO, read. But anyway, I wrote it anyway where it was. I thought the baristas were really critical to that turnaround because you go into a Starbucks and pay a ridiculous amount of money for coffee, not because the coffee is actually better. Because the whole experience that there was. And that was, I think, the success of Starbucks at the beginning. It was the third place you came there. It made you feel good to be in that store. And then I think they lost that by like one is the scaling is just hard. You know, once you grow that fast, it's really difficult to stick to, you know, kind of having the culture within every single of those, whatever, multiple thousands of stores. But. But I think they also, like, lost a little bit the focus on that. And I think that's where like, whatever he calls like, back to Starbucks or Starbucks, I think that's where the baristas really kick in. And I completely agree that that's how you have to do it. There is no company that has happy customers with disgruntled employees if they have contact with each other, which of course, in Starbucks they do.

Alfred Marcus (52:11)

It's so critical in retail. And it reminds me of those studies that were done many years ago about Disney and Disney employees and how they. Because everything's an experience. It's really entertainment in a sense, where you go, it's competing against entertainment. You're shopping and it's competing against just sitting in your bedroom in the middle of the night and ordering something on Amazon. So it's

Stefan Meyer (52:37)

absolutely. And Alfie, it's interesting that you mentioned Disney because Disney is actually doing okay on the employee experience as well. But in my class, I had somebody from Disney there, and he mentioned that they're obviously killing it on the customer experience. They're really, really, really good. And so what they're now doing is taking those insights that they have from customer centricity and applying it to employee centricity to get even better when it comes to the employee experience. And if you think about what customer centricity is, you know, it's like, first of all, it's like getting insights. You know, what do the customers want? That's kind of the listening part we talked about before to think about, like, what does the employee actually want? You know, how can we make the experience more motivating that the employees have. Then it's co creating that it's constantly innovating on, you know, the customer wants that, how can we do better? And like constantly improving in order to increase the customer experience. And so you can should now apply that to the employees as well and then have those constant feedback loop that like you have to constantly improve. You know, if you would ask a marketing executive, you know, we talked about the engagement service, you know, like is it a good idea to ask your customer or once a year how they're doing? You know, they would laugh their asses off. It's like of course not. You know, I need like constant feedback loop focus groups, inside work and so on and so forth. But most organizations do like those annual engagement surveys. Everybody knows that nobody cares about them, so nobody participates in the first place. So they're completely useless. But if you take kind of the playbook from customer centricity, you have to take that really seriously. And then you can go on and on, you know, segmentations where we are very, very sophisticated in customer segmentation, figuring out what's the different segments and whatever. We're not so much on the employees. Some organizations starting to do that, but most are kind of a one size fits all kind of shop. And so there are many, many of those tools that customer centricity has that we can apply and Disney to come back to that example, who's really, really good on the customer experience or taking those insights and try to improve on a relatively good culture and make it even better.

Alfred Marcus (55:16)

Things have to be flexible so that people can experiment regularly and get the feedback from it to make improvement. You come at this as a behavioral economist, right? That's your training and your background. So how does academically, in terms of behavioral economics, what are the insights that you get from that discipline?

Stefan Meyer (55:44)

I mean I think the view of economics, and I do think economics affected the mindset of many people, including many executives, is that people don't like to work, they hate work. They only show up if you get a paycheck and or if you controlled. That's the only motivation for people to actually shop. Now if that's your view, you have to do a tailor style workplace. You control, you break it down into small buckets, you incentivize every single thing you do. So that's kind of the view of economics, standard economics and the behavioral economics part. The behavioral economics has many aspects, but one is kind of expanding kind of what preferences people have. And so that's kind of where I come from where I studied for a while to think about what actually motivates people beyond money. How important is it, how to think about it, how to leverage it. And so that's then a very different way of thinking about why people show up at work. I mean, money is not unimportant. There are very few people who just volunteer. But money is not unimportant, but it's not what keeps people then engaged over a long period of time. Especially then, if you think about competition, people have choices between one company and the other. And I think the choice to switch from one to the other is not like $5,000 more. It's like, you know, whether they are really engaged there by any of those formats, their purpose is better, they have more autonomy, more interesting stuff to do, hard problems to work on and so on, a better culture and so on. And that really makes a difference. So that's kind of where the behavioral aspect comes from. And it then sounds, you know, you measured, you mentioned OB or organizational behavior. Kind of the psychology before, you know, it gets then closer and closer to kind of that psychology part. That's kind of the psychology and the economics part that make behavioral economics.

Alfred Marcus (58:02)

Can you summarize it? What are the like four or five motivations beyond money that you think are most important?

Stefan Meyer (58:08)

Yeah, so the four I have at describe in the book and talk about kind of how to leverage it is the first is purpose or shoot for the moon meaning and so on and so forth. The second is autonomy or a matter of trust as I call it. The third is competence and call it just right tasks. And the fourth is relatedness. So working together works. So those are kind of the four motivators that psychology research actually show that for a while that those are the drivers of what makes people work. And then I apply them to kind of thinking about in a competitive framework like how do you can now differentiate by leveraging those four.

Alfred Marcus (58:56)

One thing that also in cultures, I think this is important to say that the competition between people sometimes can become very toxic. And how do you constrain that? Because in some ways it's good. You want people to compete, to do better, but you also don't want them to undermine each other.

Stefan Meyer (59:20)

Yeah, exactly. It's a hard part. I mean, I'm an economist, I'm fully in favor of competition in general. That includes kind of healthy competition between people, you know, or if you can think about sports, like it's, it's great that people compete for. For stuff if it has like that negative, you know, we Talked about kind of the, the lowest 5% have to go, or like where it's institutionalized, really, really brutal, brutal competition that can just have negative consequences. So you need to really balance kind of the competition or think about, like, it really gets unhealthy or people start to sabotage each other. And then people also differ. You know, like, there are organizations who get away with having really fierce competition by attracting people who really do, like, that type of thing. And in other parts where, like, it's more a collaborative environment and people thrive there as well. And so it's this figuring out kind of what your segment is, employee segment is as well, is a really important aspect of what leaders need to do in order to set up the success of like an employee centric strategy.

Alfred Marcus (60:41)

The collection of employees is very important. Their orientation, their ongoing socialization, all these are very important elements to it. But are there instances. And of course, there's an obvious one that I'm going to bring up, but instances where shareholder primacy conflicts with employee encouragement. There are times when, as awful as it sounds, is that layoffs are necessary. And the way they might be made and how they're made I think also probably affects the overall culture.

Stefan Meyer (61:23)

I mean, first of all, I do think, you know, like, layoffs are not a problem. I mean, in and in itself. And we talked before about outcome and process. You know, if, like, the process is fair. I mean, it always sucks to be layoffed. I mean, there is no, there is no way around that. But there is a way to actually do it that is human and has like, long term positive implications because, you know, it actually affects the culture as well if you're doing it in the wrong way. Now there is a big conflict with stakeholder orientation in that, you know, if you want to save money tomorrow, the way of doing it is cutting labor. That's the easiest, that's the easiest way to do. I mean, actually it's, it's, it's cutting labor and cutting all branding, marketing, all the customer experience stuff right away. That's the best way of, in the short term, optimize. But that also kills in the long term or in the medium term. Kind of thinking about the experience that people have now, layoffs are important. If you think about the turnaround, layoffs are an important part. Now, you mentioned Best Buy before. So the story I actually tell in Best Buy is the CEO at the time who was responsible for the turnover of Best Buy. And remember, that was a time where Amazon was killing all those electronic, Circuit City, Radio Shack and whatever they were all killed. And so Hubert Jolly was the CEO at that point, and everybody was like, dude, you're like, oh my God. And he has an interesting book describing this experience there. And his recommendations that he got was exactly what he just said, Cut, cut, cut, get rid of people, whatever. And he did it the exact other way. He actually started to listening what the associates were thinking, what are like the stupid rules. So he started from a very employee centric approach. In the end, he had to reduce the workforce as well. But he did it in a very different way and very much employee centric. So his book, which I think is fascinating, I think it's called the Heart of Business and it took. It describes kind of his journey, his what I will call like employee centric journey in a turnaround time, which is the hardest time to actually do such policies.

Alfred Marcus (64:10)

I have a chapter on Best Buy in my book and I. But, you know, and he did end up laying off a lot of employees, there's no doubt. And. But I think that Best Buy shined during COVID They really did go out of their way to not. To not cut off their employees completely from the salaries, even though people weren't really working. And the top management team took cuts in their salaries as well. I think they managed that extremely well.

Stefan Meyer (64:39)

And I think that's just. That's then a signal of kind of respect for those humans that turns out to be those employees. Those numbers are actually human beings that I completely. In turnaround time, you have to make tough decisions. I mean, there is no way around that. And I think think employee centricity is not like just being nice all the time. I mean, you have to be kind, I think. But like, but. But not. And we talked about that before, like hard criticism. You know, there's difficult decisions to be made, but you always have to keep in mind that there are like human beings who are affected by that.

Alfred Marcus (65:18)

You have to be very clear at the beginning with employees about how they would occur and what kind of benefits they would get if they were laid off. You know, it's not suddenly one day for no reason, you're taken out of the office by some anonymous person. It's, you know, they give you some time, they give you some benefits. They. There is retraining that's often done with. But I don't. I think sometimes that's a little bit token too, and it's carried out. But yeah. Anyhow, we've talked a lot and this has been a great conversation and we probably could go on for much longer, but Listeners will have their own level. So to wrap it up, what are you working on now? What is your current passion?

Stefan Meyer (66:12)

Yeah, so I'm still interested in many of the same aspects. So at the moment I'm actually extremely interested in a kind of in person work, you know, what is. If we think about hybrid work, what should be done in the office or not. So thinking kind of, of, well, how, how, how do we think about kind of what's the advantage of bringing people together, when should we not do that and how to actually actively design this? I'm, I'm, I'm really interested in that and bringing it back kind of to why do firms exist in the first place and how can we use kind of the theory of the firm and thinking about why do firms exist and what does that tell us about the value of in person work and not. And you know, I'm in the office right now, but I'm not always. Certain tasks require in person and certain tasks don't. And so designing it. Right. It is, I observe like it's not so easy for leaders to do who either like, you know, have those strict rules either five days or three days or four day, whatever it is. And I think they're missing the point of kind of being very intentional on how to use the workplace more effectively.

Alfred Marcus (67:29)

Post Covid, I think it's been hard to bring people back and sometimes it's done in a very coercive way rather than a friendly way. My next podcast I'm going to do is with Jerry Davis and I think he's going to talk a lot about these things.

Stefan Meyer (67:46)

Yeah, he has a lot of interesting things to say about that.

Alfred Marcus (67:49)

Yeah, right, Right. Okay. So this has been great for listeners, Stefan. This has been a fascinating discussion of the employee advantage, of what it really means to treat employees as central stakeholders rather than as a cost line. Your book makes a compelling case that designing work around human motivations, fairness, meaning growth and respect, is not only ethically attractive, but also strategically powerful and beneficial for the firm and employees. For listeners, we want to explore how these ideas play out in organizations facing real stress. I'll mention again my own book, Comeback, which looks at firms that have managed to reverse decline by realigning strategy and values. Taken together, the employee Advantage and Comeback both suggest that long run performance depends on how deeply we embed people and principles into our strategic decisions.

Podcast Host (68:42)

Stefan Meyer, thank you for joining me today and thanks for listening.

Stefan Meyer (68:46)

Thank you so much.

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