Driving Business Results By Shifting Work Culture
NAREIM member Dan Stravinsky wrote recently about how Berkshire Property Advisors retained key talent in the wake of downsizing. ¬†Reprinted with permission of the Society for Human Resource Management (), Alexandria, VA, publisher of HR Magazine. ¬†For a print copy, click here.
Shortly after being hired to lead Berkshire Property Advisors‚Äô human resources function, I learned that Berkshire was planning to sell most of its 100 U.S. apartment communities. It was part of the company‚Äôs plan to wind down its partnership with two major Wall Street firms starting in 2004. The sale of the communities was necessary to return the capital that our partners had invested. Berkshire would shrink to a third of its size in a year‚Äôs time. We knew that keeping key people was necessary to rebuild the company. We also knew that creating and maintaining an appropriate corporate culture was essential to both organizational effectiveness and employee satisfaction and motivation. If we succeeded, we were sure new capital would flow our way. If we didn‚Äôt, Berkshire might not survive as we knew it. Culture in this context is loosely defined as "how we do things around here." It‚Äôs the collective behavior of managers and employees as it relates to producing business results. To "manage our managers," we had to be explicit about the behaviors we expected from them. This meant striking a balance between organizational objectives and employee needs; we knew we could not rely on generic advice from the latest article or business book. Our objective was to define what Berkshire had to do in order to be successful while at the same time satisfying and motivating its employees. A team of senior executives gathered in 2003¬†to identify the behaviors that would allow us to achieve our goal. The team developed an initial list of behaviors, which were then vetted by asking a representative sample of employees to choose the top items that they felt would positively affect effectiveness, satisfaction and motivation. Ultimately, we settled on 13 elements that we felt best defined the desired Berkshire culture and the management behaviors that would promote it. We believe that this "starting with the end in mind" approach was instrumental to producing the results we achieved. Managing Change To effectively implement change, an organization must be seen as a system of interconnected components; single-focus initiatives will not succeed. Many systems must be assessed to ensure congruence, consistency and support with the desired change; these include hiring, development, communications, policies and procedures, compensation and reward systems, and so on. Once we had a list of desired behaviors in hand, the next step was to ensure that our employees understood the culture we were trying to create. We established baseline measurements to gauge how the company was doing in each area. To determine where to focus our attention, we developed a culture survey in 2003 that assessed how employees felt things were at that time as well as how they wanted them to be. This allowed us to measure and manage the gaps between ideal and actual behaviors. We also developed a manager training class in 2008 that reviewed the connections we‚Äôve found between great management behaviors and low turnover rates, better revenue and net operating income results. It was originally conducted in person in Berkshire‚Äôs Atlanta office during new-hire orientation, but it is now offered online. "When new managers go through this training to learn the behaviors expected in managing Berkshire employees, they are surprised by the positive impact on revenue and other business results when employees are managed consistent with the behaviors we‚Äôve identified as being important," says Human Resources Director Jenn Licciardi. "The facts get them off on the right foot!" Choosing Actions Collecting information on the current status of an organization‚Äôs culture is only a first step. The key to successfully managing change lies in identifying which areas require attention and then determining the actions that will move the culture in the right direction. Berkshire chose an approach that had both targeted and broad-based components. Because we had limited resources for this effort, we focused only on areas where we saw the largest gap between actual and desired behaviors‚Äîtypically, no more than three in a given year. The survey data showed us only what the problem areas were; it didn‚Äôt tell us why they were problems or how we might address them. To learn more, we held employee focus groups to provide insights that we may have missed. In one of our offices, for example, we identified a concern about consistency in the application of policies. After meeting with a focus group, we determined that the perception of inconsistency could be traced to the performance of a single employee. Thus, we focused our efforts on correcting that employee‚Äôs behavior, and subsequent surveys showed that consistency scores in that location improved substantially. In another case, we took a broad approach to addressing an organizationwide problem with communication. People weren‚Äôt sure what the company‚Äôs goals and priorities were. There wasn‚Äôt enough information shared on how¬†the company was doing, and not all employees received the information they needed to do their job effectively. With employee input, we developed a communication plan to address the issue as systemically as possible. The plan included 14 actions, each of which had a target purpose, audience, method and point person. Examples included the following: A corporate goal-setting process that cascaded goals to each individual employee. Monthly conference calls that enabled employees at more than 100 locations to get updates on company operations. An anonymous online "message board," on which employees could ask questions, make suggestions and otherwise comment on what was going on at the company. Each post received a response. The plan underscores the complexity of bringing about change in just one area. Multiply this by the number of areas requiring improvement, and it‚Äôs easy to see why many efforts to change corporate culture fail. It‚Äôs a lot of work! A Systemic Approach Once an issue is identified, you must focus on all areas related to it. Hiring, assessment, development, pay practices and performance management are interrelated, and all policies, procedures and practices must be examined. For example, we wanted our onsite property managers to focus more attention on their employees in addition to the physical assets. To encourage that, we modified the interview questions used during the hiring process and added an assessment tool to screen candidates based on attributes that our best people managers demonstrated. In addition, we introduced training to build people-management skills, modified our performance appraisal forms to include categories related to hiring and management, ranked all property managers annually on how they managed their teams, and linked pay decisions to staff-management skills. Berkshire also allowed each team to rate its property manager on whether he or she was using the behaviors we had defined in managing the team. Did the manager set clear expectations? Provide training and feedback? Empower team members to make decisions, and recognize them when they did well? The Payoff The results of our property manager survey demonstrate the connection between Berkshire‚Äôs ideal management behaviors and business results. Managers who received low scores in demonstrating desired behaviors also performed more poorly in terms of business results, compared with high-scoring managers. They had an average score of less than 7.3 out of 12 on Berkshire‚Äôs key performance metric, while high-scoring managers scored close to 7.8 on average.¬†In other words, managers who set clear goals, provided feedback, developed their staff, encouraged teamwork and otherwise promoted Berkshire‚Äôs desired culture performed much better than those who didn‚Äôt. We saw similar results with average employee turnover: It was 52 percent for those reporting to low-scoring managers vs. 37 percent under high-scoring counterparts. The company provided coaching to property managers who had trouble adapting to Berkshire‚Äôs desired culture. If they showed no improvement, they were terminated. As the chart shows, these results were also seen companywide when we compared culture survey results with employee turnover statistics for the comparable years. Turnover costs companies between 75 percent and 150 percent of an employee‚Äôs base salary. It has a huge effect on an organization‚Äôs ability to get work done and perform well financially. We examined the impact of turnover among our marketing and sales consultants. For each property at which turnover occurred, more than $46,000 in revenue was lost per consultant who quit. This figure represented 1.4 times the average consultant‚Äôs base salary‚Äîand it didn‚Äôt even include costs for recruiting a new employee or drawing on existing staff to get work done in the interim (e.g., overtime, training, lost efficiency). Comparable results were seen for other jobs. Keys to Success Berkshire looked at culture as a systemic issue and pushed all necessary levers to bring about change, reviewing policies and procedures, compensation systems, performance management, hiring criteria, and employee development. We are now three times the size we were in 2005 with half the employee turnover‚Äîan excellent outcome for all involved. Dan Stravinski, SPHR, is senior vice president of HR at Berkshire Property Advisors LLC.