In Peak the author – founder of Joie de Vivre Hospitality, a collection of boutique hotels in California – uses Maslow's Hierarchy of Needs pyramid and adapts it to the business world by introducing pyramids depicting the needs of employees, customers, and investors.
I liked Peak because so far I never thought about the Hierarchy of Needs, which I already knew, in the context of business. While I disagree with some of the author's advice, I think his pyramids are a good tool to reflect on ones company. Also quite useful were the reading recommendations at the end of each chapter to delve into the topic of the respective chapter.
In this age of commoditization, one of the truly differentiating characteristics of leaders and companies is quality and durability of the relationships they create.
Maslow and Me
Toward a Psychology of Business
I went from being a genius to an idiot in one short year.
The goal I set for myself just a few years out of Stanford was to create a workplace where I could not only seek joy from the day-to-day activities of my career but also help create it for both my employees and customers.
What inspired me about the hospitality world was that if we got our job right, we made people happy.
The foundation of Maslow's theory is his Hierarchy of Needs Pyramid, which presumes that "the human being is a wanting animal and rarely reaches a state of complete satisfaction except for a short time. As one desire is satisfied, another pops up to take its place... A satisfied need is not a motivator of behavior."
Maslow believed that each of us has base needs for sleep, water, and food, and he suggested we focus in the direction of fulfilling our lowest unmet need at the time. As those needs are partially fulfilled, we move up the pyramid to higher needs for physical safety, affiliation or social connection, and esteem. At the top of the pyramid is self-actualization, a place where people have transient moments called "peak experiences".
If humans aspire to self-actualization, why couldn't companies, which are really just a collection of people, aspire to this peak also? What does a self-actualized company look like?
Based on his Hierarchy of Needs, the solution for a company that wants to ascend up the healthy pyramid is not just to diminish the negative or to get too preoccupied with basic needs but instead to focus on aspirational needs.
The tendency in psychology and in business has always been to focus on the deficits. Psychologists and business consultants look for what's broken and try to fix it. Yet, "fixing it" doesn't necessarily offer the opportunity for transformation to a more optimal state of being or productivity.
We often forget, especially in today's high-tech world, that a company is a collection of individuals.
How we set up our workplace mirrors our assumptions about human behavior and the world we want to create.
Karmic capitalism is just another way of saying "what goes around comes around".
In the business world, accountability, which literally means "the ability to count", defines how we value things. But is the inability to easily measure something a valid excuse for dismissing its value?
Companies that cultivate an environment that allows for peak individual performance are rewarded with peak company performance.
Both profits and personal happiness are best achieved when not aiming directly for them. They are the result of a collection of other activities that inspire your employees and yourself to a consciousness of the interdependencies we have with each other.
The Relationship Truths
One thing a downturn will teach you is which relationships in your life – both inside and outside of work – are secure and which ones are not.
The mood of an organization has a causal effect on everyone within that organization.
Companies often misjudge the true motivations of their employees, imagining that compensation is their primary aspiration. Similar to Maslow's placing physiological needs at the base of the pyramid, money (or, more broadly, the full compensation package) is a base need but also a base motivation for most employees.
Finding meaning in one's work – both in what you do daily and in the company's sense of mission – creates a more inspired employee.
Most of us spend our lives focusing on what is, but Maslow reminded us to focus on what could be.
Relationship Truth 1: The Employee Pyramid
Creating Base Motivation
Perhaps more than anything else, the experience of being flat broke and having to borrow money from friends rekindled my empathy for the challenges paycheck-to-paycheck workers face every day. Those of us at the top of the traditional corporate hierarchy tend to think that we earn the big bucks because our jobs are so stressful, but I can tell you that those at the bottom of the hierarchy experience a "just-getting-by" type of stress that most CEOs couldn't even imagine.
If you're a karmic capitalist interested in preserving a long-term enterprise full of trust with your employees, you make the right choice and acknowledge that your lowest-paid employees deserve the greatest support during the most difficult times.
Although the base of the Employee Pyramid is Money, this needs to be considered more broadly than just the size of the paycheck.
As a first step, you just need to ask yourself if your base pay is sufficient for your employees to feel that their survival needs are being met. As Maslow taught us, your employees can't focus on their higher needs when they have an empty stomach and fears about how the rent is going to be paid.
While money may pay the bills, it doesn't necessarily buy happiness.
What perishable asset can your company make available to your employees that would boost their perception of their compensation package?
How can your company better address the compensation needs of its employees? Are you confident these base needs are met? Which other companies can you emulate? Ask yourself – or your supervisor or your colleagues – to consider the following Peak Prescriptions:
- Determine your employees' current state of mind with respect to your company's compensation package.
- Ask employees "what one thing could we do as your employer to improve your package of benefits?" The more you can do this in a customized way for each employee, the happier they'll be. The "one-size-fits-all" mentality doesn't work for customers or employees anymore.
- Benchmark what your company is offering employees with similar companies, as well as top companies.
- Do an internal audit of how well you internally publicize your compensation package to your employees.
- Search for perishable assets that would make a difference for your employees.
- Form a senior executive team (that includes your highest-level human resources exec) and engage in a deep discussion regarding what unique strategy your company uses to address the Money level of the pyramid.
Giving recognition can be just as rewarding as receiving it, especially when you realize how meaningful it is to the recipient.
Most organizations get so caught up with the tangibility of compensation issues that they forget that giving authentic recognition to peers is one of the greatest ways to ensure low turnover and high productivity. The irony is that compensation costs big dollars yet truly only satisfies base needs whereas recognition is an inexpensive gift that provides a huge "bang for the buck" in satisfying employees' higher needs.
Great companies establish a clear link between what people are rewarded for and the organization's priorities.
Great companies educate and obligate their managers to provide one-on-one informal and formal feedback mechanisms to their subordinates to reinforce business objectives. Informal recognition, which tends to be most prevalent in the workplace, includes actions like positive in-person or e-mail feedback or spontaneously giving someone a small gift as a token of appreciation. This can be powerful because it's in the moment, customized, frequent, and doesn't have to be limited to boss to employee; it can also be peer to peer. Formal recognition includes programs like the annual awards ceremony, the employee-of-the-month club, or the performance review supervisors give their subordinates. Formal recognition executed properly helps to publicly define the company's values and goals and can provide widespread acknowledgment to those receiving the recognition.
For informal recognition to be effective, it must be (1) sincere and deserved, (2) specific and individualized, and (3) offered on a timely basis. Much of informal recognition is about creating a deeper connection with your employees.
Not every recognition has to have a reward attached, but if you are going to provide some reward, it's best if it's (1) customized to the tastes or needs of the recipient, (2) publicly offered so that the honoree is held in higher esteem and others can be encouraged to follow suit, and (3) immediately available to the recipient so that there's some instant gratification.
What can you do to create a culture of recognition in your company?
- Develop a recognition training program for your midlevel managers.
- Create a signature method for your managers to understand the importance of really "seeing" your employees.
- Teach all managers how to personalize and customize their approach to recognition.
- Use employee reviews as a formalized time to show recognition.
- Don't be stingy about recognizing your best performers.
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 in your company.
Finding meaning in one's work – both in what you do daily and in the company's sense of mission – is one of the rarest but most valuable qualities anyone can have in their job.
There are three kinds of relationships one can have with work: you either have a job, a career, or a calling.
If more people are working and commuting longer hours and have less time for external social activities that create deeper relationships, it's not surprising that they thirst for this sense of social connection from work.
Workplace meaning can be dissected into meaning at work and meaning in work. Meaning at work relates to how an employee feels about the company, their work environment, and the company's mission. Meaning in work relates to how an employee feels about their specific job task.
When employees think of their work from the perspective of the ultimate purpose, as opposed to the specific job description, they are able to see their role as more expansive and more linked to the organizational mission. Thus, the organizational success is their success, and a genuine sense of accomplishment can result for the employee.
Meaning is in the eye of the beholder. The more you can create peak experiences – whether it's coming face-to-face with an appreciative customer or building a sense of deep community among your people – the more likely your employees will see the meaning in what they, and the company, do.
A few ideas for how you can spread a sense of meaning in your workplace:
- Create an exercise that helps your employees understand just how much they impact the customer experience.
- Ask questions that remind your employees about the hidden value of "meaning". What's the best experience you've had in the past month here at work? If you did your job badly, how would that affect your coworkers and our customers?
- Create peak experiences for your employees that build their sense of community with each other.
- Make a list of the ten reasons people should join your organization.
- Ask disengaged employees to start a "gratitude journal" to help them build a sense of connection with the organization and what they do.
Relationship Truth 2: The Customer Pyramid
When company leadership focuses purely on meeting the expectations of their customers, they can become sitting ducks for a surprise competitor with a new mousetrap.
Customer innovation often happens on the margins by outsiders, instead of by industry leaders, who make the mistake of assuming that their customers are truly satisfied.
Most execs are more timid than they'd like to admit for fear of standing out in a negative way. So instead of imagining what would improve the lives of their customers, companies tinker with their existing products and make incremental product improvements based on the results of conventional customer satisfaction surveys. Most companies are more product-focused than customer-focused.
The price you pay is a big determinant of what value you expect to experience from your purchase.
You can create a Hierarchy of Needs pyramid for your company based on the product or service you are offering the marketplace. Just know that, similar to any Maslow-inspired pyramid, what's at the bottom tends to be more tangible or physical (features), what's on the middle level may have more of an emotional or intellectual payoff (benefits), while what's at the top is more transformational or even spiritual in nature.
Peak-performing companies know that they have to get the basics right at the base of the pyramid, but they won't likely outdistance their competitors by purely providing basic customer satisfaction.
The foundation of the Customer Pyramid is ensuring that you are delivering on the expectations of your customers. Here are some ideas that will help you succeed at addressing these foundational needs:
- Use your existing customer satisfaction measuring tools in more effective ways.
- Reach out to your customers with more direct questions that are relevant to your product or service.
- Move beyond looking just at your company's satisfaction surveys and look at the broad category you're competing in.
- Engage your executives and employees in a brainstorming session about how you would apply Maslow's Hierarchy of Needs to the motivations of your customers.
Sometimes you can learn more from the drivers of dissatisfaction than from the drivers that create baseline satisfaction.
The bigger you get as a company, the more you need to create forums for engagement with your customers. Even if you're big, act small. People are more likely to trust you when they can relate to you. And being humble usually means you're a more empathic listener.
We all want to feel special, a little different, and companies that indulge this yearning will be richly rewarded.
With technology in an enabling role, companies can create "learning relationships" with their customers such that the more the company interacts with the customer, the better the company understands the customer's desires.
Great service comes from finding the right people and creating a culture that is devoted to meeting the desires of their customers.
There are typically three kinds of employees: the superstars, the silent majority, and the weak links. To successfully launch a new hotel, you want to make sure you have twice as many superstars as weak links because the silent majority will gravitate to what's dominant. This isn't just relevant to hotels; it's important for any business that's trying to improve service or any business where employees are influenced by each others' performance. Employees are constantly looking for clues about how high they're supposed to jump. The superstars set the bar, but if they're in the minority compared with the weak links, the whole service infrastructure will slump. Even the superstars will lower the bar in that situation. The result for the customer might be service levels that may meet the basic levels of satisfaction but never aspire to that next level of meeting customer desires.
Will it be tech or touch that builds your expertise of understanding your customers' desires? If you're a leader in your industry, it will probably be a combination of the two.
- Engage intimately with your customers so you can truly understand their desires.
- Use technology to test your concept with your customers even before you launch it.
- Consider how you can build a "learning relationship" with your customers.
- Address your customers' social and belonging needs by making them feel a part of something bigger than themselves.
- Whether you're in the service business or not, inventory your staff to determine whether you have at least a 2:1 ratio of superstars to weak links.
While focus is an effective, time-tested approach to operating a business, if you are limited in terms of how you see your relationship with your customers in today's constantly changing world, you are likely to become irrelevant.
The first step in rising to the peak of the Customer Pyramid is to be willing to ask the simple yet penetrating question, "What business are we in?" Make sure to follow this question up with, "What are the unrecognized needs of our customers?"
How do you create a self-actualized customer?
- Help your customers meet their highest goals. When a company can comprehensively assist customers to reach their highest goals, it has built a deeply engaged relationship.
- Give your customers the ability to truly express themselves. If buying your product helps your customers to get in touch with a higher vision of themselves, you are helping to facilitate a peak experience.
- Make your customers feel like they're part of a bigger cause.
- Offer your customers something of real value that they hadn't even imagined.
Here are a few suggestions for how you and your company can focus more on your customers' unrecognized needs at the peak of the Customer Pyramid:
- Do an off-site retreat focused on creating your own Customer Pyramid. Ask Drucker's famous question, "What business are you in?" or adapt it to, "What business do your customers (or your future customers) wish you were in?"
- Focus on the four themes that help you address the peak aspirations of your customers.
- When in doubt, be a "Dreammaker".
- Measure and communicate about the mood of your customers. How does your team communicate about the mood of your customers, and how is your team empowered to make a difference when it is clear that one of your customers is having a troubling experience using your product or service?
Relationship Truth 3: The Investor Pyramid
Rarely am I asked, "What are the most painful lessons you've learned over the course of your career?" If you want to engage in a deep conversation with a business leader, throw this zinger question at them.
Everyone in a business is affected by the relationship a company has with its investors.
An employee can think of his boss as an investor of sorts: the boss invests time and money in hopes that the return on investment will be a productive employee.
Many people think that entrepreneurs or CEOs enjoy life without a boss. That's an illusion. Almost all of us answer to someone in the workplace. An entrepreneur or business leader is accountable to his investor or capital source, just like an employee needs to make sure that his boss is happy with their performance.
Some of the key utilitarian elements that any private investor is looking for:
- Rate of return. What's the minimum rate of return they are expecting from the investment, how is that being calculated, and what kind of extra incentives do you and the company receive if you hit some of their return thresholds?
- Liquidity timing and strategy. What is the time horizon for their investment, to whom would they sell their investment, and how does that sale affect your control of the company?
- Definition of the market and the company's approach to differentiation. Do you concur on the size of the market, the composition of your management team, and their fundamental business strategy for maximizing the opportunity? In other words, do you agree on the basic business plan?
- Cash needs to execute on the business strategy. Based on how you are going to grow the business and what key strategic investments need to be make to allow this scalability, are there expected cash-call requirements from these existing investors, or are you going to bring in another round of financing from other investors, and what's the approach to valuing the new and the old money?
- A single metric that defines effectiveness. Do you concur on what metric is the leading indicator of whether you are effectively managing the business?
Some suggestions for how you can ensure that you've created transactional alignment with your investors:
- Before they invest, make sure you understand the tangible motivations of your investors.
- Beware of the "wrong-owner syndrome".
- Create an investor survey that helps you get inside your investors' heads on a regular basis.
- Practice honest, direct, and regular communication with your investors.
By asking some insightful questions that are pertinent to the investor's particular interest (and maybe his knowledge base), an entrepreneur or company executive can collaborate with the investor in finding a solution, and in so doing, the investor is more likely to be satisfied with this path because they helped create this solution. Know that integrity and trust grow out of doing what you said you were going to do.
When money or ROI (return on investment) becomes the only language that glues a company and its investor together, it is likely this will be a short-lived relationship.
Some suggestions for how you can create relationship alignment with your investors:
- First and foremost, make sure you have chosen investors who are interested in moving beyond pure transactional alignment, and then explore their deeper motivations.
- If your investors have social or belonging needs, take a lesson from Berkshire Hathaway's annual shareholders meeting.
- Consider some perks that might sweeten the relationship.
Creating Pride of Ownership
The business world can be the most powerful institution for change that we've ever seen.
The companies most likely to create sustained profits are those that have an enduring purpose that balances the various needs of stakeholders.
Some suggestions for how you can seek and satisfy investors who have legacy needs or desires:
- Recognize that there are two kinds of legacy investors: the progressive hierarchical investor and the philanthropic investor. Some investors are romanced by the legacy of a potential investment, but they still need their transactional and relationship needs met first. In other words, they see the benefits of legacy investing as the icing on the cake. I call these people progressive hierarchical investors because they have progressed up the Investor Pyramid to self-actualization at the top, but they still care about the two levels below. There are other legacy investors who will never look at your annual financial reports, and they won't cash your dividend checks. I call these people philanthropic investors.
- Host a visioning session with your investor team about the impact this company can make in the world.
- Consider the "leader's legacy".
- Ask your investors how your company should serve the world.
Putting the Truths into Action
The Heart of the Matter
A unique corporate culture creates happy employees, which leads to greater customer loyalty that in turn drives a profitable and sustainable business.
Creating a Self-Actualized Life
How are you measuring success? What scorecard are you using? What is your calling?
Great leaders don't count their successes by the number of cars in their garage or by the impressiveness of their job title. Great leaders know their success is defined by the personal impact they've had on others.