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Empowerment for the bottom line

By Golnaz Sadri

Executive summary
Success stories from employee empowerment abound in business literature. But that strategy might not succeed at every level of every corporation. Executives need to figure out if their organizations will benefit from employee empowerment. If the answer is yes, then executives need to enact organizational and managerial activities that lead to empowered employees because profit surely will follow.


Additional academic support

Employee empowerment refers to the various ways in which nonmanagerial workers are enabled to make autonomous decisions without consulting a boss, supervisor or manager. To empower their employees, companies adopt strategies that can range from having no scripts, which lets employees  choose how to talk with customers, to giving employees discretion over how to spend thousands of dollars to satisfy an unhappy customer. Empowerment refers to strategies that allow employees to do what they think is best rather than having them do what a supervisor or manager thinks is best. Since everyone in an organization can be empowered, it creates an environment where employees cooperate instead of compete for limited power and resources.

Research has shown that empowered employees are more productive and more satisfied with their work. They exhibit greater levels of innovation and produce higher quality products and services than other employees. In turn, these outcomes of greater job satisfaction, productivity, innovation and quality lead to greater levels of organizational effectiveness and profitability. The following will highlight some organizational success stories, address the question of whether employee empowerment is right for your organization and examine strategies for implementing empowerment at both a macro (organizational) level as well as at a micro (managerial) level.

Success stories

Nordstrom, a chain of department stores, has a no-questions-asked return policy. Employees are empowered to give customers a full refund for returned merchandise. This policy is demonstrated in the frequently cited story of an older gentleman trying to return some tires he thought he had bought at a Nordstom store in Alaska. While the confused sales clerk is explaining to the customer the difficulty with the return transaction since Nordstrom does not sell tires, Mr. Nordstrom walks by and overhears the conversation. He immediately takes the tires, giving the customer a full refund. In The Nordstrom Way, Robert Spector and Patrick McCarthy note that the No. 1 rule at the company is: “Use your good judgment in all situations. There will be no additional rules.”

The philosophy is that sales people are empowered to make decisions that Nordstrom management is willing to accept. Nordstrom believes that excessive rules, regulations, administration and narrow communication channels take away employee initiative and drive. Fewer rules mean that employees do not have to fear breaking the rules. Instead, they spend their time taking care of the customer and seeing the dollars follow. Spector and McCarthy write that Nordstrom is reputed to enjoy the highest sales per square foot in the retail industry.

For another case, D.E. Bowen and E.E. Lawler in Sloan Management Review wrote that employees at the Ritz-Carlton hotels are empowered to refund up to $2,500 to an unsatisfied guest. On ExpertMagazine.com, Bill Lampton cited the Ritz-Carlton credo: “The Ritz-Carlton experience enlivens the senses, instills well-being and fulfills even the unexpressed wishes and needs of our guests.”

Several years ago homes in the area near the Ritz-Carlton in Laguna Niguel, Calif., were evacuated due to the risk of fires. The Ritz-Carlton made an exception to its rule of not allowing pets to stay at the hotel. In anticipation of the need for pet food, one employee drove to the nearest grocery store and purchased both cat and dog food for the understandably harassed guests. In another instance, Bowen and Lawler describe the story of the concierge at the Ritz-Carlton hotel in Atlanta who helped locate a specialty grocery store for a hotel guest and arranged for the doorman to drive the guest there when he was unable to find a taxi.

Similarly, Hampton Inns have a sign at the front desks that lets guests know that if they are not satisfied, they are not expected to pay. Melissa O’Brien, Chris Daly and Jerry Daly write on Hotel-online.com that the guarantee empowers all employees of the hotel, from the president to the housekeeper, to refund a guest’s money if he or she is not satisfied completely with his or her stay. Employees don’t need a manager’s approval to do this. Employees receive training on the philosophy and implementation of the 100 percent satisfaction guarantee. Refunds might be offered before a guest complains as well as after a complaint.

The guarantee has been invoked for different reasons over the past 10 years, ranging from rough toilet paper to the free wireless Internet connection being down to an alleged UFO encounter. In that case, a guest was awakened in the middle of the night by a series of flashing lights that the guest said appeared to be coming from a UFO. The most common problems cited are occasional power outages and equipment breakdown. Phil Cordell, senior vice president of brand management at Hampton Inn, stated that when a problem is fixed as soon as it is reported, most guests decline a refund. The result of the program has been increased ownership of the work process as well as increased job satisfaction for Hampton Inn employees, resulting in a reported seven-fold increase in repeat business.

Zappos.com, an online shoe and clothing retailer, is listed at No. 15 on the 2010 Fortune magazine list of 100 best companies to work for. Zappos.com also empowers employees to focus on customer service. CEO Tony Hsieh details in his book, Delivering Happiness: A Path to Profits, Passion, and Purpose, that Zappos.com has no call center scripts, no time limits to customer calls and employees can upgrade a customer’s shipping request for free as part of their routine business. Zappos. com strives for a fun and transparent company atmosphere. The company has a monthly newsletter, Ask Anything, through which employee questions and concerns are aired and answered.

At No. 4, Google also is on the 2010 Fortune list of 100 best companies to work for. The company encourages teamwork and innovation. A. Lashinsky wrote in Fortune that Google engineers are empowered to devote 20 percent of their time to pursuing innovative projects that might help the company. The policy has helped employees generate innovations that include Google News, Gmail and the Google Finance site. Moreover, nontechnical ideas that might help employees in their daily activities also are welcomed and have a chance at implementation. One employee who was tired of driving to work every day found a bus company and plotted potential routes for a company shuttle. Once she completed the research, she brought the idea to senior management, and it was adopted.

Can employee empowerment help you?

While the evidence might present a compelling argument for employee empowerment, it may not be feasible for all organizations to implement this plan. Bowen and Lawler caution against a one-size-fits-all strategy and suggest that organizations examine their business strategy, pattern of relationship to the customer, technology, business environment and fundamental management philosophy in deciding whether employee empowerment is a good fit. They suggest that the production-line approach is best suited to organizations that pursue a low-cost, high-volume business strategy with brief customer contact periods, routine technology, and a stable and predictable business environment. This situation might call for a more hands-on reward and punishment management philosophy and practice. Fast food chains, producers of durable goods and producers of generic products are examples of companies that might fall into this category.

Conversely, organizations that use a customized business strategy, have long-term ties to customers, use nonroutine technology, operate within an unstable and unpredictable business environment and employ workers with a higher level of need for social interaction and growth most likely will benefit from employee empowerment. Luxury hotels, gourmet restaurants and producers of custom goods are companies that might fall into this second category.

The writers further advise that there may be levels of empowerment, or steps toward greater levels of empowerment, based on the organization’s needs and strategies. Where the business environment is best suited to a production-line approach, such as in a fast food restaurant, organizations might use a production-line approach but try an empowerment approach for jobs that have a greater degree of flexibility and ambiguity. If the empowerment approach appears to be working well, such organizationsmight consider changing some aspects of the business so that empowerment becomes a better fit. For those companies ready to empower, Bowen and Lawler summarize the empowerment equation as follows: empowerment equals power multiplied by information multiplied by knowledge multiplied by rewards. The significance of the multiplication sign is that if one of the elements is zero, the resulting empowerment will be zero.

Implementation, organizational level

In Organizational Dynamics, R.E. Quinn and G.M. Spreitzer provide seven key questions that organizations need to address if they are committed to implementing employee empowerment effectively. The seven key questions are:

What do we mean when we say we want to empower people? Empowerment means different things to different people. Perceptions of empowerment typically fall into one of two categories: a mechanistic approach or an organic approach. In the mechanistic approach, senior management develops a vision and communicates specific plans and assignments to organizational members. The organic approach involves trusting people and embracing some level of risk taking, growth and change. Thus, while mechanistic approaches are top-down, organic approaches are bottom-up. Quinn and Spreitzer suggest that effective empowerment requires a combination and integration of these two approaches.

What are the characteristics of an empowered person? Quinn and Spreitzer conducted interviews with individuals who were asked to describe experiences of empowerment and disempowerment. They found that most empowered people share four characteristics: self-determination, meaning, competence and impact. That is to say, empowered people think that they are free to choose how to do their work (self-determination); empowered people care about what they do and think that their work is important to them (meaning); empowered people are confident in their abilities to perform well (competence); and empowered people sense that others listen to their ideas, and they are able to exert some influence at work (impact).

Do we really need empowered people? Empowered employees differ from disempowered employees. The former see themselves as more effective in their work, are more innovative, are more willing to try something new and are more transformational in their leadership styles. Thus, if the qualities of effectiveness, innovation and transformation might complement an organization and add to its effectiveness, empowerment likely will work well.

Do we really want empowered people? There are three main barriers to employee empowerment. First, bureaucratic structures with their emphasis on hierarchy and maintenance of the status quo tend to work against employee empowerment. Second, where organizations have created strong divisions between departments with a resulting rise in competition between functions and people, empowerment more likely will lead to conflict among people and is less likely to work. Third, where employees already are pushed for time and are suffering from work overload, they are less likely to embrace empowerment and are less likely to be able to focus on creation and innovation.

How do people actually develop a sense of empowerment? Empowerment is an individual’s mindset regarding his or her role within the organization. At initial implementation, empowerment requires that people change the way they see themselves in the context of their organization, and this revised vision causes them to engage in new behaviors. When the new behaviors are rewarded, people reflect on and learn from them. They are encouraged and motivated to continue and tend to impact those around them positively.

What organizational characteristics facilitate employee empowerment? Four factors assist in the process of empowering employees. The first of these is a clear vision and strategic direction for the organization. Second, people need to feel valued, trusted and able to work cooperatively with others. Third, empowered employees need clarity in their goals, lines of authority and task responsibilities. Fourth, empowered employees need to feel secure and to have the support of their bosses, peers and subordinates.

What can leaders do to facilitate employee empowerment? First, leaders need to be empowered themselves. Leaders at the higher echelons of the organizational hierarchy need to assess and, if necessary, change their behaviors to embrace empowerment. The effect then ripples down the organizational hierarchy.

Implementation, managerial level

Once the seven questions have been answered and a manager thinks that employee empowerment is right for the organization, a number of actions might help the manager implement the strategy in an individual department or unit. In Developing Management Skills, D.A. Whetten and K.S. Cameron present a nine-step model for managers who wish to implement a program of employee empowerment: (1) articulate a clear vision and goals, (2) foster personal mastery experiences, (3) provide modeled exposure, (4) provide support, (5) create positive emotions, (6) provide information, (7) provide resources such as technical support, administrative support and ongoing training, (8) connect to outcomes and (9) create confidence. Each of these steps is examined below.

Step one: Vision and goals. The first and perhaps most important step for a manager implementing a program of employee empowerment is to articulate a clear vision, a path identifying the direction in which the organization is headed and how employees can contribute. Vision statements that are short, simple and capture the values of the company work well. It is especially effective for energizing and empowering employees if the vision stirs up positive emotions and underscores the value the organization places on its employees. Vision statements often are translated into multiple languages and thus need to encompass values and ideas that are compelling to employees across the globe.

Step two: Personal mastery experiences. The second step for a manager implementing a program of employee empowerment is to create and foster personal mastery experiences. Having the opportunity to perform an activity successfully builds one’s confidence and propels future successes. Mastery experiences are the single most important source of perceived self-efficacy, which is a person’s belief in his or her ability to complete a course of action successfully. Self-efficacy is a situation-specific expectation; thus, each person has a range of high and low self-efficacy expectations at any point in time. For example, right now readers might think that they are good golf players (high self-efficacy), average tennis players (moderate self-efficacy) and poor at public speaking (low self-efficacy). According to A. Bandura in Psychological Review, self-efficacy relates to human motivation, performance accomplishments and emotional well-being. When people believe they can produce the outcomes they desire by their actions, they have an incentive to embark on activities and to persevere in the face of obstacles and adverse circumstances.

Step three: Modeled exposure. Another way to instill confidence in people and to develop their self-efficacy expectations is to provide modeled exposure to the desired behaviors. This is the third step in Whetten and Cameron’s employee empowerment model. When a person sees someone else successfully accomplish a desired behavior, it raises his or her confidence that the behavior is within grasp. This makes mentoring programs beneficial. The mentor often can be a role model for the protégé, showing that person the ropes both by words and by actions. Similarly, employee achievement awards provide modeled exposure for the remainder of the organizational constituents. The recipient of the award becomes a person for others to look up to and emulate.

As a caveat, the administration of awards needs to be handled fairly and be viewed as a valid and reliable process in order for employees to benefit. If the employee thinks that the system is unfair and there is no way for him or her to achieve the desired behavior, the hard work that went into the recognition process likely will have a negative effect, and employees may give up instead of trying harder.

Step four: Provide support. Provide support in the form of praise, encouragement and approval. Much research supports the idea that positive feedback has an encouraging effect on worker performance. Employees recall positive feedback more precisely than negative feedback. While the manager plays a focal role in providing positive feedback and praise to employees, using multiple channels of feedback through the establishment of client relationships and 360-degree feedback opens up more avenues for knowledge of work results and one’s impact in the overall supply chain. Having a customer directly tell an employee how helpful the product or service provided has been can increase that employee’s sense of impact and importance.

Step five: Create positive emotions. The arousal of positive emotions, where work is viewed as fun, has a positive impact on empowerment. Emotions accompany all of our activities. Negative emotions such as fear and anxiety tend to impede performance, while positive emotions such as excitement and interest tend to enhance performance. Both Southwest Airlines and Zappos.com are good examples of organizations that encourage employees to have fun. As an example, Southwest Airlines has a number of planes with exteriors decorated in fun and decorative themes. Some of the airline’s fun themes include its three “Shamu” aircraft; a “Lone Star” painted like the Texas flag; and a “Slam Dunk,” which symbolizes the airline’s partnership with the National Basketball Association. The 10 core values of Zappos.com include Value No. 3: “Create fun and a little weirdness.” They think that this value encourages employees to enjoy their work, think outside the box and be more innovative.

Step six: Provide information. Information is an important source of power in organizations, and sharing this power is a fundamental part of an employee empowerment program. Employees are best able to complete assignments successfully if given all appropriate task-relevant knowledge. It also helps when they know how their specific role connects to the organization’s overall mission. The important role of information in the process of empowerment is reflected in Bowen and Lawler’s empowerment equation presented above (empowerment = power multiplied by information multiplied by knowledge multiplied by rewards).

Step seven: Provide resources. Managers engaged in empowerment programs must provide their employees with resources. This includes technical support, administrative support and ongoing training. Ongoing training likely will be diverse and will focus on both hard (technical) skills as well as soft (interpersonal) skills.

Step eight: Connect to outcomes. Most, if not all, employees like to see some result from the time and energy they put into their jobs. This leads to the eighth step, connecting to outcomes. Managers can design strategies where employees are put in touch with customers. For example, employees of a company that imports exotic food products likely would benefit from visiting their restaurant customers and sampling the food cooked with the ingredients that the employees procured in the past few months. Other ways to connect to outcomes are giving employees discretionary ability and authority to resolve problems for customers as they arise. Turning a customer from disgruntled to satisfied within the space of 15 minutes, one phone call or one difficult encounter at a time, likely will be powerful for employees and contribute to the ninth and final step, creating confidence.

Step nine: Create confidence. Operating with confidence in our lives and in our jobs clearly is beneficial. When employees are confident in their work and confident that their managers will support them and stand behind their decisions, energy is diverted from saving face to finding new and creative ways to help the organization reach its goals. Whetten and Cameron suggest that managers who are fair, consistent and transparent in their actions and demonstrate competence and caring toward their employees most likely will instill confidence in their subordinates.

Empowerment enables employees to make autonomous decisions that can serve customers best and enhance the goals and strategies of the organization. Research has shown positive outcomes from empowered employees. They tend to be more productive, satisfied and innovative while providing higher-quality products and services than employees who are not empowered. All of this leads to greater levels of organizational effectiveness and profitability.

Golnaz Sadri is a professor of organizational behavior at California State University, Fullerton. She received her doctoral degree in organizational psychology from the Victoria University of Manchester, United Kingdom. Sadri has published articles in various national and international journals, including the Journal of Vocational Behavior, Applied Psychology: An International Review and the Journal of Managerial Psychology. She also has participated in various national and international conferences, including events of the Society for Industrial and Organizational Psychology, the Western Academy of Management and the National Academy of Management.

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