When a company shifts its internal investments around, employees who get the short end often feel like corporate losers—marginalized and demoralized. Because so many companies budget by simply adding a few percent to each department’s budget, a cut can seem brutal. Employees might even stop caring about the company’s mission or the needs of customers, and that’s when real damage sets in for any company.
But what if a company considered a team’s sacrifices just as important to its mission as a team’s achievements? In that scenario, hard-working employees and managers would be heroes for doing more with less. What if having a smaller budget was as much a sign of professional success as a large one?
That’s my ideal workplace.
Companies with this attitude are rare, but they’re usually doing other important things right. Their leaders put their cash behind efforts that meet their customers’ most pressing needs, rather than hoard it or return it to investors. They’re thoughtful about spending and focus their resources on the few areas where they can truly delight customers and excel. They also challenge the notions that larger incumbents hold tightly, such as the idea that a department budget is a measure of power and influence.
It reminds me of an orthodontist I knew who paid his team out of a set percentage of his practice’s monthly revenue. Each month, the team would plan out the most efficient way to allocate practice resources to provide high-quality service to patients. The goals were efficiency and quality, and the whole team shared the benefits of achieving both. And because the team felt a sense of ownership and pride in the practice, they marketed its services and customer referrals skyrocketed. The approach inspired me so much that I included it in one of my early books, Loyalty Rules!
My Bain colleagues James Allen and Chris Zook call companies with these traits “insurgents” because they’ve essentially declared war against their industry on behalf of underserved customers. Every employee, every department will do what it takes to win the war. You know these companies. They’re the Netflixes, Apples and IKEAs of the world.
In their new book, The Founder’s Mentality, James and Chris explain how these companies continue to disrupt their industries by staying true to their founder’s bold mission. Returns to shareholders in public companies where the founders are still involved are three times higher than in other companies. Companies that are in the top 20% in terms of performance, regardless of whether they are still founder-led or not, are four or ﬁve times more likely to exhibit the attributes of the Founder’s Mentality than the bottom 20%.
That applies to many Net Promoter companies, and let me explain why. First, the Founder’s Mentality infuses a sense of company ownership that inspires and empowers employees at every level. Employees bring that passion to their work, whether it’s in R&D or at the front line, and their energy ultimately results in a memorable customer experience that keeps customers coming back. Our research suggests that highly engaged employees can increase revenue two and a half times as much as unengaged ones.
Second, companies with the Founder’s Mentality understand their customers’ needs deeply and put all their resources behind meeting them, so they have some of the most loyal customers around. These companies use customer feedback to hone their products and services, and they know how to innovate efficiently.
And finally, the Founder’s Mentality philosophy requires companies to know their loyalty economics—the value of their best customers and how it contributes to profits. These companies are obsessed with their front lines—their customer-facing employees. And they try to eliminate anything that could get in the way of supporting those employees, including organizational layers or pernicious bureaucracy.
All of these factors come together to create a workplace that ultimately fulfills customers and employees. It doesn’t matter if you work in the overburdened payroll department that hasn’t added an employee in two years or if you’re leading an exciting initiative that’s launching a new product. You’re all on the same inspiring mission, and sales and growth are the natural byproducts.
If you haven’t read The Founder’s Mentality, I recommend that you check it out.
Fred Reichheld is a Bain fellow in the Loyalty practice and the creator of the Net Promoter System.