In 2014, we (along with our friend, Ben Casnocha of Village Global) published The Alliance. The book argued that in the modern economy, the key to a stronger, healthier, longer-lasting employee relationship was to be honest about the temporary nature of nearly every job. The core of the book was the concept of a Tour of Duty– an explicit agreement between manager and employee that defined the employee’s mission, the company objectives that mission would support, and the career-accelerating benefits the employee would reap for successfully accomplishing that mission. Only by being honest with employees could companies and managers build alliances based on mutual trust, investment, and understanding. When each party is transparent about what they want out of the relationship – much like negotiators of a treaty of alliance – employees can work with their managers and employers to steer their careers on a track that transforms both company and employee.
In 2020, the world is suffering through the Covid-19 pandemic and its economic fallout, and those alliances are under more stress than ever before. Here in the United States, we are experiencing record unemployment levels as entire industries like restaurants and airlines have been nearly shut down by our response to the virus. But while we wrote in the book that force majeure events could require allies to re-think the terms of their alliance – and few events could better fit the bill of force majeure than the Covid-19 pandemic – the current crisis also represents an opportunity to honor and strengthen those alliances, even in cases where employers are furloughing or laying off employees.
We discuss this in detail in the latest episode of Greymatter. You can listen to that here:
How Employers Should Honor The Alliance
When you’re an employer, you have to balance your moral obligations to your employees with your obligations to the business. Sadly, this sometimes means laying off employees. But this doesn’t mean that employers can’t behave like a good ally even to those laid-off employees. At Airbnb, for example, Brian Chesky and the management team decided to lay off about 25% of employees. This wasn’t the fault of the employees; the entire travel industry has been decimated by the pandemic. But the company provided generous severance packages, waived the usual one-year cliff for vesting stock options, and dedicated its recruiting team to helping former employees find new jobs. That’s an example of being a good ally during and after a layoff. And you don’t have to be a big company to do this; any business owner can provide good references, try to place former employees at other businesses, and stay in active communication with them to offer help and advice.
You should be a good ally simply because it is the right thing to do. But it also has major business benefits. Let’s say that you lay off a great employee, but do so in a way that honors the previous commitment to each other. When the pandemic ends, that employee will be much more willing to come back, or if she found another job in the interim (and thus needed to honor that new alliance), she could still refer other potential hires. You probably can’t offer a lifetime employment relationship, but you can offer a lifetime alliance where you remain an ally of the employee even after the employment relationship ends.
How Employees Should Honor The Alliance
The Alliance is a mutual, two-way relationship. And while it is easier for employers to initiate an alliance, employees can proactively do so as well, even if their manager or employer has never read or heard of The Alliance. An employee might tell her manager, “I’ve been following the progress of the business, and I understand that you may need to lay me off. I’m scared. I’m uncertain. But here are some ways that we can help each other, even if you have to lay me off.” The employer may never have considered that the relationship could persist after a layoff, and proposing a way to do so might be welcome. The wonderful thing about capitalism is that it can be a non-zero sum game. A small effort from the employee could make a big difference for the employer, and vice versa. That’s how we create a lot more value in the system by being open and honest with each other.
And by the way, if you’re an employee, and you take this approach only to discover that your employer doesn’t have any interest in operating this way – and doesn’t really care about you or your career – you should probably find another employer. You should find someone who genuinely cares and wants to be a good ally.
Trust and Transparency Are The Keys
The Alliance works when employer and employee practice trust and transparency. An employer who doesn’t trust the employee will offer little transparency (especially if the future looks bleak), hoping that the employee will work hard based on false hope. Conversely, an employee who doesn’t trust the employer will work hard until a better opportunity arrives, and then drop that job like a hot stone. In both cases, the goal is to milk every last drop of value from the relationship before ending it permanently.
This distrustful and opaque approach might produce some short-term gains in that single transaction, but it is bad for long-term value. It’s bad for culture, and it’s bad for reputation. Any other current employees or incoming employees who observe this behavior will rightly conclude that they’ll likely be subject to the same shabby treatment at some not-too-distant point in the future. Game theory has shown that multi-transactional, relationship thinking is generally the better long-term strategy. When you behave like a good ally, employees are more likely to join your company, and employers are more likely to fight to retain you, no matter how dire the business circumstances.
Practicing transparency during a time of great uncertainty can be difficult. It doesn’t feel good to tell your employees, “I don’t know what next quarter’s going to look like.” But by communicating with them honestly now, you’re demonstrating that you’ll communicate honestly with them in the future. And when an employer or manager is transparent, the employees are much more likely to trust them when it really counts. That’s why The Alliance framework becomes even more important in times of crisis, like our current pandemic.
For example, consider how The Alliance could help with implementing the Paycheck Protection Program. If you’ve been transparent from the start, and remained a good ally, when you receive government funds and offer to rehire any furloughed employees, those employees will likely think, “You were honest with me in the past, so you’ll probably be honest with me in the future.” They may even be more dedicated to their jobs than before. On the other hand, if you haven’t been transparent, those employees might still accept your offer, but who could blame them for viewing it as a temporary arrangement until they can find a more transparent and trustworthy employer?
The Crisis Can Forge Stronger Alliances
One of the opportunities that the Covid-19 crisis presents is the chance to strengthen existing alliances. If we are open and honest with each other about our fears, share the pain caused by the crisis, and commit to a future together, we’ve just proven to ourselves how well we can work together.
A study by Willam Tov and Huey Won Lee (“A Closer Look at the Hedonics of Everyday Meaning and Satisfaction”) found that people found greater meaning in their lives on days where they experienced social conflict. Or in other words, whatever doesn’t kill the relationship can make it stronger. We’re reminded of the great movie Apollo 13. When NASA’s director worriedly says, “This could be the worst disaster NASA’s ever experienced,” Flight Director Gene Kranz (played by Ed Harris) responds, “With all due respect, sir, I believe this is going to be our finest hour.” This crisis is an opportunity for many to make this their finest hour as managers.
Consider the case of Gravity Payments. It became very well known in 2012 because its CEO Dan Price took a massive pay cut so that everyone in the company could make at least $70,000 (which is the amount of money beyond which science tells us more money tends not to affect happiness).
It’s a payments company that serves small merchants like bars and restaurants, so the Covid-19 pandemic impacted its revenues. Price looked at the numbers and thought, “Oh my goodness. I’m going to have to cut 20% of my staff. How are we going to manage this?” He was feeling terrible about it. But what he did, which is so important, is he went to the team and said, “Here’s the situation. Here’s what’s happened to our revenues. Here’s our cash reserves. What should we do?” And what happened is that different members of the organization volunteered to take pay reductions and there were enough volunteers and enough pay reductions to avoid layoffs. We’re happy to report that as of June, the company had zero layoffs, did not raise prices, and still turned a profit. How strong do you think those relationships are now?
What If The Pandemic Has Accelerated My Business?
A lucky minority of businesses have seen the Covid-19 pandemic accelerate their businesses. The Alliance can help these businesses as well. If your business is surging, you should apply Alliance principles to two different groups.
The first group are your current employees, who are likely to be under intense stress. They’re likely working from home, with all its associated distractions (especially now that school is out for the summer), and yet you’re asking them to kick in the afterburners to work even harder than before. To support them, you need to do two things: First, you need to make sure that accomplishing the current mission also benefits the employees. In Silicon Valley, where nearly all employees own stock or have stock options, there are clear financial rewards for kicking in the afterburners. But if this kind of equity incentive isn’t possible, you need to offer something more than “do it for the good of the company.” This could take the form of cash bonuses, non-monetary perks, or most of all, career advancement and increased employability. Second, you need to offer more flexibility – this is both a non-monetary benefit and a way to make kicking in the afterburners more sustainable. If employees need to have a child on their lap during a meeting, that’s just the new reality. If they need to work outside of conventional business hours because of their childcare situation, all that matters is how much they accomplish.
The second group are the new (possibly temporary) employees coming in to help with the surge. To be good allies to them, managers and employers need to be honest about expectations. They should know that while some of them will end up being hired as long-term employees, most will not. But the organization should commit to being a good ally even to those who don’t become permanent employees. It should offer great references to the short-term employees who performed well, encourage them to list the job on their CV and LinkedIn profile, and try to help them find their next tour of duty.
Playing The Rebound With The Alliance
At some point, medical science will likely find effective treatments and vaccines to defeat Covid-19, and the world will move forward to a new normal. When that happy day comes, Alliance principles can help organizations more effectively play the rebound.
When the recovery begins, most people will still bear the scars of the pandemic, having gone through an unprecedented level of fear, uncertainty, and trauma. More than ever, they will be drawn to and benefit from being a part of high-trust organizations. The Alliance will allow those organizations to hire those people by offering a clear tour of duty, backed by the credibility earned by honoring their alliances during the pandemic.
The Alliance has some parallels to the stock market. When you hold a stock (or retain an employee) you’re really making the decision to re-buy or re-hire. And you should have the same kind of energy, enthusiasm, and positivity about re-hiring as you do about hiring. (This is the flip side of the famous Reed Hastings saying that any employee who you wouldn’t fight to keep, you should give a generous severance package). Conversely, if you’re an employee making the decision to join or stay with a company, you should be able to do so with the confidence that your manager and employer will be trustworthy and transparent, and help you accelerate your career progression.
Following these Alliance principles will allow you to attract, manage, and retain the best people for your company, both during and after the Covid-19 pandemic