The Virgin Way: Everything I Know About Leadership (18 page)

CHANGE THE POLICY – TO NO POLICY

I wrote in Chapter 3 about how one very ill-advised marketing decision seriously damaged video rental firm Netflix and decimated their stock almost overnight. Happily they recovered from it, got back on track, vanquished their one-time giant rival Blockbuster and are now once again flying high as the runaway market leader in the streaming video sector. One clue as to how they intend to remain there this time comes from a very well-advised and downright courageous initiative they adopted that rewrote the book – or to be more precise, threw it away – on something very near and dear to the hearts of most workers around the world: their annual vacation day entitlement.

I first learned of what Netflix was up to when my daughter Holly read a
Daily Telegraph
article and immediately forwarded the piece to me with a clearly excited email saying, ‘
Dad
, c
heck this out. It’s something I have been talking about for a while and I believe it would be a very Virgin thing to do to not track people’s holidays.
’ She then went on to say, ‘
I have a friend whose company has done the same thing and they’ve apparently experienced a marked upward spike in everything – morale, creativity and productivity
have all gone through the roof.
’ Needless to say I was instantly intrigued and wanted to learn more.

The
Telegraph
article talked about the new vacation policy that has been adopted by Netflix, which might actually be more accurately described as being, well, no policy! It’s a little bit like when you read that someone is offering a ‘zero per cent interest rate’. If there’s no interest can it really be called an interest rate? Anyway, simply stated, the policy-that-isn’t permits all salaried staff to take off whenever they want for as long as they want. There is no need to ask for prior approval and neither the employees themselves nor their managers are asked or expected to keep track of their days away from the office. It is left to the employee alone to decide if and when he or she feels like taking a few hours, a day, a week or a month off, the assumption being that they are only going to do it when they feel a hundred per cent comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business – or, for that matter, their careers!

The Netflix initiative had been driven by a growing groundswell of employees asking about how their new technology-controlled time on the job (working at all kinds of hours at home and/or everywhere they receive a business text or email) could be reconciled with the company’s old-fashioned time-off policy. That is to say, if Netflix was no longer able to accurately track employees’ total time
on
the job, why should it apply a different and outmoded standard to their time
away
from it? The company agreed, and as its ‘Reference Guide on our Freedom and Responsibility Culture’ explains, ‘We should focus on what people get done, not on how many hours or days worked. Just as we don’t have a nine-to-five policy, we don’t need a vacation policy.’

It is always interesting to note how often the adjectives ‘smart’ and ‘simple’ describe the cleverest of innovations – well, this is surely one of the simplest and smartest initiatives I have heard of in a long time and I’m delighted to say that we have introduced this same (non) policy at our parent company in both the UK and the US, where vacation policies can be particularly draconian. Assuming it goes as well as expected, we will encourage all our subsidiaries to follow suit, which will be incredibly exciting to watch.

LIVING IN A MOBILE CELL

While the freedom to leave the office behind whenever and for as long as you want sounds incredibly appealing, this of course assumes that the office isn’t going to simply follow you wherever you go on a 24/7 basis. For most modern-day salaried staff there has never really been an eight-hour day or a forty-hour work week, but the advent of emails, texting and smart phones has truly rendered them extinct and made the job of striking a healthy balance between home, family and work even more challenging.

Achieving that delicate balance was always something of a Chinese plate trick, but in recent years it has gone from a trick to a complex science. With almost everyone carrying their own personal telecommunications device every waking minute, the boundaries between work and private lives have all but disintegrated. By that I mean that once upon a time – before BlackBerrys, iPhones and their kin changed all the rules – when people left the office they would physically and mentally disengage from their colleagues, their desktop computer, their in-tray and their office phones and intercoms. Not so any more! The arrival of the smartphone, tablets and laptop computers has meant that almost everyone these days simply puts the office in their pockets or purses and takes it along with them: to lunch, to dinner, home for the night, the weekend, to the kids’ football games and yes, even to the beach, the ski slopes or wherever they choose to holiday. Not only that but the typical sender of a business-related email or text is usually blind to the time of day or day of the week – they expect, and usually will get, a response within a matter of hours if not minutes.

I have one very successful friend who is a senior partner in a big financial services firm as well as being the mother of two young children. She became so perplexed by the never-ending volume of spurious weekend emails that she put a weekend auto response message on her business email that says, ‘
I am away from the office until Monday attending to my other full-time business – my family. If this message is about something that cannot wait, then I suggest you call or text me, otherwise I will get to it on Monday.’
If like me you have ever been on the receiving end of her message, you’ll know who she is, but it seems the reaction has been terrific and she hasn’t had a single negative comment or any significant incidence of weekend business calls.

In what could well be brewing as a second industrial revolution of sorts, the so-called ‘BlackBerry suits’ have already started hitting the courts. In Chicago a police sergeant filed a class action under the Fair Labor Standards Act against the city claiming retroactive overtime compensation for all the hours he maintains he and his fellow officers are obliged to stay connected to their jobs via their police department-issued BlackBerrys. As a lawyer representing the plaintiffs put it, ‘They are hourly wage earners. If you’re going to make people work when they’re not on duty, you’ve got to pay them.’ At the time of writing the case is on-going, but it begs an intriguing question: why shouldn’t the same criteria apply to all workers, hourly or salaried, whose lives have become subjected to the ‘new digital reality’? The Chicago court’s ruling is certainly going to be precedent-setting and could have a dramatic effect on the way all ‘digitally enabled’ employees are compensated – or it could possibly lead to a sudden fall-off in the number of company mandated ‘electronic communications devices’.

In the absence of widespread Netflix-like changes to the old workplace norms, it would seem only a matter of time before salaried employees also start to revolt. After all, their hours on the job have steadily increased from what may have averaged fifty hours a week in the traditional context of the workplace to the current ill-defined ‘on e-call 24/7’ paradigm. Not withstanding creative intercepts like my friend’s auto response, there’s no turning back the clock. We all live in the world we live in, so the only way to mitigate the transition pain is to focus on quickly dumping outmoded policies that no longer fit our employees’ business needs and private lifestyles. When they actually worked ‘only’ forty to fifty hours a week, then four weeks of paid vacation plus public holidays maybe made sense. Today when our people are expected to work an immeasurable number of hours in their expanded virtual offices by being at the perpetual beck and call of their e-bosses, shouldn’t the same approach apply to their time away from the bricks and mortar office? So bravo Netflix and every other company that is taking bold steps to recalibrate the system – just don’t email me about it on the weekend and expect a response before Monday!

THERE’S NO PLACE LIKE HOME

Another change to the old norms that has been driven by technology is the number of people who (like me) are now working from their homes. According to the US Census Bureau, that number has risen by forty-one per cent in the last decade with almost fifteen million Americans working out of their homes. In the UK the rise is less dramatic but according to a Labour Force survey is still up by thirteen per cent in the last five years. I am not sure if I was counted in this survey or not but I am certainly the world’s greatest advocate of ‘doing it from the couch’ – or, more recently, from my hammock.

I have not as yet been privy to any statistics on how home working plays into employee retention, but I can only imagine that it has to improve the ability to keep some employee groups happy (like telephone sales or service agents) but will have no relevance to more creative roles that require a lot of interaction with peers. This was certainly the reason Marissa Mayer, the CEO of Yahoo, gave when she caused a major kerfuffle by banning work from home. In defence of her decision, however, when speaking to a group of human resource professionals, she said, ‘While people are more productive when they’re alone, they’re more collaborative and innovative when they’re together. Some of the best ideas come from pulling two different ideas together.’

As companies strive to cut costs, I foresee more and more administrative-type jobs being pushed out of expensive offices. One of the earlier adopters of work at home was the US airline jetBlue which, when it started service in 2000, set up all of its telephone reservations agents as home-based employees in the Salt Lake City Utah region. At the time I remember founder David Neeleman proudly telling me that this initiative created several hundred new job openings for stay-at-home mothers who would be unable to work from a call centre but could do a great job while the kids were at school or the baby was sleeping. Apparently the turnover with this group has been negligible.

I know a lot of ‘I’d go crazy if I had to stay around the house all week’ types who find the very idea of working from home to be quite abhorrent. In my own case I have always found working from home – as I have done all my life – reduces the stress levels I know I’d suffer if I were working from an office and bringing work home in the evenings and weekends. My family life and my work life have never had clear demarcation lines, but have always managed to co-exist peacefully. Okay, I’ll concede there have been a couple of times when the sheer volume of people that the business side of my life brought into the house became too much for my wife, but we’ve always managed to find a compromise and neutral ground. By being around the house (or houseboat as it was in the early days) so much, I got to see Holly and Sam as they grew up in a way that I could never have done leaving for an office every morning and returning after they were in bed. And, by osmosis, they too got an indirect education of sorts in how the business works.

Now, when I am not continent-hopping as I do for almost six months a year, living on and working from Necker Island has taken the blending of home and business lives to new heights. We have the most incredible team of young people running the island and looking after our guests. Our philosophy at Virgin has always been to train our people well enough so they can leave, and treat them well enough so they don’t want to. Needless to say, on a little piece of paradise like Necker, our retention levels are quite extraordinary.

It takes time and work

To a lot of people the only ‘culture’ they experience on a daily basis is to be found in their yoghurt at breakfast time. Perhaps this same thought is what inspired Peter Drucker, the internationally acclaimed management consultant and author, when he came up with the brilliantly insightful line,
‘Culture eats strategy for breakfast.’
In so doing he nailed what to my mind is one of the most under-appreciated essentials of modern leadership: no matter how visionary, brilliant and far-reaching a leader’s strategy might be, it can, and frequently does, all go for naught if it is not fully supported by a healthy and spirited corporate culture.

When people ask me what ‘secret sauce’ has made Virgin a success over the last forty-plus years, the easy answer is, ‘My brilliant, visionary leadership’ – I
am
kidding, of course! The honest answer is one hundred per cent down to the people-first culture that we started way back in the last century. We inadvertently created it while lolling around on beanbags in the first-ever Virgin Records’ shop in London – the ‘megastores’ came much later. At the time, the last thing we had on our minds was developing any kind of a corporation, let alone a culture. We were just having a good time, chasing women (and the women were chasing men – we were truly an equal harassment opportunity employer!) and figuring out each week if we’d made enough money to pay the rent and the staff. We enjoyed what we were doing, we liked working with each other and we treated our record-buying customers like they were, well, part of the family. They liked the experience so they came back for more and before we knew it we were on our way – the rest, as they say, is history.

I am sure that most people reading that last paragraph are thinking, ‘Yeah, if only it were that easy!’ So I’m sorry if it sounds like an over-simplification but that is genuinely how we set the Virgin ball in motion.

There was also a lot of hard work and plenty of sleepless nights worrying about all kinds of issues, but overall we stuck with it because we were enjoying what we did on any given day; and ‘tomorrow’, as Annie would have said, was always a day away.

HERBAL REMEDIES

Great corporate cultures don’t always just come about by chance – they are often an outgrowth of sustained and exemplary leadership such as at low-cost US carrier Southwest Airlines with the legendary Herb Kelleher at the helm for the best part of forty years. Like me, Herb was not a career ‘airline guy’, he was a Texas lawyer who saw an opportunity to start an innovative low-fare airline in his home state that would (he thought) be able to exploit some legal loopholes.

He formed Southwest in 1967 (as Air Southwest) to provide affordable air service within the state of Texas and immediately flew into a firestorm of opposition from the three existing Texas airlines. It took three years of legal battling before the Texas Supreme Court upheld Herb’s little airline’s right to fly and he was off to the races. From the beginning Herb recognised that to survive, let alone succeed, Southwest would have to have more than just low fares and so – truly a man after my own heart – he unabashedly chose sex appeal as the key. Southwest’s happy-go-lucky, fun and above all else disarmingly attractive and friendly cabin crews became the talk of the industry – rather like a certain British airline would do a dozen years later by employing exactly the same kind of ‘personalities’!

But it wasn’t just about good looks. With a company motto of ‘Hire for attitude; train for skill’, Herb always preached a gospel of if we hire and empower the right people who are committed to ‘do as you would be done by’ levels of consistently excellent customer service, then everything else will naturally follow. Of all the memorable quotes attributed to Herb, there is one that really should be the mantra for any organisation – it certainly is for Virgin – he once said, ‘We tell our people, “Don’t worry about profit. Think about customer service. Profit is a by-product of good customer service. It’s not an end in and of itself.”’ And if the proof of the pudding is in the eating, it is no small coincidence that in January 2012 Southwest became the only airline in the history of a notoriously cyclical business to report an incredible fortieth consecutive year of profitability!

I have only flown Southwest once, on a short flight to Dallas, from where I can’t recall, but what I do remember is being struck by how much fun their cabin crew seemed to be having doing their jobs. Other than with the mandatory safety messages, this group was clearly anything but scripted, very much into being themselves and having a lot of fun with their captive audience. A lot of cabin crew attempts at humour come across like they’re trying too hard and so tend to fall flat as a result. Not so here. But they weren’t finished yet – when we touched down it was a bit of a bumpy landing and over the PA the lead flight attendant welcomed us with a breezy, ‘Well, ladies and gentlemen, as you probably felt just there, we just touched down in Dallas – twice!’

Stories abound about such things like the time passengers boarding a Southwest flight were surprised to find the airplane appeared to have no cabin crew on board to greet them. Then, on some cue, the overhead bin doors suddenly sprung open and in unison the three flight attendants hiding in there all screamed ‘Surprise!’ This genuinely fun-loving culture has established Southwest as one of the best places to work and in the process built a powerful bond between employees and customers alike. As in everything about a successful business, establishing a framework in which employees feel truly comfortable expressing themselves requires a leader who is prepared to set the standard and lead by example and Herb Kelleher, for one, could always be relied upon to speak his mind and be almost crazier than his staff.

An example of Herb’s ability to exploit every opportunity to sustain the airline’s fun culture and generate favourable PR in the process came when Southwest was threatened with a trademark lawsuit in 1992. When Southwest started to use the slogan ‘Just Plane Smart’, another smaller company, Stevens Aviation, which had been using the very same tagline for some time, threatened to sue. In a classic Kelleher move, however, rather than going to court to settle the squabble, Herb challenged Stevens’ CEO Kurt Herwald to a three-round arm-wrestling match. The winner would get to keep the slogan and the loser of each round would give $5,000 to the charity of his choice. The younger Herwald readily took up the challenge and the much-publicised build-up began. Among other things, Herb put out a video showing his ‘rigorous’ daily training routine for the upcoming bout, one scene of which involved a single painful-to-watch ‘assisted sit-up’ followed by a cigarette and a glass of bourbon! To nobody’s surprise Herb lost all three rounds of the bout, but $15,000 went to charity and the two CEOs agreed that both companies could use the slogan – so not only was a courtroom confrontation avoided but everyone ended up a winner.

‘ANYONE FOR WILD TURKEY?’

My first face-to-face meeting with Herb took place in his hotel suite one afternoon in New York City while we were both attending an airline investment conference there. I was excited to meet the man as it had always seemed we were kindred spirits when it came to fun being at the core of running a successful airline – and making sure our customers shared in the experience. Herb was scheduled to be the speaker that evening prior to dinner and I was to address the group the following morning. The conference organisers, however, had suddenly come up with the idea that it would be fun if I were to give the introduction for Herb that night. As we’d never met they’d hastily arranged for us to get together that afternoon and so around three o’clock I duly arrived at Herb’s suite with a couple of our people.

Herb welcomed me at the door with a hug as if we were old pals and set about introducing me to his entourage of senior people. We’d barely settled in when there was a knock on the door and room service wheeled in a cart that normally, at least in the UK, might have been expected to have tea and biscuits on it. Not here! All that was on the cart was a bucket of ice, a dozen shot glasses and a large bottle of Herb’s favourite tipple, Wild Turkey bourbon. Without missing a beat, one of Herb’s VPs jumped up and proceeded to pour large shots of Kentucky’s famous whisky for everyone in the room– the only question he asked was, ‘Y’all want ice?’ Certainly a much warmer way to get the party started than ‘Anyone for tea – how do you take it?’

Over the next hour, as per his reputation, I found Herb to be an amiable bear of a man with a laugh that rattled the windows. With such an obvious thirst for life (and bourbon), he reminded me very much of an American Freddie Laker – although Freddie preferred rum and orange juice! We talked about how Herb’s earliest vision for Southwest had stayed true to its course while all kinds of other start-up and legacy airlines had come and gone. Avoiding any and all unnecessary complexity is the cornerstone to Herb’s business philosophy. For example, whereas in its fleet of over 900 aircraft, American Airlines has thirteen different types of airplane (even more now with the US Airways merger), Southwest’s fleet of around 600 airplanes consists of just a single aircraft type – the workhorse Boeing 737. This makes every employee’s job simpler: every pilot can fly every aircraft in the fleet and every engineer knows where every part goes and that just about every part will fit every airplane. An intimate familiarity with the aircraft means airport ground crews can keep turn around times to an absolute minimum, which drives higher productivity, and the list continues. They have also avoided getting into relationships (known as ‘interline’ agreements) with other airlines, which means they control one hundred per cent of their own scheduling decisions and don’t get blamed for losing other airlines’ baggage. If ever there were a business case for the benefits of going it alone, Southwest has to be it.

But as important as hardware like airplanes might be, what shone through when listening to Herb that afternoon was how acutely aware he was that it’s your people that have the greatest influence on the success or failure of the business and, as at Virgin, how creating and maintaining a fun, family culture is critical to achieving your targets. Another similarity between Southwest and Virgin is how intensely proud our respective workforces are to be associated with their companies. Or as a twenty-something staff member once said to me, ‘Hey, Richard, it’s really cool to work at a place where it’s really cool to work.’ I must say I found that to be . . . really cool!

Anyway, in New York that evening, only slightly buzzed on bourbon, I climbed up to the podium to introduce my new best friend Herb to the assembled senior airline executives, bankers and press. I started out by saying a few highly complimentary things about the man and his airline, and then assuming a more serious tone said, ‘Herb and I met this afternoon and I was so impressed that I have instructed Virgin’s bankers to make a major stock acquisition.’ As expected I saw the reporters in the audience suddenly sit up in rapt attention. This was news – Virgin was about to acquire a stake in Southwest! Barely managing to keep my face straight, I continued, ‘Yes, I told them I wanted to buy 50,000 shares of Wild Turkey stock.’

WEAR LAURELS – DON’T REST ON THEM

The flipside of the kind of corporate culture enjoyed at Southwest and Virgin can be found at those dreadful cultural catastrophes where ‘we’ is supplanted by an entrenched ‘us against them’ standoff. Environments where management and labour are on two different sides of a great divide separated by long-festering quagmires of distrust, bitterness and malcontent. Such situations can almost always be laid at the door of senior management’s prolonged failure to provide strong leadership and/or willingness to change with the times. While the true meaning of the word ‘legacy’ is quite simply something good, bad or indifferent that is ‘handed down by a predecessor’, when applied to corporate entities it seems to have become almost exclusively a pejorative. And the sad fact is that a lot of older, set in their ways, laurel-resting businesses tend to share the common denominator of failed or failing cultures which, like barnacles on the bottom of a boat, impede forward progress to the point of eventually sinking the whole ship.

Back in the early retailing days of Virgin, as we began to grow with more stores, a record label, recording studios and the rest, we never lost sight of ‘serious fun’ as a driving force behind the business. We carried that same culture – which was and is really just a passion for having fun with what we do while doing it better than the others – into banks, trains, telecoms and planes plus a multitude of other very diverse businesses all around the world.

As I often say (okay, I say it a lot!) – a company is nothing more than a group of people and people are like plants. I’m not sure that I buy into the benefits of talking to plants but if you water them and tend to them – more listening than talking, in other words – they will grow and flourish.

‘THEY SAY . . . ’

I have always found that one of the simplest ways to monitor the health of your culture is to constantly subject it to the
‘
we/they’ test. In a healthy corporate culture you will hear employees embracing the first person plural – as in ‘Certainly, sir,
we
can do that for you right away’ – to describe everything the company does. In an unhealthy culture, the third person plural ‘they’ and its cellmate ‘them’ take centre stage, and usually in an arm’s-length, accusatory fashion as in, ‘Sorry,
they
don’t do that even though I’ve been telling
them
for ages that the customers would love it.’ Brett Godfrey summed it up perfectly when describing the difference in (then) Virgin Blue’s work environment and that of Qantas, our major competitor in Australia, by saying, ‘Our people are always in “volunteer mode”, while over there, certainly if industrial unrest is any indicator, they seem to be in perpetual “prisoner mode”.’

One of the many things that makes the Virgin group of companies unusual, dare I say unique, in the corporate world is the hugely disparate range of products and services that carry our brand. We have never been into vertical integration as the primary reason for starting something, albeit that a lot of our ventures have over time started to connect at the edges – like airlines and hotels. A lot of companies make it an overarching policy to ‘stick to their knitting’, that is to say, stick with what you know best and don’t stray too far from the comfort zone. Not so at Virgin! In many ways we could in fact be accused of ‘vertical disintegration’, given our inability to stick to any particular knitting pattern for too long. Unlike Unilever, General Mills or Procter and Gamble, we are not a ‘house of brands’ but we are a truly ‘branded house’. With the exception of our brief foray into the condom business, we paint the Virgin brand on to everything we do. When we start a new venture we are proud to add our brand to it in the same way that we do when we rebrand and reinvent a bank or a rail service.