April 16th Monday Report - Don't Hire Jerks
April 16th, 2007


Economic Notes:

This Weeks Leads:



Don’t Hire Jerks

Building the civilized workplace.

Nasty people don't just make others feel miserable; they create economic problems for their companies.

Lars Dalgaard is CEO and co-founder of SuccessFactors, one of the world’s fastest-growing software companies—and the fastest with revenues over $30 million. Dalgaard recently listed some milestones that his California-based company passed in its first seven years:

  • the use of its software by more than two million employees at over 1,200 companies around the world
  • the use of its software by employees speaking 18 languages in 156 countries
  • growth three times that of the company’s nearest competitor
  • enthusiastic recommendations of the product by nearly all customers
  • dramatically low employee turnover
  • employing no jerks

That’s right—no jerks—although the word SuccessFactors really uses (except on its Web site) is a mild obscenity that starts with the letter A and sort of rhymes with “castle.” All the employees SuccessFactors hires agree in writing to 14 “rules of engagement.” Rule 14 starts out, “I will be a good person to work with—not territorial, not be a jerk.” One of Dalgaard’s founding principles is that “our organization will consist only of people who absolutely love what we do, with a white-hot passion. We will have utmost respect for the individual in a collaborative, egalitarian, and meritocratic environment—no blind copying, no politics, no parochialism, no silos, no games, —just being good!”

Dalgaard is emphatic about applying this rule at SuccessFactors because part of its mission is to help companies focus more on performance and less on politics. Employees aren’t expected to be perfect, but when they lose their cool or belittle colleagues, inadvertently or not, they are expected to repent. Dalgaard himself is not above the rule—he explained to me that, given the pressures of running a rapidly growing business, he too occasionally “blows it” at meetings. At times, he has apologized to all 400-plus people in his company, not just to the people at the meeting in question, because “word about my behavior would get out.”

As Dalgaard suggests, there is a business case against tolerating nasty and demeaning people. Companies that put up with jerks not only can have more difficulty recruiting and retaining the best and brightest talent but are also prone to higher client churn, damaged reputations, and diminished investor confidence. Innovation and creativity may suffer, and cooperation could be impaired, both within and outside the organization—no small matter in an increasingly networked world.

The problem is more widespread than you might think. Research in the United Kingdom and the United States suggests that jerk-infested workplaces are common: a 2000 study by Loraleigh Keashly and Karen Jagatic found that 27 percent of the workers in a representative sample of 700 Michigan residents experienced mistreatment by someone in the workplace. Some occupations, such as medical ones, are especially bad. A 2003 study of 461 nurses found that in the month before it was conducted, 91 percent had experienced verbal abuse, defined as mistreatment that left them feeling attacked, devalued, or humiliated. Physicians were the most frequent abusers.

There is good news and bad news about workplace jerks. The bad news is that abuse is widespread and the human and financial toll is high. The good news is that leaders can take steps to build workplaces where demeaning behavior isn’t tolerated and nasty people are shown the door.

How workplace jerks do their dirty work

Researchers who write about psychological abuse in the workplace define it as “the sustained display of hostile verbal and nonverbal behavior, excluding physical contact.” At least for me, that definition doesn’t quite capture the emotional wallop these creeps pack. The workplace jerk definition I use is this: do people feel oppressed, humiliated, de- energized, or belittled after talking to an alleged jerk? In particular, do they feel worse about themselves?

Workplace jerks do their dirty work in all sorts of ways; I’ve listed 12 common ones—the dirty dozen— to illustrate the range of these subtle and not-so- subtle moves, which can include physical contact. Researchers who study workplace abuse and bullying have identified scores of others. I suspect you can add many more that you’ve seen, personally experienced— or committed. The Dirty Dozen

  1. Personal insults
  2. Invading coworker’s personal territory
  3. Uninvited physical contact
  4. Threats and intimidation, verbal and nonverbal
  5. Sarcastic jokes and teasing used as insult delivery systems
  6. Withering e-mails
  7. Status slaps intended to humiliate victims
  8. Physical shaming or status degradation rituals
  9. Rude interruptions
  10. Two-faced attacks
  11. Dirty looks
  12. Treating people as if they were invisible

Lists like these are useful but leave a sterilized view of how workplace jerks act and the damage they inflict. Stories, often painful ones, are necessary to understand how workplace bullies demean and de- energize people. Consider the story of this victim of multiple humiliations:

“Billy,” he said, standing in the doorway so that everyone in the central area could see and hear us clearly. “Billy, this is not adequate, really not at all.” As he spoke he crumpled the papers that he held. My work. One by one he crumpled the papers, holding them out as if they were something dirty and dropping them inside my office as everyone watched. Then he said loudly, “Garbage in, garbage out.” I started to speak, but he cut me off. “You give me the garbage, now you clean it up.” I did. Through the doorway I could see people looking away because they were embarrassed for me. They didn’t want to see what was in front of them: a 36-year-old man in a three- piece suit stooping before his boss to pick up crumpled pieces of paper.

The damage done

The human damage done by that kind of encounter is well documented—especially the harm that superiors do to their subordinates. Bennett Tepper studied abusive supervision in a representative study of 712 employees in a midwestern city. He asked them if their bosses had engaged in abusive behavior, including ridicule, put- downs, and the silent treatment—demeaning acts that drive people out of organizations and sap the effectiveness of those who remain. A six-month follow- up found that employees with abusive supervisors quit their jobs at accelerated rates. Those still trapped felt less committed to their employers and experienced less satisfaction from work and life, as well as heightened anxiety, depression, and burnout. Dozens of other studies have uncovered similar findings; the victims report reduced levels of job satisfaction, productivity, concentration, and mental and physical health.

Nasty interactions have a far bigger impact on the mood of people who experience them than positive interactions do. Recent research shows just how much. Theresa Glomb, Charles Hulin, and Andrew Miner did a clever study in which 41 employees of a manufacturing plant in the Midwest carried palm-size computers for two to three weeks. At four random intervals throughout the workday, each employee had to report any recent interaction with a supervisor or a coworker and whether it was positive or negative, as well as their current mood. The researchers found that negative interactions affected the moods of these employees five times more strongly than positive ones.

All these factors suggest an effect on costs. One reader of a short article I wrote on workplace jerks felt that more companies would be convinced if they estimated “the total cost of jerks,” or TCJ. If you want to develop a rough estimate of your company’s TCJ, take a look at my list of possible costs and attach your best monetary estimate to each, as well as to any other factors you regard as relevant. This exercise can help you face up to the damage that jerks do to your organization. When I told a Silicon Valley executive about the TCJ method, he replied that it was more than a concept at his company. Management had calculated the extra costs generated by a star salesperson—the assistants he burned through, the overtime costs, the legal costs, his anger- management training, and so on —and found that the extra cost of this one jerk for one year was $160,000.

Finally, if word leaks out that your organization is led by mean-spirited jerks, the damage to its reputation can drive away potential employees and shake investor confidence. Neal Patterson, the CEO of Cerner, learned this lesson in 2001 when he sent an e-mail intended for just the top 400 people in this health care software company. Patterson complained that few employees were working full 40-hour weeks and that “as managers—you either do not know what your employees are doing; or you do not care.” Patterson said that he wanted to see the employee parking lot “substantially full” from 7:30 AM to 6:30 PM weekdays and “half full” on Saturdays. If that didn’t happen, he would take harsh measures. “You have two weeks,” he warned. “Tick, tock.” Patterson’s e- mail was leaked on the Internet, provoking harsh criticism from management experts, including my Stanford colleague Jeffrey Pfeffer, who described it as “the corporate equivalent of whips and ropes and chains.” Pfeffer went a bit overboard for my taste. But investors weren’t pleased either: the company’s stock value plummeted by 22 percent in three days. Patterson handled the aftermath well: he sent an apology to his employees and admitted that he wished he had never sent the e-mail. The share price did bounce back. Patterson learned the hard way that when CEOs come across as bullies, they can scare their investors as well as their underlings.

Enforcing the no-jerks rule

Continued next week


April 16th Monday Report - Don't Hire Jerks

  • That’s right—no jerks—although the word really used is a mild obscenity that starts with the letter A and sort of rhymes with “castle.” All the employees agree in writing to 14 “rules of engagement.” Rule 14 starts out, “I will be a good person to work with—not territorial, not be a jerk.”

    “our organization will consist only of people who absolutely love what we do, with a white-hot passion.

    We will have utmost respect for the individual in a collaborative, egalitarian, and meritocratic environment—no blind copying, no politics, no parochialism, no silos, no games, —just being good!”

  • “Movie Eateries” Provide An Upscale Remake to Sagging Cinemas

    The old conception of a night at the movies has died.

    Digital downloads, video on demand and DVD rent-by-mail combined with increasingly theater-like home-entertainment setups are leading more customers to think twice before plopping down $10 for tickets, then shell out more for flat sodas and stale popcorn, only to be stuck with a theater full of screaming kids and unruly teens. No wonder the grownups stay home.

    Since hitting a 16-year high in 2002 with 1.6 billion moviegoers and $9.52 billion in receipts, attendance has dropped four of the past five years, according to the National Association of Theater Owners (NATO). Attendance did increase some to 1.45 billion moviegoers in 2006 from 2005. Meanwhile, box office receipts came in at $9.48 billion last year. In 2007, things have been a little brighter, with box office gross up 6.2 percent per screen and attendance up 4.2 percent, year to date, but even keeping up that pace will only just get the industry back to where it was five years ago.

    How to woo adults back to the megaplex? Enter a slew of new concepts that put a new spin on the old “dinner and a movie” idea. Entrants such as Studio Movie Grill, Movie Tavern and Cinebarre (a unit of Regal Cinemas), are building venues that offer some combination of reserved seating, alcoholic beverage service, made-to-order dinners and theaters that include leather seating all while projecting the latest films via state-of-the art digital projection systems.

    “We are primarily an adult experience – we are not cannibalizing from the traditional theaters, but targeting people who are at home watching their DVDs,” says Terrell Braly, the former CEO of Austin Drafthouse Cinemas and now CEO of Cinebarre.

    In March, Movie Tavern signed to open a location in Williamsburg, Va., the latest in its plans to open eight locations by 2008 (giving it 20 in all). Studio Movie Grill earlier this month announced plans to open its fifth location in Arlington, Texas as it ramps up an effort to open 75 properties in the next five years. Meanwhile, Regal Cinemas recently unveiled its own Cinebarre concept and plans to open its first location in July.

    NATO has not yet started tracking statistics for movie eateries, but the segment “is growing rapidly,” according to Patrick Corcoran, director of media and research with NATO

    The idea is that these new concepts may help stem the tide of move theaters disappearing at an alarming clip. In the past nine years, the number of theaters in the U.S. has dropped 21 percent, according to the association from 7,798 in 1996 to 6,114 in 2005.

    “It’s one way exhibitors are trying to make the movie-going experience different from the home viewing experience,” Corcoran says.

    Retail real estate developers are embracing the movie eateries because they complement the clientele at the lifestyle centers that have become so popular in recent years. They also make excellent anchors, drawing in neighborhood residents and tourists alike, according to Daniel W. Aston, partner responsible for the Mid-Atlantic region with the Roseland Property Company, a developer based in Portsmouth, Va.

    “Everyone thinks that teenagers are the backbone of the movie-going experience, but concepts like Movie Tavern expand your audience instead of making you rely on just one segment,” says Aston.

    Roseland recently signed Movie Tavern as a tenant at its 55-acre, mixed-use High Street development in Williamsburg, Va. That Movie Tavern, which will anchor the 250,000-square-foot retail village at High Street, is scheduled to open in August 2008.

    Another advantage of movie eateries, which range from 20,000 square feet to 40,000 square feet, is that they require fewer parking spaces than the multiplexes because there are less seats per square foot. With the addition of a full-service kitchen and dining tables, seating capacity at such venues ranges from a 100 to 1,000 seats, less than half of the seating capacity of multiplexes.

    For example, Movie Tavern’s patrons are primarily baby boomers and families with children, with median household incomes of at least $60,000. That upscale demographic is coveted by developers of lifestyle centers, says Jeffrey Benson, Movie Tavern’s CEO.

    Also based in Dallas, Studio Movie Grill currently operates five locations, primarily in Texas, in communities where annual household incomes top $85,000. The company wants to position itself in lifestyle centers, alongside retail tenants such as Barnes & Noble, Banana Republic and the Cheesecake Factory.

    “We are interested in working only with developers who create the best retail environment,” says company co-owner and founder Brian Schultz. “Our major focus is on families, which is very synergistic with what upscale lifestyle centers are looking for.”

    Studio Movie Grill sites, which are approximately 40,000 square feet, almost rival the multiplexes. But boutique operators are not the only ones pursuing the movie eatery concept.

    Regal Entertainment Group, which operates 6,386 movies screens throughout the United States, is developing Cinebarre in a joint venture with Braly. Cinebarre theaters will serve casual food, including pizza and chicken wings along with beer and wine, during screenings of first run films. They will also offer specialty programming and celebrity events, including appearances by movie stars and theme events centered around popular flicks.

    The first Cinebarre is scheduled to open at the 493,000-square-foot Biltmore Square Mall in Ashville, N.C. in July, and an announcement is pending on a second unit. If the venture is successful, Regal will expand the rollout to 20 theaters nationwide over the next five years. Cinebarre executives are planning to renovate outdated Regal properties in areas with annual household incomes of $70,000, a median age of 35 and populations of 200,000 people within a five- mile-radius.

    “Going to the traditional movie theater is not relaxing anymore and Cinebarre will meet a definite need in the community,” says Brian Jennings, marketing manager for Biltmore Square, which is managed by Jones Lang LaSalle. “We are trying to put a lifestyle component into the mall and that’s why Cinebarre was such a great fit.”

    Muvico, which operates 12 multiplexes, has also launched a concept called the “Premier Experience” at some of its theaters. For twice the price of a normal ticket, adults can reserve seats in the balconies that are connected to its Premier Bistro & Bars. The ticket price includes valet parking and free popcorn. The Premier Experience has been introduced at theaters in Boca Raton, Tampa and West Palm Beach, Fla. and is scheduled to come to the Xanadu Meadowlands in Bergen County and to Aviation Plaza in Linden, N.J.

    Source: Retail Traffic, 2007

    Black Hole or Window of Opportunity?

    Understanding the Generation Gap in Today's Workplace

    What motivates you at work? Being respected, valued, needed? Or having freedom, independence and interaction with other bright people? What motivates you at work, and how you approach work, may have more to do with when you were born than you think. Different generations value work and think about work differently.

    Today, for the first time in U.S. history, we have four generations laboring side- by-side in workplaces everywhere. At work, these differences can affect everything - recruiting, dealing with change, rewarding and producing.

    Understanding how different generations act and interact can aid in addressing workplace conflict and motivating employees to work better and smarter.

    Click here for the complete report.

    by Angela Stefaniak, CPPA and Clayton Vetter, Planned Parenthood Los Angeles

    Source: Center for Public Policy & Administration, University of Utah, 2007

  • Economic Notes:
    • Treasury Budget
    • The unified deficit for March was $96.3 billion, slightly larger than the CBO’s preliminary estimate of a $95 billion deficit. The federal government has run a deficit of $258 billion through the first half of fiscal year 2007; this is 17% smaller than the deficit during the first half of fiscal year 2006.
    • Creditforecast.com Quarterly Household Credit Report
    • Credit quality deteriorated further in the first quarter as borrowing moderated. The aggregate dollar delinquency rate jumped to its highest level in over five years. The deterioration in credit quality last year was led by mortgages. There was some improvement in credit quality in auto and bankcards in the first quarter. Borrowing in the quarter was led by student loans and second mortgages. Subprime lending continued to lead.
    • IMF predicts fifth year of strong global expansion
    • The world economy is on course for a fifth year of solid expansion despite recent stock market volatility and the US downturn. The IMF cut its 2007 growth forecast for the US economy by 0.7 percentage points to 2.2 per cent, citing a sharper than expected downturn in housing. It also reduced its forecast for next year to 2.8 per cent. While warning that the housing correction still has a way to run and had the potential to trigger a deeper and more prolonged slowdown or even a recession in the US, with potential spill-overs to other countries, its central view remained that a growth pause still seemed more likely than a recession.
    • International Business Confidence
    • Business sentiment has improved measurably since the beginning of the year and is now consistent with global growth that is equal to its potential. On a four-week moving average basis confidence is now as strong as it has been since late July of last year. Confidence is strongest in Asia and South America and among high-tech firms; it is softest in Europe and among vehicle manufacturers. Hiring intentions have improved sharply in recent weeks and the inventory drawdown among manufacturers appears to be winding down. Expectations regarding the six-month outlook have strengthened, suggesting economic growth will accelerate later this year.
    • Import and Export Prices
    • The U.S. Import Price Index increased 1.7% in March. The increase followed a 0.1% rise in February and was led by a 9% decrease in petroleum prices. Export prices rose 0.7% in March, after increasing by the same amount in the previous month.
    • MBA Mortgage Applications Survey
    • Mortgage demand decreased 0.4% in the week ending April 6. Purchase applications increased 2.7% and refinance applications decreased 4.0%. The increase in purchases is less than to be expected if the housing market was recovering, considering the low numbers last week. Therefore, these numbers indicate that housing is still slowing domestic growth.
    • Chain Store Sales
    • Chain store sales grew 5.9% in March, up from 2.5% in February and the best growth since last April, according to the ICSC chain store index. Results were lifted by an earlier Easter and generally favorable weather, meaning April will be far weaker. In addition, a number of drags are building including rising gasoline prices, housing market weakness and deteriorating credit quality.
    • Manufacturers Alliance/MAPI Survey
    • The Manufacturers Alliance/MAPI composite index increased slightly to 58 in March from a reading of 54 in December. The index points to slowing but continuing expansion of manufacturing activity in the coming quarter.
    • Oil and Gas Inventories
    • Crude oil inventories inched higher by 0.7 million barrels for the week ending April 6, according to the Energy Information Administration, well below expectations of a 1.5 million barrel build. Gasoline stocks fell by 5.5 million barrels, far greater than the 1.4 million barrel draw expected. Refinery activity improved to over 88%, while crude imports moderated, feeding the less than expected crude build. Distillate inventories inched higher against expectations of a mild drop. Yet another sharp draw in gasoline and the weak build in crude oil makes this a bullish report for prices.
    • Weekly Natural Gas Storage Report
    • Underground storage of natural gas increased by 23 billion cubic feet during the week ending April 6. This was in line with expectations. Inventories are now 28.4% above the five-year average. This report is likely to have a neutral effect on prices.

    Source: Economy.com

  • This Weeks Leads:
    • Ruth’s Chris Steak House
    • Ruth’s Chris Steak House, Inc. trades as Ruth’s Chris Steak House at 103 locations nationwide and internationally.
    • The high-end steak and seafood restaurants occupy spaces of 11,000 sq.ft. in freestanding locations and mixed-use centers.
    • Plans call for 20 openings in the existing markets during the coming 18 months.
    • Typical leases run 10 years with four, five-year options.
    • A vanilla shell and specific improvements are required. Preferred demographics include a population earning an average household income of $90,000.
    • A land area of two acres is required.
    • For more information, contact
      • Phil Demena,
      • Ruth’s Chris Steak House, Inc.,
      • 5318 Northwest 77th Terrace,
      • Parkland, FL 33067;
      • Web site: www.ruthschris.com.
    • Merlos Cutlery and Merlos Cutting Edge
    • Merlos Cutlery, Inc. trades as Merlos Cutlery and Merlos Cutting Edge at 21 locations throughout AZ, CA, ID, NC, OR, TN and TX.
    • The stores, selling housewares, kitchen and sporting knives and gifts, occupy spaces of 500 sq.ft. to 800 sq.ft. in lifestyle and specialty centers and malls.
    • Plans call for three to six openings throughout the existing markets during the coming 18 months.
    • A vanilla shell and specific improvements are required.
    • Preferred cotenants include Lord & Taylor.
    • Preferred demographics include a population of 300,000 in a 15-mile radius earning an average household income above $55,000.
    • Typical leases run 10 years.
    • For more information, contact
      • David Merlo,
      • Merlo's Cutlery, Inc.,
      • 318 East Oak Street,
      • Santa Maria, CA 93454;
      • Web site: www.merloscutlery.com.
    • Eblens Casual Clothing & Footwear
    • Eblen’s, Inc. trades as Eblens Casual Clothing & Footwear at 28 locations throughout CT, MA and RI.
    • The shops, selling men’s and women’s apparel and footwear, occupy spaces of 5,000 sq.ft. to 6,000 sq.ft. in strip centers and urban/downtown areas.
    • Plans call for three to five openings throughout the existing markets with representation by New England Retail Properties, Inc. during the coming 18 months.
    • Typical leases run five years with options.
    • A vanilla shell and specific improvements are required.
    • Preferred cotenants include A.J. Wright, Burlington Coat Factory, T.J. Maxx and video stores.
    • Send site submittals to:
      • Matt Halprin,
      • New England Retail Properties, Inc.,
      • 150 Hartford Avenue,
      • Wethersfield, CT 06109.
    • Lucy Activewear
    • Lucy Activewear operates 40 locations throughout AZ, CA, CO, IL, OR, TX, VA and WA.
    • The women’s active wear stores occupy spaces of 2,000 sq.ft. to 2,500 sq.ft. in freestanding locations and urban/downtown areas.
    • Growth opportunities are sought throughout the San Francisco bay area in CA during the coming 18 months, with representation by Metropolis Retail, Inc.
    • Preferred demographics include a population of 100,000 within five miles earning $80,000 as the average household income.
    • For more information contact
      • Jim Bradley,
      • Metropolis Retail, Inc.,
      • 2017 Mountain Boulevard, Suite 1,
      • Oakland, CA 94611.
    • Windsor
    • Windsor operates 37 locations throughout AZ, CA, CT, MI, NJ, NV, NY and TX.
    • The shops, offering apparel and accessories for juniors, occupy spaces of 4,200 sq.ft. to 5,000 sq.ft. in malls.
    • Growth opportunities are sought throughout AZ, CA and FL during the coming 18 months. Typical leases run 12 years.
    • A vanilla shell and specific improvements are required.
    • Preferred cotenants include Nordstrom and Macy’s.
    • Preferred demographics include a population of 200,000 within four miles earning $60,000 as the average household income.
    • Competition is cited as Ann Taylor Loft and Bebe.
    • For more information, contact
      • Ed Zorehkey,
      • Zorehkey & Associates,
      • 30021 Tomas, Suite 300,
      • Rancho Santa Margaurita, CA 92688.

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