How to Pay Your People Twice When There Ain’t Enough Money: (A Venture into the Realm of Psychic Income) Po Chung, Chairman DHL International (HK) Ltd. YEO Keynote Speech Hong Kong March 3, 2001 How to Pay Your People Twice When There Ain’t Enough Money: (A Venture into the Realm of Psychic Income) Opening up offices in a new country every five weeks and a new city every eight days… not for one year, not for two years, or for three years… but every year for fifteen years. It is a record that the Guinness Book of Records would not accept because they didn’t know how to classify DHL’s achievement. But… it remains a world record that will probably never be broken. Well, we continue to open new offices. Of course we ran out of countries a long time ago, but the entrepreneurial spirit that helped build DHL still exists today. It’s been alive and thriving for more than thirty years. I’m sure that is another world record that will never be broken. My mission today is to explain to you the things that make DHL so tremendously successful. Whenever I’ve spoken around the world on the success of DHL, the content of the speech focuses on DHL’s three key philosophies. • Push decisions to the lowest strategic level • Teach strategic thinking to all decision makers, and • Make the company an extension of the family The three philosophies are easy to understand, and after each speech I hoped that at least one person in the audience would try them out in his or her own company. Unfortunately, over the years, I’ve learned that most people go away thinking that DHL is an interesting success story, but that the three philosophies have no application in their own company, or that implementing them would be too difficult and too different from their existing corporate culture. I think many people have adopted or adapted one or two of the philosophies. But to my knowledge, I don’t think any company has adopted all three as part of a comprehensive management philosophy. So ‘DHL Worldwide Express’ is still the only company that uses all three of the philosophies as an integrated management strategy to produce DHL’s most significant competitive advantage – it’s ability to perpetuate its entrepreneurial spirit. I must accept part of the blame for not being able to motivate people outside of DHL to adopt the three philosophies as ‘a package’ of core principles. Principles that I believe are absolutely essential to the future success of any large company, especially one operating or wishing to operate in the global marketplace. In the past, I was unable to present a clear picture of how and why these philosophies work together because even I didn’t know and understand the secret. It was only while preparing this speech that I finally discovered why they are so powerful when they working together in tandem. Only recently, in that place between being sound asleep and fully awake– you know the place –did I finally see the forest for the trees, and discover the secret of the three philosophies and DHL’s enormous success. And what is that secret? It is this: We pay everyone in DHL twice. We pay them once with hard currency they can deposit in the bank and a second time with psychic income that’s deposited in their hearts and souls. The hard currency is enough to provide for what Abraham Maslow labeled ‘basic needs’ – and the psychic income takes care of what Maslow labeled ‘psychological needs’. We’ll come back to Maslow later. Before I explain in more detail, I must admit that most of what I have to share with you is not new. Many cognitive scientists and psychologists, including Maslow, have already published hundreds of volumes on the topics of motivation, human needs, and self-esteem. Unfortunately, like the business theorists, the scientists have always discussed each topic in isolation and up close—too close to see the bigger picture or provide anything useful for us leaders and managers. What I’m giving you today is a set of different perspectives –bird’s eye views that I hope will make the ideas and principles easier to understand and to apply in the contexts of business management and human motivation. Money isn’t everything? How many times have you heard the expression, ‘Money isn’t everything’? I’d guess you’ve heard it dozens, if not hundreds of times. My question is, ‘If money isn’t everything, then what are the things in addition to money, that add up to everything or almost everything?’ Health, which is physiological wealth, is an obvious one. I believe that emotional wealth or ‘psychic wealth’ is another. Some of you may consider ‘spiritual health’ as a separate form of wealth, but in this presentation today, I’m classifying spiritual health as a sub set of psychic wealth. So, from this perspective, there are at least three separate forms of wealth that make up the ‘everything’ that we are talking about when we say, “Money isn’t everything.” I like to consider these three forms of wealth as separate systems that operate to motivate human beings in different ways. From this perspective, when you understand how the three systems work, you have three sources of wealth from which to pay your fellow workers. The three systems are: • the physiological system, • the material or monetary system and • the emotional or psychic system. Each of these systems operates just like any other system. Each one has inputs and outputs. Each generates outcomes and products, and each generates waste. Each one also affects and is affected by the health of the other two systems. The Physiological System The inputs of the physiological system are oxygen, nutrition, water, medicine, exercise, sexual stimulation and so on. The outputs are things like work, physical health, babies and bodily waste. You are very healthy when this system has a lot of reserves. You get sick when this system breaks down. And, when this system is bankrupt, you die. The health and wealth of the physiological system are measured in terms like calories, endurance, stamina, blood pressure, and body temperature. We sweat and go to the toilet to discharge waste. The Monetary System The monetary system is represented by money and the property we buy with money. The inputs of the monetary system are salary, profits, bonuses, allowances, gifts, trades, interest, and if we are lucky, our winnings. The outputs are things like housing, jewelry, gifts, education, transportation, clothes, vacations, and debts. This system is weakened when our income is reduced or when we are burdened with debt. When the system has a lot in reserve, we are wealthy. When it is bankrupt, we are literally bankrupt. The health and wealth of the monetary system is measured in terms like dollars, francs or other currencies. Other monetary system measurements are the quality of hotel one stays in and the prestige value of one’s cars, watches, and vacations. The monetary system creates waste in the form of worn out goods, product packaging material, and money lost at the racetrack or on the stock market. We are very familiar with the physiological and monetary systems since we deal with them consciously and unconsciously everyday. We learned how to manage these two systems from our parents and teachers. We learned what and when to eat, how to make a living, and how to save for our retirement. The Psychic System We may be aware of the psychic system, but we don’t pay as much attention to managing it as we do with the other two systems. The reason for this is simple: Our parents and teachers never taught us how to control the psychic system’s inputs and outputs with the same precision that they taught us how to manage what we should eat and how we should earn a living. In addition, unlike the other two systems, the psychic system doesn’t have simple units of measurement like calories and currency. It’s a kind of mystic system. In fact, like gravity, magnetic waves, and nutrition, the inputs of the psychic system only become real when we recognize they exist. They’re like air. Before someone teaches a young child about air, she does not recognize this invisible reality. Air doesn’t exist for the young child anymore than water exists for the fish. Once the child learns what air is, then she accepts air as real even if she goes years without consciously thinking about air. Yet, if she plays a sport or meditates, air becomes something she must consciously manage. The inputs of the psychic system are compliments, criticisms, awards, rejection, relationships, and so on. The outputs of the psychic system are self-esteem, emotions, joy and love, attitudes, and waste. Many recognized geniuses in the field of psychology have given us great insights into the realms of the mind, intelligence, behavior, personality and mental illness, but none have used a ‘systems model’ to give us insight into how we should manage the psychic system’s inputs and outputs. Managing the Three Systems When we manage the physiological system well we get good health. When we manage the monetary system efficiently we live a good life, even in retirement. Managing the psychic system well makes us happy and leads to high self-esteem and personal fulfillment. I believe that managing the psychic system is just as important as managing the other two human systems. When we are good managers of our psychic inputs and outputs, we provide ourselves with a solid foundation from which we can manage our emotional affairs. This is the type of foundation that supports better relationships with everyone that we come into contact with – from our family and friends, to our co-workers, and even the waitress who serves us breakfast. Managing the psychic system is especially valuable in our relationship with that most important person, our self. It is also important that leaders, managers, and supervisors integrate a conscious management of the psychic system into their roles at work and at home. This will help them manage more effectively, confidently and happily. Psychic Income Psychic income is the positive emotional feelings our mind and body experience when, for example, we contribute the best suggestion at a meeting; get a date with a princess, or a compliment from a peer. We get the same ‘feeling good’ sensation when we win a tough tennis match, give a friend good advice; or come out on top of the class on an examination. Unfortunately, psychic income can also be negative. I think there is a strong correlation between self-esteem and the ratio between the amount of positive and negative psychic income one receives over his or her lifetime. I want you to start thinking about psychic income as the currency or trading media of your emotional life. It’s the credits you give yourself when you accomplish something that you are proud of, or when you make a quality contribution that gives credit and psychic income to someone else. Giving and receiving psychic income on a regular basis can create psychic wealth, raise your self-esteem and increase the self-esteem of those you come into contact with. Once we satisfy our needs for food and security, the human drive to acquire psychic wealth is the most powerful human motivator there is. It is also the most important criteria people use to decide how much, how hard, and how long they intend to work for a company. Hormones classified as endorphins are the primary outputs of the psychic system. They are released from cells in the brain immediately following a positive experience and the intake of psychic income. Endorphins are one of the most powerful drugs in our body. They result in the euphoric feelings of happiness, joy, confidence, self-esteem, and peace of mind. Endorphins also provide some defense against the short and long-term negative effects of bad experiences that result in the intake of negative psychic income. Emotional or ‘psychic waste’ is not as easily discharged as the wastes of the physiological and monetary systems. In fact, it’s possible to carry psychic waste around for weeks or months. Some people carry their psychic waste around on their shoulder for years. Some people pack their toxic waste around with them all their life. Fortunately, we can discharge our burdensome psychic wastes by learning to forgive and forget, or by neutralizing our psychic or emotional waste products. I think it’s a matter of mental discipline. Prayer, mediation, and writing a journal are good methods of discharging psychic waste. Maximizing Psychic Income There are several ways to maximize your psychic income: First: Apply the psychic income test. The test for determining if psychic income is real is very simple. When you earn it you feel good about yourself. When you earn it regularly, you acquire psychic wealth and increase your level of self-esteem. If you are pleased with you own efforts and you praise the efforts of others, then you like what you see in the mirror. Second: Beware of psychic income misers. A quality performance should always be rewarded with a large amount of psychic income. If your company’s managers do not give your employees the psychic income they deserve, the good people will leave your company for one that will. Don’t be a miser yourself. If your managers are giving a lot of psychic income to their workers, you need to make sure you give enough to your managers. Third: Beware of psychic income phonies. Kissing ass is not an acceptable way of giving psychic income. Psychic income must be earned. Anyone who enjoys having their ass kissed is a phony and probably has other motives Fourth: Beware of psychic income thieves. These are the people who take credit for the contributions of others or who try to make themselves look better by criticizing the efforts of others. In today’s competitive world, nothing will drive your best employees away as fast as a manager who steals the psychic income of his subordinates. Fifth: Acknowledge and accept psychic income when it’s offered. Just smile and say “thank you”. When your teammates or co-workers congratulate you, accept the psychic income, and acknowledge their gift so that they can receive some psychic income in return. In doing so you give as much as you receive. Sixth: You can buy psychic income. You can do so by trading the monetary income you’ve earned into charitable deeds. It is no coincidence that every great religion and philosophy teaches the value of giving to the less fortunate. But be careful. Giving a lot of money to charity for the purpose of advertising yourself is very dangerous. It’s better to give in a low-key manner. Giving away your race track winnings or the interest on your inheritance never produces as much psychic income as giving away money you earned by your own hard work. Hands-on giving is by far the most rewarding. Contributing your time and personal effort is far more rewarding than merely contributing your excess money. Psychic Income Bankers A psychic income banker is a person who lives in keen awareness of psychic income. He or she is on the constant look out for opportunities to give love, consideration, and recognition to those around him. • He understands how psychic income is created and destroyed. • He praises in public and criticizes only in private. • He knows when to give psychic income and when to receive it. • He is generous with his time, money and contacts, because he can make himself and others happy at the same time. DHL is the Wall Street of psychic income bankers. The Connection between Contribution, Psychic Income, and Motivation? Abraham Maslow published his popular theory of human motivation in 1943. Like his colleague Carl Rogers, Maslow believed that actualization was the driving force of human personality. Self-actualization, as he called it, is the highest drive, but before a person is motivated to be self-actuated, he or she must satisfy other, lower motivations like hunger, safety and belonging. He used a pyramid to illustrate the hierarchy of human motivation (Slide 29). At the bottom of the pyramid is the basic physiological need for food, water, clothing and shelter. Moving up, the next need is protection against physical and economic danger, followed by the need for social acceptance, then personal esteem, and finally at the top, the need for self- realization and fulfillment. I think Maslow’s greatest contribution to the business community is the insight that once a need is satisfied, it loses its motivational force. That’s why money isn’t everything. Once an employee is earning enough money to meet his basic needs, money no longer is a motivational force (Slide 30). Money and property are only motivators up to the second level. There and above, it takes more than money to keep a person committed to a company to the same degree he or she is committed to a family. Employees need to feel they are making a valuable contribution to the company in order to satisfy their need to belong, their need for self-esteem, and their need to be self-fulfilled. Only psychic income can satisfy those needs. DHL’s three philosophies act synergistically to produce a working environment that provides our employees with many opportunities to contribute to our family (Slide 31). That’s why they work harder, stay longer, keep happy, and continue to search out innovative ways to make the contributions that keep us competitive. Contribution, and the need to belong Human beings are social animals. We live and function within groups: family groups, social groups, and work groups. The need to be accepted by the group and to stay a part of the group is a basic human need. It’s driven by a primal fear of being rejected by the group. Rejection during our early prehistory would have certainly increased the possibility of premature death. During the hunter/gather stage of human development, staying in, and being accepted by the group was a daily matter of life or death. Contribution was uncomplicated and easy to define. Killing animals for food was a daily problem. The fastest runner would contribute by catching and helping to make the kill, while the strongest person would be able to carry the meat the furthest to home. The smartest might develop better and more effective methods of hunting, such as chasing an animal over a cliff, or designing a new hunting weapon. The one with the best memory would contribute as a medicine man or be the storyteller. Women contributed in a number of ways, not the least of which was the miraculous ability to conceive children who would take care of the present generation when they were old or in ill health. Contribution was everything, and it still is. In modern society men and women spend almost as much time at their workplace as they do with family and friends. Contribution at work is essential if we are to have a good and productive relationship with our co-workers, remain satisfied at work, and indeed remain employed. It is therefore vital that employees have opportunities to contribute in order to derive the psychic income they need to satisfy their higher order needs. It should be obvious that from the chairman to the CEO, and on down through every level of an organization, management should lead in a way that creates a working environment where every member of the staff can earn the psychic income they each need. Managers and leaders who demand outstanding results must make that environment extra fertile to ensure there is a plentiful supply to harvest frequently. Psychic income: How it works at DHL I would be less than honest if I said that from day one of the founding of the company we had the three philosophies formulated and articulated. In fact, it was not until 1986 in a speech at St Gallen, a business school in Switzerland, that I first verbalized the three philosophies as our corporate management strategy. And as I said earlier, I didn’t understand how they worked to produce highly motivated and happy employees until less than two months ago. Exactly when the philosophies were fully acknowledged and made public is of little importance. What is important is that DHL started practicing them in the early nineteen seventies. As a result, for over thirty years our staff has been able to make significant contributions and enjoy accumulating great psychic wealth. Today, DHL is just as entrepreneurial as it was the first day we operated. When our people walk in the streets anywhere in the world, we walk tall. Let me explain how each of the philosophies contributes to this phenomenon. Pushing decisions to the lowest level: how and why it works In the early nineteen nineties, a vast number of books appeared from management gurus telling us the importance of staff empowerment and how to create it. At DHL, by that time, we had already been empowering our employees for over twenty years. Were we smart and insightful? Well, not really. The fact is we had no choice. We operate 24 hours a day in over 200 countries across 24 time zones. Hundreds of thousands of small decisions must be made every day, and fast. The traffic situation in a city varies every day. The weather is unpredictable. Airline traffic and delays, shipment volumes and last minute requests from important customers also vary from day to day – and even minute to minute. So, to push decision making to the lowest level was the only way DHL could function effectively. DHL couriers, supervisors, airport managers, city and country managers are encouraged and pushed to learn and decide the best way to perform his or her daily work, as long as they do it effectively and on time. Pushing decisions downward resulted in the company-wide empowerment of all our people. It also forces them to learn quickly all the skills and knowledge that is necessary for the job. It helps us to quickly identify leaders who are not ready to take on heavy responsibilities and we can give them other jobs and training until they are ready. We created an environment in which everyone was given regular opportunities to make their work important, and develop to their full potential. They recognize that how they perform directly affects the performance and reputation of their company. They feel they have participated in controlling the destiny of the company and their own future. We pay them a fair wage and give them a lot of psychic income at the same time. Strategic thinking: how and why it works We did not invent the slogan “Think global act local” but it was a strategic mind model that we started practicing as early as 1972. I believe it was Sachi & Sachi or Bates who came out with the slogan in 1981, we unashamedly took it as our own, mainly because we had the largest global network at the time and we did what it said. While pushing decisions to the lowest level was simply a matter of necessity, not smartness, we definitely can take credit for deciding to teach all our decision-makers to think strategically. From the very beginning, we realized that our people needed to know how to make correct and appropriate decisions, not only on local situation changes, but also on changes that happened half way around the world. Giving our people the power to make important decisions is like giving them a gun. Teaching them to think strategically is showing them what the target looks like. Knowing what the target looks like reduces the odds they might shoot themselves in the foot. More importantly, they learn how to use limited resources to achieve the company’s goals, while shooting at our competitors. It’s a smart and logical philosophy. Training and learning are a natural part of our corporate life. Our people feel that the company is continuously investing to improve their skill and knowledge. For example, in the mid-nineteen eighties, it was obvious that strategically, everyone in our Hong Kong operation should be able to speak Mandarin, the national dialect of the People’s Republic of China. To reach this objective, we invested heavily in teaching everyone to speak Mandarin. In the process, we gave our employees a lot of confidence and psychic income. Armed with this new skill, they know they can compete better against our competitors. And they know they can take the skill with them if they ever decide to leave. Not many do leave. We pay a fair wage and we provide more psychic income than any other employer I’m aware of does, because we have institutionalized psychic income. This keeps our people contributing to our family. The corporation and family values: why and how it works When I first talked to my Western colleagues about the idea of introducing family values into the company, they laughed. Their mindset was “business is business, and family is family, and the two can not be mixed.” To win them over, I had to explain two things. First, in four-fifths of the world DHL operates in, family values are the only values people understand. In fact, in most of the places we operate the only way to run a business is the family way, and most of the successful companies are family run. Secondly, even in the West, people want to feel like they belong to a family at work. That’s why labor unions were able to thrive. Unions represent the family values that western companies didn’t start embracing until only recently. Family values do not include nepotism. For example, only one of my relatives works for DHL, and my partner hired her, back in 1976. The most important benefit for a company adopting family values is the safe haven it creates for making mistakes. In a family, you don’t disown your sons and daughters when they make a mistake. At DHL we encourage people to innovate and carry out their decisions. Trying out new things always results in a few failures. We tell our people that they can make any original mistake – once. DHL was the pioneer of the express courier business. When we started, there was no one around to show us what to do. We learned almost everything that was worth learning the hard way, by making mistakes. If we had a culture that was afraid of making mistakes and hid failures, we would not have survived the first year in operation. DHL is a culture that says it is okay to make mistakes and quickly tell others, so they learn not to make the same mistakes. This safe learning environment made DHL one of the first and best learning organizations in the world. Making it work – at work I believe it is self-evident that people work better when they are happy. At DHL, our three key philosophies work together to provide many opportunities for our employees to contribute to the company. This working environment produces all the psychic income our employees can consume. The result is a happy and enthusiastic workforce. I’m sure this is an outcome that every company wants from its corporate philosophy. For DHL, it is not simply a matter of what we would like to have; it is the result we must have to continue to succeed. All of our customers interact with our couriers directly, or on the phone. Our couriers are the daily faces of the company. Our good image depends upon our people at every level being seen and heard as happy and enthusiastic. Our customers feel good when they interact with our happy and confident crew; so they get psychic income too. What people want from their work? • People want to earn a fair, competitive wage. This satisfies their basic need for food, shelter, and security. • They want the opportunity to be able to contribute to the well being of the company. This gives them the opportunity to satisfy their need to belong, it increases their self-esteem, and permits them to achieve self-fulfillment at work instead of somewhere else. • They want to understand and share the vision of the company and know that the company’s vision is virtuous. Working for a virtuous company raises self-esteem and promotes self-fulfillment. • They want management to provide leadership and coaching, and then to get out of the way. This makes them feel they are in control of their own destiny • They want to feel that the company is interested in them and their well-being. Being interested in your employees’ education gives them a sense of security and keeps them from looking elsewhere for ways to achieve self-fulfillment. The challenge So, now you know that the secret to DHL’s success is not a result of three separate philosophies, but a result of the three philosophies working together. While each of them has the power to improve any company’s performance, -- the happy, enthusiastic entrepreneurial spirit a company has at startup cannot be maintained unless all three philosophies are working together. My challenge to you is to quickly integrate all three into your own organization. If your company is newly established, this shouldn’t be a difficult task. Educating your people about why psychic income needs to be shared and how to do it will help keep the young company’s entrepreneurial spirit alive forever. If your company’s culture is well established, change will be more difficult, but still worthwhile. It is all too easy and tempting for leader/managers to make all the decisions in isolation and then hoard the entire harvest of psychic income. This is the old way. In the new way, managers recognize that keeping all of the psychic income is tantamount to stealing income from their people, and doing so does little to inspire staff and make them happy. In my view, the best leader-managers are those who allow and encourage their entire team to earn the maximum amount of psychic income. The leaders earn their own psychic income from recognizing that they have built and coached such an excellent team. So, What’s in it for you? Remember, money isn’t everything, and mark my word, that there never will be enough money to pay all of the people you want to hire. But there is always enough psychic income to go around and keep everyone happy as long as you leverage the power of the psychic income system. My philosophy on human resources has always been to hire fewer people, teach them well, keep them longer, and pay them twice– once with money and once with psychic income. The key to holding on to them is to provide a fertile environment in which they can make meaningful contributions, accumulate psychic income, and consequently be happy in their work. The bottom line is that people need to feel needed and acknowledged for their commitment and participation. This is not just my opinion. It is simply the way things are – the way we human beings function. General Electric CEO, the legendary Jack Welch said in 1998, “I hope to leave behind a company that’s able to change at least as fast as the world is changing, and people whose real income is secure because they’re winning – and whose psychic income is rising because every person is participating.