In the early 1980s, Ralph Stayer sent a long memo and a $200 check to every employee of his family business. Since taking over as CEO, sales had increased fifteen-fold. Profits were up 150%. Headcount was growing. Regional expansion was underway. But Stayer wasn’t happy. Product quality and employees morale weren’t as high as he wanted. Everything, he had resolved, had to change.
His letter announced a compensation restructuring, which accompanied a dismantling of hierarchy and the introduction of self-managed, self-organizing teams throughout the company.
The purpose of a company, he proclaimed, was not to make money; it was to help its members (Stayer banned the term employee) thrive. Innovation, customer delight, and profits would all follow from it. As he put it, “Helping human beings fulfill their potential is of course a moral responsibility, but it’s also good business. Life is aspiration. Learning, striving people are happy people and good workers. They have initiative and imagination, and the companies they work for are rarely caught napping.”
He would later call this the most important insight of his career.
The change was neither easy nor popular at first. Two years in, Stayer fired three top managers because they kept deferring to him. Deference to the CEO did not fit into his vision of “an organization where people took responsibility for their own work, for the product, for the company as a whole.”