Keeping Your Grip through the Business of Change- Hidden Keys to Resilience at EarthLink
Looking for innovative ways to retain good people during bad times? EarthLink, one of the nation’s award-winning Internet service providers, took an unusual approach and realized outstanding results.
As an executive, you know that when the economy suffers, office rumor mills flourish. Whether or not your company has enacted cost cutting measures such as reduced benefits or layoffs, seemingly endless media coverage of these events energizes the hallway harbingers of doom, often increasing concern about job security among your company’s most valuable asset – your people. As bad buzz seeps through the informal networks, it takes an innovative approach to keep experienced, quality talent from leaving -- recognizing they could be key to the company remaining competitive, or to its recovery.
Well before today’s economic malaise, EarthLink faced the challenge of retaining top talent. In late 2007, EarthLink, the Atlanta-based internet service provider, took action to restructure its business; discontinuing operations in unprofitable business segments and dramatically changing the workforce, including a widespread reduction in force. These actions, along with ongoing operational improvements, proved successful in turning around company performance resulting in $302 million in free cash flow for 2008; a 141% increase over 2007.
But getting there was no walk in the park, according to Stacie Hagan, EarthLink’s Chief People Officer. “Our number one priority following the restructuring was to stabilize our workforce,” Hagan stated. The effort to calm fears and refocus employees on taking care of customers and creating value for shareholders required a multi-faceted HR strategy. “Our approach was comprehensive, addressing all areas of the employee value proposition, but the main efforts fell into the three areas we believe matter most to employees,” Hagan added. EarthLink’s plan included:
- Creating Opportunities to Win through Compelling Compensation
- Clear Communication with a focus on Change Management, and
- Commitment to Ongoing Employee Development
“We spent a lot of time and effort redesigning our compensation programs to drive performance, and to absolutely ensure that when the company won, our employees won too,” reports Hagan. This investment is difficult when primary business objectives include aggressive cost management. Nevertheless, EarthLink’s success in linking pay to performance demonstrates that everyone wants to be on a winning team and when employees can understand clearly what’s in it for them, focus and perseverance soon become the cultural norm.
While many companies today face financial constraints that limit the potential for new performance rewards, Hagan is quick to add that a commitment to people and to preserving what they love about the company culture was critical to success.
EarthLink’s company culture and its long-held value for “treating people right” was key to attracting and retaining talented employees, and the company’s new CEO, Rolla Huff, who joined in 2007, acted quickly and often to reinforce that culture and the commitment to people.
“One of our greatest assets is our CEO’s absolute commitment to transparent communication.” Hagan said. “Whether he is talking to investors, to members of the senior team, or to employees at large, he never waivers in his commitment to straight-talk about the state of our business and our future opportunities.” EarthLink leveraged that strength and created multiple forums for two-way communication between company leaders and employees. In one such town hall meeting, Huff openly made a promise to employees that despite efforts to manage costs, the company would continue to invest in developing people.
Laura Stanley, EarthLink’s Director of Talent Management, heard that promise and led the charge to invest in people by creating an innovative strategy to get the most for every dollar spent on training. Research by the Hay Group links leadership development to shareholder return. The research found that companies that identify and foster leadership talent ultimately perform better on the stock market. Stanley translated this research into a renewed commitment to developing resilient leaders, and announced a series of coaching programs open to anyone who supervised others.
“Open and honest communication from the top [of the organization] was a good start,” Stanley stated, “but our goal was to inspire an overall culture of renewed optimism that would help retain the experienced talent we needed to deliver excellent service to our customers.”
In collaboration with two coaching and consulting organizations, Clearwater Consulting Group and Charter Oak Consulting, EarthLink built The Agile Leader program including 360 assessments, individual coaching, brief onsite workshops and follow-on group coaching. The response was extremely positive and managers quickly signed up.
Clearwater Consulting Partner, Becky Dannenfelser, explained: “In addition to core content on the importance of feedback and understanding one’s leadership style, we included work on the leader’s role in maintaining transparency and a positive perspective in the midst of dramatic change. And as the year went on, the small group discussions became increasingly critical forums for exchange of ideas on what’s working, and how to support each other.”
Most participants became “repeat attenders,” building and maintaining supportive relationships that crossed functional lines.
The bonds that some of us formed were incredibly important and the sessions gave us a chance to talk about things that are often considered off topic because they’re not project-related; such as how to deal with answering tough questions from employees or finding ways to do more with less. Sure, in some cases it was venting. But you do find some comfort knowing that there are other people in the same situation. - VP participant
The first step of the program involved offering 360 assessments to EarthLink managers, directors and VPs who wished to participate. The assessment results were reviewed in a workshop that included instruction on receiving feedback, and were followed with one-on-one coaching.
I did the 360 in November of 2007 and the follow-up [with the coach] was my first release valve for my concerns about the company and my role in it. I was able to come up with a plan for three things to concentrate on and that really helped me figure out what I needed to do to be most effective going forward. – Senior Manager participant
The program provided targeted one-on-one coaching to individuals grappling with specific issues surfaced in the 360. An aggregate analysis of the 360 results highlighted several common leadership competencies in need of greater focus for many participants. This led to creating stand-alone workshops to address challenges such as:
- How to Hold Difficult Conversations (interpersonal communication)
- How to Build a Leadership Network (collaboration)
- Coaching Your Team During Change (coaching skills)
- Finding New Solutions to Old Problems (creative problem solving)
The Agile Leader training sessions were followed by small group meetings of cross-functional peers. Facilitated by the executive coaches from Clearwater Consulting and Charter Oak, the discussions anchored the learnings from the workshops, emphasized application of the course materials, and allowed the group to share experiences in a confidential setting.
The workshops were good, but the group sessions after were really valuable. We shared ideas for how to manage our teams, but also these situations bring out the best and worst in people and we counseled each other on how to handle bad attitudes – people trying to game the system -- one leader to another. - VP participant
The program’s ongoing success was due in part to the responsiveness of the design and delivery team to incorporate topics that were pertinent for managers at that moment. As the realities of the economic downturn unfolded, new topics and experiential sessions were added to teach survival skills and encourage adaptability.
As for ROI, both Clearwater Consulting and Charter Oak Consulting are proponents of the geometric effect when training is followed by coaching -- greatly expanding the value of training dollars. Research indicates a quadrupling effect on productivity when participants are coached as they implement what they have learned in a workshop. EarthLink managers agree:
The usual with training is: Cool class! Now let me go back and answer the 300 e-mails that have cropped up. It is easy to forget what you just learned. With this program, the relevant topics and extra coaching were incredibly important in helping managers adapt and lead the transition of our business. -- VP participant
And what about that goal to stabilize the work force? Hagan reports that voluntary turnover among employees at EarthLink achieved an all-time low early in 2008 and continues to decline, and she credits this program for contributing to effective retention.
But for Hagan, Stanley, and the entire HR team at EarthLink, the real ROI was confirmed during an earnings call when Huff reported to investors:
“In my judgment, the most remarkable thing about our performance has been the ability and willingness of our people to stay focused on customers while simultaneously doing the things necessary to create shareholder value. . . . I’m taking the time to tell you this because you should know that it is the culture that is sustaining EarthLink. It is the culture that is allowing us to post the results that we have today, and providing us the opportunity to realize the meaningful long term cash creation that exists in [this] business. It’s a culture that I suspect a great many companies are going to have to learn to develop to survive the next several years. I guess we were blessed with being forced by our business model to get a head start on this emerging reality.”
During challenging times there is a tendency to think of managers as a commodity. It is easy to focus on the business case for change, cost-cutting and the future viability of the business and forget that the leaders and managers in the business right now are your life-line to future success.
“Managers should be viewed as critical stakeholders,” states Tony Daloisio of Charter Oak Consulting, “Investing in their engagement and development is not only essential for long term success and rebuilding the business, but it enables the business to make technically sound and informed decisions about the present. A little consideration goes a long way to building loyalty with managers who are looking for any reason to stay committed to the company they have given so much to over the years.”
Fostering a work environment that invests in employee education for professional development remains a strategic priority of the company, and a key retention tool that will be crucial to EarthLink’s continued success.
EarthLink’s innovative strategies are instructive in today’s climate where U.S. payroll employment declined every month in 2008 and over 600,000 jobs were lost in January 2009 alone .
Whether your company is in a turbulent cycle, or preparing for a future that now seems much less predictable, what is your plan for holding on to talent when faced with the real or potential chaos and confusion of forced change? While EarthLink’s focus and investment in leadership development, transparent communications and creating opportunities to win may seem counter-intuitive to business practices today, they proved to be fundamental strategies to successfully contain a potential loss of productivity and talent – and cut the corrosive chatter -- in a down cycle.
EarthLink is a good example of how companies can weather dramatic change without being stripped of the human capital assets that will lead to future success.
