Warren Buffet was on TV the other day. He was discussing a New York Times op-ed piece he wrote that suggested taxing the rich would not hurt anything. He said the world would not come to an end, nor would the rich stop investing if their tax rate were raised.
He gave a vivid example in the form of a question. He asked interviewer Matt Lauer whether he would prefer to keep his money in a 1 per cent savings account because of his high tax rate, or, if Mr. Buffett called him in the middle of the night and gave him a hot stock tip, would he say, "Great, where do I invest?"
Mr. Buffet is correct, and history has proven him right with trickle-down economics.
Trickle-down economics refers, of course, to the idea that tax breaks and other economic benefits provided by government to businesses and the wealthy will benefit the middle and lower classes by improving the economy as a whole. John Kenneth Galbraith, the economist, said "trickle down" would fail in the same way "the horse-and-sparrow" theory did in the 1890s: feed lots of grain to a horse and enough will pass through it and fall to the ground to satisfy a few sparrows.
Trickle down may not work in economics, but it sure does for employee productivity. Think of mentoring as your stock tip in the middle of the night from Mr. Buffet: it will give you a strong return on your HR investment -- if the mentoring involves structured measurement.
Over the course of the past six months, I have been investigating the "trickle-down" effect of mentoring in the workplace. My idea is based on the work of Elton Mayo, begun 1931 and 1932. After experiments, later defined as the Hawthorne Effect, Mayo believed that workers performed better if they felt better in the situation, because of the sympathy and interest of observers. He said this experiment is about testing overall effect, not testing factors separately. He also discussed it not really as an experimenter effect but as a management effect: how management can make workers perform differently because they feel differently.
The data I have collected over the course of the past five years demonstrate that mentoring makes employees feel differently. The trickle-down effect of mentoring is that it enables employees to be more productive and innovative. This is because behaviour is a function of the relationship between people and the environment.
Productivity and sales have been the theme this year in many publications, including Harvard Business Review (HBR) and the New York Times. June's HBR offers numerous ideas on motivating and compensating a sales forces. The New York Times wrote about a company whose employees are not compensated especially well, but who are loyal: those of Apple Inc.
Why is it that some companies can offer fair compensation packages and still have productivity issues, while others can offer $25,000 or less a year and have very high productivity? Culture.
It's all about culture. And our culture is shifting. The rich will eventually pay tax. Actually, our culture is not shifting it is repeating itself. Culture, like history, does tend to repeat itself. However, there are so few students of history left I don't think anyone has noticed.
During the last century, there were four historic eras of leadership. The Classical Era (1910-1935), The Transitional Era (1935-1955), The Systems Era (1955-1975), and The Middle Range Leadership (1975 to now).
The Classical Era, sometimes call the Bureaucratic Era, was the age of systematizing workers, it taught people how to focus on task. This didn't work out too well and ended with large fights between owners and employees who wanted to unions because the gap between the rich presidents and poor workers was enormous. Tax was a big issue then too.
The Transitional Era was also known as the Human Resource Era. Leaders focused on people, subsequently innovation and productivity went up; so much so that if you look at the economy of the time you will notice that it is also the most economically prosperous era of our time. This was also the era of the Hawthorne study.
Well, nothing good last forever, so we moved to the Systems Era, often called the Scientific Era, where the focus was on task and people and, as we know, it is really hard to focus on one thing, let alone two; consequently this era didn't work out too well for business.
Finally we moved to where we are now: the Middle Range Era, or the Laissez Faire, era. This era is best understood through the movie Wall Street: anything goes, just make those quarterly returns. As we saw by the crash of 2008, this era didn't work out too well either.
To be effective, the data suggest we should return to what Mr. Buffet has always believed: focus on your people, learn from the Transitional Era. No matter how big your advertising budget, if your employees don't feel good, they are not going to make customers happy and move product. The substantial data we have collected suggest that structured mentoring programs enable employees to feel good, and to understand how they can be innovative and more productive at work, and this makes companies money.
Invest in your people in the same way Mr. Buffet is investing in America. Get them talking to each other through mentoring. The trickle-down effect of mentoring is demonstrated by the fact that, on average, each company we have worked with has seen an increase in their employees' productivity of about 11 per cent and their reported on-the-job satisfaction increase 12 per cent.
Mentoring, when measured and run in a systematic format, closes the knowledge gap between senior leaders, Gen X's and millennials. Mentoring helps people understand the depth and breadth of the corporation. Mentoring helps people see the sum of all parts of the company and how they fit together and what their role is.
Most important, mentoring enables knowledge transfer and prepares the corporation for the exit of senior leaders with critical roles whose departure could cause a disruption for the company. The trickle-down effect of mentoring is that your productivity gap is closed through applied knowledge transfer, and your investment is solid because your employees are happy.
Dr. Mary Donohue is the founder of the Donohue Mentoring System™ and an Adjunct professor at Dalhousie School of Management Graduate Studies. She is the author of three books, including her most recent book on mentoring and structure. This year she was nominated for the Premier's Award for her business acumen, as well as her work on culture and millennials in the workplace. To book Dr. Mary for speaking engagements, please e-mail firstname.lastname@example.org.
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