Defining values Featured

8:00pm EDT July 26, 2007

It took about four years for Mike Hayde to see the fruits of his efforts to imprint and reinforce a strong corporate culture on Western National Group, but it came in a powerful message during a deep recession in the real estate industry.

“In 1994, a lot of companies were laying off people, and I called together our senior management, and I said, ‘Would all of you take a 10 percent pay cut so we can give a 4 percent pay raise to everybody in the company who makes $40,000 or less?’” says Hayde, Western National’s CEO. “To a man and woman, everybody did it. I think it was one of our best moments when it comes to what our culture is and what our values are.”

Four years earlier, Hayde proposed a plan to senior management to articulate the company’s values and to commit to live by them. At the time, before he had been named CEO in 1994, Hayde was convinced that if the company’s values weren’t codified, the company he joined in 1971 and stayed with because of the very values that its founders had lived by would change into one he wouldn’t recognize anymore. And that, he believed, would jeopardize the real estate management and development firm’s future.

“We were 500 people at that time, and it just wasn’t the same place I came to work at,” Hayde says. “I said we’re going to continue to grow and continue to change, and I think we should try to write down today what are our values, not who we want to become. We’re a pretty good company.”

And what would have occurred had Hayde not addressed the culture issue at the $260 million company?

“We would have wondered why we weren’t as close together and why the culture wasn’t as strong, but we would never have realized why it wasn’t,” Hayde says. “I think you see this at different companies that face growth problems. You don’t get out and address it, and suddenly, it’s five years later and you’re going, ‘It’s not the same place I came to work for.’”

Hayde doesn’t have any hard and fast data to demonstrate that Western National’s employee retention rates are any better than those of its peers in the real estate and property management industry. Instead, he points to an unbroken string of years in the black since the company was founded and to the perennial recognition of Western National’s people by the industry.

“Here’s how we try to do it, because I don’t think turnover is the answer because there are some pretty mediocre companies that have had associates for a long time,” Hayde says. “What we try to do, for instance, is the Institute of Real Estate Management has an annual dinner where they hand out awards in a particular county. We participate in four counties here in Southern California. I want to go to that dinner, and I want to see our people up on that stage as much as any other company is and more. I want us participating and clearly see that our peer group says that our people are winners. And we do well there.”

Creating the credo

Hayde started the process by delegating it to long-time employees.

“I got seven people who had been with the company eight years or longer to sit in a room and write down who we were,” Hayde says. “They came up with the values, we approved them, and then I went out and we rented hotel rooms near our properties, and we had two meetings at each area, so half the teams could come to one and half could come to the other. I said, ‘This is important to me and the company and to all of us because it’s who we are, and we need to acknowledge that it’s important, and we need to be more vocal about living it.”

Hayde says that having employees below the senior management level come up with the values was key in getting the process off on the right foot because it gave them ownership in it from the beginning.

“I thought that I didn’t want to have it come across as the five most senior people get together and this is what it takes for you to be successful,” Hayde says. “And, I wanted the people who had made us successful to write down, ‘Here’s why I’m at this company.’” [Read Western National's credo.]

Accountability

Defining the cultural values was just the first step. You also have to lead by example and hold people accountable to the values.

Each month, Hayde writes a two-page letter to all 1,100 Western National employees, and most of the content deals with the company’s cultural values.

The human resources department reports directly to him, and he works on its budget. And he’s hands-on with a three-hour class when it comes to making the first transmission of those values to new employees.

“I teach a class in values once a month to all new employees,” Hayde says. “We print the credo on our business cards, we try to bring something more to it than making money. We want you to go out to dinner and tell your friends you work at Western and have them go, ‘Wow, that’s a great company.’”

All of these things help set the tone for the culture. “My worst fear would be one of our associates did something, and you’re out to dinner, and someone says, “Oh really, I can’t believe you work there.’ And there are companies like that,” Hayde says.

To ensure that management is supporting the credo, all employees are surveyed twice a year to rate their bosses on the key points of the credo.

“It’s a survey where you rate your boss as to whether he’s honest or dishonest, quite frankly,” Hayde says. “Does he value human relationships or not, and it’s on a scale of 1 to 5, and it can’t be traced back to the employee. I expect all of our leadership to be between 3.6 and 3.7 to 4.5. If anyone’s a 5, I’m a little worried because that means they’re perfect, and I doubt that’s happening.

“I kind of dig in also because one of the questions is, ‘Supports the credo, doesn’t support the credo.’ I expect everyone surveyed to be a 4.5 or better on that. If it’s honesty, I expect them to be at a 4.5 or better on that. So all questions don’t weigh the same with me.”

At corporate headquarters, no one leaves without an exit interview. The people who are leaving are asked about support of the credo, the value system, and what they thought about the honesty and the integrity of leadership.

“I think people, when they really know that they’re not going to be employed here anymore, they can be honest,” Hayde says.

“I’d love to say we’ve got this great culture and all these wonderful things, but let’s face it, everyone’s afraid for their job. Am I going to say the wrong thing and tick the boss off? In my mind, it’s just one last shot to hear an honest appraisal of one of our associates who’s a leader and isn’t doing well.

“Quite often, thank God, we hear, ‘I’m leaving because I think there’s a better opportunity for me in another company and that opportunity wasn’t here, but I loved my boss, I loved the people I worked with.’”

In very rare cases, a string of negative responses about a manager can end in a firing, but Hayde rarely acts on a single response from the exit interview. His CFO, for instance, a consistently high scorer, got all zeros from one employee. That one response was quickly disregarded.

“I’m looking for a trend. Just tell me if something’s changing,” Hayde says. “If you’re a 3.75 and you’ve always been a 3.75, maybe you’re not the happiest guy in the world, but that’s OK because your overall score comes out a 4. That’s a darn good leader. So I find it in values or in culture, you’ve got to take even more so a longer or a trend look.”

Hayde looks for patterns in responses and, when necessary, has a face-to-face meeting with anyone who’s getting consistent negative feedback in the exit interviews.

“In one case in the last six or seven years, somebody got terminated,” Hayde says. “After we did some more investigation, the smoke wasn’t just smoke, it was a fire. In most cases, it’s an ugly conversation, but the senior vice president and I will sit down with them at lunch and say, ‘I want to give you some feedback, and I’m not telling the person you report to about it. We just want you to know what the perception is of the people who left. We all know that they left, so maybe they don’t like you. Maybe you ran them out for good cause. Who knows, but it wasn’t one person, it was a number of people.’”

Making people important

When the seven-point list of beliefs that guide Western National’s culture was created, the one at the top of the list was “People are our most important asset.”

Treating its people as the most important asset means constant reinforcement, so Hayde makes sure that his employees get the recognition they deserve, particularly when they live the company values.

“We have a credo committee, 19 people from various divisions within the company, and every three months, they nominate an employee,” Hayde says. “No officer in the company but any line employee up to a director in the company can nominate somebody they think did a great job of making our credo real.”

The credo committee reviews nominations, and anywhere from three to nine employees are rewarded with $750 in cash to spend on a vacation, two days off, a watch, a write-up in the company newsletter and a “Credo” candy bar. Meetings are called at each employee’s location, and the announcement is made in front of his or her peer group.

“We do that, and I think that’s important because people look at that and say, ‘Wow, they’re giving out money, cash, to guys that are buying in to the culture,’” Hayde says. “They’re not just saying, ‘Atta boy.’”

Managers at Western National are encouraged to hold a credo lineup, a 10-minute meeting with their employees every morning. Credo lineups are designed to accomplish three things, Hayde says.

“We thank everybody on the team for whatever they did yesterday,” Hayde says. “There’s always something you can thank someone for, and nobody will get tired of being thanked. I’ve never had someone tell me, ‘Stop thanking me, I’ve had enough.’ The second thing is to make it clear what we’ve got to do today, what’s our work today, what are we going to do today, here’s what we’re going to do, whatever it is. The third one, which most companies forget, is to ask if anyone’s drowning, does anyone need help, because the better the employee, the less likely they are to ask for help. They’re going to do it somehow.”

The bottom-line value of a people-first culture for Hayde is the way Western National Group performs on a day-do-day and year-to-year basis and how he’s able to depend on the entire team to continue the company’s success.

“The only reason I run a pretty good company is because of the people who support me and work at it,” Hayde says. “At this point, with 28,000 units under management and $125 million worth of construction each year, I’m actually not responsible for too much. You look at all our people and see all the good things they’re doing, they make my job pretty easy.”

HOW TO REACH: Western National Group, www.wng.com