In the Sunday, December 28, 2008, New York Times, professor Alain Enthoven has a cogent op-ed piece entitled “Health Care With a Few Bucks Left Over.”

In his piece is a compelling argument that our current health care system, neither the patients nor the providers are rewarded for cost-effective, high-quality health care.  He believes strongly that giving more provider choices to health insurance plan participants, particularly large, efficient multispecialty group practices, would significantly reduce health care costs. (more…)

As I have transitioned toward retirement from Pitney Bowes, I am gratified by the many letters and calls I have received from present and former employees.  What has been striking is the degree to which people valued the small favors I did for them.

One executive remembered that I had increased the employee benefit for adoptions from $800 to $2,000, which helped him and his wife adopt two children.  Another remembered a small contribution I made to an MS fund-raising drive for multiple sclerosis.  Still another remembered help I gave her to get the company to make it easier to get support for hearing-impaired employees.  Many remembered condolence, congratulations, or recognition letters I sent, or even a conversation in which I told an individual that he or she was highly valued.

Probably one of the most heartfelt expressions of gratitude I receive year after year was from parents whose children had received college scholarships or other support from the Company. What these stories and others tell me is that, for all the attention organizations pay to compensation and major benefits, leaders underestimate the role small favors play in driving organizational loyalty, engagement, and performance.

As we move into more difficult economic times, we will not have as much money to pay as much as we used to pay.  What we need to do better is to match our total reward and remuneration system with what people value.  Very often, executive compensation committees agonize over making sure companies pay competitively, and overpay executives in the process, without really achieving the loyalty and retention they hope to get.

Having talked to many executives who have left Pitney Bowes, their initial explanation is that they received a better offer and, sometimes, they have gotten a promotion in the process.  However, after we talked for a while, I usually learned that they just did not feel adequately valued by the Company, and that their feeling of being undervalued caused them to take the call from the outside recruiter.

While there are some mercenaries out there, there are far fewer than organizations believe, and we need to figure out how to make remuneration more flexible and less standardized to meet individual needs.  In 1993, I drove the introduction of flexible benefits at Pitney Bowes, but I believe that we have more opportunity than ever to add highly-valued, but low cost, benefits for people.

If an organization does a great job delivering customized benefits valued by the largest numbers of their employees, the organization generally has lower, not higher, labor costs.

Those who oppose these programs often point out the risk of recognizing an employee that others believe is not deserving of recognition.  For example, see the Employee Recognition, Rewards, Awards, and Thank You Ideas article from the Human Resources section of About.com.

Clearly, good recognition processes cannot overcome poor performance management, particularly if the leader supports the wrong people and undervalues the right ones.  My point is that, once a leader is able to figure out who needs to be rewarded and recognized, there is a much wider range of tools available than are used today.

Some people to whom I have made this point respond that individuals still value W-2 income because they cannot pay the rent or the mortgage with the kinds of benefits I have described.  I reply to these people as follows:

• People who are living paycheck to paycheck will generally not get out of a big financial hole by getting an extra percentage point of pay increase. If they want to improve their lot in life significantly, they need to get skills development that enables them to qualify for promotions.
• There are benefits that work to reduce the cost of living for people. For example, our credit union is a wonderful tool for helping employees and their families get more affordable mortgages.
• People have varying levels of need. For someone who is a second income in a family, their reason for working at a company may be the medical plan, rather than the salary they receive. Finding a way to give the person a better medical benefit might actually be more valuable than a salary increase.

We need to be far more resourceful in thinking about rewards and recognition to stretch organizational resources further and deliver more value to people in the process.

The failure of so many large, well-known companies over the past year has reminded us that long-term business success is more difficult than most people realize.  I know that when I started my business career 34 years ago, I went to a large Chicago law firm that seemed like it had been, and would continue to be, around forever.  Within the next few decades, that firm, and many others like it, would be gone, a casualty of a much more ferociously competitive world in private legal practice.

If we look at the Fortune 500 list, 30% of the companies on the list that was published in May, 1996, the month I became CEO, are gone.  Since the list was first published in May, 1955, 1,300 companies have come and gone from the list. 

Why is this so?  I believe that there are many reasons, but the biggest one is that a business that discovers and takes advantage of a market opportunity is inherently sowing the seeds of its own destruction the more success it achieves

When a business is exceptionally successful, others want to copy it, or figure out how to capture more of the benefits of its success for themselves. Competitors find a way to take a portion of the profits for themselves. When  customers see that a business is exceptionally profitable, they are more likely to demand large discounts if they have the power to do so.  Employees demand higher wages, salaries, and benefits because they have contributed to the enterprise’s success.  Governments try to raise taxes on the successful business.  Communities try to solicit more charitable contributions.  Sometimes, antitrust and competition law proceedings are initiated, and government attempts to figure out if the business has used inappropriate or illegal tactics to be successful. In effect, a situation of large and growing profits is inherently unsustainable. (more…)

I am stepping down from my position as Executive Chairman of Pitney Bowes on December 31.  I will also no longer be a member of the Pitney Bowes Board of Directors.

I do not anticipate being in any sort of direct employment or contractual relationship with Pitney Bowes. I made this decision for two reasons.  First, there needs to be absolute clarity that I am not part of the Pitney Bowes leadership team.  Being any sort of agent, employee, consultant, or contractor to Pitney Bowes is inconsistent with that clarity. Second, I need to be free to take positions on public policy issues that are mine, and that will not be confused with Pitney Bowes’ position on these issues.  I expect that I will be aligned with Pitney Bowes, but the Company and I each need the freedom to decide how to think and act about issues independently of each other.  I will adhere strictly to my responsibilities as a former employee of the Company, but I will no longer be an insider.

I have four passions in the public policy arena:

• Health and health care
• Transportation and sustainable infrastructure development
•  Community development
• Communications

I will continue to take on project-based assignments outside Pitney Bowes that involve work with both the public and private sector on each of these issues. I also expect to stay on the two public-company boards of directors on which I serve, and to remain engaged with the Dossia personal health record initiative, the Boston University Alzheimer’s Disease Center, the National Urban League, and the RAND Health Advisors Board.  I will also continue to support my wife’s work with charter schools.

I am particularly excited today about the idea of applying the tools used by effective start-up businesses in the non-profit sector.  Too many non-profits spend too much money on non-core activities. They also fail to work together with other non-profit organizations, even when cooperation would benefit both organizations.  They also often have missions that are too fragmented and diffuse.  I am going to try to see what I can accomplish in my area.

I have become very interested in working with business start-ups because I like the passion, energy, and brainpower of many entrepreneurs I have met and with whom I have worked.  I am excited about spending more time with them.

I also plan to spend some time thinking back about my experience as a Pitney Bowes leader and employee, and will share some of my reflections on business from what I have learned from my 29 ½ year career at Pitney Bowes, my five years in private law practice, and my life experiences outside the Company.  I will create a new topic area called “Reflections on my Business Career: Lessons Learned” and, from time to time, will post blogs on specific lessons learned.

I have often been asked whether the approach I take to blogging will change since I will no longer be a Pitney Bowes employee.  The answer is that, while we have always indicated through the disclaimer that the opinions expressed are mine, rather than Pitney Bowes’, I would expect that there will be some changes that make that divergence clearer, but I am reluctant to predict what they might be.  The main message I want to reiterate is that, from December 31 forward, I will be expressing my views without any vetting process inside Pitney Bowes.

I want to thank the people at Pitney Bowes who have helped me get this blog underway and who review my blog before it is published.  They have been greatly helpful, but I cannot ask them to provide services to me as a retiree, given their other responsibilities.  I have gained great wisdom and insight from them, but I will be a free agent as of January 1.

I look forward to engaging with readers in my new role.