#122—Stephan Meier: Employee-Centricity as a Competitive Advantage

Stephan Meier, is Chair of the Management Division and the James P. Gorman Professor of Business Strategy at Columbia Business School whose work lies at the intersection of behavioral economics, business strategy, and the future of work. 

Customer-centricity has long been at the forefront of conversations that involve optimizing profit, with the idea that happy customers lead to increased revenues. But a new theory is quickly gaining traction—that employee-centricity is just as important. 

Stephen is a big advocate for the idea that happy employees not only boost company morale, but have a clear direct correlation on the bottom line. In his upcoming October 2024 book, The Employee Advantage: How Putting Workers First Helps Business Thrive, he collects fascinating case studies and insights from his research to showcase how businesses that invest in employee experience often outperform others.  
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In this conversation, we discuss key points from his book, including: 

• How you can adapt customer-centricity frameworks and tools to improve your employee experience 
• The four key motivators in the workplace beyond compensation that have an enormous impact on performance 
• How technology can both help and hinder the workplace—and how you can use it to optimize the employee experience 

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Episode Timeline:
00:00—Highlight from today's episode
1:26—Introducing Stephan+ the topic of today’s episode
2:59—If you really know me, you know that...
5:34—What's your definition of strategy?
06:06—The thesis of Stephan's book
08:38—Clarifying employee value creation 
09:58—Employees as the new customer  
16:13—How companies should see their employees
19:49—Are companies really prioritizing employees? 
22:03—Common misconceptions about employee motivation 
27:47—Exemplary employee-centric companies 
32:20—How can people follow you and continue learning from you?
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Additional Resources:
Personal site: www.stephanmeier.com
Link to book: The Employee Advantage: How Putting Workers First Helps Business Thrive
LinkedIn: https://www.linkedin.com/in/stephan-meier-5297082/
X: https://x.com/meier_steph?lang=en

Thank you to our executive producer Zach Ness, our producer Nazanin Homayoun Jam and our editor James Pearce. If you enjoyed this episode, please follow, download, and subscribe. I’m your host, Kaihan Krippendorff—thank you for listening.

Follow us at outthinker.com/podcast

Transcript

Kaihan Krippendorff: Well, Stephan, thank you so much for being here. I loved your book, and I'm excited to dig into it a little bit. At least with you.
 
 Stephan Meier: Thanks for having me.
 
 Kaihan Krippendorff: So I wanna open up the same 2 questions. I ask all of our guests. The first is for us to get to know you a little bit personally, nothing to do at all with your work. If you could complete this sentence for me, if you really know me, you know that.
 
 Stephan Meier: I'm really excited about making Lego stop motion movies.
 
 Kaihan Krippendorff: Really? When did that start?
 
 Stephan Meier: So it started about when I was actually writing the book in the first fall, and I was juggling between writing the book, you know, teaching. I'm the chair of the management division here. So dealing with the administrative stuff. And I was really, really stressed out. So I kind of needed something to ground me, and I stumbled across this book in an airport bookstore, like how to make Lego stop motion movies.
 
 And they're like, that's interesting. I mean, that would definitely ground me, and I have a lot of Legos from my son. That is now he's now 14. You know, he's not that much into Legos anymore, but I still have all of those. So I felt like, why don't they make lego stop motion movies about the book.
 
 So I'm making Lego stop motion movies related to work the workplace and the future of work. So they're all related to ideas, chapters, in the book, and I have many of them, and now I decided, you know, why don't I release 1 after the other with my newsletter or, like then I now started to do, like, endorsement, you know, tobacco is endorsing my book. And the queen and the genie and the bottles. So all those characters I had from my son. There's an injuggle.
 
 And, like, all those characters that I have from my son, I make now into Lego Stop Motion movie. And it's a very meditative approach, but also it reminds me of a little you know, work has to be fun, and that's kind of where the fun comes in. I don't take those seriously. I mean, they're just basically, for my enjoyment, but if somebody enjoys them even better, and it keeps me really sane from, like, doing all those other work, which is more brain heavy and now, you know, moving legal figures 1 frame after another is definitely very agitated.
 
 Kaihan Krippendorff: Yes. Amazing. I love it. Yeah. There's so much we could draw on about creating space in the workplace for creativity for, you know, getting rid of that really efficient 6 sigma kind of mentality, the default mode of your brain, and, you know so we we'll dig, I'm sure, into that next.
 
 So you you're the chair of the management department at Columbia Business School, 1 of my almaurs, You teach strategy. You taught strategy for a long time. So what's your definition of strategy?
 
 Stephan Meier: So, I mean, my definition is, like, strategies, media formulation, and the planning process that really involves making choices and thinking really carefully about trade offs in order to add value in an industry. And by doing so, you can create a sustainable competitive advantage.
 
 Kaihan Krippendorff: So there are lots of levers that you can use to create sustainable competitive advantage. And what I love about your work, if I'm gonna over simplify it, we've had it. Felix overholsteredski, here. He knows a good friend of yours, a good friend of ours, and he laid out his value stick. But as I understand, like, you with his next book, are focusing not on the top of the value stick, but the bottom of the value stick were more so involved with you.
 
 Just can you just talk to us about what is the thesis of the book, and why did you decide to take on the writing of the book?
 
 Stephan Meier: Thank you. Yeah. It it it is very much related to this idea about creating the audio in an industry and related in some sort to, like, what Felix talks about with the audio base. Strategy. And just to remind everybody, you know, their value stake is gonna you can create value on the top end of the balance.
 
 It says customers, clients, And in order to do that, you need to improve the customer experience or the willingness to pay. And if you're then different on increasing the willingness pay, you're actually able to increase price and lower the margins. As a result, if you're not different on the willingness to pay, you know, price competition will lead to price drops down to call. Now there is a flip side, you know, on the other side of the value of those value sticks. Is the supplier and labor and employees being 1 of the most important suppliers And the same logic I argue applies there as well.
 
 In order to create and then capture value, you have to lower the willingness to supply or make the employee experience better in order to actually lower the cost per unit. Not increase it. And I think that's kind of the idea, the core idea, you know, cost employees are kind of like the new customers. And if we then apply everything, all the tools that we think about employee centricity, they also apply. To add if you think everything about customer centricity, they also imply to thinking about employee centricity.
 
 So for example, Nobody would say that customer centricity is lowering the price. Although, obviously, if you ask customers, you know, price is an important attribute in most of the decision. But a lot about customer centricity is increasing the willingness to pay, making the experience better. In order to actually increase the price Mhmm.
 
 Kaihan Krippendorff: As a result. Clarification question here, I think some people listen to what you said. And if willingness to sell is willingness to sell my labor for this company and creating value is lowering the willingness to sell, so I'm willing to work for less and less and less, Are you talking about paying employees less trying to minimize what you pay them?
 
 Stephan Meier: I mean, I don't think it's, like, paying them less overall, but, like, you pay them effectively less per unit. You know? If it makes you happier and more engaged, to work for a company, you're gonna be more productive. So giving the same way to actually creating more output per wage, or you're less likely to leave So turnover is gonna go down, and that will actually lower the cost per unit as well. Or you're gonna be more innovative.
 
 You know? We kind of know that, like, in order to create innovation, you know, people have to be really engaged and motivated, then you get they have to give them some leeway. That makes them happier to work there, but also more innovative, which then will either create, you know, ideas how to be more efficient and or, you know, ideas how to make the customer happier. And so it could could lead to not only the cost per unit going down, but maybe even the billing has to pay. Right.
 
 On the other side, go up.
 
 Kaihan Krippendorff: Right. And I and I love that you kind of dig into if we take the lens that we have spent decades working on optimizing the value to customer and we now turn around and apply that to employees or probably a lot of things that we do differently in the way that we engage them and segment and things like that. But before we get there, I'd love to hear your argument. Why are employees the new customer? I believe it.
 
 I've said it. I haven't proven it. You've been able to actually support it. But what do you say to someone that says, you know, the pendulum is just gonna swing back and forth. Right now, we're in a tight labor environment.
 
 So we gotta really treat custom employees well. But you know, supply and demand will shift again, and then we can we don't have to treat them as well again.
 
 Stephan Meier: Yeah. Yeah. Good question. And I heard this all. You know?
 
 It's like, oh, in a when the in the business cycle, you know, sometimes the employees got a little bit of the over upper hand, but in the end, you know, we're gonna go down to squeeze them, and they're happy that they have a job. Now if that's where the case, you know, by book would be not that interesting, but I actually do believe that there are factors that led to customer centricity that are hitting kind of the labor market and will shift the power somehow to the employees. You know what? Let's go back to customer for a second. You know, like, before there was customer centricity, it was product centric.
 
 You know, it we designed, like, to catch it because the engineering department could with all the bells and whistles, and then we took, like, marketing efforts to push it onto the customers. They're like, you know, you really need that feature that you've never thought about, but, like, you really need this. And then we shifted to, you know, thinking about customer more and the experience of the customer became more important. And I think we did that for for factors that led to that. 1 is, you know, competition increased and innovation efforts became much more important.
 
 Like, you know, people add more choices. And now suddenly, that's when an agility and constant innovation, you have come up with interesting insight that customer actually want. And number 1, so innovation or competition increase. Second is transparency increased about the experience. You know, think TripAdvisor for hotels, you know, before you couldn't really know.
 
 And now you have TripAdvisor, you have product reviews, and you have all that information that really take go into, you know, what the customer really cares about, and then there is a lot of evidence that know, Tripadvisor, like, gets rid of tourist traps. So there is 1 of my colleagues who has a has an article on my, like, tourist traps in Rome. Or disappearing when TripAdvisor enters the market. So that's number 2, kind of transparency about the experience. Third is there is a lot of data.
 
 About customer. You know, there is back in the days when I didn't know anything about you as a customer. You know, there was no reason or no tools, how it could actually tailor it to your very needs. Now Amazon and Netflix and whatever knows so much about it, that they can tailor exactly what I want and what I need. And there is obviously cautionary tales about how to do that right, but there is definitely more data.
 
 And maybe as a result, so that's number 3. There is more data. And number 4 is their preferences change. Now people got you know, actually wanted the experience more the experience becomes more important. And probably as a result of the first 3, you know, customers could pick here.
 
 You know, I always tell that story. When I grew up, you know, I thought with my sister mainly about watching TV or what to watch on that 1 TV we had and that TV schedule. Now we're now a family of 5 where, like, everybody watches whenever they want. At whatever time, there is no conflict with everybody is, like, it's personalized experience that kids have. And, you know, my kids I mean, I think they think like, 2 day delivery is, like, is part of how the world works.
 
 They don't know that it's different. So because somehow preferences change that we want brands with purpose and personalization. I think all those first 4 trends hit the labor market as well. You know, there is 1 the innovate, the agility, obviously, the people do that. So we actually need to make sure that people, the employees deliver on, like, you know, constantly creating new ideas.
 
 There's also more competition. It's easier to switch.
 
 Kaihan Krippendorff: Yeah. I love the line 1 of the lines in your book is it's the employees that are gonna come up with the innovations that are gonna come up with the is. And as companies need to compete more in innovation, it's the ideas are gonna come from employees.
 
 Stephan Meier: Absolutely. There is number 1. Second, there is more guarantee on the employee experience. I mean, the equivalent to Tripadvisor is Glassdoor dot com. But, like, if you have a scandal, it goes viral.
 
 And as Bezos said about the customer, you know, if you screw up offline, he or she tells 6 people if you screw up online, if she tells 6000, I mean, I think that's true about the employee experience as well. There is much more data that we have about employees as well. So I do think this 1 size fits all is gonna be over on those who can actually figure out how to tailorize it, and maybe we talk about that later, you know, how to actually think about the employee experience and tailor it to individual needs. And then as a result, you know, the fourth preference is always changing. People want to work for companies that have purpose that gives them some needs that they have, and I talk in the book about, like, what those needs are.
 
 Yeah. And I think the days are over where we just force them to do their work. Does it go up and down in the business cycle? Absolutely. I think the trend is gonna be that employees are gonna be more important than we're gonna make a difference if you wanna create a competitive advantage.
 
 Kaihan Krippendorff: Yeah. So there's some fluctuation with the market, but these are 4 long term trends that are gonna move the maybe the pendulum's moving, but the pinnacle of the pendulum is also moving towards employees. That makes a lot of sense. I've got 15 questions, but they kind of all cluster around. Here's what I'm thinking.
 
 I'm thinking, alright. Customer lifetime value has changed how people relate to customers. Should there be employee lifetime value? We had David Ulrich on this on this podcast. You talked about, you know, we segment and personalize products for customers, but we just sell a generic product commoditized product that we call employment.
 
 Right? We had John Windsor on the call who's this kind of open talent person, and he talks about jobs can get fragmented into tasks and they can be configured in new ways. How do you see it evolving if a company's job becomes the product, and their customer becomes the employee. Mhmm. How does work change?
 
 Stephan Meier: Yeah. I think it changes in all of those aspects that you alluded to and even more. And I do think, like, if we think about customers and what do we do with customers, it's a good tool to think about what happens with the employee. So let's say, if you would ask a marketing executive, is it a good idea to ask your customer once a year how they're doing? They would laugh their But it was like, of course not.
 
 We need, like, constant input, some feedback. Now that's kind of what we do with our employees. We ask them once a year. Nobody cares about it. Now both know, so the employees are not very engaged in those surveys.
 
 So we need to figure out kind of how to get input from the employees. The other is like the customization that you talked about segmentation. We're doing a terrible job. If at all in segmenting our employees. We sometimes do it, like, old school that, like, probably customers did, like, 20, 30 years ago.
 
 Old, young, you know, rich poor. I mean, that's what, like, banks would do. Whatever it is.
 
 Kaihan Krippendorff: College degree and not college degree. Yeah. Yeah.
 
 Stephan Meier: And I think we have to move away from thinking about that and starting to segment more on behavior and attitudes. And so on and so forth. Now does that mean we have to change? Absolutely. We need different types of data.
 
 We actually need to figure out you know, what customer what do customer want, what do employees want, how do they tick and then segment accordingly. In terms of, like, lifetime value of employees, I think that's a very, very important idea. You know, I have a chapter in my book where where it's title, like, is the employee always right. And the employee the customer is not always right. So if we think about customer centric, it's not always right.
 
 And if anything, the right customers might be always right. So we have to figure out, like, what are the right customers segment and then and tailor maybe to those very high value customers. I think we have to do that the same with the employees, figure out, like, you know, who do we want? Who do we don't want? How to actually then create an environment where we tailor it to those different employees.
 
 But choice then be you know, it's important to have choice. Like, for customers, if you segment, you can't tailored to every single segment. You have to kind of decide. I'm on a catered to that particular segment and that particular type of customer. And I think we have to do the same with employees.
 
 Kaihan Krippendorff: A lot of companies will say that they do this well. Aren't companies doing this and are there examples of companies that we think are doing well that aren't? Or example of companies who are doing this well?
 
 Stephan Meier: No. I think I mean, what is what is absolutely right? You know? I've never heard any executive the ones I read about or the ones I teach in our executive programs. That wouldn't say, you know, employees are more most important asset.
 
 Now there are a couple of evidence that that's probably not true. So 1 is the what I collected. I actually looked at whether of 2 stakeholders, customers, and employees, you know, how much do executives care and talk about customers and the and or employees and the and the difference couldn't be store code. You know, on average, they talk about 10 times more about their customers. It's actually increasing over time than employees.
 
 And when you then do text analysis, you know, how tool executives talk about customers. Customers are, like, growth, opportunities, and employees are, like, risk, cost, very negative. Terms. So that's 1 evidence. I mean, I actually got a little obsessed.
 
 I then looked at, you know, strategy textbooks. You know, how often do we talk about customers or employees? And it's about the same ratio. I mean, it's dark. You know, you can go back to porter who has the 5 forces have buyers and suppliers.
 
 He talks much, much more about buyers and suppliers. But then what you can do also you know, when you look at the engagement levels that, like, Gallup, for example, collects for, like, decades, you know, the engagement level are terrible, you know, about in the US, I think about 65 percent of workers are disengaged at work. I think worldwide, it's even higher. They're, like, 80 percent. So I don't think people executives actually care about employees as much or put enough effort behind it.
 
 And if they do, they're doing a terrible job in actually being effective.
 
 Kaihan Krippendorff: Yeah. Tell me more about that because what I got from reading your book is when we do put employees high as a priority, we seem to say, well, their value is compensation, and you take a much more kind of human centered kind of the view of a behavioral economist, tell us what do people get wrong when, you know, with the current approach or the common current approach?
 
 Stephan Meier: No. Yeah. Yeah. Thank you. I mean, if it were all money, then, obviously, the logic that I just said about, like, how to create value would be not to.
 
 Then it would be 0 sum game. You know? Like, I give you more money. It comes out of my bottom line. It will be a little bit equal equivalent to, like, lowering the price.
 
 To customers. But, again, for customers, we're thinking about the experience very definitely what do they be and what do they want. So a big part of my book is about, you know, how to actually humanize work by taking into account what motivates people beyond money. I write about money. You know, there is on the lower end of the income distribution, you know, money is undoubtedly very, very important.
 
 If you if you go to work and you're always worried how to make ends meet, you know, that, like, hits productivity pretty badly. You know, you can't just focus. But at 1 point, you know, money just doesn't do that much more for motivation. And now we only need to understand, you know, what actually motivates people. So that's where the behavioral my behavioral economics background on the research really takes in to think about what are the motivators and I narrowed it down to, like, 4 motivators that are important.
 
 Number 1, its purpose, or I call this shoot for the moon. And the idea is, you know, people wanna work or an organization that doesn't hire. I had purpose. You know? Nobody very few woke wake up in the morning and say, like, let's help my firm to increase the return and invest the capital by, like, x percent.
 
 You know, that's not somebody that's not what what motivates. People. And I tell the story shoot for the moon about, like, you know, what NASA did on their committee to have, like, put the man on the moon. And what implication that has and, you know, to create it because it's hard. You know, every firm has a purpose statement, but most of it or that or not.
 
 I'm editing. So I talk a little bit about what what helps creating the right purpose. Number 2 is autonomy. As a motivator. Or I call it a matter of trust because the flip side of the con autonomy is trust.
 
 Where, you know, it's very, very motivating to being feeling empowered, but it's very hard for leaders to do that because now they have to give up you know, some control they have to trust. And I think not just giving up control but being involved, even more, you know, because I think 1 of the problems with autonomy of giving out control is often that data completely disengaged. Which is a disaster as well. So they have to be kind of engaged coaches. Number 3 is competence.
 
 I called as such as Stripe tasks with which is I illustrated with the story about my son who I struggled with reading mean, he had to read 30 minutes a day at school and, like, we fought so hard and, you know, probably a retiring and relate to that. I was telling him, look. Look. You could if you just read 30 minutes when you come home from school, you can do whatever you want. That's all I ask you.
 
 And it but 1 day, it would pull me into a library bookstore. It said, like, I wanna buy a box of books. And I was like, Woah. I mean, like, Christmas came early. So, like, what, like, what happened?
 
 And he actually wanted to use his birthday, man. So what happened is, like, he actually found a a book series that was just right for his level. That was not like a baby book, as he would say, if it's if it's too easy. And what was not like Harry Potter, we don't wanna use 6. You wanted to read Harry Potter, which was too hard.
 
 And it's a very universal trade that people want to be optimally utilized in scale. Now key obviously read this was called The Weird School Series. After a while, that book series became a baby book. So you needed to move on. Now employees feel the same.
 
 Most people actually leave their jobs because they're bored. They don't develop. They don't learn anything. They're done, and then they switch jobs. Now we have to figure out kind of how to create just write tasks for everybody involved.
 
 And constantly update, which is hard, and we can talk a little bit more about that because I think technology actually could help in dealing with that. It's kind of a personalization that obviously consumer companies figure out. I know exactly where you are in your what do you like in Netflix watching. And if you move on to another genre, you know, on Netflix, we'll learn and we'll show you a new 1. And I think the same can be done in in the workplace.
 
 So that's number 3. And number 4 is what I call or was called relatedness, so working together works. Kind of creating the right corporate culture, so to speak, like, environment where working together really works. And so those are kind of the 4 motivators, and then I talk a lot about, like, how to use those in order to humanize work. And how also technology can help, but also can be very, very detrimental to some of those motivators have used it appropriately.
 
 Kaihan Krippendorff: Love it. I have many more questions, and we are reaching the top of our time with you. What I think would be really helpful is to know what are examples of companies that we can look to for inspiration. I think that if and this is just me making it up, but I think you would agree. The reason that we went from product centricity and became so customer centric is because there were companies like Amazon who really did well by being, you know, driving to be earth's most customer centric company.
 
 So who is that next company that we can look to for inspiration that will inspire people who are motivated by profit to say, wait a second. It is now employee centricity.
 
 Stephan Meier: Mhmm. Mhmm. Yeah. Thanks so much, Tanya. I mean, there there are AAA number of them, and I discussed sum.
 
 So let me give you 3 snapshots, short examples, and then it can dive deeper in the book. So 1 is Costco. In in in the US. So it's really much more customer centric than some of their competitors, in particular, Walmart and Sam's. Club.
 
 Now they do, you know, also pay higher wages and have, like, health insurance, but an important part of what they're doing is giving clear career path to people who come in. So it's like you start at the at Costco, you kind of know what are the steps to actually making a career in progress and, like, working on those just right skills. And as a result, they're not only, you know, about 90 percent or, like, internally promoted but they're super successful. You know? They're making you know, people are very happy.
 
 They're that creates, like, a a lot of loyalty on the customer side. People are willing to buy the subscription, are willing to pay for the Kirkland private brand that has higher margin and support. So that's an interesting example, and 1 is not like a tech firm who has, like, resilience of dollars to to spend, like, a low margin business in general. Another 1 is EHL Express. So the German delivery company with the yellow you know, yellow wests.
 
 And they were voted for many, many in, like, 2 or 3 years in a row as the best employer. In the world of all the company. And they do a lot of things that are employee centric and and and a lot has to do with, like, just respect, empowering, you know, getting feedback from even people who deliver, giving them clear career and training up a unities. And so many activities that kind of led to them being an an employer that is, like, really valued. And the last example that I find really exciting is like Burt's org.
 
 That's a Dutch health home health care. Organization who does, as a result, kind of, to a fraction of the cost and has much higher success and satisfaction rates. Than any of their competitors. And seen as kind of a revolutionary organization, they do everything with the time. So they have teams of 12 nurses and gives them complete autonomy.
 
 And what they're doing, including hiring and what they're gonna do. Now what I find really interesting about this company is not just the autonomy, but in order for to make that work, you need to give a lot of feedback. You need to act it doesn't work by just giving a look. Here here's your task. Go.
 
 Run for it because then off, you know, stuff sometimes goes wrong and you have to intervene with it. What they do, their IT system is very, very elaborate. Where they share all the information about all those different teams with all the teams. Not in order to control but in order to provide them with the right information to themselves correct, figuring out what is best practice, and they talk themselves about, like, on the top level, the headquarters kind of coaches. You know, they help them if something goes wrong, but they're reading more there to support in order to kind of micromanage.
 
 So those are 3 of the many I talked about, and some, you know, tap into 1 or the other of the motivators a little bit more. And the others and all of them are successful in a result because this is not this is not altruism. So the book is really about, like, how can we actually put as the subtitles as, you know, putting workers first in order to make business thrive, in order to create more profitability and create sustained. Just a competitive advantage.
 
 Kaihan Krippendorff: Love it. Love it. So the book is the employee advantage, how putting workers first helps business thrive. I love that you not only speak to our hearts, but speak to our logic, and that I think is what we need in order to create the shift. How in addition to buying the book, which we encourage everyone to do, how else can people connect with you and learn from you, are you teaching any exec ed classes?
 
 Or is there any other materials or ways to be connected with you?
 
 Stephan Meier: Yeah. Yeah. Thank you, Kyle. I mean, once yeah. Look at the book and, like, write me comments about that once once once you read it.
 
 There is a lot of material on my web page as well, step from Stephan Meier dot com, including a link to the Allego movies. And I also teach a bunch of executive education classes. So I actually have 1 as 3 day online version on the future of work that I teach with Jeff Swartz, who was a former partner at Deloitte. And the lead of the future of work practice. I have a bunch of other, like, executive programs.
 
 Here at Columbia Business School, and I also do public speaking, like, 1 on 1. Great. Congratulations.
 
 Kaihan Krippendorff: Well, we will encourage people to buy the book, to learn from you, to bring you in, because every worker out there, we need this. And thank you for doing that work and for really presenting it in such a readable, logical, and convincing way. Thank you.