Three Answers Every Employee Needs

In 1996, I switched jobs within Smith Barney from investment banking to equity research; within weeks Smith Barney bought Salomon Brothers. That should have been a good thing, except that I had been hired to start coverage of the Cement and Construction sector in Latin America, and Salomon Brothers already had an Institutional Investor-ranked analyst in that area. With several of my colleagues in a similar situation, weeks of speculation ensued as to which analysts were in and which would get the boot. Senior management attempted to mollify us by rattling off the reasons why this acquisition made sense, but for those of us wondering if we had a job, their strategic vision was irrelevant.

This experience came back to me in late 2010, listening toSteve Kaufman, a senior lecturer at HBS and the former CEO of Arrow Electronics, presenting at the Forum for Growth and Innovation. On the topic of acquisitions, Kaufman recounted the standing advice of the former head of Arrow's acquisition integration team. "When we make an acquisition", she said, "every employee has just three questions: 1) Do I have a job? 2) Who do I report to? And 3) How will I get paid? Until they get answers, nothing else matters." As I've thought more about this rule of thumb, my sense is that these three little, but very big, questions apply just as much to our everyday work lives as they do to what we go through during unsettling mergers. Once we get answers to these questions, we are more likely to really show up to work.

1. Do I have a job? In Maslow's hierarchy of needs, one of our most basic needs is to feel secure. But once we've got the paycheck that will put food in our stomachs and shelter over our heads, we need to feel that we belong, that what we do every day matters, and that we are moving toward our potential. Yes, you go to work, but take it up a level: what's your real job when you are there? Are you clear about your role? Are others? Do you like your role? And if you've mastered this question, consider whether you have created a context where your employees can do likewise.

2. Who do I report to? If you've been through a merger, you know just how blurry the reporting structure can be. Because senior management is frequently unwilling to make tough decisions, to their detriment, departments often have co-heads. But uncertainty can be found in any work situation, not just after a takeover. Not knowing whom you report to, and therefore by what metrics you will be measured, or simply receiving mixed messages about whose opinion really matters, can result in chaos. In Jonah Lehrer's Wired article, "The Uncertainty Effect," he cites the research of Colin Camerer, a neuroscientist at Caltech who writes that "With less information to go on, [people] exhibit substantially more activity in the amygdala, a brain area reliably associated with fear conditioning. In other words, we fill in the gaps of our knowledge with fear. And it's this inexplicable fright — an irrational by-product of not knowing — that keeps us from focusing on the possibility of future rewards." If you're looking to increase productivity, start with clarifying the reporting lines.

3. How will I get paid? Notice that this is not how much. We all want to be paid in cold hard cash, and preferably a good amount of it. But how else will you be compensated? What of the intangibles that are ultimately worth far more to most people than dollars and cents? Many would happily take less salary/bonus and fewer stock options if they knew that a member of senior management would take a serious interest in them. Wouldn't you stay at a job longer because of intangibles such as long-term opportunities, the belief that you are building something, the feeling that you have a seat at the table? Think about each of the people who work for you. Have you thought about what constitutes good performance, and how you will pay them — in ways that go beyond financial rewards — when they perform well?

It's tempting to relegate the asking of these three questions to when there's been a one-time event — as I did when Sandy Weill acquired Shearson, Salomon, then Citicorp. But that would be overlooking the real value of this exercise. Whether surviving a merger or simply another day at the office, answering these three questions goes to the heart of retention and morale. If you can't answer them, it's time to roll up your sleeves.

Back at Smith Barney, I went through several weeks of uncertainty. We eventually created a new sector, Latin American Media and Entertainment. In the parlance of disruptive innovation, I had found an area of non-consumption — a burgeoning sector in need of analysis — and effectively became a new market disruptor. This no doubt contributed to my becoming an Institutional Investor-ranked analyst within a year of launching coverage. But I couldn't have done it if I hadn't known who I was reporting to, how I would get paid, and precisely what my job was.