Rethink Podcast Episode #7 – Unlimited Vacation to Post Employee Engagement
Today’s guest is Nathan Christensen. He’s the CEO of Mammoth HR, an HR technology and consulting company serving more than 70,000 small businesses nationwide. Before joining Mammoth, Nathan practiced as an attorney with Perkins Coie law firm, and as a management consultant with the Boston Consulting Group. He holds degrees from Stanford University and the University of Chicago law school.
One of the things I admire about Mammoth is their HR Future team, which is an internal group that meets monthly to discuss current issues and trends, and what-if scenarios. This can range from unlimited vacation, the emergence of the gig economy, and employee engagement.
Enjoy the conversation, and we hope you get at least one or two takeaways that you can bring to your business.
But HR trends, we believe, are connected to much broader trends as well, deeper trends, outside just the employment regulation space, trends that have to do with socioeconomics or generational shifts, economic trends. And we wanted to push the envelope a little bit, and to look not just 6 to 12 months out, but 6 to 12 years out, and understand what trends are occurring right now in our country, in our workforce, that might have implications for what the workplace will look like, what the nature of work will look like 5 to 10, 12 years down the line.
But here’s a question the team was wrestling with or the team will wrestle with next month. What comes after employee engagement? We’ve seen strides with this and we’ve seen companies – overall, we’ve seen kind of an incremental progress. But some companies have an engaged workforce. What comes next? What’s the next frontier, the next challenge for an employer that has an engaged workforce? Is that the end?
And we realized that this whole idea of unlimited paid time off was really more important for what it said to our employees than what it actually did. Everyone knew they had a job to get done, and they needed to get it done, and their colleagues, their clients were depending on them. But it sent a message of trust that they’re going to be able to manage their lives.
Every person in the company is a culture creator. And that although HR might be an architect of culture, they might set out the plans, they might set out the building blocks of culture, like having a vision and a mission and core values and making sure those things are getting done, that really the structure of a culture is built by everybody in the company.
This transcript has been edited for length. To get the full measure, listen to the podcast.
Can you explain what Mammoth HR is all about and what you guys do?
At Mammoth, we believe in the power of HR to transform businesses, work places, and people’s lives. And we work with, as you said, about 70,000 small, midsized businesses around the country, supporting them with their HR needs. We consider ourselves a technology-enabled HR consulting company. Our mission is to help our clients thrive through building great work places. We work with all these companies around the country, and by working with them and supporting companies in all 50 states, we’re able to bring in the best practices that we see, the trends we see from around the country, to help support our clients.
And one way to think about it is HR for the sharing economy, a lot of companies around the country sharing an HR team and benefitting from the best practices, questions, issues, solutions, that we all generate together.
Is this a trend to outsource HR? Is the term outsourcing HR correct? I feel outsourcing is sort of a dirty word. Is this a trend though? Are more and more companies looking to do this?
There are a couple things driving that. And I think you’re correct, it is a trend. Here are some trends that are driving companies’ desire to look outside their own walls for some additional expertise or help. One is that regulations are getting more and more complicated and there are more and more of them. Traditionally, employers have been regulated primarily at the state level or the federal level. More and more cities and counties are getting involved in setting employment regulations which adds another layer of regulations for people to pay attention to. And the regulations themselves are getting more and more complex.
Another factor is companies are becoming smarter about the connection between people and profit. They’re understanding that by investing in HR and doing HR well, it can be a huge driver of their own success. And a third trend is that technology is opening new doors for companies. Whether it be a platform or service like ours, or an applicant tracking platform, it’s allowing companies to get new insights into their workforce and how to manage them. I think all those trends are contributing to employers looking for new HR solutions. And we see a lot of new entrants in the market, proliferation of tools, a lot of investment capital coming in.
One of the things that caught my eye about Mammoth was an article – it was a headline – unlimited vacation. And then that sort of led me to Mammoth HR and then learning about your HR Future team. Can you tell me more about the HR Future team? We’ll come back to unlimited vacation, because I want my HR team to know more about it.
Lots of HR professionals look 6 to 12 months out. You’re looking at, for example, the current legislative session, what regulations might come out of that. And that’s really important. City, state, nationwide, there are important trends to keep track of in the short or midterm. But HR trends, we believe, are connected to much broader trends as well, deeper trends, outside just the employment regulation space, trends that have to do with socioeconomics or generational shifts, economic trends. And we wanted to push the envelope a little bit, and to look not just 6 to 12 months out, but 6 to 12 years out, and understand what trends are occurring right now in our country, in our workforce, that might have implications for what the workplace will look like, what the nature of work will look like 5 to 10, 12 years down the line.
We assembled a team; it’s not just HR professionals. We have professionals sit on the team from across the company because we wanted to bring in a tech voice, a marketing voice, and so forth to explore these issues. Our future team meets monthly and tackles one issue each month. And I’ll just give you a couple examples so you can see the types of things that we’re thinking about. Last month when the team met, they talked about the emergence of the gig economy. And I think that’s something that a lot of employers, a lot of people are thinking about right now especially with the rise of Uber and some other opportunities for part time or independent contractor work.
And the question that our team was wrestling with is, given the emergence of the gig economy, where is it going to go? There have been some projections that by 2020, 40 percent of all workers will be in gig-type jobs. That would have dramatic changes on what the workplace would look like, what the nature of an employee/employer relationship would look like. The team was wrestling through what this would mean for HR practitioners, for employers, for executives, for employees, for independent contractors, trying to predict some of the regulatory changes we might see, how it would affect company culture, and things like that.
Next month, the team is going to look at another issue. Right now, the HR field is focused on employee engagement. It’s sort of the holy grail. And there are a lot of surveys right now, like from Gallup, that show that only about 1 in 3 American workers feel engaged at work. HR is very focused on this. And we think that’s a really good, valuable thing. We also see a lot of evidence showing that by getting employees more engaged, the business does become more creative, innovative, profitable, all those sorts of things.
But here’s a question the team was wrestling with, or the team will wrestle with next month. What comes after employee engagement? We’ve seen strides with this and we’ve seen companies – overall, we’ve seen kind of an incremental progress. But some companies have an engaged workforce. What comes next? What’s the next frontier, the next challenge for an employer that has an engaged workforce? Is that the end? Or is that a means to something else, some higher self-actualization as a group of people? It’s questions like those the future team is wrestling with and trying to put out some thought leadership on where things are going.
One of the experiments you tested in the HR future team was unlimited personal time off. Can you tell me more about that and what the results were?
Sure. Because we’re an HR company and we give out a lot of HR advice, we consider ourselves an incubator for HR ideas, a place to test out new ideas and see how they work. A couple of years ago we started getting calls from companies that had been hearing about this idea of giving unlimited time off and wanted to know our advice. Good policy, bad policy, how do you implement it. And candidly our HR team was divided. Half the group thought this was not something to advise. It created too many challenges for an employer to manage. The other half thought that for the right employer, the right context, it was a good idea.
And the way we were going to solve this, we thought, was by trying it ourselves. We gave ourselves one year. Previously, we had a more traditional defined vacation or paid time off policy. And we scrapped that and we put in place an unlimited policy. We were very deliberate in communicating with our employees that this didn’t mean that they shouldn’t take any time off by taking away that defined amount. We still wanted them to take vacation, to refresh, spend time with their families, their friends. We tried to be very clear about the expectations. And we told everyone this is an experiment. At 12 months we’re going to look to see how we did.
Over the next 12 months, people traveled all over, they coached mock trial teams, they attended friends’ weddings abroad. And at the end of the 12 months I sent a survey to all the employees asking them to rank our benefits, the ones we currently offer and some that we were considering offering. And paid time off, the unlimited paid time off, came in third, right behind health insurance, right behind 401(k) match, unlimited PTO. It was dramatically higher than things like dental insurance, vision insurance, professional development. And I saw this result and I thought, wow, this is clearly a benefit that people are attaching a lot of importance or value to.
Well, then we crunched some numbers to see how people had actually used it. And I was really surprised by the result. Because the year before we implemented this, on average people in our company took 15 days of time. And that doesn’t include holidays, but 15 personal paid days off. Then we implemented this. And the average in the year we implemented this rose from 15 to 16 days off. One more day. That was surprising to me, especially in light of the value that people seem to attach to it. They seem to really care about something that hadn’t really dramatically changed their lives.
We started to think about this. And we realized that this whole idea of unlimited paid time off was really more important for what it said to our employees than what it actually did. Everyone knew they had a job to get done, and they needed to get it done, and their colleagues, their clients were depending on them. But it sent a message of trust that they’re going to be able to manage their lives. Now, it wasn’t all perfect. Because there were some communication issues around what it meant to have unlimited time off, and how you evaluate a full contribution of work, a full portfolio of work, when there’s no longer an issue of how much time you’re spending in front of your computer. It raised a lot of interesting questions. And we made some changes, although we continued the program.
The first change we made, we don’t call it unlimited time off anymore because that became just sort of marketing click bait, or recruiting click bait. And that almost cheapened the program. Now we call it personalized PTO. Because the idea is that it isn’t unlimited, you do have constraints, but you’re able to tailor it to your personal needs. And if one year you have a sick relative that you need to – and want to spend time with. And another year you don’t have a lot of vacation planned. It’s up to you to sort of balance all of that out.
Another change we made is that we now communicate it more as a two-way street. The company will invest in you by giving you the time and flexibility you need to manage your life, and we ask you to invest back in us with being fully engaged in your job and our company. And everyone responded well to that because people don’t like gimmicks. And the third thing we did is we tied it to one of our core values. One of our five core values here is Care to the Core. And we messaged to our employees that really this policy is rooted in that. It’s not, like I said, a recruiting click bait or something. It’s really tied to who we are and what we care about. And one of the things we really care about is our employees, our colleagues, our clients, our partners, and supporting them and seeing them as whole people.
The idea of giving people more flexibility comes back to the idea of, when you come in this company, you’re a whole person, and we want to support you in your life both within work and outside of work. It was an interesting experiment. We continue to offer this policy. We don’t advocate it for every company. It needs to be culture and company specific. But it was an interesting experiment.
You were talking about this personal time off being one of the top three things that you found in your survey. In general, I’ve often thought money was my most important driving factor – but what do employees care about?
There’s an interesting TED Talk by Daniel Pink called, On Motivation. And Daniel Pink advocates that the three keys to somebody being motivated are autonomy, mastery, and purpose. And I think that’s a great framework for employers to use. Now as you mentioned, traditionally employers have often thought that what employees care about is compensation, benefits, perks. And there’s truth to that. Employees do want to be treated fairly; they do have goals for their lives that require good compensation. It’s not that compensation doesn’t matter.
But whether it’s a generational shift or whether it’s always been there, we do find that there are different areas to focus other than compensation for employers in building relationships with employees that are tied to the things that they really care about. So employees really want to be part of something bigger than themselves. And that gets that whole purpose aspect. Feeling that they’re part of a project that’s doing good in the world and that they’re doing it with other people. They want to be trusted in that, get the autonomy. They want to have the flexibility to guide their own path obviously with coaching, and input, and direction, too. But they want that sense of trust. And then they want to get better. And that’s that aspect of mastery. They want opportunities to grow as people and as individuals.
Now, the good news for employers is that all of those three things are perfectly in sync with the employers’ interest. And if you’re giving employees, if you’re motivating them through the things that they care about, the autonomy, mastery and purpose, it’s going to be beneficial for the group as well.
I just want to say thank you. What a great conversation. I didn’t anticipate having a great conversation with HR people. I never normally do, right? Is there anything I missed?
The only other comment I’d make is that we’ve talked about a lot of these issues and their relationship to HR. But it’s important that everybody in an organization see that something like company culture isn’t just a function of HR, that actually every person in the company is a culture creator. And that although HR might be an architect of culture, they might set out the plans, they might set out the building blocks of culture, like having a vision and a mission and core values and making sure those things are getting done, that really, the structure of a culture is built by everybody in the company. And these are issues that are good for any manager or any employee or any executive to be thinking about.