Like a Virgin

Q: Some business leaders believe that the customer should always come first, many will always put shareholders first, while others argue that employees should come first. So who should come first: shareholders, employees or customers?

—Eden Kironde, Uganda

A: Conventional wisdom holds that companies should see to their shareholders’ needs first, their customers’ second and their employees’ last of all. We have always turned this pyramid on its head; at all the Virgin Group companies our employees come first, then our customers, then our shareholders. It’s simply common sense: if your workforce is happy and well-motivated, your customers are more likely to be happy as well – which means there’s a greater chance that your business will see strong sales and good profits, generating the results that your shareholders demand.

We stumbled on this formula when we were launching our record-store business in the late sixties. We decided to look for employees who were passionate about music, because we thought their enthusiasm and knowledge would be as important a draw as the beanbags, free coffee and listening posts we planned to feature in our first stores – and that turned out to be correct. Our employees were able to help music aficionados find new bands, and to assist customers new to the music scene to develop and expand their tastes.

When we launched Virgin Records a couple of years later, it naturally followed that the staff should be as passionate as those at our other businesses. We put a lot of effort into finding and hiring the right people, and then we made sure that they felt empowered to run the business as they saw fit – that’s what we had employed them for. This approach helped us to attract and keep great talent. Those employees found and signed the artists that soon made Virgin Records the world’s largest independent label, attracting a generation of fans.

It can be difficult to ensure that this focus on employees continues across an organistion, especially as your business grows and diversifies, but it is certainly well worth the effort. Virgin has launched four hundred businesses in more than forty years of expansion; our focus on our employees is one of the main reasons for our success. We maintained a common culture that unites our businesses and ensures that we retain a strong, loyal following among our customers. You can see it in every employee’s can-do, blunt, if slightly irreverent attitude. One small way we try to keep this culture alive and thriving, is to throw a number of our employees together as a team to work on a project. We ask them to apply from all over the world to join a week long volunteer trip to a community outside our game reserve in Ulusaba. Working with colleagues from other Virgin companies brings to life all the Virgin values.

If you decide to take your business down this path, you’ll need to find great business leaders who are also outstanding communicators, or develop these skills yourself. As CEO, you must be able to gauge the mood of your workforce. Are your employees interested and creative, or are some of them uncommunicative or withdrawn? If you sense a problem, you must uncover any underlying rivalries or resentments and defuse tensions quickly, before they impact morale. In the service industry, it is crucial to get this right, as nothing will ever mask a staff member’s surliness.

Do your employees or colleagues feel that their voices count? If an employee spots a problem, do they have the tools to fix it? If another has a good idea, is there a venue for sharing it? This is the other aspect of communication that you must master: making sure that front-line employees are able to contact you, so that you and your team can act on their information.

When a CEO has created clear channels of communication throughout his company, front-line employees are more likely to feel positive, empowered and able to make a difference. Customers will know the difference – and love it.

In 1997, when we took over the West Coast Main Line, we also took over management of its crumbling infrastructure, its ageing fleet of trains and its demotivated, long-suffering workforce. On the day we relaunched the rail service, the passengers saw almost no difference, except for a splash of Virgin red paint. Today, we are the most popular network in the UK, with a passenger approval rating of more than 90 per cent, and our trains carry more than twice as many passengers. We have won market share from the airlines and have changed the public’s perception of train travel.

Some of the expansion can be attributed to ‘stuff’ like track upgrades and our new fleet of high-speed trains, but at the core of our success is the job that was done by chief executive Tony Collins and his team. He chose only people who reflected his own passion, energy and imagination, and who worked tirelessly to relay our vision to the staff and instil a strong sense of Virgin’s culture and pride – it wasn’t an overnight turnaround but what we have today is as night and day to what we inherited. An effective CEO is a leader, a mentor and a manager, and at the same time must be deeply involved in the day-to-day workings of the business. His or her responsibilities are to all the interested parties, but if the first priority remains the employees, all the other people (like shareholders and customers) can only come out as winners.

Some businesses will view 50,000 employees as nothing more than a cost to be managed, but at Virgin I see 50,000 passionate brand ambassadors.