To Pact or Not to Pact? Creating Mutual Value with Your Employees

To Pact or Not to Pact? Creating Mutual Value with Your Employees

This week, the business world learned that that as part of her effort to turn the company around, Yahoo CEO Marissa Mayer had asked executives to either verbally or in writing make a commitment to stay at the organization for three to five years. Kara Swisher at Re/code, who broke the story, criticized the decision:

That move seems to have backfired a bit, resulting in several major departures recently, including European boss Dawn Airey, marketing and media head Kathy Savitt, development chief Jackie Reses and many others to other jobs. Curiously, Mayer tossed them all under the bus in Yahoo’s recent quarterly call, slyly suggesting to analysts all the departures had been planned and that her current team was Yahoo’s bestest ever.

But LinkedIn founder Reid Hoffman and fellow entrepreneurs Ben Casnocha and Chris Yeh took the other side of the debate, arguing in the Harvard Business Review that Mayer was right to ask her executives to make a commitment to the organization:

By setting the explicit expectation that Yahoo executives needed to commit to sticking around through a 3 to 5 year tour of duty to turn around the company, Mayer will be able to build much stronger relationships with the far greater number of top executives who decided to take the pledge.

So, are these “pacts” good — or even realistic?

The answer, I think, is yes: Pacts between an employee and an employer can be strong motivators for both intent to stay and general engagement. When my team was doing research on careers earlier this year, we found that employees at organizations like LinkedIn (which has long touted the “Tour of Duty” model of employment, where employees are given two- to four-year contracts) are more satisfied with their careers and can be more committed to the organization.

You may think this bucks conventional wisdom — in order to make employees believe they have a future at the company, don’t we need to promise a long career, not just a short “tour of duty”? However, what LinkedIn does (and what Mayer was attempting to do) is create mutual value between employees and their employer. The employee makes a promise to stay with the organization for a few years, and in exchange they are clearly told what type of work they’ll be doing, what development they’ll see, and how they’ll be compensated. This is incredibly motivating for employees, as they can see their place, role, and purpose in an organization clearly.

That being said, Mayer and Yahoo may have made one critical misstep in deploying this pact to their executives: waiting until a time of crisis. This tilts the scales in favor of the organization, rather than truly creating mutual value. Employees, especially executives, easily see through the “corporate line” Failing to create this type of agreement upfront with their leaders, and instead waiting for a crisis moment, may have caused Yahoo to lose key leaders they could have otherwise kept.