How Lanco Medical Group Fosters Workforce Happiness to Motivate Employees and Grow Fast
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The saying, "Find a job you love and you'll never work a day in your life," was probably coined by somebody who was really happy at work. According to Pew Research, the number of people who feel that way has steadily declined since the pandemic.

We know that happiness at work has all kinds of benefits for both workers and employers. Happy workers are healthier and more productive, they're better at solving problems, and they're willing to go the extra mile. All of which leads to lower absenteeism, higher retention, more satisfied customers, and not surprisingly, stronger financial performance. Everyone wins when employees are happy. So why isn't every employer making happiness

the top priority on their job. Today on Cold Call, we welcome Professor Susanna Galani to discuss the case Lanco Medical Group, fostering happiness for growth. I'm your host, Brian Kenney, and you're listening to Cold Call on the HPR Podcast Network. Susanna Galani studies performance management systems and explores the interplay between monetary and non-monetary incentives. She is a second time, maybe third time, repeat customer on Cold Call. It's great to have you back, Susanna.

Thank you, Brian. It's great to be back. I think this will be great. Let's just dive right in. I'm going to ask you to tell us what inspired you to write the case and what is the central theme and your cold call to start the discussion in the classroom? This is the quintessential HBS story. I was teaching a session in one of my executive education courses I participate in, and I was talking about my work and the interplay between monetary and non-monetary incentives. And

Recently, I've been focusing on how that interplay plays differently for different people and how the preferences of people in any organization vary with respect to what motivates them. And I was giving my little spiel in class and talking about my current work. And after class, one of the participants came down the steps with her smartphone and

showing me that that's exactly what they were doing or trying to do in their organization. And that was Lisbeth Hermida, which is the protagonist of our case and the co-founder of the organization. Okay. And so how do you start the discussion now when you're doing this case in class? So, well, the first question

question we ask our students is what is the goal? What is the problem that Lisette is trying to solve? And what is the ultimate goal of the organization? Because this is not just about making a workplace a happy place to be. She has a very, very specific and very precise business goal, which is growing fast in a market that has a ton of potential, but also a ton of risk and a ton of uncertainty.

Yeah. Let's talk a little bit about the company, what they do and the market that they're in. Can you describe Long Coast Business? Yeah. So, well, they are a pharmaceutical intermediary, if you will, in the Central and Latin America regions. Well, if you ask them what they do, they will tell you, we deliver health. What is their mission and their North Star? And in order to deliver health, of course, you have to go through pharmaceuticals and medical devices.

And they predominantly started working with what they call their institutional channel, which is working with governments. In Latin America, a lot of the medications are provided through government contracts. And so that was their start.

But lately, they've been growing into, first of all, multiple countries, which is one dimension of growth for them. And in addition, also into multiple segments, so much so that they've started working with private distributors, pharmacy chains, and so on. And in addition, they are actually now developing some of their own generic, branded generic medications in order to provide access

the actual medication, not just the contract through the supply chain. How large is Lanco? What's the size and scale of their operation? They're relatively small, but they're growing so fast. At this time, they are about 55 people in total, but they're planning to double their size in the next year. So they're really on a trajectory that

that's very steep. So being able to sort of scale the culture and things is going to be really important. And the case does start to dive into that. Why did they choose to prioritize happiness as one of the things that they were focused on? Yeah, that is actually the second question that we discussed in the case, because the idea is what's the importance of the human capital in this company that is growing fast, that is dealing with multiple different constituents,

And how do you balance the need to attract and retain qualified and skilled talent, but also somebody that will follow your journey and drive the change with you when you are so decentralized? Because these people are literally in different countries. And so Lisette cannot be, other than on a Zoom call, present in every single location. And she has to leverage their local teams to drive this change and drive the growth.

This is a very specific type of business where you need people that understand not only the science behind pharmaceuticals, but also how to deal with their respective channels. So when they deal with the institutional channels, they need to understand what are the bureaucratic processes.

processes? What are the forms? What are the agencies through which you work in order to get the approvals to operate in a certain country or the license to procure pharmaceuticals for the healthcare system and so forth? So it's a very, very bureaucratically intense business. Mm-hmm.

In addition to, you know, dealing with private customers, pharmacy chains, which are regular companies. And so very different set of skills in that particular interaction. And again, growing fast and developing a set of skills and relationships. The relationship with these counterparties is very central to them. So Lisette and her team really, really wants to keep

the right people around in the organization for the long run. What was the method that they used to gauge happiness with the employees? Well, they leverage a third-party provider. It's a company called Mide La Felicidad. My Spanish is not great. And this company had developed a survey instrument

to gauge not only the regular engagement, satisfaction at work, which there are so many well-established tools in the market, but they had this additional element, which was gauging the level of happiness of the employees, not only at work, but in life. And that was really important for this company when they developed the instrument, but also it was important for Lisette.

Because she realized how much the life at work and outside of work is intertwined.

And she realized how much she could leverage opportunities to contribute to her workers' happiness outside of work and how that would eventually reflect in their performance and in their loyalty to the company and in their, you know, drive to move the company forward. The case actually follows them going through multiple iterations of this survey.

Maybe we should start at the beginning. I'm curious, what did they learn at the beginning? What were some of the gaps that they discovered that were surprising to them? Lisette would always tell you, don't ask a question you're not prepared to hear the answer for. And in fact, the first time around, they were very, very surprised. If you met Lisette and her husband, who is the CEO of the company, they are

very, you know, what we would call people-people. They really care about people in general. They have a high EQ. And they thought that they were already doing many great things for their workers. For example, differently than other companies in the region, they would offer them free health care plans for them and for their families, which is not a normal thing to do in that region. They would provide fresh fruit in the morning,

at the office because many of their workers didn't have an opportunity to eat nutritious food. They organized a company trip every year in some nice location. And then they realized that these were not only not appreciated as perks, but they were also interpreted as entitlements.

So they were doing this to make their workers happy and hoping that they would be grateful in return. And she actually recalled during our interviews how she felt they were even cruel to a worker in saying this was not at all what they wanted. Yeah. A rude awakening in some ways, but...

It led her and her team to think deeply about, okay, so what is it that we need to do differently because we're missing the mark? Then they reacted to some of these things. They did it again. And they found that some things had improved.

But some things didn't move. In fact, they went through three consecutive iterations. And some of these needs that the workers are reporting as not being met remain unmet. So the final question for Lisette in the case is, what are you going to do about that? Are you going to continue to...

to invest. For example, one of these items is the need for better financial education. Yeah, I paused on that one for a minute because it seemed strange to me that that's one of the things that they would be offering as a perk to their employees. Yes. In fact, one of the questions I had for Lizette is, is this your responsibility as a company leader to provide financial education for your workers? And she felt that

To some extent it was because this was something that was stressing her workforce. These are people that may not, in many cases, have had a formal education in finance and related topics. So they earn their salaries, but they don't know how to, for example, invest them in something that will give them a living wage when they retire. And so these are causes of stress which can get in the way of

of the work that they are supposed to do for the organization. So she provided channels through which they could strengthen the financial education of the workers. Unfortunately, this doesn't seem to have worked yet. So that is still a need that comes out even in the third iteration of the case as an unmet need.

Yeah. You described them earlier as having a high EQ and really caring about their employees. I would imagine that it's almost a little hurtful if you are responsible for all these people and you think you're doing right by them and then you find out that you're missing the mark in a number of ways. Did Lissette talk about how they sort of dealt with that as providers?

Yes. They decided that, you know, feeling hurt and taking offense was not really leading to anywhere good. Yeah. So what they did, they started talking a lot more in detail with their workers.

about what is it that they need, what ways they would want these needs to be met, what vehicles should the company use to help close that gap. And they have engaged in a very, you know, honest and open conversation, which if you think about it, it takes courage on both sides. Because in many organizations, I am sure that if we pull

five random organizations, pick them out of a lineup, and we asked the workers if they are receiving things that they value in exchange for their work, we would be surprised by the responses. The question though is, would these people feel comfortable telling their leadership

that they are not getting what they want. They would rather have something else. Let's take the company trip, for example. How many people would feel that they have to go?

and not that they really would like to go to the company trip. And so these are those dynamics an organization can be a little bit difficult to navigate when you don't have, you know, a base of trust and comfort to talk about these things openly. Yeah, and I'm sure a lot of our listeners can relate to this. I'm just thinking about even with my team, as we try to think about what our outing is going to be each year, we do an outing. We want to take everybody out of the workplace and let them have fun. It's so hard to find an outing that everybody agrees

wants to do. In fact, I don't think we've ever successfully done it. And we're not a large group. We're smaller than Lanco, so I can imagine. Also, does this get more complicated as you try to determine what makes people happy in one country versus another? Because we've got cultural differences at play now in terms of what people's expectations are.

Absolutely. Not only cultural differences, which exactly right, they are there for sure, but there's also regulatory differences. There are things that in certain countries you just cannot give your workers or certain things that in certain countries you must give your workers. So that is no longer a perk. It is actually an entitlement. So she has to navigate that complexity too.

Yeah. Is there a certain point at which, you know, they thought to themselves, we just can't, you know, there are some things where we just have to be disengaged. We just can't make everybody happy on every front. Yes. And in fact, that in line with the work that I'm doing, you know, more in my own research, reinforces the idea that offering these perks or rewards or privileges

Personalizing the incentive systems is also a sorting mechanism. There are certain people that will not be happy with the set of things that the organization is willing or in the position to offer.

That is a lost battle. Those people will likely leave the organization regardless because there is nothing that Lanko can do or is willing to do that will meet their needs. This is also a way to understand who is a good match for the organization and who isn't.

How important is it in these situations, and not just at Lonco, but at any organization, to have a really strong set of core values that kind of guide you in those decisions that everybody understands? Oh, it's very important. It makes things easier as well.

right? Because it's easier to align people around the same set of ideals and values. And especially in knowledge-based work, we have a lot of attention. We put a lot of attention on the mission and the core values and why are we here? So it is a rallying cry and an alignment mechanism throughout the organization. But what you get in exchange for your work

may or may not be related to the values. There is a little bit more of a daylight there sometimes. You might be very motivated by compensation or financial rewards.

And somebody else sitting next to you might be motivated by recognition. And they might share the same core values. As an employer or even as a manager, how do you think about that? How do you sort of sort through that? Is there sort of a methodology that would help you determine what's going to motivate this person versus that one? Yeah. This is a much longer process.

program, if you will. Oh, we have plenty of time, Susana. But it is something that I've been thinking about for quite some time now. And I've been discussing these ideas with our executive education participants to just gauge their reactions. So the first thing is ask them, right? We haven't been asked. In our culture at work,

We rarely are asked what is it that motivates us, so much so that many of us have never thought about it, not to the degree that you would need to have thought about it to be able to make an educated choice. I always use provocatively the term deprogramming because we have been ingrained in a way of thinking that the way that we're going to get appreciated by our organizations is through a very small set of options.

And there's also a fear of, you know, losing the fairness because I might get something that is very valuable to me, but it doesn't compare in market terms to what my colleague is getting. So we have to really rethink how we think about rewards and how we think about motivation within an organization. So this takes a longer time.

But the starting point is to start having that conversation and being willing to be dynamic about the response to that conversation. Maybe the first time that somebody asks me what motivates me, I will respond based on a mental image I have of myself.

But then when I experience those rewards in exchange for my work, I might realize that maybe that's not what motivates me. Maybe I need to rethink that. And so I think there needs to be a journey within the organization toward creating an environment in which people really understand what motivates themselves to begin with. And I can imagine that would change over time for individuals. What motivated me a couple of years ago might not motivate me in the same way today. So that's a conversation that has to continue. You can't have it once.

Absolutely. And it does. It does. I have actually evidence from other organizations in the healthcare industry I've been speaking with, you know, young physicians that come out of medical school with a ton of student debt and wanting to start a family have a different priority set of

of preferences compared to a more senior physician who has now grandchildren that they don't get to see because they don't have time. So they would rather have flexibility in their schedule as opposed to maybe the additional call shift to get paid a little bit more. So certainly these preferences change because we as people evolve in our lives and things happen to our lives. So there's a contextual factor that is dynamic. So yes, we should absolutely do this periodically. Right.

We're using words like motivation and happiness interchangeably. And I wonder if we should think about those as the same thing or are they different? And should we care more about people being motivated than happy? That's a sort of ambiguous question, but I'm wondering if I'm thinking about, you know, looking at my own organization and trying to gauge, what should I be gauging exactly? Yeah. Yeah.

Well, we can be very cynical about this and maybe we should, right? Because I can imagine some of our listeners thinking about, well, this is all great, but it's not my responsibility to make people happy. I don't have control over their lives, over the quality of their marriage or, you know, the health of their loved ones. And those are certainly important factors that affect people's happiness in life, but

However, there is a relationship, maybe not 100% overlap, but there is a strong relationship between happiness inside and outside of work. And we know for sure that unhappy people are less motivated to work hard because they're distracted, because they're not engaged. So there is a balance to be achieved there. I'm not here to say that we should absolutely dedicate every hour

business leader to making all of their people happy in life, but to the extent that there are opportunities to contribute to this balance, I think there's latent effort and latent performance that we can capture. Again, this is the cynical view, right? We can squeeze out more performance from our people if we can move the levers that motivate them and make them happy. We know things have shifted and changed since the pandemic. Yeah.

and even our faculty here at HBS study hybrid work and the pros and cons of the way the workforce has started to change how it operates. In doing a little bit of research off the case, just to write the introduction, I looked at rates of employee happiness, people who would say that they're happy or satisfied on the job. And I was surprised at how high it was, actually. The numbers were higher than I anticipated just because of the range of kinds of things that people do at work. Some jobs are

probably lend themselves to happiness more so than others. But I'm wondering, in your research, have you looked at the impact of the pandemic on how employers are thinking about making a satisfying workplace for people?

Yes, I don't have data on that, but the conversations I have had with many business leaders in several industries, it's that there is much more awareness now after the pandemic about what you want from your work, what you want from your life. The pandemic being, you know, in large extent a near-death experience.

has caused people to reflect deeply about what is it that they were doing and were they happy doing what they did. So I believe there's a little bit more self-awareness among workers and maybe a little bit more awareness

courage in big quotes to talk about it. And a lot of people have left their jobs because they felt they were not satisfied. So I think there's, there's more, um, there's more awareness. It's more salient as a concept.

We also know that the younger generations, which, you know, it's another issue is that the mix of generations in the workforce now spans, I think, at this point, five generations because we still have some baby boomers. Wow. Yeah. And we go all the way to Generation Alpha who started to creep in in some organizations already. And whereas, you know, I'm not a fan of, you know, bright lines between the preferences of different generations, I

There are some tendencies that have been shown empirically about different preferences, different expectations. So we also have to navigate that complexity of having people that have different preferences, but they have to work together. Yeah.

Yeah, so you have to sort of think about maybe a strategy where you have multiple types of benefits for people depending on where they are in their career stage, where they are and what generation they belong to. That gets complicated fast, and I would imagine it gets expensive pretty quickly. So as people are listening to this, is there any advice you would have for somebody who's thinking about how to put benefits in front of employees? I want to be very clear. I am not thinking, even in a company as big

relatively small as Lanco that have 55 employees, I would not envision 55 different incentive programs. That is impractical. It's uneconomical.

But there are types of people. So we can gather information on their preferences. And maybe we cannot satisfy preferences one through eight or one through 10 for every single employee. There will be groups of people that are motivated by a subset of those options.

Some people are motivated by tangible rewards. Some people are motivated by opportunities for growth. Some people are motivated by flexibility. To some extent, all people are motivated by all of these things in different degrees. But if they rank them at the top of their list, we can create subgroups and then tailor some programs to those specific subgroups to the extent that it makes sense. I would also recommend in general to create opportunities

opt-in programs where we give choices to the workers on what is it that they want to get in exchange for their work. And one participant in a recent executive education program I taught described in her organization, they have a certain number of points that they can spend, in quotes, into the

a variety of different programs. And so that already gives people agency on choosing what is it that they want to get in exchange for their work. That's a great idea. I like that. I would say...

You know, we don't have to reinvent the wheel. We don't have to invent a brand new instrument from scratch. I think we can leverage a lot of the information that we already have. But what we haven't done is to utilize it to have the conversation afterwards with our workers about what is really that motivates you. So I think...

Many organizations already have the information somewhere in a survey database that they collected every other year for the past decade. But have they used it in the right way?

Yeah. So as Landco continues to try and navigate this ambitious growth plan that they have, what do you see for them as the best opportunity looking forward? What scares me of them is that the leadership is so involved. It's going to be interesting to see when they scale up, right? Right now they have 55 employees. What happens when they have 5,000? But I also trust and hope, this is the opportunity that you're asking me about, that they will

develop a culture in the organization where managers think about motivating their employees along these principles. And so it doesn't have to come from the top leadership all the time, but it becomes a way in which each team leader can gauge the motivation preferences of their team members or have some agency in tailoring the offering for them. Yeah.

Susana, this has been a great conversation, as I knew it would be. And I have one last question for you, which is how we always end these shows, which is if there's one thing you want our listeners to remember about the Lonco case, what would it be? Happy people do good work that satisfy customers, that give us money to meet our financial goals. Susana, thank you for joining me on Cold Call. Thank you, Brian. This has been fun.

If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, Think Big, Buy Small, and Women at Work. Find them on Apple, Spotify, or wherever you get your podcasts. And if you could take a minute to rate and review us, we'd be grateful.

If you have any suggestions or just want to say hello, email us at coldcall at hbs.edu. Thanks again for joining us. I'm your host, Brian Kenney, and you've been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.