Change in Organizational Culture: Sustainability Initiatives and "Speed Brakes" in the Massage Envy Chain
In his writings and theories on organizational culture and specifically on cultural changes meant to improve organizational performance and/or stability, Robert H. Miles defines and discusses six "speed brakes" that can prevent an organization form effectively implementing desired changes. He defines them -- and proposes solutions for them -- in a specific sequence as he insists that it is in this sequence that they ought to be addressed. Miles' (2010) speed brakes are cautious management culture, business-as-usual management process, initiative gridlock, recalcitrant executives, disengaged employees, and a loss of focus during execution. Though he recommends specific steps to counter each of these six speed brakes in order, Miles' (2010) plan for organizational plan can be boiled down to a very simple overarching strategy: have a well-focused initiative for change that is rolled out quickly and immediately. Using the speed brakes and the general plan for organizational change defined by Miles (2010), with reference to Schein's model for organizational culture, the following pages examine the case of the Massage Envy chain and its successes -- and failures -- with sustainability initiatives.
After starting a subscription-based massage service focused on low costs to consumers and an upscale setting reminiscent of a higher-end health club, Massage Envy quickly developed into a franchise business and began to spread (Lyons, 2010; Massage Envy, 2013). After experiencing tremendous growth, the owner sold the Scottsdale, Arizona-based company to Veria, a Texas-based health-focused media group that is itself a unit of a large Indian conglomerate, the Essel Group, in 2008; Veria sold the company to a private-equity firm based in New York, Sentinel Capital Partners, in early 2010 (Lyons, 2010). At that time, the company had over six hundred stores operating in forty-two states as franchise operations, which suited Sentinel Capital Partner's portfolio just fine -- the company owns fast food franchise locations as well as other franchises in numerous states, and adding the entire Massage Envy chain to its belt was seen as a strong move after the company boasted $600 million in revenue (Lyons, 2010). Whether or not the growth the company has experienced is sustainable, or is sustainability initiatives throughout the company generally have been or even could be successful with current constraints, is a matter of some debate.
Massage Envy might have had revenue of $600 million in 2009 (a figure that is the matter of some dispute, apparently), but it also has 20,000 employees working to earn that revenue (Lyons, 2010). If all of the company's revenue went to employees, this would mean an average annual salary of $30,000 per employee. There is also, however, significant overhead eating up presumably large portions of revenue, profits for the owners (something a venture capital firm is not likely to pass up), and inequality in the pay grade -- regional managers and executives are undoubtedly making more money than floor-level associates. As the company is not publicly owned this information is not readily available and so cannot be concretely ascertained, however even the most even-handed company in the world pays some more than others. If only a third of revenues were used to cover overhead and growth expenses -- an incredibly low estimate, to be sure -- and assuming that financing was not used to pay salaries, this leaves a $20,000 average annual slary, meaning some are making $30,000 per year and a god deal more, while others make only $10,000 and a good deal less. This would be a major "speed brake" in any cultural change initiative, including sustainability initiatives, and is also indicative of certain of the specific speed brakes defined by Miles (2010). An examination of these speed brakes and their impact on developing a culture of sustainability at Massage Envy, as well as a plan for reframing and moving past these speed brakes, provides a road map to greater success and more assured longevity for Massage Envy.
The continued problems of pay scale and delivering workers a living wage while still giving consumers the pricing they want is plaguing the company, and without a major change no initiative will be successful. This is part of the reality that Miles (2010) insists a "cautious management culture" must be made to confront, overcoming the first speed brake. As Schein would put it, the values amongst those at the top of the firm need to be changed so that they recognize the values of all employees (Miller, 2011). This two-pronged problem is fixed by those in control of large-scale strategy and culture recognizing that a living wage must be paid to operational-level employees, and that a significant change to the current business model is necessary to make this happen. This change is simple if not especially easy, but once it is made this speed brake no longer exists -- the cautious management culture afraid to make a change in the face of significant revenue generation will be replaced by an active management culture with an eye towards short-term adjustment and long-term profitability (Miles, 2010). This also runs into the problem that Miles (2010) calls initiative gridlock, in which multiple company goals or development plans come into conflict with each other; the company has clearly been undergoing rapid growth, which necessarily comes at some expense even as a franchise operation, while at the same time the company (and its franchise owners, it should be noted) have been unable or unwilling to pay their employees a living wage based on the revenue that the company is taking in (Lyons, 2010). The recommendation here is to limit initiatives in a way that eliminates conflict -- if growth and living wages cannot both be sustained currently, growth should be slowed while wages are increased, or another solution should be found that allows wages to be financed as a priority (Miles, 2010). This would again reframe the speed brake in a manner that would allow the company to move forward with realigned values that remained more consistent across management and employees (Miles, 2010; Miller, 2011).
The primary resources needed to make these changes are as simple as knowledge base and will power -- the executives must recognize that changes need to be made and they must be willing to face the risks of making these changes. There is nothing really to be accomplished at the artifact level of the company's culture as described in Schein's model, nor are the assumptions -- the assumed values -- of great importance (Miller, 2011). Instead, it is the real values -- the second or middle layer of Schein's model of organizational culture -- that requires real and immediate adjustment in this company. Bringing initiatives in-line requires only that the decision makers that could actually bring this change about decide to develop the courage to make this change; there are no special resources required, only a diverting of current resources from current growth projects and owner profits to higher employee wages, as without the basic consideration and respect shown by a living wage it is unlikely that any culture initiative will take hold the way the company desires (Miles, 2010; Miller, 2011).
Again, however, the feasibility of the necessary changes succeeding in creating a stable economic environment in which a cultural change initiative can take place is very much dependent on fundamental changes to the business model. Massage Envy was first envisioned and has been built as a low-cost massage alternative, and this necessarily means charging less than most other massage salons and thus paying less -- it is not an operation that is easily scaled as each massage given requires the undivided attention of one masseuse, which is why the number of employees is so high relative to the revenue generated (Lyons, 2010; Massage Envy, 2013). This only accounts for the masseuse as well, while there are other members of support staff, management, and corporate staff as well (Massage Envy, 2013). Ensuring that everyone is paid a living wage will almost certainly involve an increase in the price consumers are charged for membership/massages
(in addition to other more innovative initiatives, such as continuing to expand its service line, more effective marketing, etc.), and this will fundamentally change the company's positioning at least somewhat (Lyons, 2010; Massage Envy, 2013). A sustainable growth initiative that is supported at the cultural level simply will not exist without a living wage being paid throughout, however, and thus a fundamental change will need to be made at some point.
Cultural change according to Schein's model must be related to values, and will likely ultimately be reflected in artifacts -- can be manipulated to some degree by artifacts, in fact (Miller, 2011). This is not something that can readily occur when many of a company's employees are paid so little that they cannot help but become disinterested and disinvested in the company culture, regardless of what that culture is. Management entrenchment in the low-cost low-wage mentality has created an unsustainable system, and…