Management Lessons from Undercover Boss

Are CEOs out of touch? Is top management oblivious to the concerns, cares, and responsibilities of the average worker? That's the premise behind the new CBS reality series, Undercover Boss. Top executives go to work under assumed identities as new employees in their own organizations. "Extreme times call for extreme measures," the show states in its intro. "They will discover the truth."

For all the potential such a premise has to be gimmicky, the idea of bosses trying to understand the reality of their workers' experiences has validity, according to Professor Michelle L. Buck, director of leadership initiatives at the Kellogg School of Management. "One of the biggest responsibilities of leaders is to set other people up for success," says Buck. "Leaders can't do that if they don't understand the experience of people carrying out the work."

After watching an episode in which William C. Carstanjen, chief operating officer of Churchill Downs, worked with three employees in varying capacities at Churchill Downs locations in Florida and Illinois, Buck spoke with Bloomberg BusinessWeek Management Editor Patricia O'Connell about the message of the show and the responsibilities managers have to create a culture of openness. Edited excerpts of their conversation follow.

Patricia O'Connell: Out of curiosity, what did you think of the show, Undercover Boss?

Michelle Buck: I was very interested, not just for our conversation, but as someone who teaches a class in managerial leadership. … It's a look at how important it is for leaders to know what's happening at all levels of the organization. As [William Carstanjen] said, "this is really a people business," and everything is a people business. [Managers need to find out do] people have what they need to do their job? What are their hopes and dreams? Those are the factors that affect their motivation and their ability to get their work done.

If [Undercover Boss] that can trigger conversations and open awareness of these issues to the fundamental business practice, that's a great thing.

What do you make of the idea that clearly a lot of employees have no clue what top management looks like? I realize they are showing situations where there are many, many layers between the workers and the top management. But still, I was struck that employees have no idea who their top people are.

I was at an event at Kellogg with an executive of a large global firm and we were talking about the show, before it had aired. He said the premise was scandalous. The ability of people to go undercover [and not be recognized] at a large organization shows the problem.

In the episode you and I watched, Carstanjen changed things for several employees who he had worked with undercover. One was promoted, one got a job closer to home and a raise, another got more horses to train, and and one saw a race being named for his late daughter. They all seemed genuinely grateful and touched by what had been done for them.

In our Managerial Leadership class we talk about the fact that "everyone has a story." The employee whose daughter had died—he has a very unique story. And when a company or a leader knows that, [he or she] can tailor or customize the work experience. What was done in terms of naming the race for his daughter is going to engender such loyalty, such commitment, such engagement, which is what organizations need.

The Gallup Organization has researched employee engagement, measuring the percentages of employees who are engaged, not engaged, or actively disengaged, in companies internationally. They measure impact, including bottom-line cost to the economy of employees who are actively disengaged. The cost in 2006 was more than $300 billion.

Leadership is a relationship, a partnership, and employee engagement isn't just a soft and fuzzy topic but has bottom-line implications.

One of the biggest responsibilities of leaders is to set other people up for success. … Leaders can't do that if they don't understand the experience of people carrying out the work. There was one quote I wrote down from the other night. Carstanjen said, "Spreadsheets only tell half the story. This is a people business. We have to know how people are feeling if we want to run the business well. Decisions are made in the boardroom that affect them, and I've never understood the consequences of our decisions."

Everyone has a story—and everyone's story is different. A CEO can't walk around changing everyone's life. How can management find out what the dreams of employees are when they don't have a rapport, or even a relationship or contact, with these people?

Yes, obviously there is the issue of scalability, especially if you are talking about large organizations. … A CEO or top executive won't be able to go undercover or even do a walkaround to meet all employees. But they can institute and create the organizational culture where the top leader has to be the role model. They have to walk the talk, and this has to cascade throughout the organization.

It's about seeking feedback and input from people. Leaders need to acknowledge and reward feedback or recommendations that employees, especially lower-level ones, might be afraid to offer. That's the whole premise about these [bosses] having to go undercover. [Top management] has to create the environment where they say: "Tell me what I need to know." "What would prevent us from doing our best work?" "What do you need to do your best work possible?"

Workers likely would not have been as open had Carstanjen shown up and said, "Hey, I'm the COO, and I don't know enough about the way the operation works. What's hard about your job?" Even if you create a culture from the very top where this kind of conversation is important, and you want to give people the tools they need to do their jobs well, and you set it up so that cascades down throughout the organization, how do you make it safe for employees to be open with you?

Leadership is a relationship, and like any relationship, it evolves with trust and credibility. So a leader has to be consistent in showing desire for the input and acknowledging the feedback—but there has to be follow-up as well.

Too often people feel, "I made the suggestion, they said thank you and smiled, but nothing ever happened." And that can cause a real decrease in morale ….

Whose responsibility is it to do that? Is it my direct manager's responsibility, for example, to have that conversation with me?

Top leaders have the responsibility for creating this culture. They have the responsibility for being role models themselves and encouraging this kind of behavior in all the managers who report to them. … It has to be localized to be effective in an organization, but ultimately that comes from the culture created at the top.

And though it should start at the top, it should not stop a midlevel manager in an organization from doing it on their own. If I'm in an organization and I feel that culture has not been established at the top, that shouldn't prevent me from doing it on my own with my own work team.

People are often frustrated by what management isn't doing at the upper level, and they feel like they're one individual in a large organization and that they can't make a difference. But like what we're talking about here, with your immediate work team, that is something that an individual manager takes initiative on.

Michelle L. Buck is Clinical Professor of Management and Organizations at the Kellogg School of Management at Northwestern University. She teaches Leadership and Negotiations courses in Kellogg's MBA and executive programs. She also serves as the School's director of leadership initiatives. For more information about the Kellogg School of Management, including its MBA and its executive education programs, visit

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