As Israel Berman, head of Hay Group in Europe, said in his opening remarks at this year’s Hay Group International Conference in Berlin, what differentiates the best companies from the rest is a powerful corporate culture that drives great performance, enabling teams and individuals to realise their strategy and their own potential.
Culture drives performance through three channels, explained Hay Group’s Jean-Marc Laouchez:
It is critical to have alignment between the organisation’s core values, the messages it sends to people and the behaviours it expects of them.
And alignment has proven results. Hay Group’s research finds that organisations with well-aligned cultures show consistently better results than other companies, with an average five-year return on investment that is twice as high and gross profit margins that are 27 per cent higher.
The changing face of reward examines how the business drivers of reward are changing due to the impact of the global downturn and other macroeconomic trends in the global economy. The study is based on face-to-face interviews with senior HR specialists from over 230 companies in 29 countries, which collectively manage more than 4.7 million people and generate annual revenue streams of approximately US$4.5 trillion.
Across all sectors and regions, organizations are struggling to re-build profitability following the recession. With revenue growth hard to come by, they are focusing on cost containment and performance improvement as the paths to profit growth. This requires them to balance four, often conflicting, challenges: cost containment, performance improvement, talent engagement and risk management.
In particular, the tension between cost containment and talent engagement was a very strong theme to come out of the research. Organizations are very concerned about retention and motivation, particularly for top performers, high potentials and those with scarce skills. However, the option of paying more for retention or performance is often no longer available and companies are focusing more on intangible rewards (such as motivational leadership, challenging work and career development) to boost engagement.
Talent Q’s Dimensions provides a cost-effective way to measure the capability of sales staff, especially when assessing large numbers in revenue-critical roles.
Selecting the best :
Two recent studies demonstrate the contribution that a carefully chosen personality test can make to the tricky business of predicting performance – especially when in-depth assessments of behavior are too difficult or costly to carry out.
Talent Q ran assessments with employees in sales roles – 60 in telecoms and 29 in a pharmaceutical company – and compared the resulting predictions with employees’ actual performance against sales targets.
The test chosen was Dimensions, an online assessment that measures the key, work-related aspects of personality covered by a range of other personality measures. Participants undertook a single assessment that explored how they approached tasks, how they managed relationships and what motivated them.
Emotional intelligence is “the capacity for recognising our own feelings and those of others, for motivating ourselves and for managing emotions effectively in ourselves and others.” This has been misconstrued by some as a requirement to become ‘warm and fuzzy’ at the expense of having a hard-nosed business sense. But emotionally intelligent leadership is not about unfaltering ‘niceness’, nor is it about being emotionally bland or controlled to the point of appearing emotionless and robotic. Rather, it is about exercising real choice, based upon a realistic and accurate assessment of oneself in a given situation, instead of being driven by one’s emotions to act in an uncontrolled manner.
As described in detail in The New Leaders2, this perspective on emotional intelligence can be encapsulated in a behavioural framework of four competency clusters: self-awareness, self-management, social awareness and relationship management.
This kind of leadership is not based on personal dominance and is not directed toward self-aggrandisement,the service of self-interest or the exploitation of others. Nor does it rely on manipulation, threat or punishment. Rather, it shows regard for the rights and feelings of others, within the context of established institutional procedures and guidelines. In order to be a catalyst for change, these leaders must deal with their own uncertainties and gain the personal confidence that will enable others to respond positively to change. Emotional intelligence is not for ‘wimps’. In fact, leaders who are not emotionally self-aware will not be mentally tough enough to succeed in tomorrow’s business environment.
Organizations are emerging from recession into a tougher, more cost-conscious and performance-oriented world. It is clear that a return to ‘business as usual’ is unlikely. Indeed, the new mantra is ‘do more with less’. Firms are lean, and, if not exactly mean, concentrating their effort and investment on those activities that will deliver the greatest returns.
At a time when both financial and human resources are at a premium, the discretionary effort of employees will be the most vital component in creating high-performing organizations. And in order to ‘go the extra mile’ employees need to be both ‘engaged’ and ‘enabled’.
As we highlight in this issue of ViewPoint engagement alone will not driveperformance; enablement is also critical. Embedding both into organizational cultures is no easy feat. It requires strong leadership, management accountability, strong performance management, ongoing measurement,excellent communication and, last but not least, clear alignment between individual targets and rewards with business objectives.
It’s a challenge, but it can be done, as some of Hay Group’s recent research shows. Three of our landmark studies – The World’s Most Admired Companies (in conjunction with Fortune magazine), Best Companies for Leadership (with Bloomberg Businessweek) and The changing face of reward – provide valuable insights and lessons for fi rms wanting to create their own high-performance cultures. In the rest of this ViewPoint we examine some of the different levers to create better engagement, as exemplified by some of the world’s leading organizations.
Goleman’s book had all the earmarks of a classic fad: a bestseller featuring ideas and concepts borrowed from outside the business world; articles and follow-ups in dozens of professional magazines, including the Harvard Business Review; seminars at scores of professional meetings and conventions; and serious discussions in hundreds of executive suites and HR departments across the country and around the world. But a funny thing happened to emotional intelligence on the way to being forgotten. It wasn’t.
In fact, far from joining other management fads that have come and gone in the ensuing decade, the qualities that comprise emotional intelligence are more critical to the success of business leaders than ever. The reasons for this enduring value can be found in the ways the business environment has evolved since the 1990s – including the economic uncertainty of the last few years– and in how the core qualities of emotional intelligence help leaders strengthen their effectiveness in that changing environment.
Perhaps more to the point, however, emotionally intelligent leadership delivers results. Research has confirmed a significant performance gap between leaders who display the qualities of emotional intelligence and those who don’t. Hay Group’s own work has revealed that the most admired organizations report their executives demonstrate higher degrees of emotional intelligence – and that the lack of these qualities contribute significantly to the failure of high-potential executives. Emotional intelligence has endured because it really is essential to effective organizational leadership. And that’s even more true now than when it was introduced in 1998.
There are a lot of frustrated people in most workplaces today. We’re not talking about the incorrigible office grump or the permanently unmotivated slacker. Instead, we’re referring to dedicated and valued workers who are being prevented from achieving their peak potential by organizational obstacles. Better enabling these employees to succeed represents an untapped avenue for radically improving productivity.
Packed with the latest research findings from Hay Group, ‘The Enemy of Engagement’ uncovers the hidden impediments to performance – excessive procedures, lack of resources, overly narrow roles, and more – and outlines best-practice solutions for eliminating them. This is not an insignificant issue facing businesses today. According to the study, depending on the industry, between one-third and one-half of employees report work conditions that keep them from being as productive as they could be.
How can family businesses break the third generation jinx?
The first generation builds, the second expands and the third destroys. This is the universally acknowledged phenomenon that few family-owned businesses (FOBs) survive beyond the third generation.
In the typical evolution of FOBs, they start from the Controlling Owner stage to the Sibling Partnerships stage and finally, to the Cousin Consortium stage as they mature from being a start-up company to one thinking about passing the baton.
By professionalizing, FOBs are able to tap into the external labor market, giving them access to higher quality and quantity of human resources. These experts in their corresponding fields can contribute significantly to the expansion and the success potential of the FOB. They also inject more professionalism in the firm and are immensely valuable resources in enabling the FOB to achieve rapid financial growth within a short span of time.
The success of FOBs depends on driving the balance between the
family “heart” and the business “head”. By monitoring the happiness index on top of financial performances, FOBs can keep the hearts of the family members warm and the pockets deep, to ensure the long lasting continuity of the business.
We’ve all heard the one about the CEO who was asked how many people worked in his organisation. “Oh, about half of them,” he replied.
Joking aside, how true is this within your organisation? If you don’t know chances are it’s not being measured or at least not being measured in a way that gives you the same top line data such as profit, debt days outstanding and units shipped. It’s interesting that many organisations just don’t know, even when perhaps half of their salary bills, their biggest costs, are going on people either not contributing
– what we call non-engaged – or, worse still, those who are actually pushing in the wrong direction. In other words, actively disengaged.
After all, who needs competitors if you’ve got actively disengaged employees on your payroll?
All of our research shows that employees want to work and want to work hard, it’s what human beings naturally want to do. That’s the good news. Given that the vast majority of us want to work, what then is the driving force behind those that want to work in the same direction as the employer and those that don’t? That’s the question a good engagement study seeks to answer. And the answers matter. A well aligned workforce results in better bottom-line performance. It delivers higher scores on pretty much any business critical key performance indicators you care to mention, whether they be profit, innovation, safety or anything else. It also means comparatively better share performance.
To the question of whether employee engagement matters to the CEO the answer is undoubtedly ‘yes’. Highly engaged workers make for better business outputs, more loyal customers, fewer ‘problems’ and better financial performance. What’s not to like?