When you’re a manager in the middle, and even when you’re the most senior executive, improving the performance of your organization can seem overwhelming. Yet there are simple things you can do every day that will draw outstanding performance from your team.
You can do the simple things it takes to create engagement. You don’t need complex project plans or big budgets. It’s as simple as building on the strengths of your organization: putting your staff to work doing the things they do best, ensuring they know what’s expected of them, and letting them know how they are making a difference.
There’s evidence that this is more than cosmetic. Creating a highly engaged workforce has a measurable impact on profitability. The Gallup Organization has run the numbers, comparing the results of organizations with top-quartile engagement to those in the bottom quartile in the same industry. In their most recent study, Gallup calculated that organizations with highly engaged employees produce 2.6 times the earnings per share (EPS) growth rate compared to organizations with lower engagement in their same industry.
What makes for engagement? Gallup’s research has identified 12 factors--factors that are highly consistent with the findings of the Corporate Leadership Council (see 2 Ways to Increase the Value of Your Human Capital Today). Here are three of the 12 factors that contribute to an employee feeling highly engaged—and acting highly productively:
• I know what is expected of me at work;
• At work, I have the opportunity to do what I do best every day;
• In the last seven days, I have received recognition or praise for doing good work.
Notice “in the last 7 days.” Not “at my annual review”, or “quarterly bonus update. “ In recent memory, in the last week. That’s a pretty tough standard, but the good news is, once you begin to focus on managing these factors, it can be habit-forming.
Ask yourself and your employees: do they really know what’s expected of them? Have you shaped their jobs so they’re able to play to their strengths? Have you recognized their contributions in the last 7 days? While we recommend Gallup’s Q-12 Survey, you don’t need to wait for a survey to get insight into these critical factors.
Because employee engagement is a leading indicator of strong business results, we believe you should measure it. Whether you purchase a survey from Gallup or another vendor, or create your own, measuring your employees’ engagement can make sure you get a realistic picture of their engagement today, learn what to do to enhance that engagement, and track your progress. Ultimately, you should be able to do the math yourself: follow the straight line between your employees’ engagement and your company’s earnings.
Friday, February 26, 2010
Thursday, February 18, 2010
The value of stability
A businessman we respect owns a restaurant franchise. Even before we knew him, we loved his food and had worked our way through several “loyalty cards.” We should have guessed was that there was more than good cooking that earned our loyalty. There was good management—and a keen eye on the relationship between good management and profitability.
It turns out he has industry leading retention, of both employees and managers. And industry leading profitability and growth rates.
He would tell you the relationship is not coincidental. Like any business owner, he runs the numbers constantly, comparing the performance of each one of his restaurants. After several years of collecting an exhaustive list of metrics, he realized he could simplify his job; there was one measure that above all others predicted profitability. That metric was the tenure of the management team. Without exception, the restaurants with management teams who have worked together the longest are the most profitable. What he calls his “stability analysis” is the single strongest predictor of profitability in his business.
His conviction about the value of management stability drives his investment decisions. Going into the recession, he had an unusually high ratio of managers to employees. So, as consumers tightened their belts and reduced discretionary spending, it would have been understandable, in terms of “old math,” if he laid off some managers. His competitors did just that. But using his “new math,” he made a tough and bold decision: he decided to maintain his high level of management staffing. The results? In spite of the toughest economic environment in a generation, he has held his levels of profitability and has actually grown his corporate business as his competitors have faltered and retrenched.
We think every business should do this “new math.” In your business, what is the value of tenure? Find out by comparing the performance of like business units where there is a range of performance and analyzing the tenure of your managers and employees. We believe this new math will reveal some insights that will drive your investment decisions.
It turns out he has industry leading retention, of both employees and managers. And industry leading profitability and growth rates.
He would tell you the relationship is not coincidental. Like any business owner, he runs the numbers constantly, comparing the performance of each one of his restaurants. After several years of collecting an exhaustive list of metrics, he realized he could simplify his job; there was one measure that above all others predicted profitability. That metric was the tenure of the management team. Without exception, the restaurants with management teams who have worked together the longest are the most profitable. What he calls his “stability analysis” is the single strongest predictor of profitability in his business.
His conviction about the value of management stability drives his investment decisions. Going into the recession, he had an unusually high ratio of managers to employees. So, as consumers tightened their belts and reduced discretionary spending, it would have been understandable, in terms of “old math,” if he laid off some managers. His competitors did just that. But using his “new math,” he made a tough and bold decision: he decided to maintain his high level of management staffing. The results? In spite of the toughest economic environment in a generation, he has held his levels of profitability and has actually grown his corporate business as his competitors have faltered and retrenched.
We think every business should do this “new math.” In your business, what is the value of tenure? Find out by comparing the performance of like business units where there is a range of performance and analyzing the tenure of your managers and employees. We believe this new math will reveal some insights that will drive your investment decisions.
Tuesday, February 9, 2010
2 ways to increase the value of your human capital today
The basic unit of human capital is each employee’s performance—and the leader’s job is to create the conditions for employees to perform at their very best. But there are so many possible ways you can approach this job. In a workday that is long on tasks and short on time, what will make the most difference? What can you do today?
You can measurably improve performance today by doing 2 things 1) Make sure your employees understand what you expect of them, and 2) Tell them how they are doing.
An analysis by the Corporate Leadership Council** suggests that fair and accurate informal feedback can improve individual performance by nearly 40%. Ensuring employees understand performance standards can improve performance by 36%. And, based on their study, of the many things you can and should do to build a high performance organization, these are 2 of the 7 highest impact actions you can take.
We recommend a self-audit. In your next 1:1 meetings, ask your employees to articulate what’s expected of them—and see if you agree with their interpretation. You may need to clarify your expectations.
Set a goal of giving feedback to your staff each time to you have a 1:1 meeting, or after they’ve completed a task. This not only signals your assessment of their performance; your feedback will clarify and reinforce your expectations.
The head of institutional sales for a financial services organization spends 15 minutes immediately after each presentation by his staff providing them feedback. During their presentations, he makes notes on specific things they do well and jots down 1-2 specific suggestions for improving next time. He hands these notes to his staff after they’ve debriefed.
The president of a national retail organization, that has turned in year-after-year of unprecedented growth, has a reputation for providing feedback “early and often.” When he travels, the manager who meets him at the airport knows she’ll be asked about her people and get instant feedback on her management—before they get back to the car.
Employees who understand what’s expected of them, know what their manager thinks of their performance, and feel comfortable that their contributions are valued, perform measurably better. They are more confident, more committed and more likely to make effective discretionary efforts. In other words, they deliver more value. Value that you’ve created through your everyday management practices, at every level of the organization.
*And in case this sounds like advice targeted at first-time, first-line managers, consider this: the amount of feedback leaders receive is typically inversely related to their level in the organization. Ironically, the most senior leaders, with the biggest impact on their firms, typically get the least amount of feedback and coaching.
**Building the High-Performance Workforce, Corporate Executive Board, 2002.
You can measurably improve performance today by doing 2 things 1) Make sure your employees understand what you expect of them, and 2) Tell them how they are doing.
An analysis by the Corporate Leadership Council** suggests that fair and accurate informal feedback can improve individual performance by nearly 40%. Ensuring employees understand performance standards can improve performance by 36%. And, based on their study, of the many things you can and should do to build a high performance organization, these are 2 of the 7 highest impact actions you can take.
We recommend a self-audit. In your next 1:1 meetings, ask your employees to articulate what’s expected of them—and see if you agree with their interpretation. You may need to clarify your expectations.
Set a goal of giving feedback to your staff each time to you have a 1:1 meeting, or after they’ve completed a task. This not only signals your assessment of their performance; your feedback will clarify and reinforce your expectations.
The head of institutional sales for a financial services organization spends 15 minutes immediately after each presentation by his staff providing them feedback. During their presentations, he makes notes on specific things they do well and jots down 1-2 specific suggestions for improving next time. He hands these notes to his staff after they’ve debriefed.
The president of a national retail organization, that has turned in year-after-year of unprecedented growth, has a reputation for providing feedback “early and often.” When he travels, the manager who meets him at the airport knows she’ll be asked about her people and get instant feedback on her management—before they get back to the car.
Employees who understand what’s expected of them, know what their manager thinks of their performance, and feel comfortable that their contributions are valued, perform measurably better. They are more confident, more committed and more likely to make effective discretionary efforts. In other words, they deliver more value. Value that you’ve created through your everyday management practices, at every level of the organization.
*And in case this sounds like advice targeted at first-time, first-line managers, consider this: the amount of feedback leaders receive is typically inversely related to their level in the organization. Ironically, the most senior leaders, with the biggest impact on their firms, typically get the least amount of feedback and coaching.
**Building the High-Performance Workforce, Corporate Executive Board, 2002.
Thursday, February 4, 2010
Stop the Ratings Game
“This year, we couldn’t give any salary increases, so I was able to rate people the way I really thought they performed. It was the best review period I’ve had.”
“I do trades…I tell employees, this cycle, I’ll give you a “meets expectations (3)” rating and your neighbor an “exceeds expectations (4);” next time you’ll swap and she’ll get the lower grade.”
“I keep at least a 1-2 low performers on the team so they can take the hit at merit time. Otherwise, I have to punish some of my good performers with low ratings.”
These are not quotes from Dilbert. They are comments of managers who struggle to make the best of a bad system: annual performance ratings, accompanied in most firms by some sort of “forced curve.”
And the ratings trader? In one firm, fully 60% of employees had different ratings in the July cycle than in the same year’s December cycle. Could the performance of all those employees have significantly improved, or declined, in just 6 months?
Another firm knows that the absolute worst time to survey employees’ engagement is at merit review time. Calls to their employee relations department skyrocket, with managers calling for help in how to deliver bad news and employees calling to vent their frustration.
We believe rating systems, especially those that force ratings along a curve, are counter-productive. By distilling an entire year’s contribution to one letter grade and looking for 60 – 80 of your staff to be less than stellar, these systems end up de-motivating most of your workforce.
Here’s perhaps the biggest cost: these highly charged discussions become a “can I get through this without too much bloodshed” transaction, instead of an open, two-way discussion about performance and contribution and development and the future. With ratings and a curve hanging over the conversation like a dark cloud, these performance discussions become a lost opportunity.
How can this pattern be good for business?
Yes, absolutely, companies should pay for performance. The employees who contribute the most should receive the highest rewards. And yes, every employee needs, mostly wants and certainly deserves honest and specific feedback about what they contribute and how they need to raise their game.
But performance ratings systems do not ensure that the best get the most, nor do they lead to improved performance. And the kiss of death is a bell curve. Performance ratings, and the bell curves they almost inevitably lead to, cost companies time, morale and ultimately, money.
Our solution: establish clear performance standards, goals and measures and pay for those—or not, based on what the employee delivers. Cheer ALL your employees to outperform. Abandon performance ratings, and especially, do not look for a bell curve in your workforce.
(Would any firm ever impose a bell curve on their products? “No, I’m sorry, it can’t be a best seller; something has to be a dog.”)
Subscribe to:
Posts (Atom)
Posts
