According to a 2013 CEO Institute survey, the number one issue keeping chief executives awake at night was “sourcing and retaining skilled staff.” Yet when PricewaterhouseCoopers asked 1,300 global CEOs about their operational priorities that same year, talent strategies didn’t make the top five. So while CEOs claimed to be suffering from insomnia, it seemed they were doing very little to create remarkable workplaces to alleviate the problem.
This discrepancy intrigued me and I started researching why it was (and is) still happening. I found that some CEOs simply don’t rate people practices as a core profit driver. Others throw perks at employees like lollies to children, hoping to magically improve their staggeringly high staff turnover rates. The rest? They simply don’t know where to start.
In practice, the 80/20 rule applies — 20% of strategies have greater impact than the other 80% put together. Here are my top six steps that have led to remarkable workplaces around the globe:
1. CEO buy-in and a “people practice” champion at the top table
“Best employer” companies are characterized by CEOs who passionately believe the bottom line is driven by human endeavor and who embrace people practices as a profit-generating strategy on the same platform as Sales, Marketing and IT. By prioritizing people-centric initiatives, their companies achieve on average at least four times the profit growth (Aon Hewitt People Practices Inventory 2011) and three times the share market returns (Russell Investment Group 2011) compared to average companies.
In addition to having CEO buy-in, these businesses all have a high-achiever at executive level responsible for driving organizational change through intelligent people practices. They might amend internet security rules so employees can work from home; introduce commuter-friendly shift times; procure high-impact training programs; or implement initiatives for increased communication, transparency and egalitarianism.
Standard corporate leadership consists of CEOs, CIOs, COOs and CFOs, but unfortunately there are still very few “people” leaders. Without an effective champion with direct influence at executive level, the modifications required at all levels of the business to build a remarkable workplace simply never happen.
2. Monthly one on ones
Of all the talent management strategies I’ve seen or used to build a remarkable workplace, the monthly one-on-one system, during which a manager takes time to have a productive reflective discussion with each employee and create an individual action plan, is a standout. Not only does it nurture the vital bond between an employee and his immediate supervisor, but, as a study by Bersin and Associates found, a monthly action plan alone results in twice the revenue per employee and a 27% lower staff turnover rate.
Despite research like this, annual or biannual performance appraisals are still standard for many organizations. Yet imagine a coach who only met with his professional athletes once or twice a year and reeled off a long list of everything the athlete was doing wrong. Irregular check-ins are simply devastating to high performance.
Tech company Atlassian makes a great case study. When executives discovered that their twice yearly staff appraisals led to disruptions, anxiety and a drop in both manager and team morale, they implemented these monthly check-ins. The result: extraordinarily high engagement scores of 87% and several Best Employer awards to boot.
3. Families, villages and tribes: Create small, flexible teams every business area
Neurological experiments show that decision-making performance falls off rapidly as the group size grows beyond seven. You see this at dinner parties when as soon as a group gets beyond this number, people split off and start to talk in separate groups. This is also what happens in teams. In my first book, Family Village Tribe, I explained how travel retailer Flight Centre split its entire company into seven-person business teams (families), because profits were found to drop almost by half as they increased in size. The company believes that this is because they emulate hunter-gatherer community size, a structure in which people inherently prefer to work. Gore, Virgin, Semco, Spotify, and Atlassian are other companies that have adopted the small-team strategy.
Flight Centre also groups its teams into local villages (max 7 teams) and tribes (max 20 teams or 150 people), each with their own leaders and support staff. Based on economies of scale this seems counterintuitive; however, the increase in productivity far exceeds the extra costs. The company doubled its profit in one year when it split its single Australian operation into 6 stand-alone teams. The same strategy proved so successful for GORE-TEX that founder Bill Gore only ever put 150 parking spots at each of his businesses. As he told an interviewer, “When people start parking on the grass we know it’s time to build a new plant.”
4. Improve actual job roles
Frederick Herzberg’s famous large-scale study of workers showed unequivocally that achievement in the actual job itself was the greatest motivator at work. This included such aspects as doing creative, challenging and varied work; the opportunity to do a job from beginning to end; working without supervision; and being responsible for one’s own efforts. Salary, interpersonal relationships, company policy and working conditions were all inferior to these factors.
Even if an organization is dynamic and inspiring, people will quit if their tangible job role isn’t engaging enough. It’s amazing what can be done. Sometimes it’s as simple as removing unnecessary paperwork, or axing overly bureaucratic systems. Australia’s Holden Hill police station had constant staff turnover of administrators because they hated typing up transcript tapes – a minor but monotonous part of the role. By transferring this duty to a casual staff member, they solved the problem and saved significant staff turnover costs.
5. Team-based planning
Baseball great Babe Ruth once said, “You may have the greatest bunch of individual stars in the world but if they don’t play together, the club won’t be worth a dime.” The conventional approach to business planning is that a manager attends an executive planning day and then tries to get the team to run with his company-devised strategies. The staff have no buy-in because they’ve had no access to the rationale behind the plan so implementation is patchy at best. It’s akin to dragging dead horses across a desert.
In contrast, the individuals who make up a team are like an incubator of ideas. Tapping into them creates energy and excitement. Rather than one leader driving all the change, you then have the whole team driving improvements. The plan has to align with the company’s overall goals, but this still gives individual teams a lot of scope.
The improvement is remarkable. One corporation I consulted with had business units that achieved over 50% profit increases within three months of implementing this more collaborative strategy. Multi-billion-dollar online sales company Zappos and 43,000-employee Da Vita Healthcare are other examples of companies that have used this kind of democratic approach and shown that giving front-line staff more say in their own business really does pay off.
6. Reward and recognize genuine achievement
In a 2012 Globoforce survey, 47% of workers gave “not being recognised for their efforts” as the main reason for leaving their last job. Turn this around and there’s a serious prize on offer for those companies who get this right.
My old company used to stage an overseas awards night every year, flying high-achievers to sumptuous locations, feting winners like superstars on stage, and entertaining the crowd with celebrities like Bob Geldof and The Village People. It cost the business several million dollars, yet even at the height of the global financial crisis, this was one expense they refused to cut, because it was people’s single greatest motivator. Virgin is also renowned for its staff recognition events and Steve Jobs of Apple fame used to hold a “Top 100 retreat” in which he took the 100 smartest employees to an undisclosed location every year.
To underpin this kind of event, an organization needs to be able to objectively compare its people performance and the best way to do this is to create intelligent KPIs for each role. Yet many employers use subjective measurements that stoke employee resentment, or they make KPIs so complicated that employees can’t track and improve their own performance.
It’s a matter of what gets measured gets managed. Delta Airlines reported a 564% ROI on its rewards and recognition program; the Avis Budget group an $11.4 million profit bounce; and Sutherland Global Services says the money put into recognition earns a 20-times return and is their best investment. Senior Vice President Tom Steuwe’s only grievance: “I am kicking myself for not having done this 5 or 6 years earlier.”
The proof is in the profits
With all of the above strategies the proof is in the profits. Even during the global financial crisis, the Parnassus Workplace Fund — a group that only invests in organizations with a solid reputation for having outstanding workplaces — had an annual average return of investment of 10.81%, compared to the S&P index’s 3.97%. This shows that there’s an enormous upside for CEOs who embrace people practices and realize that building a remarkable workplace is no longer a business diversion. It’s now the main game.
As a start-up director of a UK retail business opening a new shop every month, Mandy Johnson was forced to learn new strategies to recruit, retain and develop people to reach high performance at break-neck speed. She’s written about her experiences in her best-selling book Family, Village Tribe, which made Kobo’s 2014 top five list for Business-Entrepreneurship and is a set text in many Australian MBA courses. Her second book Winning The War for Talent has just been released and has also garnered excellent reviews in the business media.
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