The old saying that “people are our most important asset” is actually true. Compelling evidence suggest that organizational success comes more from managing people effectively than from attaining large size, operating in a high-growth industry, or becoming “lean and mean” through layoffs (downsizing or rightsizing?) But while many leaders believe that putting people first makes strategic sense, all too few of their organizations do it.
What can you actually do to implement high-performance management practices and enjoy the benefits that will almost certainly accrue?
Unfortunately there are no easy answers – if there were, this strategy would not be such an important foundation for sustainable competitive success. But there are things that high-performance organisations do that stimulate new thinking about the question.
Achieving profits through people requires consistent leadership attention and that is precisely the biggest barrier to its success. The scarcest resource in most organizations is time and attention and most leaders don’t seem to have enough.
Time spent focusing on one thing cannot be spent on others, and too often quarterly financial results crowd out the long-term management of people.
Leaders of truly successful organisations see their role as systems architects, engaged in the critical tasks of building values, cultures, and a set of management practices that enable the recruitment, retention, development, and motivation of outstanding people.
They also engage in the important work of building work practices that ensure that the ideas of all people become known and used.
It may seem obvious that building organizational capability and ensuring the implementation of high-commitment management practices is a key managerial responsibility. However, this prescription is frequently embraced in default.
Conventional wisdom argues that senior leaders should focus on making strategy. Yes leaders should worry about the right strategy, but implementation is a lot more important.
“Finding the right answer is relatively easy; doing the answer is frequently impossible.” Numerous studies indicate that managing people using high-performance or high-commitment practices can produce enormous economic returns. Moreover, really making people your most important asset turns out to be difficult to imitate.
Jeffrey Pfeffer has observed three basic principles that leaders use to transform their organizations to a high-commitment model of management: build trust, encourage change, and use appropriate measures of performance.
Each of these principles makes as much sense as the idea of building organizations that develop and apply employees’ knowledge and competence. But again experience reveals that common sense is not common in managerial practice.
At the most basic level, one builds trust by treating all members of the organization as though they can be trusted. This means, among other things, sharing information with everyone. To keep secrets imply that the organization does not trust those from whom information is withheld.
Knowledge is power, and sharing information entails sharing power. But not to share information suggests that there are some in the organization who can be trusted with its secrets, and others who cannot. This is the wrong message to send if you want to harness the efforts and energy of everyone.
You cannot build trust without treating people with respect and dignity. It is now all too common to have layoffs in which those let go are immediately escorted off the premises. This process deprives them and those left behind of the opportunity to say good-bye and, more fundamentally, signals distrust and disrespect. Building trust means taking the organization’s values seriously.
Leaders can encourage change in many ways. One is by exposing themselves and their colleagues to alternative models of management. Symbolic egalitarianism and promotion from within are examples of the new management paradigm.
One important barrier to decentralizing decision-making, using self-managed teams, and eliciting employee commitment and cooperation is the symbols that separate people from each other.
Consequently, it is not surprising that many of the firms that are known to be achieving competitive advantage through people have various forms of symbolic egalitarianism – ways of signaling to both insiders and outsiders that there is comparative equality and it is not the case that some think and others do.
Promotion from within is a useful adjunct to many contemporary management practices. It encourages training and skills development because of the availability of promotion opportunities within the firm binds the workers to employers and vice versa.
It facilitates decentralization, participation, and delegation because it helps promote trust across hierarchical levels; promotion from within means managers are responsible for coordinating the efforts of people whom they probably know quite well.
If people do outstanding job but outsiders are being brought in over them, there will be a sense of alienation from the organization. One other advantage from promotion within is that it tends to ensure that people in management positions actually know something about the business, the technology, and the operations they are managing.
Measuring What Matters
Finally, leaders who have successfully built high-performing workplaces make sure to measure the practices that constitute high-commitment management. They also measure related management processes that determine how the organisation is functioning. Most financial reporting systems provide details about what has happened, but much less information about the organization’s present condition or the reason for its performance.
It is, as the saying goes, like trying to drive by looking into your rear-view mirror. A positive response to this problem is Robert Kaplan and David Norton’s balanced scorecard approach, in which financial measures are weighed against measures of customer satisfaction and retention, employee attitudes and retention, new products and new business development, or readiness for change.
Some of the indicators are more difficult to measure than past financial performance, but sophisticated leaders recognize that measurement systems focus organizational attention, and the adage “what gets measured gets done” is factual.
Every business has a few key drivers of success. It is the job of management to lead a process in which these key success factors are understood, measurements for them developed, and then attention focused on those measures.
If people are an important source of competitive advantage, then the attraction, retention, development, and spirit of an organisation’s people require as much attention as the financial statement.
Measuring what really matters, not what the current information system happens to routinely track is critical. It is no accident that great companies develop unique standards of performance – and these often involve people.
A New Role for Leaders
In the contemporary world, knowledge and capability have become key to success because everything else is easily acquired or imitated. Putting people first, or at least taking people issues seriously is more important than ever.
But implementing high-commitment practices requires a different view of management and competitive advantage. From this perspective, leaders build systems that build distinctive competence and capability.
These leaders don’t necessarily make a lot of business decisions, even decisions about strategy. They make more important decisions about systems for recruiting, motivating, and developing people that, if successful, will ensure the organisation has the talent necessary both to develop effective strategy and to execute it.
It may seem strange to see the leader’s role as being the Chief People (or Culture) Officer, but that is exactly what Jeffrey Pfeffer found in organizations that have really achieved profits through people.
By Captain Sam Addaih (Rtd)