Rethinking Redundancy

One of the great ironies of early 21st century business is that at the very time management is recognising the value of people and their contribution to organisational success – and so becoming increasingly focused on policies to win ‘hearts and minds’ and engender greater employee loyalty – the more disengaged people appear to be.

The Towers Perrin 2007 Global Workforce study, based on a survey of 90,000 workers in 18 countries and input from a database of more than 2 million people across 40 countries, reveals that only 21% of the global workforce are ‘engaged’ in their work, where engagement means ‘freely giving their time, energy, creativity and knowledge to their work'.

The survey shows that of the rest, 41% are ‘enrolled’ (something that in one organisation used to be referred to jokingly as ‘on the payroll but not at work’); 30% are ‘disenchanted’ and 8% ‘disengaged’.

Turn this around and it tells you that 79% (86% in the UK) of an organisation’s greatest asset and primary source of competitive advantage are not pulling their weight.

Paradoxically, this trend of disengagement is happening at a time where management is more employee-friendly and liberal than at any time in history. The problem is, though, that workers still see the manager’s role as to maximise efficiency and/or profits, and that largely at their expense; and ultimately so too do managers, as evidenced by their preoccupation with headcount and the levels of employee costs.

There is need for a whole new approach to bring the two sides closer together and bridge this great divide. Let’s see how this could be done.

In a recently published book, Mobilizing Minds, McKinsey executives Lowell Bryan and Claudia Joyce argue that “profit-per-employee should now be the key business metric”. Yet, while undoubtedly making the case that people are a business’s most important asset, this metric remains rooted in traditional management thinking and will perpetuate the type of industrial-age conflict we are talking about and which has blighted business performance for the past 100 years or more. For example, a business making a profit of £1 million with a workforce of 100, would have a profit-per-employee of £10,000. If, however, management were able to reduce headcount by 10%, the profitper-employee would now be £11,111.

While reflecting well on management, this would perpetuate the worker perception that they are expendable, further reduce loyalty, undermine efforts to improve employee engagement and extend the traditional worker/manager conflict – which would be further reinforced and exacerbated if this was a KPI and management incentives were dependent on it.

So while this new measure both recognises and addresses the importance of people, it perpetuates the mindset that people are simply a cost; it has no direct impact on behaviour and does nothing to improve industrial relations or enhance employee engagement. In contrast, recognising that people are indeed assets and valuing them as such, would offer a far more powerful solution. Here, the KPI would be ‘return on human assets’ which, while ultimately no less meaningful or useful, would engender greater co-operation between worker and manager.

The desire of the individual to optimise their asset value will still be counter-balanced by a management desire to minimise it; but as the means of increasing their value will be through making a greater contribution, both parties will now be working to the same goal: endeavouring to maximise the individual contribution.

Recognising people as assets and treating them as such will engender a more complete view of the individual and their capabilities and talents, and thus create a platform for them to start maximising their own potential, whilst also inspiring a greater sense of belonging and commitment.

The approach of valuing people as assets, and setting up appropriate KPIs to measure their effectiveness, provides an essential first step in creating the new management model that is required. It co-opts worker and manager alike to develop the individual and optimise their potential, creating a collaborative partnership that reverses the traditional conflict between the two and ensures greater engagement, to the ultimate benefit of both parties.

High Employee Engagement Vs Low Employee Engagement

High Employee Engagement % Low Employee Engagement % Swing % Difference %
Operating Income 19.2 -32.7 51.9 -270.31
Net Income Growth 13.2 -3.8 17.0 -128.79
Earnings Per Share 27.8 -11.2 39.0 -140.29

One year performance comparison. Figures as per ISR research published 27 June 2006.

This is clearly illustrated in Table 1 which shows – once again on an average basis only – the remarkable difference in one year’s performance between companies with high employee engagement and those with low employee engagement. Figures of that magnitude, and in the light of the Towers Perrin research quoted earlier, would suggest that the scale of the potential benefits of ensuring your people are fully engaged makes it a ‘no-brainer.’

Bay Jordan is a member of Winning Teams and the founder of business transformation consultancy Zealise Limited and author of ‘Lean organisations need FAT people’ (ISBN 0-9768447-4-5)

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