People: The Forgotten Frontier
by Karen Sella of FutureSense, Inc.
"All organizations now say routinely that people are our greatest asset. Yet few practice what they preach, let alone truly believe it."
People are still the forgotten frontier of the workplace. As Drucker so aptly noted, organizations routinely say that people are our greatest asset. Yet few practice what they preach, let alone truly believe it. Despite the heightened awareness prompted by the tragedy of September 11th, this still rings true.
The business of valuing, motivating, and rewarding people is more an artistic exercise than a scientific process. It is based on individual performance, yes, but that performance is scored against profit expectations, managerial ambitions, and the unique culture of each organization. Actual performance is often subjugated to the business agenda, and both individual potential and corporate profits suffer in the process.
This paradox between potential and profit is intriguing. The link between HR and the bottom line is still one of the most overlooked roads to profit in American business. Human Asset Management—the managers’ greatest challenge to contribute strategically to the success of the organization by truly understanding and appropriately leveraging the relationship between the human factor and the bottom line—may appear to be old news. However, when it comes to today’s Human Asset Management, managers and entire HR departments are still failing.
Individual performance is not improving bottom line performance in most organizations and the reason is a lack of systemic thinking in business. While managers are moaning about under productive people, and HR departments are going out of business, they’re missing the connections among four key dimensions of people at work: the where, who, how, and why of environment, culture, development, and rewards. All four must be addressed to produce performance and profit results.
Environment is the "where", the infrastructure, framework, or social architecture that attracts people into organizations. It is the organic core that supports work.
Unfortunately, most work environments are not designed to motivate performance. Environments are created to set up a comfort zone that acts like a magnet to drag people to work, and that is just what they do. They drag people to work with predictable negative effects on productivity and profit.
The result is that people do not fundamentally enjoy what they do. They regard it as a necessary evil.
In fact, not creating attractive working environments has had some nasty consequences, including the fact that voluntary and involuntary turnover rates have increased 50% since 1994. The cost of turnover is 1.5 x salary and benefits for exempt employees, and .75 x salary and benefits for non-exempt employees.—and that does not include lost opportunity costs.
Culture is very simply defined as "how" people interact at work. How they support their organization and its mission, how they regard each other, how they work together toward common goals, and how they treat their customers. Culture is like oxygen—necessary for the life of the organization and largely invisible until it’s forced into closed systems or mixed with other elements.
Think about culture in terms of mergers and acquisitions. We know that about 70% of all M&A activities fail to deliver the financial goods to the bottom line. We also know that roughly the same percentage of all change management efforts fail to deliver as advertised. In this age of new economics, we commonly see a pattern of growth and expansion followed by merger or acquisition followed by divestiture or shrinkage for economies of scale to deliver on the projected profitability culminating in carefully crafted statements from the public relations department as to why profits are below projections. The explanations given frequently fail to acknowledge a fundamental lack of cultural differences that contributed to the downfall.
Because organizations don’t factor in culture ex ante—before the fact, the different organizational cultures mixed together often react with volatility. Without a thorough understanding of the cultural groups preceding the merger or acquisition, organizations become cultural reactors destined for failure. In short, despite remarkable lip service to the contrary, organizations forget about the people.
The consequence of this kind of dissembling, of not dealing with cultural issues of respect, trust and loyalty, is that it doesn’t take long for employees to adopt a "me, first" mentality. Why go the extra distance to serve a customer with a problem? Why be innovative? Why be loyal and stick around? Why be productive?
Merger or not, disillusionment with the direction their company is going also plays a big role in retention and turnover. This is especially true in high tech companies, where visionaries and strategists have to be at the top of their game to keep up with the blistering pace of the industry. If people perceive that vision or strategy to be flawed, or performance of the company is down based on competitive market growth or lack of acceptance in the marketplace, people start looking for their next possible "big win" opportunity. Strong leadership can hold things together for a while, but most talented people are smart, and recognize when it’s time to move on … before they fall into the yawning gap between promise and performance.
The third workplace dimension is development – the "what" of the workplace. Corporations today are spending some $60 billion annually on training and development. Our contention is that 80% of that is wasted because, from the developmental point of view, most organizations provide entertainment, not education.
One-day courses, one-week courses, just don’t work, because education without repetition is pure entertainment. Thirty days after the event, the material is out of sight and out of mind … particularly around issues of leadership, managerial training, coaching, and all of the "people" areas.
Development in core competencies sticks a little longer, because people have a chance to actually use the knowledge. In its essence, development is hope. It is belief in individual potential. It is a map and tools to create the future, individually and collectively. It requires spending time figuring out what makes people work … their motivational profiles … how to make them assets to be invested in, not resources to be depleted.
Because development is all about improving business performance through people, a true development organization will repeat, and continue to repeat, developmental information over and over again. And, by providing information, learning, and training with appropriate measurement against goals, organizations can assess the return on their "assets"—their investment in people—and drop it to the bottom line.
The fourth and final workplace dimension is the "why" of motivation. Motivation is particularly interesting to look at right now because we’re seeing a complete bifurcation of the 20-something Generation X’ers from the 40-something Lifers. That bifurcation tells us that we can’t continue to use the traditional model of compensation plans, performance reviews, and merit increases. That model doesn’t work anymore because the motivational profiles of people are getting more individualized, and for the first time since boys left the farms for the factories, we are seeing a complete separation of interests and motivations between successive generations.
The 40-something generation looked at their exhausted – and largely absent – Eisenhower era fathers and thought, "Not me! No way! I’m going to have it all!" But having it all meant working 60-70 hour weeks juggling career, marriage, mortgage, middle age, and the looming specter of retirement with no savings. The 40-somethings are sitting in our cubicles, shoulders slumped, feeling like the Energizer Bunny™…still going and going…and having to go on for another 20 years.
Then the Generation X’ers come along and start looking for something interesting to do, and some motivation to do it with. They see the 40-somethings, and think, "No way! Never! I don’t want that type of a career path!" Generation X’ers have a different work style. Nine to five? Probably not. It’s more like, "I’ll work when I need to work. If I need to get up at 2:00 in the morning, and work 30 hours straight, I’ll do it." And they can do it, because this generation is technologically empowered. They are creative. And they know that the best way to see the future is to invent it themselves.
Their motivational profiles are unique, yet most organizations are rewarding them with the same old worn-out methods. Our compensation planners continue to develop merit increase guide charts, which say, "We’ll rate your performance on a scale of one to five … and then we’ll figure out the position that you’ll have within your salary range, and then we’ll make sure that you’re progressing at a specific rate depending upon your performance." The essence of this approach is differentiating amongst shades of gray. We say we pay for performance—and the difference between a good and a great performer may be, after taxes, a six-pack of their favorite beverage!
To work, the workplace has to optimize and synthesize environment, culture, development, and motivation. If organizations want to create the right workplace for people, they have to create the right mixture of the four dimensions. If they exclude any one of the four, they will not succeed with their people, not in today’s world, and most assuredly not in tomorrow’s.
People are the forgotten frontier in American business. They have been for the last 100 years, and they will be for the next 100 years unless organizations develop the workplace for the people who inhabit it. People want to work in a culture where they are self-empowered and participative—where they are valued as assets in an environment that supports their work and their potential. Ultimately, to deliver on the promise of "people as our greatest asset", organizations need to deliver on the knowledge that people want to do work that is authentic and meaningful. Organizations need to create work environments that connect people to the company—its strategy, mission, vision, and values—so that they feel motivated to do their best work.