ARE PEOPLE REALLY YOUR GREATEST ASSET?
James R. McDonald, Ph.D.
How does the owner or executive of a small or mid-sized business maintain profitability in a roller-coaster market, with impending credit restrictions, and an over-all economy in question? Likely they already have initiatives in place to control supply chain, improve technical quality, render customer service more user-friendly, and provide management training. Still, the question remains, “Have you really done enough to leverage your human assets?”
Business owners and executives must continue to shave expense and boost revenue. Technology upgrades have been helpful, as have quality initiatives such as Six Sigma and process improvement. These technical approaches have nevertheless been limited by the capabilities and willingness of their people to execute.
No matter how effective one’s software systems, or how well designed one’s operational processes, it is still the moment-to-moment actions of managers, technicians, and administrators that, when strung together, make each business operation succeed. The chain of decisions, communications, handoffs, keyboard strokes, and other manual activities, all must function flawlessly to bring a quality product off the line, a valuable sale to close, or a customer complaint to resolution.
Companies must improve their people performance in order to thrive – or survive, for there is a direct cost attributable to human error, inattentiveness, inaccuracy, and certainly to fraud. The improvement of human performance, therefore, remains a powerful strategy for growing profitability.
The improvement of human performance has been an elusive objective. Millions of dollars are spent annually on management training and motivational speakers, with sparse results. Effective training can produce better performance, but most non-technical (I.e., “soft-skills”) training fails to do so when measured by the post-training transfer of skills to the specific point of action required. Typically, training outcome delivers a meager 15 – 20% retention of the target skills, only one month later, according to the Society for Human Resource Management.
Yet, human performance can be improved, therefore both reducing costs and raising productivity. Revenue growth can be attained through better performance of people, by turning marginal producers into higher producers. Humans are the greatest source of error and risk in almost any process. Therefore, employee actions either make your company profitable, or they sabotage your best efforts.
FACTORS THAT HAMPER HUMAN PERFORMANCE
Performance requires action: the actions of individuals to accomplish a task, and the actions of managers required to ensure those individual accomplishments. Three important factors pose major risks to out improvement strategies: 1) poor employee engagement; 2) poor employee relationships; and, 3) human reactions to change.
Employee Engagement. The Gallup Organization has reported that the damage done by unproductive, “disengaged” employees – almost 20% of the workforce – costs US industry at least $300 Billion a year. 54% of workers are described as “good enough,” accomplishing the minimum of work required to get by, and not much more. Only 26% of workers are considered “engaged,” and therefore productive. The remaining 74% are a drag on productivity and a cost burden to the company.
Employee Relationships. Employee disengagement often occurs when one is treated poorly, or even when one perceives one is treated poorly. “Poor treatment” results from an organizational environment that tolerates abusive behavior or language, inconsistent or unfair expectations and rewards, or when workers are readily discarded as they are “used up.” The negative impact of such a culture affects both performance and the relationships among peers. In fact, contrary to the popular belief that good employees quit for money reasons, unwanted turnover is primarily due to unsatisfactory relationships with one’s boss or peers.
Gallop has also connected customer retention with disengaged workers. Disengagement leads both to lost customers and to the negative PR spread by customers unhappy with our services. Disengaged customer service personnel actually produce disengaged customers. And, the financial consequences to the company are profound: Engaged customers account for a 23% premium over the revenues produced by average customers. So, for a $20 million company, “disengagement” could cost at least $4.5 million in lost opportunity income!
Human Reactions to Change. Performance improvement requires some change. And, change breeds resistance to change! This resistance is a primary reason improvement initiatives fail. But, resistance is a normal reaction; in fact, it is a human survival instinct. If there were total acceptance of all change, we would have (even more) chaos in life.
Therefore, we must face this normal resistance to change head-on if we are to induce (seduce?) others to embrace a new set of objectives, or any new process. Resistance, like change itself, must be anticipated and managed, in order for improvements to occur. Ironically, resistance to change often occurs at or near the top of the management pyramid, and this dynamic alone can spell the ‘kiss of death’ to an improvement initiative.
COMPLICATING FACTORS
Two additional contemporary factors affecting performance improvement must also be considered. First, the ready replacement of labor is dwindling. Baby Boomers are retiring, and younger replacements come from smaller age cohorts. Both managers and individual contributors are more difficult to replace with employees at similar levels of competency. And further, new recruits always lack the knowledge and experience of the company, its operations, its customers, and its culture.
And lastly, it is important to consider the analysis of major change initiatives over the past 20 years – mergers, downsizing, re-engineering, and installations of major software ‘up-grades.’ Most of these initiatives have failed (as high as 70-80%), because of inadequate people management. Yes, there have been technical problems, but the failures to manage, plan, communicate, and gain both participant buy-in and consistent top-down support, have scuttled many major projects. These are people-management issues, complicated by the inability to manage the change process itself, as well as the normal human reactions to that change.
FACTORS THAT DO SUPPORT PERFORMANCE IMPROVEMENTS
Both managers and individual contributors can re-engage themselves and thus help a business achieve its goals, by improving their performance.
Humans may be the greatest source of error and risk to operations, in spite of technical improvements. However, they can also be the greatest source of enhanced productivity, to reinforce technical gains. Workers who are trained, motivated, and well coached perform correct actions consistently and thereby raise quality, improve the work environment, and reduce turnover. Human performance, therefore, can either support technical capabilities or subvert them. The key is whether or not all employees are positively engaged in each operational process.
Further, since very improvement is a change initiative, both the process of changing and the inevitable resistance to it must be, and can be, managed. Even the almost inevitable nay-saying, foot-dragging, and sometimes outright sabotage that accompany change can be managed. But, how can we do this?
In order to plan and execute a successful improvement initiative, we must have a model and a plan that respects the dynamics of change as well as the human reactions that are stimulated by it. The principle is that both the structure and process of change must consider how people are best motivated, so that the new actions required will consistently bring about the expected results
CONCLUSION: SO, PEOPLE ARE OUR GREATEST ASSET!
Operations, processes, and change initiatives can all be more profitable when there is as effective strategy that addresses human performance problems. Although not necessarily easy, if the desire to increase revenues, while also improving employee relations, is an objective, performance can be improved. It is a simple equation of motivation plus capabilities: The financial benefits will accrue, if there is the will to act to develop and engage the requisite employee behaviors. But, as Albert Einstein advised, “The thinking that got us into these problems cannot be the same thinking that will get us out of them.”
The successful improvement initiative will include a strategy that accounts for each of these factors, in order to influence the human element, while at the same time taking advantage of often latent the human capabilities, already available, that are required to execute each operation.
In conclusion, normal people resist change (E.g., improvements) and will unconsciously work against something new if it is not presented and structured in a manner that makes sense to them, that respects their human/emotional reactions, and that directs them through a reasonable process. Ironically, many leaders resist accepting this reality of employee resistance. But, it is quite clear that improvement initiatives, designed and managed with human factors in mind, are more likely to succeed, and thus retain quality employees and quality customers.
Jim McDonald is a consultant and principal with ValuePoint LLC in Austin, Texas. For questions or information: jmcdonald@valuepointllc.com.
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