In supply chain management, much is made of the benefits of digital transformations, automation, and the application of AI. And of course, using technology can offer greater transparency, better informed decision making and efficiencies. However, many with experience of the promise of new software systems may echo the observation of the American economist Robert Solow, “You can see the computer age everywhere but in the productivity statistics’.
The fact is that no matter how wonderful your technology solutions, there will always be a limit to how much benefit they instil in your business if you fail to take into account the critical role of your people.
The phrase “our people are our greatest asset” is well-worn. Countless business strategies and CEO statements seek to portray a warm feeling about the importance of employees to their endeavours. However, in many instances, it seems people have a different perspective. It is not hard to see why:
From ‘quiet quitting’ on an individual level to productivity on the macro level, there would seem to be a persistent problem with “our greatest asset”.
Thinking of people as assets suggests we are a means to an end; as long as we are directed, measured, and incentivised in specific ways, then outcomes can be managed. Many businesses and organisations seek to persuade and influence with carefully crafted corporate messages and reward systems. However, now more than ever, if you want to be a business that delivers sustainable results, that either outperforms the competition, or reinvents itself to innovate and differentiate, you need something more.
Let’s be clear, employees are not assets. They are people. They are far and away the most important element of the success of any business. More to the point, it is what people bring to work that is the single most important component of business success. Every other component you can think of, from the right business strategy, to the best products, to the greatest advertising, all have one other component either driving them or enabling them; human effort. And that effort is, in large part, discretionary.
The human potential for performance is vast, but so is the range of effort humans choose to give. Most companies leave enormous amounts of performance potential untapped because they fail to get all the commitment and engagement (i.e. effort) that’s available from their people. When you believe you own the asset, you believe the asset owes you its effort. How often have you said or heard “we pay competitively and we offer great benefits”? Treating employees fairly is simply a base line. People have hopes, dreams, fears. How a business engages with these emotions is critical. The corporate world can be a miserable place, or it can be a tremendously empowering place. The latter is far more enjoyable, but more importantly, it’s far better for business.
So what can be done to access and harness this potential and ensure, more often than not, people are expending their discretionary effort? Here we consider the critical elements that form a coherent leadership approach.
There have been a myriad of vision and mission statements crafted over the years. Very few hold any true meaning. Generating profit tends not to feature in such statements and perhaps it goes without saying but most business decisions attempt to support or increase it. What is fundamental to creating a sense of purpose for people is a deep understanding of what value the business is seeking to add and how it will go about this. That means understanding what the business is doing that sets it apart and what fundamentally determines profitable outcomes.
In his book, “Good to Great”, Jim Collins describes the ‘hedgehog concept’: how gaining clarity on what the business can be best at, what its leaders are passionate about, and what core indicator of profitability determines performance, has allowed some businesses to consistently deliver superior results. This understanding helps define a purpose for the organisation and sets the framework for decision making and actions. Not least, it shapes what the business will and will not do and on what criteria such decisions can be made.
Using this kind of understanding is essential to cascading a sense of purpose through the organisation. Drawing from an overarching purpose, it is essential to engage at a meaningful level with people for the roles they perform. The delivery driver, the manufacturing engineer, the marketing manager, all can (and should have) an individual sense of purpose with a clear line of sight to that of the business. This sense of purpose and contribution at an individual and team level is fundamental to unlocking potential. What are the key actions and approaches that the driver, engineer, or marketeer believe are critical for success in their respective roles and how do these add to the collective output of the business?
Day to day rituals, patterns of thinking, shared values all shape and define the culture of an organisation. The reality that plays out in the processes and workings of the business may or may not align with what the business formally says about itself. Unfortunately, culture has, in many organisations, come to be seen as something that can be changed at a whim. Circumstances, history, formal and informal leaders’ personalities are among the many aspects that influence ways of working and are not quick to adapt. Also different locations and teams within an organisation may have very different experiences.
A culture where ideas, suggestions, and challenges to current approaches is nurtured and encouraged is difficult to create and even harder to sustain. Acknowledging that risk taking is inherent in any form of innovation is easy to play lip service to, less easy to preserve amidst budgets, targets, and key performance indicators. This is why a sense of purpose at business, team and individual level is so important. Clarity on purpose creates a guiding framework and can foster a discipline about what the business should and should not do, what it should stop doing, what it should support and fund fully. That sense of purpose, combined with a coherent leadership approach, can determine the pervading culture in the organisation. By careful consideration of purpose across the business, ways of working or ‘how things get done’ can be aligned with specific situations.
With purpose comes discipline and the culture of the organisation should determine how efforts are guided. There will no doubt be ‘once-in-a-lifetime opportunities’ for the business but if these are not aligned with purpose or, more likely, divert or drain resource from sustaining that purpose, there needs to be a cultural protocol that supports critical decision making. There will be many ‘once-in-a-lifetime opportunities’ in a thriving business. It is a core task of leaders to create the freedom for people to contribute fully whilst also accepting they have a responsibility to the core objectives of the business and the guiding principles it seeks to operate within.
As businesses grow, the features of organisation design increasingly appear. Job titles are created, functional teams form, tasks become more specialised. In parallel, reward and incentivisation schemes develop often with accompanying performance management systems. From time to time, it is essential that business leaders assess these design features and their coherence to the stage the business is at and how it is fulfilling its purpose. There could be several prompts for this; a change in operating scale, competitive threat, a sense of being constrained or simply that things do not feel quite right.
It is important to combine an assessment of the job roles people are assigned with how performance is evaluated and rewarded. For a sense of purpose to pervade each role, then a simple assignment of tasks is not sufficient thinking. How could a person in that role bring more of themselves to work? How can they add value to others? How could they develop? How can they gain satisfaction from what they do in the role? What is the scope for discretionary effort?
Performance management approaches and reward schemes need careful design to avoid creating incentives that conflict with the purpose and culture of the business. Setting KPIs to foster ‘creative tension’ is a fallacy and risks unhealthy conflict and waste. A fundamental understanding of purpose and what determines profitability for the business should form the core of performance management and any KPIs must be coherent with this. That is not to say that stakeholder interests are ignored, indeed, quite the opposite. By understanding and clarifying purpose, and how that purpose can be fulfilled on a sustainable financial basis, KPIs can be developed and adapted over time in such a way as to incorporate key stakeholder inputs and aspirations.
With clear intent and specific ways of working, a business needs the right people. Not everyone will fit. Whilst a recruitment process will play its part, the ongoing development of the business requires a systematic approach to training to ensure the deployment of the necessary skills and capabilities. Again, this is best achieved by a detailed interweaving of individual aspirations and business needs. Some people will grow through the organisation, some will ensure stability, some will need to move on.
Leaders play a critical role in developing people. It is no easy task to do this well. The ongoing development of leaders and their skill sets is paramount. Leadership styles will naturally be different but there needs to be core elements that are congruent with the purpose and culture of the business. This is not about being an extrovert or an introvert, it is about understanding and valuing others and having the capability to translate all the signals and information people give into tangible insights that can be actioned.
There are many calls on the funds a business has available. Budgets for training can be susceptible when costs need to be managed. That said, with a thorough approach to confirming training plans, any external expenditure can be tightly aligned with the needs of the business. Training and development in this light is not a luxury.
We all have good and bad days. There are times when we are more motivated than others. Businesses that are likely to thrive are those that can release the potential of their people more often than not. It could be luck and circumstances that bring together the right people at the right time. Sustaining such performance however takes a little more effort but is not onerous. The awareness, instinct and systematic thinking of business leaders can foster an environment that breeds success.