From Surviving to Thriving in the New Economy
Are there critical success factors that make the difference?
Do today’s economic conditions reflect a bad economy, or simply a changed economy to which we must adapt? Have the complexities of adapting to accelerating change reached the point where organizations are more challenged than ever to thrive in this new environment?Even in the current difficult environment, there are organizations that are thriving, not just surviving. What’s their secret?
There are many factors that can influence the success of organizations in this new and changing economy. Considerable research points to a few critical success factors that, through both good times and bad, have long separated those who fail or just manage to survive from those who thrive no matter the external environment.
These studies include ones by the Conference Board for the last 20+ years, by the Hay Group, by the Gallup Organization, and others.
Getting Hit From All Directions
Change today is so fast and coming from so many directions that mere reaction to change is not enough for many organizations to thrive. As the pace of change continues to accelerate, it will continue to pose an even greater threat—one that we can ill afford to ignore. At the same time, change will present countless opportunities, and only those organizations adept at adapting to change will capitalize on those opportunities.
Here are just a few examples of the changes organizations are currently facing:
- Rapid changes in technology and market conditions
- New and changing laws and regulations, particularly in financial services, healthcare, and tax law
- Changes in the availability of financing and funding
- Changing labor demographics and attitudes
- New competition emerging from directions we often didn’t anticipate
Could it be that we simply can’t react and adapt fast enough with change coming so rapidly from so many directions? Are there ways to get ahead of change, to ride the wave and capitalize on its power?
The Conventional Reaction
Organizations have been tightening their belts for some time now, cutting costs and downsizing. This is a fairly conventional reaction in a downturn. At the same time, organizations are seeking ways to get more from less, to enhance productivity and gain greater efficiency. How, in the face of such uncertainty and even fear regarding job security, can organizations increase productivity?
We’ve all heard the notion that employees, for most organizations, are their most valuable and important assets. As the research we are about to explore suggests, leading organizations seem to find ways to leverage those assets. They have employees that are highly committed to achieving the goals of the organization, people who are creative and innovative and find solutions to the challenges their organizations are facing.
A recent Hay Group study, for instance, shows that leading organizations are increasing employee engagement at a time when many organizations feel their options are limited. The study, conducted between 2008 and 2009, found that the organizations that increased employee engagement had revenue growth 4.5 times greater than organizations that failed to increase employee engagement.
“Even while cutting costs, our research shows companies can still engage their employees through soft dollar investments made by their leaders and managers,” notes William Werhane, Hay Group Insight’s global managing director. “Our research shows that even during the downturn, companies that have focused on maintaining open and honest communication with employees, ensuring that strategic directions are clear, fostering trust and confidence in senior leaders are seeing positive returns on their investments.”
This study and others explored below suggest that organizations with managers who have strong communication and leadership skills have a distinct competitive advantage.
More Clues to Success Factors
From 1998 through 2009, the stocks of the Fortune 100 Best Companies to Work For have significantly and consistently outperformed the major stock indices. The things these companies do to make them among the best companies to work for are not just nice things to do—they are providing these companies a significant competitive advantage. They have productive and committed employees who are energized and focused.
These companies have earned the label “Best to Work For” during a period when US job satisfaction has been in steady decline. Surveys by The Conference Board, conducted roughly every 5 years since 1987, show a continued, steady decline in Americans’ job satisfaction.
The decline, which cuts across all age and income brackets, has been a long term trend since the first survey in 1987, when 61 percent of Americans said they were satisfied with their work. In the most recent study in 2009, only 45 percent of Americans report satisfaction with their jobs, the lowest rating in the history of the survey. In fact, 22 percent of those surveyed do not expect to be in their current job in a year.
How motivated, focused, and committed to the goals of the organization are these “dissatisfied” workers likely to be? “The downward trend in job satisfaction could spell trouble for the overall engagement of U.S. employees and ultimately employee productivity," said Lynn Franco, director of the Consumer Research Center of The Conference Board.
"These numbers do not bode well given the multi-generational dynamics of the labor force," adds Linda Barrington, managing director, Human Capital, The Conference Board. "The growing dissatisfaction across and between generations is important to address because it can directly impact the quality of multi-generational knowledge transfer—which is increasingly critical to effective workplace functioning."
John Gibbons, program director of employee engagement research and services at The Conference Board, noted that "Widespread job dissatisfaction negatively affects employee behavior and retention, which can impact enterprise-level success."
What’s Driving Dissatisfaction?
The findings in a study by the Gallup organization of over a million employees and 80,000 managers sheds light on what typically drives dissatisfaction and leads good people to go elsewhere. The results and implications of the Gallup study are explored in the book “First Break All the Rules,” by Marcus Buckingham and Curt Coffman.
The research strongly suggests that if you are losing good people, first look to their manager.
"People leave managers not companies," write authors Buckingham and Coffman. "So much money has been thrown at the challenge of keeping good people—in the form of better pay, better perks and better training—when, in the end, turnover is mostly a manager issue."
The Gallup research suggests that organizations that lack great managers will lose good people, damaging performance and productivity.
Highly effective managers, according to the Gallup research, exhibit some of the following behaviors:
- They set clear expectations and define the right outcomes rather than the right steps
- They motivate people by building on their strengths rather than trying to fix their weaknesses
- They encourage employees to find the right fit for their strengths within the organization
Not all employee turnover is a bad thing, of course, but when good people leave, they take considerable knowledge and experience with them, including skills and knowledge they developed on the job or in training programs their employer invested in. They also often take with them, to the organization’s direct competitors, critical customer contacts and relationships.
In yet another study, the Saratoga Institute for the American Management Association in 1999 found three reasons people leave their jobs:
- Poor supervisor skills
- No growth opportunities
- Inability to speak freely
Research on why good people leave jobs, and on the keys to retaining top performers, consistently show that pay and benefits are not high on the list of reasons people stay or leave.
"Any company trying to compete must figure out a way to engage the mind of every employee," Jack Welch of GE once said.
Why Does There Appear to be a Leadership Gap?
All of this research, and in particular the exceptional performance of the Fortune 100 Best Companies to Work For and of the companies in the Hay Group study, indicate that motivated and committed employees are critical to success, and that managers are the key to creating an environment in which employees thrive. In order to adapt to accelerating change, organizations need creative, innovative, and highly productive employees. Why do so many organizations suffer from managers that appear to be ill equipped to create this kind of high performance culture?
Most managers began their careers in their industry as technicians. The best programmer may eventually become the head of the programming department, the best radiologist the head of the radiology department. The technical skills and knowledge that enabled them to succeed as technicians, however, are not enough to ensure success as a manager. What managers often lack is strong communication, interpersonal, and leadership skills, as well as an understanding of what it takes to create a high performance culture in an age where employees are looking for more than just good pay and benefits from their jobs.
Why are these leadership skills so often lacking? One simple reason is that these are skills not taught in high school, college, and even most graduate schools. Most graduate business programs focus on finance and accounting, administration, marketing, business strategy, and computer skills.
In addition, few employers have developed highly effective leadership development programs. Organizations typically invest most of their training and development dollars into programs that focus on the technical skills and knowledge employees require.
Finally, many leadership programs are not highly effective, and because they fail to deliver results, or those results are hard to quantify, organizations are hesitant to continue to invest in such programs.
Developing Future Leaders
Complicating this picture is the aging of the baby boom generation, which over the next 5 to 10 years will result in many top leaders in organizations retiring and leaving a potential leadership gap behind. How do organizations move forward and do a better job of developing future leaders?
Investing in leadership training and development programs is an obvious answer, but such investments must be made wisely in order to get the desired results. There are three characteristics of highly effective leadership and management skills development that organizations should look for in any program:
- Repetition: Research shows that repetition is the key to learning and retention. Many training programs fail to deliver results because they attempt to impart too much information in too short a time. Participants suffer from information overload, and in the long run they retain little of what they were exposed to.
Effective programs provide smaller chunks of information over a longer period of time, with repetition built in between training sessions. This spaced repetition, which Ken Blanchard highlights as critical to the success of training programs in his book Know Can Do, can come in the form of material that is reviewed between sessions in both text and audio. An audio component makes repeated exposure to material practical and convenient because participants can get repeated exposure to the material by listening to it while driving, for instance, or by burning it to an I-Pod and listening while working out.
- Application and Action Planning: Knowledge alone is not power, as Dale Carnegie once noted. Applied knowledge is power. Effective training and development programs have either an experiential component, where participants can immediately apply what they are learning (through role plays or other forms of practice), or they have an action planning component where participants set goals and develop specific plans of action as to how they will apply what they are learning.
- Follow Up: Ken Blanchard also points to follow up and ongoing coaching as critical to successful training and development programs in Know Can Do. The goals and action plans referenced above require ongoing measurement, assessment, and coaching to ensure that training and development results in improved performance. The ongoing coaching can be provided internally by the participants’ managers once goals and action plans have been established as part of a leadership development program, or it can be provided by a professional coach.
Soft Skills Deliver Hard Results
Interpersonal, communication, and leadership skills have long been labeled “soft” skills, and therein perhaps lays a problem. Leaders looking for concrete, hard results may think of “soft” skills as just that—soft and not leading to any concrete results. But research clearly indicates that top performing organizations have a “leadership” edge, while organizations that suffer from unwanted turnover and employees that have low motivation and productivity are plagued by managers ill equipped to create a high performance culture.
Developing soft skills can lead to concrete results—the key is to ensure that leadership development programs are designed for maximum results and contain the three key elements outlined above.