VOICE insight on Performance – ”Employees are our most important resource...”
…is a statement many companies make. But, how do we know that they live what they preach? And how do companies know that a focus on employees make the company successful?
For swedish version: VOICE
insight: "Medarbetarna är vår viktigaste resurs..."»
In a competitive market, if you do not grow, you do not survive.
When you create sustainable growth, customers, employees and
investors all benefit. The two critical intangible assets of a
company, its employees and customers, and the relationship the
company forms with these constituencies, are what creates value and
generates profit.
The metrics
At TNS SIFO we have been using an integrated approach to connect
the two stakeholders - customers and employees. Our extensive
research has gone on for more then two decades. We have shown
how companies can indeed base their entire business model around
linking intangible assets to organizational value and building a
metric-based management system.
Broadly, there are three types of metrics that
companies need to track and manage - employee and customer metrics
are the lead measures, while profitability is the lag measure.
Several organizational antecedents that impact these should also be
included in the management system.
The model that results is used to guide strategic resource
allocation decisions as well as tactics for addressing specific
gaps. For this system to work, buy-in and involvement is
required across different functional areas including HR,
Marketing, Sales, and Customer Support.
Client Request
An international knowledge-based corporation asked TNS to
develop an employee metric that would help identify the employee
drivers of profitability. The metrics were built on TNS's VOICE concept and
areas reflecting the company's strategies and policies. VOICE is the generic
model that has proven to explain the relationship of customer
loyalty to organizational efficiency and profitability. In order to
design a final model we combined the generic VOICE model with the
unique features of the specific business.
The first step involves creating a two-by-two
matrix combining the data from employee research and
profitability.
The next step is plotting profitability and
employee measures across the quadrants. Almost invariably, the
highest profitability is found in the upper right quadrant.
Based on the data from our case we can make the plot diagram
with the four quadrants. Each dot represents a business unit. After
plotting the profitability and employee data we can visualize the
positions of the BU's.
The Model and Key Drivers
Employee measures include factors such as Motivation,
Competence, Responsibility and Authority. These factors are
sometimes called "Individual Capabilities". The other dimension of
employee measures represents "Organizational Capabilities" such as
Co-operation, Organizational Efficiency, Learning, Creativity and
Speed (in decision-making).
Individual and Organizational Capabilities make up the Human
Capital index. In other words, there is strong "Human
Capital" when employees are motivated, have adequate skills, have
authority to act, take responsibility, collaborate efficiently,
learn from experience and can use their creativity.
There is a high correlation between employee data and
profitability. We can also identify the main drivers of
profitability.
Individual Capabilities
Individual Capabilities that are main drivers of profitability
are Motivation and Competence. The correlation was strong i.e. .65
- .75. 65-75% of the employees who are working in Business Units
that are positioned in the upper right hand quadrant are Motivated.
The opposite would be employees in the lower left hand quadrant
where we found that around 1/4 are frustrated, and less than 4 out
of 10 are Motivated.
No enterprise can succeed only with engaged and skilled
individuals. People can leverage their potential by working
effectively and efficiently together.
Our VOICE model, based on the value added concept, is very
consistent with previous research e.g. Ed Lawler's concept of 'High
Performing Organizations'*. Lawler states that there are three
major sources of high performance: Human Capital, Organizational
Capabilities, and Core Competencies. VOICE has all three dimensions
built into the model.
"These three go together in the sense that organizational
capabilities and core competencies require the right kind of human
capital in order to be created and sustained by corporations".
Organizational Capabilities
We found that the main Organizational Capabilities were
Co-operation and Organizational Efficiency and a strong commitment
to the company. We usually find that organizations reach their
highest potential when competent individuals have efficient work
processes and modes of co-operation.
The correlation between Organizational Capabilities and
Profitability was .68 - .82. Thus, there is a very strong linkage
between the organizational capabilities and business
performance.
60-80% of the BU's in the upper right hand quadrant perceive the
organization to be efficient with a productive way of
collaborating. This is contrasted with the low performing BU's
where less than 50% of the employees consider that the potential of
the organization has been achieved. Lawler: "Organizational
capabilities and core competencies require more then simply
talented labor. They require the right organizational systems and
management styles".
Leadership drives Human Capital
We assessed Leadership at all levels of the corporation. The
data show that excellence in leadership enhances Individual and
Organizational Capabilities i.e. Human Capital. Again, there is a
strong link between Leadership Capabilities and the other drivers
of performance. The correlation is .70.
Conclusion
This case demonstrates again that, once established, the Value
Added Concept (VOICE in congruence with the specific business
logic) becomes an effective tool for management irrespective of
sector and geography.
Our experience shows that if a company manages its employee and
customer assets using appropriate metrics, it is very likely to
generate higher profitability. We find this to be true across
varied sectors such as retail and hi-tech engineering,travel and
telecommunications. Moreover, our research spans various geographic
areas and we have observed the direct relationship between
intangible assets and profitability across markets.
* Edward E. Lawler III, Designing High Performance
Organizations, Center for Effective Organizations, Marshall School
of Business, University of Southern California
About TNS SIFO Employee Research &
Consulting
TNS is a global leader in human behaviour research, helping
clients to understand and actively manage their company's
relationships with groups such as employees, customers,
shareholders and the general public. At
TNS SIFO Employee Research & Consulting, our unique ability
to measure human behaviour globally allows us to develop insights
into what actions will improve organisational outcomes.