| Business owners are increasingly asking these | | | | individuality, humanistic aspects of a situation. |
| questions: What is it that really drives | | | | No one is pure in any one of these; we each can |
| performance and profitability, and how can we | | | | think in all three of these ways, with different |
| identify, quantify and measure all the assets of | | | | ability levels and preferences. The questions then |
| our company so that we can increase its | | | | become: which way is dominant and how does |
| performance? | | | | this impact an employee's performance? |
| Sounds complicated, but in reality, it is | | | | Take a few minutes and reflect on the following |
| straightforward. Have you ever been challenged | | | | questions: As a business owner, are you intent |
| with looking at a series of dots on a piece of | | | | upon understanding each situation and asking a lot |
| paper, and been asked to draw a line between | | | | of questions before you decide; are you inclined |
| them? If you are like most people, you will draw | | | | to want to get the work done right now; or are |
| straight lines to connect the dots. (Remember the | | | | you more concerned with how that decision will |
| analogy about the shortest distance between two | | | | impact others? How do others in your business |
| points?) Let's discuss below some of the basic | | | | view the same situation? |
| factors that drive performance (the dots) and | | | | If your business utilizes a variety of teams to |
| discuss how you might begin to measure and | | | | make decisions, are they working as effectively |
| manage these factors more fully (the lines and | | | | as they can, or are there internal conflicts among |
| connectors). | | | | team members? When establishing sales targets |
| Why is this important? | | | | for your sales staff, are you adapting the sales |
| The key drivers of performance have actually | | | | targets based on the thinking preferences of your |
| changed in the last 10 to 15 years. Most products | | | | sales staff? Does it matter? If a work task |
| and services are now bought on the basis of | | | | requires a strong, systematic approach, what |
| brand, reputation, service, employee engagement, | | | | happens when you assign that task to an |
| and other factors. Add technology's impact | | | | employee predisposed to just "get the job done"? |
| globally and it means that competitors' miles away | | | | Are customers and coworkers satisfied with the |
| can reproduce products and services at less cost. | | | | results? |
| Business value is usually reflected in financial | | | | What can you do? |
| terms. In 1978, when New York University's Stern | | | | Managing a company to excellence is not simple; it |
| School of Business conducted a study with the | | | | is not complex either. We described the dots - |
| country's major corporations, it found that there | | | | those basic factors that drive performance. We |
| was a 95 percent correlation between a | | | | discussed how you can measure and manage |
| company's balance sheet and its market | | | | these factors better (the connectors). How can |
| capitalization. In 2005, the Stern School redid the | | | | you increase your overall performance and |
| study, and found that there was now only a 28 | | | | market worth? Let's look at some steps you can |
| percent correlation! | | | | take. |
| What does this mean?Business value today is | | | | First, how do you define your company's |
| more dependent on non-traditional assets and | | | | strategy? How many of your employees |
| things not measured on the income statement | | | | understand it? How aligned are your operations to |
| and balance sheet. What truly drives a company's | | | | your strategy? How aligned is your budget to |
| performance today? The tangible (financially | | | | your strategy? Are these dots connected? |
| measured) assets of a company remain | | | | Next, what decisions do your employees make? |
| important; however, the intangible (the 72 percent | | | | What are the key factors to be reviewed for |
| not correlated) assets are more significant to | | | | each type of decision to be effective? Do your |
| business profits. | | | | employees understand what those key factors |
| Just what do these intangibles comprise? | | | | are, and why they are key factors? Are your |
| Let's list them: intellectual property, corporate | | | | employees making decisions utilizing these key |
| strategy, corporate brand, operational and | | | | factors? Are these dots connected? |
| administrative systems and processes, access to | | | | Several other areas to review include employee |
| capital, off-balance sheet items (for instance, | | | | selection, employee management and employee |
| activities related to knowledge, collaboration, | | | | motivation - especially as these relate to |
| leverage of operational systems), company | | | | workforce alignment and company performance. |
| reputation, and the experience and decision | | | | Recently researchers at the Center for Advanced |
| making strength of the corporate executive | | | | Human Resource Studies (Cornell University) |
| team. Sound familiar? | | | | looked at these areas. |
| If most business value is intangible, should it be | | | | When looking at employee selection processes, |
| any surprise that: | | | | they found three strategies used to select people |
| - Staff now devotes the most of their time | | | | for positions - the person/job fit (selecting based |
| solving complex and routine problems by applying | | | | on knowledge and abilities to perform a particular |
| their knowledge to, collaborating on and leveraging | | | | job well without a lot of formal training), the |
| organizational systems? | | | | person/organization fit (selecting based on a |
| - Nearly 8 out of 10 employees produce services | | | | person fitting with the cultures and values of the |
| - providing expectations of value - rather than | | | | business and working well with others), and the |
| tangible products? | | | | person/future fit (selecting for the long-term |
| - Activities related to knowledge, collaboration, | | | | contributions of a person to the business' |
| leverage of operational systems and other | | | | long-term strategy). They found that businesses |
| associated activities are not financially valued or | | | | that selected on a person/future fit strategy |
| analyzed? | | | | created the best, long-term workforce alignment. |
| Let's look at some further information, based on | | | | When looking at employee management practices, |
| research by David Norton's Balanced Scorecard | | | | they found that businesses used four different |
| Report: | | | | strategies - formal processes and procedures (job |
| - Only 5 percent of a workforce understands | | | | descriptions and regular feedback), direct |
| their company's strategy. | | | | monitoring, professional standards (trust |
| - Only 15 percent of senior management spends | | | | employees without direct oversight), and culture |
| more than 1 hour a month defining strategy and | | | | and peer pressure (employees monitor each |
| aligning operations to it. | | | | other and exchange feedback on performance). |
| - Only 25 percent of companies have their | | | | They found that businesses that use formal |
| operations aligned to the strategy. | | | | processes and procedures and professional |
| - Only 40 percent of companies align their budget | | | | standards created the best, long-term workforce |
| to their strategy. | | | | alignment. |
| This research affirms what we increasingly know | | | | When looking at employee motivation practices, |
| and understand - developing an intellectual | | | | they found that businesses used three different |
| workforce is necessary to drive the success, | | | | strategies - creating a family-like community |
| growth and performance of our business. As we | | | | (motivated by responsibility to each other and the |
| develop this workforce, are we able to | | | | business), favoring interesting and rewarding jobs |
| understand how to increase their performance? | | | | (challenging work and opportunity to grow), and |
| Do we understand how our employees think and | | | | relying on fair compensation (higher wages and |
| make decisions? Do we know why they connect | | | | other financial incentives). They found that |
| their dots the way they do? Each employee | | | | businesses that created a family-like community |
| thinks about his work tasks differently and has a | | | | created the best, long-term workforce alignment. |
| unique perspective about his role within the | | | | Clearly, "high-performance" human resources |
| business. | | | | practices can result in higher market values per |
| We all have a unique view of our world. Our | | | | employee than in firms that do not, oftentimes as |
| values, likes and dislikes develop over time. Once | | | | much as $40,000 higher. As you look at your |
| in a business setting, we need to understand | | | | business, are you using strong employee selection, |
| these "unique views" to help each employee | | | | management and motivation practices? |
| perform better and help the business increase its | | | | Is your workforce aligned for positive, long-term |
| performance and profit. | | | | company growth? What can you do now to |
| Some years ago, Dr. Robert Hartman (Yale/MIT) | | | | foster that alignment and increase your business |
| developed formal axiology to measure the | | | | growth? Again, are the dots connected? |
| thinking process and its impact in a business | | | | If they are, then your company quite possibly has |
| setting. Formal axiology identifies three core ways | | | | the right types of people in the right places at the |
| a person can think about anything: | | | | right times doing the right things. Congratulations |
| - The Head - The systemic dimension of thought: | | | | are in order. Now, seek to reinforce it, again and |
| intellectual, theoretical, idealistic thinking about what | | | | again, for the connected dots will always |
| should be, what ought to be, rules, structure, | | | | contribute positively to driving your company's |
| systems, conceptual, big picture; | | | | success, as measured by higher quality products |
| - The Hand - The extrinsic dimension of thought: | | | | or services, more satisfied customers, effective |
| practical, real-world, results-oriented thinking; and | | | | product marketing, increased sales growth, |
| - The Heart - The intrinsic dimension of thought: | | | | profitable operations and increased market share. |