CONDUIT

So how does recognition serve the agenda of the CFO?

So how does recognition serve the agenda of the CFO?

Finance is charged with maintaining the economic health of the enterprise. That requires easier access to capital in order to grow and expand. The capital markets evaluate the risk of investing in a firm through a number of lenses, but today’s evaluations sets are becoming increasingly intangible.

The value of companies has been shifting noticeably from tangible assets: bricks and mortar, to intangible assets: intellectual capital, the ability to innovate and brand reputation. These invisible assets are emerging drivers of shareholder value in the knowledge economy. Of course, an asset that is not always physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies, goodwill and brand recognition are all common calculations in today’s asset valuations.

In 1978, market value and book value were pretty much matched: book value was 95% of market value. Twenty years later, book value was just 28% of market value. New York University's Stern School of Business calculates that in the late 1990s businesses invested a staggering $1 trillion per year in intangible assets.

John Kotter and James Heskett provide the first comprehensive critical analysis of how the "culture" of a corporation powerfully influences its economic performance. In there book, Corporate Culture and Performance, they studied the relationship between culture and performance in more than 200 companies. The authors describe how shared values can profoundly enhance economic success including a higher market to book premium. Conversely companies without performance enhancing cultures faired to adapt to changing markets and environments. Their stocks where not valued as high in the capital markets.

What is competitive advantage really?

Competitive Advantage. You can’t leaf thru a business magazine or tune into Bloomberg without hearing that phrase over and over. It is, as all the B-B ads will tell us, the aspiration for contemporary business leaders.  But what is competitive advantage really? And how do firms achieve and sustain it?

I set out to address that issue during a presentation I made at the Sales Performance Conference sponsored by SYNYGY. The title of my session was: How Recognition Systems Serve the Bottom Line and it centered on this: Sales compensation executives (and for that matter anyone in the compensation suite) are being asked to do more than drive incremental revenue. To add value to their firms they are being called upon to contribute to the strategic and economic business agendas of their colleagues in marketing finance, operations and HR.

So what's the common denominator for all of these business disciplines? What variable does operations, sales, market, finance have in common? Very simply stated it’s the reliance on their people as the primary source of competitive advantage. 

Markets have transitioned from a production economy to information and service- based economy. No matter what business you are in you have competition. The internet has lowered transaction costs and barriers to entry. Substitute products and category alternatives flood the market. People (not factories) are a company’s source of productivity and innovation.

We live in a what I like to call a “commodified” global economy. My point is this: it’s not so much what companies do but how they do that result in true competitive advantage. In other words it is not the product that is the brand, but rather the people that are selling, delivering or servicing the product or service that are.

In upcoming posts I will look more closely at the agendas of each area business area within the firm and talk more about the role people play in helping optimizing outcomes.

Stay tuned!

Building a culture of recognition

In recent postings, I've discussed the impending challenges of a shrinking labor pool in a knowledge-based economy. Becoming an culture of recognition, can give your firm a significant competitive advantage. Across the enterprise, executives are becoming increasingly aware of the inherent power of recognition levers to build and sustain a culture of commitment and responsibility. That means making positive reinforcement a way of life. It requires cultivation, delivery and consistency in application.  Often internal tools and developed or platforms licensed from vendors. But recognition planners can get easily frustrated when platforms are underutilized by internal stakeholders.

Fear not. Implementing recognition tools are not unlike installing any other change process. Users (including your middle manager constituency) may adopt a "wait and see" posture. During the reality stages they will look for signals that the company is serious about recognition. They will privately wonder if their managements interest in recognition will come and go like some other corporate initiatives.

Contemporary diagnostic and tracking mechanisms can help plan sponsors isolate early adopters from laggards and varying/relevant messages can be sent to each. Those using the program should be congratulated for their efforts. Incremental improvements in key measures can be used to illustrate success reinforcing the behavior. hose who are not yet using the tool will be encouraged by the success of their colleagues.

Often people are placed in positions of power because they are good at what they do, but some have little idea how to leverage recognition as a growth tool. And, as we know, being recognized as a leader among peers is often as  effective as a tangible award.

Give your managers examples of how their peers are using recognition to drive results locally and you will be taking a giant first step to building a sustainable culture of recognition across the enterprise.

Are you watching the door?

In my last post I talked about the impending war for talent. Its worth repeating: Every 10 minutes a baby boomer turns 60 and in less than 10 years 75 million will be of retirement age.

Expect ripple effects. Nope make that a tsunami. By the year 2016 there is a projected shortfall of 3 million skilled workers. Qualified middle and senior managers are expected to be in short supply.  Look at the current U.S Labor stats and you will see a disturbing trend. The unemployment rate for educated workers is 2% and expected to decline! Translated: more jobs, less people.

How do you keep precious professional resources longer? According to recent work done by Dr. Harold Stolovitch of the University of Montreal far more people leave a job because of working conditions including their perceptions on how they are treated.

Recognition goes along way in creating the desired environment and culture. Challenging yet supportive work environment are tough to leave and actually attract talent.  The best platforms clarify what is valued, set meaningful goals, support goal attainment and recognize people for their performance and contribution to the success of the team.

The team element is key. By reinforcing achievements companies communicate the importance of each member's role and celebrate their contribution creating a level of commonality across the work group.

Many factors go into switching jobs. But leaving  a job is easier if you don't believe in their direct, feel your role is not respected, or don't feel a connection with the people you work with.   

Keeping employees a few years longer

According to the U.S. Census there are an average of 7,918 people turning 60 everyday? Do any of them work for you?

It used to be fashionable to be retired. It was a reflection of stature and success to have stopped working. Now most workers approaching retirement are not at all focused on days of leisure. Retirement no longer defines slowing down as much as it signals an opportunity to recalibrate one's focus and commitment.

Many baby boomer's in their 50s and 60s see retirement as a life space that allows them to do something meaningful with their time. Translation: their current jobs don't provide that level of satisfaction. Some talk of teaching, building homes for the poor, working with the elderly, or coaching youth sports.

Smart employers are already taking steps to re-recruit aging workers with flexible work schedules, job sharing, continuing educational credits, community service support, and other elements that strengthen the practical fit between aging workers and the current employer. 

Recognition can help strengthen that emotional connection. When initiating reward programs most companies focus only on recognizing what is good for the employer; productivity, improved customer care, workplace efficiency.

But what about recognizing employees for doing what is meaningful in a broader sense? Social responsibility is getting significant attention when it comes to corporate environmental stewardship. Rightly so. But should companies incorporate their definition of social responsibility to include the micro level and in the process reward and recognize their employees who are doing "meaningful work" throughout their local communities.

I believe you will see more and more companies recognize and encourage community efforts in the future. Doing so will help companies establish a level of mutuality with all workers (not just the older ones) and establish that the values of the firm and the employee are indeed aligned. After all shared values are the bedrock for an engaged workforce.

They say that the "contract for life" is over. Maybe so. But if companies can reaffirm "a connection for life" older workers may come to realize that they don't need to retire so quickly to do something meaningful. If the company supports their efforts simply by recognizing them day-to-day they may be more likely to stay at their respective firms (contributing knowledge band wisdom) a few days and years longer.

All sources of competitive advantage are temporary

    All sources of competitive advantage are temporary and companies that fail to adapt to new technology, fickle customer preferences, or shifting competitive influences can easily lose market traction. While many companies enjoy short term bursts of high performance over their lifetime, only a few sustain momentum over the long run. 

     So what’s the answer? How do you sustain competitive advantage? There is no easy answer of course, but the key may be in promoting innovative use of tools throughout the organization through recognition.  

    In our rapidly changing global economy where market conditions, buying expectations of customers, competitive forces, new product offerings and supporting business technologies are constantly changing, executive leaders must continuously find ways to improve their company’s effectiveness and efficiency.

    Organizations must ensure optimum economic performance, rapidly incorporate new systems or technologies, maximize dwindling resources, reduce fix and variable expenses, improve customer service, and strengthen the bottom line, while finding new and more innovative ways of gaining competitive advantage.

    Many firms rely upon technology to give them a leg up in the market. And while it is the primary role of an information system is to collect data and sort that data into useful information, it is the users or people that convert that information into knowledge which can then be exploited into competitive advantage. 

    In the end competitive advantage derives not from the technology, but on how businesses (and their people) use the technology.

The secret sauce of engagement

“What keeps you up at night?” Ask that question around the C-suite today and you will hear the bulk of executives talk of the need to build, manage, develop, optimize and empower a high performing work force.

Talent. It’s the most precious of all resources and the imminent time bomb that’s ticking away in the minds of all business leaders. For the first time in history, the supply slope of incoming workers is inverted. Over the next decade population figures suggest that more people will be leaving the workforce then entering it.

That concern is no surprise to anyone that’s kept an eye on workforce demographics. But the difficulty goes beyond the numbers.

Different expectations of younger workers and new skill requirements in our knowledge and service based economy complicate the impact of a rapidly shrinking funnel of talented workers. Toss in global expansion, virtual workgroups, change velocity and the continued pace of mergers and acquisitions and you have the formula that exacerbates the problem exponentially. Even with the writing on the wall, some organizations have been slow to prepare for the complex challenges that are brewing in our global economy.   

So what’s the remedy?  Part of the answer is in reducing turnover. When people stay they don’t need to be replaced and the firm retains intellectual knowledge.  When employees see their jobs as their business and coworkers as colleagues they are more likely to be emotionally and intellectually invested in your franchise and with it the temptation to look elsewhere for what’s missing in your environment is removed. 

The secret sauce of engagement is mutuality. In our competitive world it is inevitable that change will follow. For every new business strategy implemented make certain you have taken the care to communicate and reinforce the value of change through the eyes of your employee constituency. Use employees as role models and celebrate, on a large scale, individual commitment to the brand.

Not only will you ignite innovation and foster better customer care you will be creating the type of employee environment that today’s worker will call home for a long time.

Are Budgets Good for Growth?

With the budget setting period over for many of us, its important to point out one important fact: Budgets can often stifle innovation. While the budget process looks forward it does so with the past in mind and is used primarily as a spending control tool mechanism.

But budgets should be designed with managers and not accountants in mind. Not having dollars in the budget to fund a worthwhile project is myopic. Not only does it discourage growth (achieved thru additional revenue or cost savings) but it stifles innovation and employee ownership.  Image the impact on your business (not to mention the employees who thought of that winning idea) when developing an innovation is shelved because there is nothing in the budget.

The sheer amount and velocity of change within all business models requires a quicker response to meet competitive threat and/or emerging opportunities. A flexible budgeting process seems more appropriate in our fast-paced, global economy. Think of that the next time you need to close a performance gap.

Monitoring the return on incentive spending is also made easier (and more actionable) by illustrative technology. Flash for example can highlight information patterns providing convenient, real-time information to budget owners across the hierarchy. Thru data dashboards, mangers can examine all the relevant vital signs of key projects and measures while linking performance data to budget utilization. It is thru this process that budget monitoring (as a growth tool) becomes more relevant to the organization and provides the context for knowledge that can be exploited for gain.

Is your organization too focused on the negative?

Organizations tend to examine negative cost variances closer than positive ones. How often have we seen time and money spent diagnosing the reason behind underperformance? Course corrections are implemented to close performance gaps in the identified area, but the impact of those efforts is often limited to the offending area.

Organizations are missing an opportunity to also uncover, reward and promote best practices that will benefit the entire enterprise.

In our hyper-competitive world its essential that organizations share new, innovative ways of working throughout the entire organization.

Sine the front-line, rank-and-file has hands-on experience they often have insightful ideas on how the work can be performed better, faster, and more efficiently. The participation of front line personnel is critical in identifying work flow innovation.

 

Rewarding employees who innovate can do more than improve efficiency. Showcasing workers who have developed a better approach and publicizing their efforts has been known to fuel process adoption faster across the firm.

And then there is always the positive ancillary impact sharing best practices can have on both employee engagement and customer equity. Recognition of workers can lead to an elevated emotional and intellectual commitment to the firm across all job classifications. Employee ownership also has a direct impact on customer satisfaction and eventually drives such financial values as share of spend, repeat purchases, price insulation, improved lifetime values and lower acquisition costs.

Identifying budget variances is a good business practice. It is a useful control mechanism. But when its only used as a policing mechanism the impact can be more harmful than good. Turn your perspective around. Invert your search and look for the leaders within. That’s the way to ignite growth.

HR managers it’s time to take your seat at the planning table.

Conduit is not a Human Resources blog. We don’t talk about benefits administration, relocation practices, or 360 assessments. Conduit was never intended to pontificate on the relevancy (real or potential) of HR in the face of the changing economy. But let’s face it, HR has rapidly grown in stature and significance across the collective landscape of all companies.

That’s why CNN just recognized the HR Manager as one of the most important contemporary jobs in corporate America. CNN says that “Even lower-level managers are expected to design employee programs that also benefit the bottom line.” And “the mission is to make work more rewarding for workers. HR helps shape corporate culture and strategy.”

Why the rise in visibility? If you have been reading Conduit you have actually heard us discuss the acute importance of people for some time now. We have proclaimed that people have become the primary source of competitive advantage and we are adamant that your brand lives or dies based on the emotional and intellectual commitment of your people up and down the value chain. You may also recall references to study after study that suggests corporate financial performance rises when employee engagement is higher. Employees produce more, turnover less, embrace change and satisfy customers. That last part leads to increased spend, lower acquisitions costs, and higher lifetime values.

For HR managers it’s clearly time to take your seat at the planning table.