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December 2007

“The New Metrics!”

“Today's approach to measuring financial performance is geared excessively to the capital-intensive operating styles of 20th-century industrial companies. It doesn’t sufficiently account for factors such as the contributions of talented employees that, more and more, are the basic source of wealth.”

These could so easily be my words, but are, in fact, part of the abstract for a McKinsey article entitled “The New Metrics of Corporate Performance: Profit per Employee,” which is in turn adapted from “Mobilizing Minds: Creating Wealth from Talent in the 21st Century Organization,” a book by McKinsey partners Lowell Bryan and Claudia Joyce. The exciting sense that my philosophy is shared by one of the world’s premier thought-leading organisations is aroused further by their statement, “Financial performance—observed through balance sheets, cash flow reports, and income statements—is and always will be the principal metric for evaluating a company and its managers. But greater attention should be paid to the role of intangible capital and the ways of accounting for it.” Not only does this align with everything I have been saying and writing, but it supports my arguments regarding the benefits, for they add, “The superior performance of some of the largest and most successful companies over the past decade demonstrates the value of intangible assets.”

It is therefore entirely logical that they should conclude, “Companies can redesign the internal financial performance approach and set goals for the return on intangibles by paying greater attention to profit per employee and the number of employees rather than putting all of the focus on returns on invested capital.” Indeed, this is intrinsically very close to the message that I have been proclaiming. So close and yet so far!

'Profit per Employee,' as Bryan and Joyce maintain, is perhaps one of the single most  important measures that companies today should be using to assess their true performance. It unquestionably offers a metric that allows both year-on-year comparison and a meaningful measure of relative performance against competitors, essential for the financial and investment markets. However, it also has one major shortcoming: it fails to recognise the humanity of the people and thereby perpetuates the traditional 'command and control' mindset of the twentieth century.

By contrast, the Zealise solution, recognising and accounting for the people as assets, addresses this shortcoming. It treats people as people, recognising and catering for their individuality, and thus not only creates a more participative culture that eliminates such autocracy, but also provides a basis for consistently valuing and accounting for these intangible assets. By offering a measure of ‘Return on Human Assets’ it still offers a very effective means to consistently quantify the human contribution to the business, with all the benefits offered by 'Profit per Employee', but with the additional advantages of greater buy-in by the people; more engagement as a result of greater ownership and a sense of belonging; and people who are more fulfilled as a result, thereby creating happier workers and a happier work environment.   

I know this is a subject I have written about before, but I cannot help myself. Why would any organisation want to settle for less?

"That's not my job!"

There can’t be anyone who has not heard that statement at some stage in their lives. The thing is that it has most likely been when in some sort of dilemma, which makes it extremely provoking, even if perfectly valid. No organisation can afford to risk antagonising people in this way and it is therefore a statement that needs to be eliminated – especially if the organisation is serious about customer service.

I would go even further and claim that the statement is evidence of an ailing organisation: one in which there is no recognition either of the importance of the individual or the organisation as a team in which everyone has a key role. Let me explain why.

Last week I received an email notifying me that a scheduled credit card payment had not been processed and asking me to phone urgently to sort the matter out. As I was out of town at the time and had only checked my emails during a five minute interval, this was rather frustrating for there was little I could do about it, either then or any time of the next couple of days. When I duly followed upon my return, I learned that a payment for the princely sum of £3.57 had been rejected, and, after a brief exchange, we established, as I had suspected, the problem stemmed from the fact that my previous credit card had expired and the company now required the details of my replacement card.

I happily provided those to a rather disgruntled sounding lady at the other end of the phone, who then told me, “In future you should advise us before your card expires!” I apologised and said that it quite honestly wasn’t something I had thought about as it really wasn’t a great priority in my life, and, since they must have a number of customers in this position, perhaps they could notify us? There was a chilly response that they didn’t know, followed, when I suggested that their system could perhaps be changed to include this capability, by an even more acerbic, “You will have to raise that with IT; I am only the Credit Controller.”

Of course this is not a situation that should make the “10 O’clock News!” It was only a minor inconvenience and, while mildly irritating, not something to lose any sleep over. Nevertheless, it is a perfect example of a disengaged employee, and illustrates both the lack of customer focus and joined-up thinking that prevails in most companies today, and which gives rise to such disengagement. The fact is that more ownership of the role with a greater sense of teamwork with the rest of the organisation would not only ease the burden on this unhappy Credit Controller, but save time and effort all along the line by all those involved – the Credit Controller, the person processing the payment at the card company and the customer. 

Is this really asking too much? Am I being unreasonable? The economic waste of this breakdown is self-evident and if we are all doing things that we need not be doing it is no wonder that we are all feeling unfulfilled, disengaged and ultimately unhappy. It seems to me such attitudes are endemic in most organisations today, and there is a great need, not only to drive home the message that dealing with the customer is everyone’s job, but also to look more closely at:
a)    Their people and they way they manage them; and
b)    The nature of their customer interactions.
The two are clearly inter-connected, but a business that is committed to improving its customer experience should be actively empowering their people to recognise and affect the circumstances that impact negatively on what they do. This would include being alert to customer input as to how they could improve.