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November 2011

Facing facts: why we need to move beyond redundancy and find a new solution

A relative recently sent me the following summary of the 2011 US budget to help me understand the situation. I cannot vouch for the veracity of the numbers but whether they are 100% correct or not doesn’t really matter. They give a very simple picture of the situation and also illustrate why it is a problem, wherever in the world you are. 

US Income: $2,170,000,000,000
Federal Budget: $3,820,000,000,000
New Debt: $1,650,000,000,000
National Debt: $14,271,000,000,000
Recent budget cuts: $38,500,000,000

All the zeroes are overwhelming so let’s remove 8 zeroes and pretend it is your household budget.

Total annual income: $21,700
Expenditure: $38,200
Amount of new debt: $16,500 ($38,200 minus $21,700)
Total debt: $142,710
Proposed expenditure reductions: $385

In other words the budget cuts proposed by the US congress are the equivalent to you reducing your expenditure by £385 in the face of a deficit of $16,500 and a debt increasing to $142,710. Hardly a sane solution, you will agree, and one that clearly lays up problems for the future.

The problem is that the entire western world is in a similar situation. This is serious because you stimulate an economy by stimulating growth, and historically we have done this through increased borrowing – something which is clearly no longer a viable option. However, it is even worse than that because repaying past borrowings has to come out of current income. This means reducing expenditure on other things, including things that we have come to take for granted.

The fact is that we have fuelled our past growth by unsustainable borrowing. This means we are not as prosperous as we like to think we are. Of course this has serious implications but the real tragedy of this is that we are not facing the truth. Expecting things to return to “normal” anytime soon is a fool’s dream. Yet we continue to live in that hope.

Neither the press nor our political leaders are being open with us and telling us how it really is. In the US the Republican refusal to tolerate additional taxes seems to be a denial of Canute-like proportions, while here in the UK our coalition government is doing its best to reduce spending and introduce “austerity” measures but is facing a tremendous backlash. The threat of industrial action is a result of a failure to communicate more openly and effectively. Yet, while softening us up for a prolonged struggle, they continue to focus on whether or not we will have a “double-dip recession” when the reality is that we are facing a significant decline in our standard of living. How can it be otherwise when you are spending your current income paying off your past debts?

The galling thing about all this is that, in this failure to face up to facts, we are delaying the development of new solutions.

The fact of the matter is that we have become too inured to thinking it is government’s responsibility to lead us out of these difficulties. Yet government is financed either by taxing the people or borrowing. As it cannot borrow, this only leaves raising taxes – a gloomy prospect in the face of a shrinking economy and declining incomes. Thus it is up to us as businesspeople to provide leadership and develop the solutions.

No more redundancyAnd the first solution is to call a halt to the pattern of redundancy that is default solution in a shrinking market. This is imperative as redundancy perpetuates the cycle of decline. Making people redundant is a double whammy because it causes the market to shrink further and compounds the situation while at the same time transferring the costs of unemployment to society.

Of course as a business leader you can argue that it is your responsibility to do the best for your business and that entails laying people off. However, if you look at the bigger picture you can see that this argument is based on self-interest and is not actually for the greater good. It calls upon a minority to pay the price for the rest and – even if you feel you can justify it on the grounds of eliminating your least productive employees – you know that it has a long-term price, both on the morale of the remaining employees and on the business itself. Furthermore, in the economic environment we currently face, where you cannot rely on someone else to be creating new opportunities, you are jeopardising the future even more.

That is why I recommend that you look at people as human assets; assessing their value to the organisation (rather than just viewing them as a cost) and building on that to create the employee ownership and hence the employee engagement that offers us all a brighter future: you, your business and the economy as a whole. 

Appreciation, Appreciative Inquiry and Employee Engagement

Like good music a good quote makes you think and is something you can enjoy over and over again.

This is a good – even great – quote and so I make no apology for repeating it.

“The greatest of human needs is the need for appreciation.” (William James)

Just think what that means for you and the way you manage your people.  Do you really appreciate them?

Voltaire expressed it slightly differently when he said, “Appreciation is a wonderful thing: it makes what is excellent in others belong to us as well.”

This, however, has more than just philosophical significance. You could also say it has some accounting implications. This is because, when your employees are the human assets that you so often say they are, you need to recognise that, unlike most other assets, they can – and ought to – increase in value over time. And since the accounting term for a decrease in value is “depreciation”, it is entirely logical that an increase in value should be termed “appreciation.” This makes it more than just a play on words to say that you need to appreciate your people. It creates a secondary booster rocket for employee engagement.

You see, because William James was right when he said that people need to be appreciated, it follows that people who are appreciated are more engaged. In fact this is precisely what Voltaire was saying. When you appreciate people you secure greater loyalty from them. So now, by treating your employees as human assets, you create a formal mechanism to systemise this appreciation. The employee no longer has to depend on the supervisor’s whim and the content is likely to be less subjective.

If you are a regular reader of this blog you know that Stage 2 of valuing people as assets is employee ownership - making the employees co-owners of the business. Of course this creates reciprocal ownership whereby the employees actually own themselves, as assets of the organisation. This means they are effectively working for themselves and so are even more engaged and willing to commit to the organisation than they would otherwise be. As a result they are far more likely to fulfil their own potential, and so enhance the organisation’s. This is optimum talent management and the ultimate organisational win-win.

If you doubt this you need only look at the spread of Appreciative Inquiry (AI). As you possibly already know, this (as identified in Wikipedia) is “primarily an organisational development method which seeks to engage all levels of an organisation (and often its customers and suppliers) to renew, change and improved performance.” Rather than ask the question, what’s wrong, AI is “a self defined ‘asset-based approach.’ It starts with the belief that every organisation, and every person in that organisation, has positive aspects that can be built upon. It asks questions like ‘What’s working well?’, ‘What’s good about what you are currently doing?’”

Thus you can say that accounting for people as human assets is the next logical stage of AI. It applies the principles of AI to the people, and in doing so, does so much more than accentuate the positive – it institutionalises appreciation! So if you are looking to enhance your employee engagement and create more ownership and accountability for what they do, you should take a serious look at AI. And if you are already an AI disciple, you should be looking to take it to this next stage.

Appreciation is truly a powerful force. Tap into it, channel it and you will transform your organisation, your business and your results! You will create a great workplace where people do great work because they feel great.

The real secret to creating employee engagement

Are you giving enough?

Now I am sure you are thinking to yourself, "What kind of question is that?" And of course it is rather ambiguous and open to interpretation, so let me throw a little more light on it and hopefully give you some food for thought. Who knows; it might even change the way you act. And if it does I have little doubt you will get results that astound you.

It is tough being a manager or business leader at the best of times. And I am sure you will agree, these are not the best of times. And as a result you are likely to be under greater pressure to deliver results. Everything takes more effort and you have to run harder and work longer hours. Your energy, your effort and your expertise are all being stretched and as a result you are likely to feel that you are giving a great deal. However, that is expenditure not giving. And sometimes we tend to get the two confused - even though they are massively different.

Giving in its purest form is a spontaneous outpouring; an expression of something from deep inside of you that gives pleasure without necessarily expecting anything in return. On the other hand expenditure always demands a quid pro quo; something in return - usually of equal or greater value. It can certainly bring you pleasure but it is by no means the same for giving is about bestowing pleasure to others.

So what? Well just think for a moment about how much more satisfying the latter is. Expenditure invariably suffers from the law of diminishing returns, whereas giving never does when the gift is appreciated. Think about how you feel about your work. I'll wager you aren't as engaged as you could be. Yet how different it would be if you felt you were making a difference and your effort was appreciated.

Now just pause a moment and ask yourself if your employees aren't feeling the same way? The odds certainly are strong that they are. And if so, what are you doing as their leader to change this. Once again my friend Steve Roesler is offering you the perfect recipe to do so.

Can it really be as easy as asking for help?

Yes, because by asking your people for help, you move them off the expenditure treadmill and onto the giving treadmill. You remove the sense of obligation and pressure and so enable them to feel good about what they are doing. In the process you also create the employee engagement that otherwise seems to you like such a daunting, nearly impossible goal.

You could say it is like the old cliché of selling them instead of telling them. However it is even better than that, because here you are not even doing the selling. Your people are actually sell themselves. They simply buy into something that makes them feel good about what they do and in the process become naturally more engaged - as long as you don't forget to say thank you!

Thank youAnd the real beauty is that it entails less effort than anything else you are doing. There is no expenditure! You are simply giving. And that creates a virtuous circle. 

Talent Management versus Talent Development

I don't know about you, but I struggle with the term "talent management." Not because I don't understand the ideal, but because I am concerned that the HR profession has got hold of the wrong end of the stick.

It seems that the profession is anxious to improve its standing and is climbing aboard the talent management bandwagon to do so. It sees talent management as the answer to employee engagement and the panacea to redress past wrongs. I even heard one high profile HR manager proudly boast that "they don't talk about people; they talk about talent." That's all well and good, but it completely overlooks the fact that talent is embodied in people. You don't hire talent. You hire a person who brings the talent with them. Forget that at your peril.

Unfortunately many do seem to forget it! How many organisations have you come across where considerable effort is being expend on the development of "high-pots" - people with high-potential who, by virtue of their classification as "talent," are placed on a fast-track career path? Once again the law of unintended consequences comes into play and causes a double whammy.

First is the negative impact on other employees. If this is ever recognised it is completely disregarded and the organisation blindly creates a two tier employee structure with a kind of "talent apartheid." With the best will in the world this is inevitable because you effectively create the perception of a divide between people who have talent and those who do not.

And, even if you insist that the "high-pots" are not allowed to know that they are designated as such, the fact you treat them differently will make it obvious. Furthermore, it also runs the danger of raising expectations. Thus any failure on your part to live up to these will create a bone of contention that may be difficult to rectify. Either way, you are creating a rod for your own back, and possibly sabotaging all your employee engagement initiatives.

Challenge iStock_000003187407SmallSo for me true talent management entails hiring the right people and enabling each and every one of them to maximise their individual talent. That's why I prefer the concept of talent development to talent management. It brings a whole new cachet to the learning and development function, and makes it an organisation-wide blanket rather than an opportunity for the privileged few.

That is why I enjoyed this blog by Steve Roesler so much. I just love the Henry Ford quote that "My best friend is the one who brings out the best in me." If you take that to heart then you as a manager should be your employees' best friend! And I am even more encouraged that my model of employee ownership will help you build a framework where you can make it happen.

In fact it has been a doubly good week for me from that perspective, because I was very grateful to have been given an introduction to Bruno Chaintron at Bruno specialises in helping organisations redefine roles so that they fit the talents of their people rather than trying to shape people into a fit with their job description. Now there is someone who understands that the more successful people you have the more successful your organisational will be!

So what are you going to do develop your talent to its optimum?   

Where now for employee engagement?

Two significant items grabbed the headlines here in the UK this past week. Time alone will tell just how significant they prove to be but their timing is definitely on the wrong side of ironic, coming as they do in the same week that St Paul's Cathedral was closed for the first time since the blitz of the World War 2 due to the "Occupy Wall Street" anti-capitalist protests. Certainly both are likely to have a major impact on employee engagement. 

Anti-Capitalism protest outside St Paul'sThe first was a leaked report that the government is proposing to increase the period before an employee can make a claim for unfair dismissal. They say this is a job-stimulation policy because too many unproductive people are retained because existing legislation makes it impossible for management to dismiss them. As a result better qualified, more willing workers are unable to replace them!

This would be an asinine move by government and really a case of fools stepping in where angels fear to tread. Why? There are several reasons actually.

  1. The relationship between management and employee is a personal one. As such it is shaped by behaviour and no legislation can control human behaviour.
  2. You know as well as I do that the problem is not usually with people in the first year of a new job. New hires are nearly always trying to prove themselves. Disengagement is the consequence of perceptions that accumulate to make people disgruntled, disenchanted and disillusioned over the years.  And it is a disease that spreads poisoning the atmosphere for those around them.
  3. The timing is potentially a political disaster in the face of coalition cost-cutting.
  4. It is a tacit admission that management is incompetent. But worse, it also implies that management is incapable of redressing this on its own.

I am sure you can think of others. For me the last is the worst - particularly from a government that is supposed to champion non-interference in a free market.

The second item was the report that remuneration for directors of FTSE 100 companies increased by an average of 49% in the past year. This exceeds even the 43% for CEO's who earned an average £3,855,172 last year.

Of course this is petrol on the flames of the anti-capitalist fires. But you need to be very careful here, because averages are always dangerous, and even the researchers who uncovered this statistic warn of the need to use the median rather than the average, because the average is too easily distorted by one or two exceptional cases. This is very clearly the case when the top 2 earned about £18 million each! In fact the median was only 16%. Even that seems disproportionate in these tough times but it does not make for the same provocative headlines.

Anyway I decided to try to put these figures in context. Consequently I sacrificed a few hours to conduct my own research see how these companies had performed and to what extent these increases could be justified. The results were certainly very interesting. Let me give you a few insights.

Per their latest annual consolidated income statements (laboriously converted to £ at yesterday's exchange rates in 28 cases) the FTSE 100 companies earned before tax profits of £182,446 million which was a 27.4% increase on the previous year. Coincidentally the median improvement was also about 27.4%. The after tax profit total was £134,783 million or 25.5% more than the previous year and thus indicates a contribution to the national exchequer of £47,663 million or 26.1%. Thus the median increase to the directors of 16% would not seem too inappropriate. (However, you might also be interested to know that the top earning CEO's companies were 13th and 21st in the profit before tax table, and 8th and 68th respectively in the change in profit before tax table with improvements of 331.9% and 12.9% respectively.)

So how does all this link to employee engagement? Well, as part of this exercise, I also looked at the number of employees that these companies had. I was only able to get figures for 86 out of the 100 and in some instances these were a year or two old or just approximate numbers. However, the world wide employees for the companies where I was able to get numbers totalled an incredible 5,415,122. So just think about it. There are somewhere in the region of 6 million people who contributed to these results. How do you think they feel about these increases - especially when they don’t anything like the same sort of increase?

So do you really think you are going to win any employee engagement battles in the face of such earnings disparity? Admittedly this is only the top 100 companies on the UK stock exchange, and hopefully this is the exception rather than the rule. But if you are working in an organisation where your top people get such disproportionate rewards relative to the rest of the organisation do you think you will ever resolve the problem?

No wonder capitalism is becoming a lighting rod for protest. And with reports like this it will only get worse. Things are going to have to change if we are ever to see the productivity improvement and the economic prosperity that comes with it.