Yes in each case: and you’d be right. Although it is hard to be categorical about what causes what, the evidence is that high employee engagement and satisfaction is indeed reflected in superior business outcomes, including profit. Among a stack of similar studies, the most recent scholarly research finds that a value-weighted portfolio of the ‘100 Best Companies to Work for in America’ outperformed the market average by a cheerful 3.5% a year over 25 years – hardly a flash in the pan.
Nor is there any mystery about what causes people to enjoy their jobs and work at them. Things like responsibility for doing a worthwhile job, work autonomy, opportunities for personal growth, working with good colleagues and recognition head the list. Salary and working conditions – another ‘duh’ – rate barely a mention. They are ‘hygiene factors’, demotivating people when inadequate but never becoming a positive source of satisfaction, however high they go.
Yawn. Tell us something new.
Yet the commonplaces contain a large puzzle.
Because the ‘alpha’ garnered by companies that put employees first shouldn’t exist. It resembles the economists’ hypothetical £5 notes that really are lying around in the street because no one has picked them up. Think about it. We know that overall, global levels of employee engagement are dismally low, the proportion of those highly engaged plunging downwards from 20 per cent in the US and 12 in the UK to single digits in France, China, India and Japan. We know also that raising them would improve business performance. Finally, we know what good management looks like.
‘So, if something doesn’t work very well, and a (proven) better alternative exists, surely we would expect everyone to gravitate towards that alternative?’ ponders London Business School’s Professor Julian Birkinshaw, who has just spent a year investigating the subject, with fascinating results.
One factor, Birkinshaw and his team surmised, was that management is always approached from the point of view of those doing the managing. Unlike marketing, which has learned to view its function as ‘seeing the world through the eyes of the customer’, managers still see the world exclusively though their own eyes, not those of their employees. One result is s a hopeless mismatch between expectation and requirements on both sides.
This matters, big time, because, underlining yet another ‘duh’, the single biggest predictor of whether you will be engaged and happy in your work is having a high-grade manager. And in this area Birkinshaw’s findings are both extraordinary and damning.
In marketing, many high-performing companies (eg Apple) use something called the Net Promoter Score as a measure of customer loyalty. NPS asks, on a scale of 1 to 10, how likely you are to recommend the company to friends or colleagues. It’s a tough metric, because only 9s and 10s count as promoters, and 1s to 6s as detractors. Subtracting the latter from the former gives a single net score showing how positively (or not) customers view the company.
Now, when Birkinshaw and his colleagues asked employees at five companies to rate their managers in the same way – ‘how likely is it that you would recommend your line manager to a colleague as someone they should work for in the future?’ – there were massive variations. One company posted a NMPS (net management promoter score) of +61 per cent while at the other end of the scale another company scored -28 per cent. But the average was -15 per cent – that is, overall 15 per cent more employees gave their managers the thumbs down than the thumbs up. From an employee point of view, there were more bad managers than good.
Dwell on that a bit. Here we have perhaps the most basic building block of management, the relationship of a manager with his/her immediate report. We have an unimpeachable evidence base. Yet we still manage to get it wrong more than we get it right. In its most fundamental task, getting the job done through other people, management’s effect is negative.
Why do managers find it so hard to do the right thing?
One reason is surely ideological. As Birkinshaw notes, most large organisations continue to operate on a management operating system devised a century ago – bureaucratic coordination, hierarchical decision-making, extrinsic rather than intrinsic reward. In a world where the imperatives of efficiency and compliance have long ago ceded to commitment, initiative and discretionary effort, these principles objectively outlived their usefulness some time ago. But the framework was effectively locked in place by the shareholder-value, free-market doctrines that emerged in the 1980s (which requires all thse things), and they have permitted no movement since.
By reinforcing natural human tendencies to self-interest, control and risk-aversion, ideology makes them self-fulfilling. So even if it wasn’t originally, the behaviour that constitutes good management – focusing on people rather than self, delegating and tolerating mistakes in a larger cause – now runs against the grain. It becomes an ‘unnatural’ act. Put this together with managers’ conflicting priorities and limited time, and the fact that a check-list of things to do isn’t necessarily a good how-to-guide (all the activities require precise judgment so as not to overshoot in either direction), and good management, though obvious, suddenly seems less easy.
Birkinshaw’s research leaves some leading questions.
Why isn’t this stuff taught to all business students from lesson 1?
Why did the last government spend an estimated £70bn – enought to bail out a small eurozone economy – on IT and management consultancy, none of which addresses the elementary management issues?
Isn’t this, as Donal Carroll of Critical Difference suggests, the starting point for a manifesto for a radical, democratic, functional form of management?
A fair cop
It’s a mantra intoned in every management article ever written. ‘Success in [fill in the blank] depends on unwavering commitment from the top’. ‘Without senior management initiatives are unlikely to succeed’.
In other words, if you’re a middle manager with ideas about doing things differently, forget it – at least until you can find a top manager to sanction and champion the changes.
Obviously no one told Inspector Simon Guilfoyle.
In a recent presentation, he described his experience as an practical ‘operations inspector and systems thinker’ who in September 2010 took over responsibility for a staff of 80 policing the busy north-eastern sector of Wolverhampton.
When Guilfoyle took over his sector, a patch ‘busy even for Wolverhampton’, including a district well known for guns, gangs and serious organised criminality, this is what he found.
Officers were hardworking but harassed, with the heaviest workloads in the town. Crime rates were high (not totally down to the police) and service poor: to meet the numbers (x arrests, detections and stop forms a month) officers inevitably focused on doable cases rather than difficult ones, and backlogs ate up capacity to deal with new ones. Performance data was useless as a guide to activity because it made no distinction between noise and signal. There were conflicting priorities. Seven operational teams worked as individual units, unlike criminals, who nipped happily across boundaries. Bureaucracy and the rule-book had gone unchallenged for years, fostering a culture of risk aversion and disempowerment, with inevitable effects on morale.
‘There’s so much we do to make our own job harder, stuff that generates more work and is no value to the public,’ sighs Guilfoyle. He blames the poor service on an anti-systems approach to service delivery, in particular the target-driven performance management.
So what did he do?
Guilfoyle explains it far better than I can:
‘I went to Wolverhampton and got rid of some waste. It’s not much more scientific than that.
‘I can’t do much about what the force or government are saying about targets and so on, but I can do whatever I can locally on my sector.
‘The first step: take out from people’s performance reviews numerical targets and all those arbitrary measures of achievement.
‘I pointed out to the sergeants that if I needed to know what happened overnight I could press a button on a computer. I didn’t need to know what they did or planned to do on a daily basis. If there was a really interesting job to do or that had been done, great, I’d love to hear about it, let’s celebrate and let the community know. But I don’t need to know they’re patrolling the hotspots because that’s what I expect them to do.
‘I believe strongly in organisational trust and devolved opportunity. Sergeants are sergeants for a reason, and however much I consider myself still front line, these guys are on the ground every day, and I need to trust them to be sergeants and do their jobs without me leaning over them. They know their staff and their patch better than I do, so let them get on with it. Let them sign off their overtime, they don’t have to report back to me on normal activity.
‘Clear priorities. We’ll target the things that matter most to the community. You know what I feel about targets, but you can’t do everything so you have to have priorities. Let’s go for serious acquisitive crime, which is a problem in our sector. And anti-social behaviour – we know who the main offenders are, we know the hotspots, let’s use the data about crime patterns intelligently and react to what’s there to react to, not stuff that isn’t there. Clear priorities, everyone’s going in the same direction then, and we’re making value judgments about what to put further back in the queue. Of course all crime is important to the victim, but we have finite resources and priorities where certain offenders and certain types of crime are causing more harm to individuals, and it’s right that we focus on them.
‘Because officers at the time didn’t have the capacity to address them, we were carrying the largest workload in Wolverhampton on existing enquiries. Some of this stuff was growing hairs – crime reports from 2008-2009, for perfectly straightforward stuff. Unfortunately it was still ongoing, so the public was receiving worse service [while officers attended to it]. The likelihood of resolving any of the cases had totally vanished, because the victim had moved away or the CCTV footage had been erased. I asked the sergeants to review all existing crime reports, and we filed a third of them. The public tends to be pretty realistic when you say let’s get real about the theft of a Mars Bar three years ago. There was a lot of support when those decisions were made, because there was a minimal chance of bringing anyone to justice.
‘Professional judgment. The optimist’s view – mine – is that people join the police to do good and help people, and then we ask them to leave their brains at the door, we constrain them with prescriptive doctrine and process. They’re robbed of professional judgment. I really wanted to embody in my sector, we trust you as professionals. If you need to lean on the sergeant or me do so, but 99 per cent of the time you can deal with a house burglary or road traffic accident or angry caller on your own because you’re a professional and that’s what you do.
‘That was stage one.
‘In January 2011, as a result of the initial changes there was extra capacity which allowed us to set up – from our existing people, we were never going to get any more – a proactive team which could address issues across borders within and beyond the sector. So now we have a capacity where you have local ownership of individual neighbourhoods, but also the proactive team to do extra things on top of the daily business.
‘We’d slashed the workload by one-third so that was manageable, and it’s being managed effectively so we get through it quite fast. Service is better, officers are more visible so in theory that should drive crime down a bit. Then one of the extra things we did: before January we had a massive list of people wanted on warrant, escaped from prison, had failed drug tests, who – guess what – were probably responsible for much of the crime. We’d never had capacity to deal with them before, because we were chasing our own tails with waste activity.
‘Having taken waste out, we’ve taken the new team, a sergeant and eight PCs, and set them loose on the guys who are doing the cash-in-transit robberies, burglaries, gang activities and class A drugs.
‘Yes, in one sense we’ve ‘created’ crime by finding these people, but we’re now addressing the root causes of crime, the drugs activities fuelling house burglary and cash-in-transit robberies, for example. We’ve tackled emerging trends like stealing lead off roofs – a 90 per cent reduction of one crime type overnight, because we found out who was doing it and locked them up… There’s now no one on the sector wanted by prison or failing to attend a drugs test, they get locked up straight away so they’re not out committing extra crime.
‘Radical, eh?
What’s the picture in north-eastern Wolverhampton now?
‘Here’s a Statistical Process Control [capacity] chart, showing the incidence of serious acquisitive crime.
‘The first step change coincides with the initial changes, the second with the introduction of the proactive team. Coincidence? Maybe, I don’t know. I can tell you it’s the same 80 people working on the sector as before, they weren’t bad people then, but they couldn’t get things done because they were swamped in waste. As Deming said, 94 per cent of it is down to the system and 6 per cent to the people who work in it. All I’ve done is said, let’s stop doing this because it’s wasteful.
‘To summarise. It’s a two-stage process. Analysis took about five minutes. The check phase was so obvious because I was already within the work, so I was able to see without having to look from an outside angle.
‘Stage two, once we got things under control, let’s see what we can do with the extra capacity.
‘So there are two questions to consider.
‘Is it rocket science?
‘No.
‘Were these crime reductions a coincidence?
‘You decide.’
Acutally there’s a third question. Do you still believe it’s impossible to change anything as a middle manager? Take a leaf from Guilfoyle’s book: just do it.
Making a play for power
Harder to talk about than money and sex (its constant hangers-on), power is passed over in silence by a literature that desperately wants management to be a respectable science rather than a battleground for primitive urges. Yet for all the words devoted to ‘official’ topics such as strategy, leadership, shareholder value and customer focus, the truth is that the drive to win and keep power is the ‘invisible hand’ that yanks the strings which determine much of what happens in business. And, through business, increasingly in politics too, as the Murdoch and Berlusconi scandals in Europe and the struggle to regulate the global financial sector graphically illustrate….
Read the full article in Management Today, 1 November 2011
Occupy and the real meaning of self-interest
Just what the Dean and Chapter of St Paul’s wanted. The news that FTSE 100 bosses’ pay went up by an average 49 per cent last year could hardly have been better calculated to strengthen the Occupy movement’s conviction of its rightness and its determination to stay put. Nothing changed: the gap between self-serving haves and powerless have-nots continues to grow apace.
The reality that top executives have taken up residence on a different planet was coolly underlined on the Today programme by the intelligent and articulate Sir Martin Sorrell (salary £7.4m), chief executive of giant marketing services group WPP. WPP, Sorrell stated simply, was global, with just 10 per cent of its revenues in the UK. He left unsaid the fact that the group was also global as in footloose, having moved its domicile to Dublin in 2008 before relocating back to London this year.
You could almost hear Sorrell shrug the questions away. He didn’t so much defend his pay – he didn’t need to – as calmly inform his questioner why the situation was thus and could be no other way. It’s none of our business, he could have added but didn’t, and there’s nothing, absolutely nothing, anyone can do about it anyway.
WPP is a perfect summation of the ideal late capitalist corporation: enormous (2010 revenues £9.3bn, pre-tax profits £1.4bn), anonymous, diversified, of no fixed abode or nationality, subject to no overriding law but its own, while Sorrell himself is the archetypal technocratic leader. Together they are the product of what author and guru Gary Hamel describes as a sweeping twin process of centralisation within companies and consolidation across them that in industry after industry has concentrated power in the hands of a few imperial CEOs who earn greater returns on an hour of their time spent lobbying politicians than on an hour inspiring employees or pleasing customers. We now have a ‘corporatocracy’ rather than a democracy, Harvard Professor Jeffrey Sachs argues. It’s a regime ‘Of the 1 per cent, by the 1 per cent for the 1 per cent’, charges Joseph Stiglitz, the Nobel economics laureate, like Sachs hardly a raving left winger.
The counterpart of the remote untouchability of the few at the top is the perceived powerlessness of the many at the bottom, in front of St Paul’s, in Zuccotti Park or any of the 900 cities where Occupy protests have taken root. One blogger expressed the view from the bottom like this: ‘There is an overwhelming and global sense that the rest of us don’t matter any more in our globalised industrialised society, except as passive consumers of products. We are not needed or wanted any more for our ideas, for our viewpoints, for our knowledge and skills, for our approval at the voting booth, or even for our physical labour; the corpocracy would prefer that we just borrow more and spend more, endlessly, quietly, and uncritically, until we die’. Another noted that capital having exhausted its first fuels, ‘now it’s the creation of poverty, not of wealth, that makes the world go round’.
That seems almost literally true. While households and governments are crippled by debt, partly incurred by bailing out the banks, corporations are soaking up all the wealth they are creating. In the US corporate profits as a proportion of the economy are near an all-time high, just as wages are at an all-time low. Leaving aside the period in 2007 just before the crash, profits are higher than at any time since the 1950s. US companies alone are sitting on $2tr of unspent cash.
In years to come, people will look back on this era as just another in the line of imperiums stretching back through the Arab dictatorships, the domination of the communist party in Soviet Russia to the anciens regimes and feudal societies of Europe. The sense of entitlement of today’s corporate ruling class is as absolute, and irrational, as the former belief in the divine right of kings. Along with the weight of vested interest, it is such that it is most unlikely that reform will come from within. But if it doesn’t, the lesson of history is that sooner or later it will surely come from outside. As Stiglitz points out, one thing that all the exorbitant wealth of the rich doesn’t seem to buy is an understanding of what self-interest really means: looking out for number one requires having regard to the welfare of the other 99 too.