People Are Assets, Not Costs

Judith M. Bardwick, Ph.D.

It’s very strange: In all the years that I’ve been speaking and consulting to management about the hundreds of studies in many nations that clearly demonstrate that high levels of employee commitment and engagement predict financial success, I’ve consistently found that virtually no one in management has ever heard of these facts.
Here is a tiny sample of the data that overwhelmingly demonstrate that when employees feel positively about their organization and their work, financial results are high:
• Companies consistently rated as the “Best to Work For” are run by people who (1) achieve their business targets and (2) sustain the well-being of their employees. These organizations have higher market value, growth, return on assets, and return to shareholders than peer organizations that don’t value and involve employees.
• The consulting firm Watson Wyatt administered surveys of the Human Capital Index (HCI) to 51 organizations in the United States and Europe. When the HCI scores were compared with each corporation’s 5-year total return to shareholders, companies with a low HCI score averaged a 21% total return, companies with medium HCI scores achieved a 39% total return, and those with high scores had a 64% return.
• When customers gave a company high marks, that organization earned a 160% 5-year return to shareholders when compared with the Standard & Poor’s (S&P) Index. When both customers and employees give a company a high rating, that company’s 5-year returns to shareholders is 320% of the S&P

Over the last twenty years, numerous studies found that when people are very positive about their job and their organization, feelings of commitment and engagement predict positive financial results. The average is a gain of 30% higher profits and a share price 2-3 times higher than a peer company with low scores. That happens simply because companies in which employees are really involved retain their employees and their customers.   The reverse is also true. When companies see employees only as costs and not as key assets, employees reciprocate with powerful negative feelings. Then, people come to work but they withhold discretionary effort, fear prevails, innovation disappears, and teamwork is only a slogan.

The Message

A critical leadership task is to create widespread awareness of this information throughout an organization as a first step in reinstating employees as stakeholders and as assets. The key message is simple: When employees are viewed and treated as critical resources and commitments are made to them, the probability of financial success increases dramatically.
The reverse is also true: when employees are treated as costs and not as assets, they feel abused and frightened (for good reason). When people are neither trusted nor respected and their work is not regarded as significant, employees quit even if they come to work. The real cost of a non engaged or an actively disengaged employee is enormous because they alienate customers and customers leave. So do sales and profits.   In fact, too many people are misers with praise and rewards. And, more the pity, they’re proud of it. As a result, the most prominent current practices regarding employees essentially guarantee high levels of negative feelings and low levels of commitment and engagement—a sure route to failure. Many executives are unwittingly treating even valued employees in ways that will almost certainly assure employee alienation.   Even when the economy was good, in many countries about half of all employees felt vulnerable economically and psychologically. I call these feelings a “psychological recession,” the feeling that “While the present is awful the future will be worse.” Prolonged fear and depression invite failure because scared and alienated people can neither concentrate, nor focus, nor innovate. Chronic anxiety depletes people of their mental energy.
The first task is to create real awareness at every level of an organization that (1) treating employees only as costs creates serious problems with powerful negative effects that impede success, and (2) there are policies and practices that make success much more likely. In order to have an impact, the message must be in line with how people are actually feeling and be simple, brief, and focused. It must begin with a sense of alarm that is based on the organization’s reality and then move to the idea that when the core issues are faced, the right changes can be made and success and a better future become very likely.

Create Change

When I speak to employees who are not executives, they always relate to these facts and ideas. I am, after all, describing what they’ve experienced and how most of them feel. So it is not surprising that they always ask, “Have you talked with our executives and upper-level managers? If you have, what was their reaction? Are they even aware of what’s going on? Are they concerned enough to do anything different now that they know how people feel? What can I do to make change happen?’’   The most visible leader in an organizational change effort is usually a top executive. But core change does not happen until and unless an aligned leadership develops throughout the organization, at all levels. Succeeding in creating major change has to ultimately involve the majority of people.   The answer to the essential question, “What can I do?” is, first, get the facts and master them. Every person involved in creating change has to be able to describe the facts easily and, more importantly, clearly and simply.   The next task is to be able to describe the problem and the solution in the “elevator speech.” That means you have less than a minute to get your views across. To achieve this, you need a great answer to the question, “What really matters?” In some ways, crafting the elevator speech is the hardest task of the entire change effort. It’s difficult to be very brief, right on point, and be convincing.   Feelings are always much more important than facts in getting a buy-in to change, and basic change is always unsettling. That’s why the majority of people in the organization have to believe you are telling the truth, you are guided by a deep sense of unease by current practices, and you are convinced real change will achieve success.
Change leaders must create the fear that not changing is much more dangerous than changing. Then, it is time to create hope: “If we pull together and we all get on the train, while it won’t be easy, we can do it! Count me in! ”

Make Change Happen

Generating the motivation for change and specific ideas about how to succeed is only the starting point. Operationalizing anything, actually making things happen, is at least equally difficult.
The task for the organization is to regain the perspective that people are a major asset and management must behave in ways that tell employees they are valuable and important. Ideas, attitudes, and behaviors must be aligned and converge on the single theme that making commitments to our people and gaining commitment from them is the only way we can succeed. When most people share that value and agree on that goal, lots of specific ways to reinforce commitment and engagement will be generated.
No one, not even the CEO, can make things happen alone. To make things happen, change leaders must gain power. There are two relevant kinds of power: one involves role power, people at the highest levels in the organization who are responsible for making decisions in the business of the business. In corporations, those are the people who have the major profit-and-loss responsibilities. These positions have the greatest amount of authority and frequently, the highest levels of influence and political power. Anyone who has access to these people is also seen as powerful simply because these people are accessible to him or her.   It is the responsibility of change leaders to learn which of these decision-makers is already in basic agreement with the view that people are a critical asset. The goal is to identify these people in order to gain powerful allies as quickly as possible.   The second kind of power lies in the power of numbers. When many people in an organization clearly believe the same thing and are calling for change, the importance of their message is greater than that of even a few top decision-makers. The large number of supervisors and middle managers are a ripe source of allies as they are in a position to really know how their subordinates are feeling and behaving and how wide are the gaps that cause people to be alienated.   In terms of numbers, the middle and lower rungs of the organization are a potential source of the largest numbers. There are leaders everywhere; they are simply people that others trust, respect, and want to listen to and follow. Having less education is not a barrier to becoming a leader. Change leaders must find these potential allies wherever they are: at entry level, in blue- and pink-collar positions, in the collarless jobs of professionals, and in the different generations.
When change leaders have a firm understanding of the issues and a clear message of alarm and hope, and when they have identified allies, they need to create an initial basic plan that is so direct and focused that it fits on a single page. Inevitably, the reality of implementation will make the simplest plan very complex and complexity diffuses focus. The more complex the initial plan is, the less effective it will become.

The Change Process

1. Identify the real major problems. Open the books. Speak the unspeakable.
2. Identify the core business and whether it is a cash cow or a high-risk, high-growth business. Create the essential strategy based on competitive advantage. If there is no clear competitive advantage revisit the question, What is the business of this business?
3. Identify the most important goals and those that are easiest to accomplish. Balance the goals of importance and ease. Limit the number of goals at one time to three and determine due dates.
4. Designate the organization’s few core values: for the U.S. Marines, they are honor, courage and commitment. This is critical, because values and not rules are the true guides of behavior.
5. Create simple, honest, and direct communications in order to gain understanding and buy-in. Never assume your message is heard. Go into the field and find out what people think is being said.
6. Organizational units and individuals create line-of-sight goals from the organization’s targets to their own with due dates.
7. Reward the angels and fire the snakes. Distinguish thrivers – people who are eager to make and lead the changes– from survivors – fence sitters and cynics – and strugglers or failures who oppose change. Move thrivers into leadership roles.
8. Fire trouble-making strugglers.
9. Fire chronic nonperformers.
10. Start again: Murphy’s Law, If anything can go wrong, it will, is the bedrock truth.

Anxiety and fear can be reduced by opening the books and telling people the truth about what is known and what might happen, by being clear and specific about what people are expected to do, and by making as many people as possible part of the change process. And everyone must be working toward goals that are achievable because nothing motivates people more than being successful. It is in the organization’s best interest to act in ways that increase their numbers.

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