Welcome to the Momentum Business Coaching Newsletter for
November 2006

Balancing People, Values and Business

In the last few years several books have addressed why some companies are more enduring than others. What distinguishes the great from the merely good? What contributes to sustaining success in today's rapidly changing economic environment? Built to Last, Good to Great, Hidden Value, The Knowing-Doing Gap, and Peak Performance are just a few of the books that are providing answers.

Really great companies, even in bad times, place people and values first. An obsession with stock prices can obscure vision and cause companies to lose their way. The link between people and the bottom line is becoming more apparent. Organisations that succeed over time are those that have a strong values-driven culture. They are people-centered organisations who balance values and business.

The quality of the interaction with and among employees drives the quality of the products and services. A focus on treating employees with warmth, dignity and respect pays off in how customers are treated and consequently in how the business performs.

Many organisations forget the connection between customers, employees and financial results. If you want to have great business results, you must have customers who love your products and services - customers who believe that they're getting excellent treatment from the company. In order to do that, you have to have employees who are motivated, committed, and using their talents on behalf of the organisation.

As Herb Kelleher of Southwest Airlines is fond of saying, "We put our employees first, our customers second, and our shareholders third. In that order it works and out of that order nothing works."

Where's the Evidence?

A wealth of empirical evidence shows the effectiveness of a people-centred approach that delivers value to the customer, the employee, the organisation and the shareholders. While the details of studies that measure the affect of employee performance on bottom line revenues can be complex, the overall results are impressive. Consider the following research (cited by O'Reilly and Pfeffer in Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People, Harvard Business School Press, 2000.):

One study using multiple samples and measures found that a change of one standard deviation in an index of human resource management practices produced increases of $20,000 to $40,000 in stock market value per employee. Another study reported that companies that were one standard deviation higher in their use of high-performance work practices enjoyed more than $27,000 in increased sales per employee, $18,000 in increased market capitalization and $3,800 in profits as well as a decrease in employee turnover.

Similar results are found internationally. In Germany, a study found that companies that place employees at the core of their strategies produced higher shareholder returns than industry peers. And Korean enterprises discovered from one research study that "dedicated positioning strategies appear to be executed more effectively where organisations exhibit a high level of commitment to their employees."

Three Common Themes

According to Pfeffer and O'Reilly in Hidden Value, three common themes underlie the things that successful companies do to develop and tap the potential of their people:

1. The company has a clear, well-articulated set of values that are the foundation for management practices that provide for the company's competitive success.

2. The company has a remarkable degree of alignment and consistency in the people-centred practices that express its core values.

3. Senior managers in these companies (not just the founders or the CEO) are leaders whose primary role is to ensure that the values are maintained and constantly made real to all of the people who work in the organization.

The most visible characteristics of successful companies are their values and the fact that the values come first even before stock price. Why are values so important? Because money by itself isn't sufficient for motivating long-term high performance. Most of us need to believe that what we are doing makes a difference to others and that our work is important. We also want to feel that we are valued as people. We want to be respected for who we are, not simply for what we do.

As we continue into this new century with new uncertainties, companies will need to draw on the full creative energy and talent of their people. Why should people give full measure? Confronted with an increasingly mobile society, cynicism about corporate life, and an expanding entrepreneurial segment of the economy, companies more than ever need to have a clear understanding of their people and their values in order to make work meaningful and thereby attract, motivate and retain outstanding people. There must be a balance with people, values and business in order to create sustainable results.

15 Questions to Ask to Create a People-Centered Organisation

When core values are clearly defined and articulated, they become living values that get communicated and reinforced continually. In the absence of repetitive reminders of these values other implicit and negative values can take over, such as individual ambition at the expense of team work. The only insurance against such undermining is to reinforce values in both language and actions.

John Miller authored QBQ! The Question Behind the Question: Practicing Personal Accountability in Business and in Life, (www.qbq.com). He suggests asking some questions in order to stay connected with core values:

Resources for Sustaining Results

Becker, B., Huselid, M., "High Performance Work Systems and Firm Performance: a Synthesis of Research and Managerial Implications," in Research in Personnel and Human Resources Management, ed. G. R. Ferris, no. 16 (1998), 53-101.

Bilmes, L., Wetzker, K., and Xhonneux, P., "Value in Human Resources," Financial Times, 10 February 1997, 10.

Buckingham, M., Coffman, C. (1999).First, Break All the Rules. Simon & Schuster.

Collins, J., (2001). Good to Great: Why Some Companies Make the Leap…and Others Don't, Harper Business.

Collins, J., Porras, J.I. (September 1996). "Building Your Company's Vision," Harvard Business Review.

Collins, J. Porras, J.I. (1994). Built to Last: Successful Habits of Visionary Companies. Harper Business.

Drucker, P. (2001). The Essential Drucker. Harper Business.

Huselid, M. (1995). "The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance," Academy of Management Journal 38: 645.

Katzenbach, J. (2000). Peak Performance: Aligning the Hearts and Minds of your Employees. Harvard Business School Press.

Lee, J., Miller, D. (1999). "People Matter: Commitment to Employees, Strategy and Performance in Korean Firms," Strategic Management Journal 10: 579.

Pfeffer, J. (1998). The Human Equation: Building Profits by Putting People First, Harvard Business School Press.

Pfeffer, J., O'Reilly, C. (2000). Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People, Boston: Harvard Business School Press.

Pfeffer, J., Sutton, R.I. (2000).The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action, Harvard Business School Press.

Welbourne, T., Andrews, A. (1996). Predicting Performance of Initial Public Offering Firms: Should HRM Be in the Equation?" Academy of Management Journal 38: 891-919.