As companies struggle with the many realities of today's business world, business leaders are finding a need to shift their strategies in order to stay competitive.
by Site Staff
October 1, 2003
As learning professionals, we understand the power of a metaphor in explaining complex, multilayered concepts. Let's consider for a moment that the business environment is a river that carries all boats ahead with the current. When waters are smooth, it's much easier to float downstream without a tremendous amount of coordinated effort. But when you hit whitewater, it is critical to have knowledgeable leadership at the helm-one that consists of a well coordinated team of paddlers with an in-depth understanding of the river's twists, turns and currents to help navigate around rocks and snags, including the unseen obstacles beneath the surface that can flip your boat and send your paddlers downstream looking for safe haven, most likely on someone else's boat.
Like it or not, everyone in business today is navigating through rapids. The momentum of the 1990s' swollen river has slowed, exposing more dangerous obstacles than we've seen in recent history. The performance of every individual on the boat depends on the strength of the leadership, the flow of information and the ability to successfully negotiate rough waters. In this environment, the function of performance management suddenly becomes a critical success factor, and CLOs find themselves in the indispensable role of navigator, looking ahead to see what dangers await around the next bend and helping leaders communicate directions that will successfully lead everyone to the calmer waters of the future.
As many companies struggle to navigate the whitewater, their boats increasingly have fewer paddlers, leaders are forced to rethink strategies on the fly, currents are shifting rapidly, and the paddlers don't always know what's expected of them or how their job impacts the overall direction of the boat. Consider the following statistics:
- 95 percent of employees do not understand their companies' strategies.
- Less than 17 percent of employees understand how their jobs relate to overall corporate strategy.
- 50 percent of employee time is spent on nonproductive tasks.
- 47 percent of companies rarely or never measure the impact of workforce development on productivity.
- The average turnover rate of employees across all industries is 17 percent, and on average, it takes more than 52 days and $12,000 to bring on a new hire.
It doesn't take much imagination to picture a boat careening downriver, bumping into unseen rocks and spinning out of control. The boat may not go under, but how long will the paddlers stay when they look around and see other boats enjoying a well navigated, smooth and exciting ride?
When such a large percentage of employees don't understand a corporate strategy or how their jobs map to that strategy, companies end up with employees who are doing nonproductive work and are likely to have lower levels of job satisfaction. In today's business climate, when companies fail to measure the impact of workforce development on overall productivity, they are ignoring an increasingly important success factor that directly influences the bottom line.
So how can companies cruise through the whitewater of today's business environment? The most successful companies-the ones that stay out in front and enjoy a successful ride-are taking a new approach to performance management, ensuring that critical information flows quickly and effectively throughout the organization. There are six key elements that, when implemented, help to ensure that a company is moving in concert as an efficient, focused organization to achieve its corporate goals:
- Strategy: Develop a workforce management plan that clearly corresponds to corporate objectives. Corporate management needs to be actively aware of and engaged in workforce and performance management to ensure that corporate objectives are integrated into the performance management process and to better understand the organization's key assets. In the past, employees were viewed mainly as an expense, a means to getting work done. Human capital metrics were created and maintained by human resources alone, and there was little effort to understand how to optimize and measure the value of the workforce. Today, successful companies view their workforces as a source of value. In modern organizations, the CEO, CFO and other business leaders work with the CLO to design and use tools that measure ways in which employee performance management directly impacts an organization's ability to execute corporate objectives and increase profitability.
- People: Assemble a workforce with the necessary skills to execute. This may sound obvious, but it is surprising how often top executives do not know what competencies exist within their organizations. To best allocate resources for key initiatives, company leaders need to know what resources are available and be able to identify gaps between current and required workforce skills. Frequently, when there is a change in strategy, companies either hire new employees with the desired skills or expect current employees to learn new skills (both at considerable expense) when the knowledge and skills necessary to deliver on new initiatives may already exist within the organization.
- Alignment: Link individual activity to corporate initiatives. Every employee needs to be able to articulate the company's main goals and understand how his or her job contributes to the company's success. All initiatives in the organization need to have clearly defined metrics, and employees need to know what they are. Scorecards are extremely valuable when they are relevant and tied to corporate strategy, but employees must know and understand how they are being measured and how their work maps back to corporate initiatives. Nearly 50 percent of Fortune 1000 companies use a scorecard methodology, but only half of scorecard implementations were considered successful. Most companies do reasonably well in developing a scorecard's objectives and metrics, but they aren't able to bridge the gap between high-level corporate strategy and individual execution. There must be a place where employees can go to view corporate strategy and initiatives at the highest level and see how individual goals set throughout the organization correspond with these initiatives. This creates a direct link between the employee's own goals and the goals of the company at large. The biggest challenge is not how to create scorecard, but rather how to institutionalize a culture of performance that is based on concrete individual goals that roll up into larger corporate initiatives.
- Capabilities: Continually develop the right capabilities to support goals. In the past, companies typically looked at learning on an individual basis without tracking existing organizational competencies and identifying skill gaps that must be bridged to execute on key initiatives. In this ever-changing economic environment, as corporate strategies and initiatives shift, competencies and learning processes need to reflect new realities. Workforce competencies and skills must optimize current initiatives and foster future innovation. Organizations must also track and measure the evolution of organizational competencies, benchmarking competencies to identify examples of excellence and set objectives to close skill gaps and link these objectives with learning and recruiting plans. With so many innovations in technology, the options for skill development have flourished in recent years, providing additional means to grow a company's competencies.
- Employee service: Provide ongoing services to help employees meet objectives. Successful companies need to provide timely and cost-effective support to employees across the organization. If, for example, the workers in your company are spending hours on end trying to get an HR-related question answered or searching for IT support for a PC problem, they are not productive. Employee service allows employees to devote the maximum time possible to accomplishing individual goals that are designed to support corporate strategy. World-class employee service doesn't just help streamline employee needs for technical and administrative support; it also helps companies cut costs dramatically in that they can reduce the need for costly live support and shift to providing preemptive and self-service solutions, increasing the quality of employee services and reducing the time to solve problems.
- Business outcomes: Measure employee impact on business drivers. This last component is the most critical. Careful attention must be paid to measuring and monitoring the impact on business outcomes throughout all performance management activity. At every step-from recruiting and performance management to competency tracking, development and serving employees-there are both costs and business value associated with the relevant activity. The CLO needs to understand the net value created at each step. This makes the CLO's job more essential than ever.
So, as the CLO, how can you begin to make the changes necessary to implement these elements? The first step is to conduct a standardized benchmarking assessment that determines where the company is today. Conduct surveys across the organization-from executives and managers to employees and training staff. Determine the status of key metrics, such as the percentage of employees who have a career development plan and receive regular performance appraisals, the number of employee objectives that are tied directly to corporate initiatives and the percentage of corporate goals that are being met. These key benchmarks will enable you to understand the level of sophistication of the company and help identify where performance management processes can be improved.
CLOs can then develop these benchmarks into a business case that identifies mission-critical gaps, quantifying the value of filling them. This business case can and should directly link improvements in the performance management process to bottom-line issues such as higher employee retention and lower recruiting and training costs, cost savings from reduction in time spent identifying content for employee training, reduction in travel and other administrative costs and increased productivity. Once a business case is developed, the CLO should spend time with other senior-level executives of the company, walking them through these benchmarks, identifying issues and building consensus on next steps.
What Does This Mean for the CLO?
As the steward of talent in the organization, the CLO is truly the company navigator. And during these tough economic times, making that critical connection between employee performance and the overall business performance of the company is one of the greatest challenges and opportunities that CLOs experience. To successfully make this connection, CLOs not only need to understand what competencies exist within the organization and how well employees are performing against key metrics, but they also need to understand the company's business drivers and corporate metrics.
Implementing an ERM (employee relationship management) system can help achieve this goal. A key focus of ERM software is to provide a framework of execution that enables a company to develop an employee management plan that is based on corporate objectives, to provide insight into the company's human assets to assemble a workforce with the necessary skills to execute on corporate strategies, to align individual activities with corporate goals and initiatives, to continually develop the right capabilities to support those goals and initiatives, to provide employees with ongoing services that help them meet objectives and to measure how all of this impacts the company's bottom line.
Essentially, an ERM system allows a company to take performance measures and turn them into a meaningful framework that builds performance into the DNA of the company. ERM provides new opportunity for learning organizations to forge direct links back to corporate initiatives or a clear way to measure the impact of their service delivery.
It is time for the CLO to step up and earn his or her place in the executive suite. Having a well trained workforce that is aligned with corporate strategies and goals is the lifeblood of corporate success. CLOs have the responsibility for building a learning culture that enables that alignment to happen, and if they can do that successfully, they will have a direct and measurable impact on the overall success of the corporation.
Anthony Deighton is general manager, Siebel Employee Relationship Management, Siebel Systems Inc. In this role, he has worldwide responsibility for executing all elements of ERM business strategy, including product, marketing and selling activities.