So What Happens Now? Post GFC Management Behaviour

I have written and spoken quite a lot lately about the impact of fear based leadership and management during the GFC. Many organisations are now in the position of having significant numbers of "Detached" employees who are present but waiting for an opportunity to leave their manager. This is a significant risk for businesses who are now gearing up to capitalise on the increased confidence in the market. They will find themselves talent short as employment opportunities and mobility increases and people start to run-away from their oppressive managers.

So what happens now?

Some organisations will just sit tight and wait and deal with the consequences in a reactive fashion. This will set them back and position them behind their competition. There will be 3 levels of organisation over the coming 12 months.

Level 1 - those organisations who have held firm to their Engagement Initiatives and have continued to focus on Manager and Leader capability and behavioural impact. These organisations will lead the charge into the new market with stable and committed workforces.

Level 2 - those who abandoned their Engagement Initiatives during the GFC and focussed on driving performance through leveraging fear and insecurity as a means for getting short term performance from their people. In this level, it will be the organisations who now realise this error and who work hard to re-build employee bonds through revisiting their Engagement initiatives and invest heavily in people growth and development. A particular focus should be given to Manager behaviour to ensure coercive or threatening behaviours are removed. In many instances the damage with any one manager will already be done and organisations in this category should look at structural re-alignment of managers where Engagement is clearly low. By be re-aligning employees or alternatively re-aligning managers, the organisation will reset the "Attachment" phase and be able to re-build Engagement levels associated with a new primary carer. I will be writing more on this approach in a future blog.

Level 3 - those organisations who prior to the GFC likely had little interest or investment in Engagement Initiatives and who are characterised by more aggressive leadership and management behaviour. These organisations have not recognised the enormous value of engaged workforces and the GFC will not have done anything but likely re-enforce this view for now. These organisations will continue to suffer from low Engagement, low discretionary effort and moderate performance. They will likely survive but be destined to forever be positioned behind the other 2 levels until they choose to embrace constructive leadership, culture and create an Engaged workforce.

What level of organisation are you working for? What type of management or leadership behaviour have you been using over the past 16 months? What are you going to do now to ensure you are building emotional commitment in your people to capitalise on the new market?

Get Ready For The Wave

I spoke over the past week at 2 conferences - 1 in Hamilton Island for the Recruitment Consulting Services Association of Australia and New Zealand and the Other for the Australian Engagement Conference in Sydney. At both events there was a subtle but present air of confidence from the delegates that has not been there for about 10 months or so. People were talking in a more confident and optimistic manner and the nature of the conversations were geared towards opportunities to come. This week the new job advertising figures were released by the Olivia Group and showed an increase in job advertising. Employment figures indicate a bottom in the unemployment rate and the Recruitment Industry Benchmarkiing Report shows the decline in permanent and temporary placements has stopped.

At Sork HC we are seeing first hand an increase in the willingness to invest in Leadership and Management Training and Development that has not been present for about 1 year. We have started 6 new senior leadership behavioural programs in the last 2 months with another 4 to commence before the end of the year. Our clients are talking people strategy with us and starting to now move into key talent protection mode.

Employee confidence and security has increased and "talent" is starting to move out of the survival thinking mode, into the self-actualising thinking mode.

Get ready for the wave... We are about to see a significant increase in employee mobility with people who have been clinging to their jobs, now feeling confident to let go and in some cases take a running dive into the job market. There is a Push phenomenon about to take place here which is different to what we have experienced for many years. Where before the GFC the employment market was characterised by "Pull" conditions - that is that employees were seeking employer of choice environments and were being drawn to certain companies and managers, we are about to see them hitting the market driven more from a desire to push away from the companies they have been working for during the downturn becuase of the way they have been made to feel. More on this in my next blog along with the Detachment process of employees that has already occured.

For now the question to ask is - Is my business ready? Depending on the behaviours that have been present in your leader and managers, you will either be in a high risk dangerous position, about to experience a mass exodus - Or you will be in a low risk strong position with employees who are high in Engagement and you will be ready to capatilise on this with the ability to Attract key tallent to your doors in the coming months.

For those who would like to follow me on Twitter (I am a low level user so I will not bombard you) my Twitter site is: http://twitter.com/AnthonySork

Manager Behaviour Liability - Turning Market

Most if not all of you have come in contact with Maslow's "Hierarchy of Needs". A well referred to model and one I am making reference to quite a bit lately with line managers. Most commonly in relationship to managers who leverage fear and insecurity to get performance from their people.

Though intentions may be well placed, unfortunately by leveraging insecurity and fear for a sustained period, managers will have the opposite effect. You will get short term spurts of performance from people through this approach, but soon their focus remains on the insecurity you have created and you prohibit them from achieving a state that enables Self-Actualised thinking and behaviours.

Security oriented behaviour is defensive and focuses on minimum requirements for survival. Employees who are feeling insecure because of the behaviour of their manager will just "survive" the environment they are in until another option is found. In a market that is beginning to show the signs of turning, the options are fast approaching.

The Manager who achieves sustainable high performance by creating an engaging climate in all types of economic conditions will experience retention and greater levels of performance as this market turns.

The manager who has leveraged fear and insecurity should prepare themselves for a mass exodus and a reputation that will follow them well into the future.

Alignment Vs Engagement

I have been asked a number of times over the last few weeks to explain the difference between Alignment & Engagement in the context of measuring employee perceptions. In simple terms it is a difference of "Cause" and "Effect".

Alignment is the variance in perceived states between "Actual" and "Desired". Actual state being what I am experiencing or have been experiencing recently. Desired is the state I would prefer to be experiencing. Zero variance between actual and desired states equates to total alignment. The greater the variance the less aligned an employee is. This is the "Cause".

Engagement is the emotional and intellectual committment of an individual (or group of individuals) to the social structure to which they belong. The level of committment is most significantly influenced by the relative alignment they experience. Therefore Engagement is the "Effect". (Engagement levels further lead to variance in Discretionary Effort and Performance of individuals).

Measuring Alignment using an internally consistent scale is far more important when managing Engagement than measuring employees relative to response positioning against a norming sample set or comparing scores using external benchmarking. If you are intending on measuring and managing engagement, be sure to focus on alignment as the key measure.

Though discretionary effort is commonly referred to in Leadership and Engagement literature, I still find that the concept is not well understood. I try to explain it in these terms which seems to get a bit more traction with my the Leadership teams I work with:

2 people of equal competency and capabity levels. One person is emotionally connected (attached or engaged) at a high level and the other at a low level to the organisation. The person who is highly emotionally connected applies themselves relative to the best of their ability, the person who is lowly emotionally connect focuses on performing to the minimum standard required to remain secure in their job. This focus on performance standard drives the range of individual effort they respectively apply. Because it is their choice, it is discretionary.

The most significant influencer on the emotional connection of an individual to the organisation they work for is their immediate manager (over 80%). The consistent impact of the immediate manager on the employee is therefore what drives the level of discretionary effort that the employee applies. This can range up to 40% between high and low levels of Attachment & Engagement. Once a person "can do" it really comes down to who they are doing it for that will impact the performance you get from them.

Engagement Debate Part II

The second key thing to consider is - are you reducing your engagement investment because of a false financial assessment?

With a strong focus on cost reduction it is necessary to review your people investment and make decisions relative to the value of the asset (your people), the cost of the investment and the return on that investment from engagement initiatives.

If an individual is regarded as being of low (or lower than desired) value, then the decision to reduce or end an investment in them will appear to be the correct decision. This is not necessarily the case as the reason their value may be considered lower than desired may be because of the level of engagement, not the value of the asset.

It is tough in any market to put a price tag on your people and refer to them as “assets”. It congers up images of people walking around with bar-codes tattooed to their foreheads. In conditions such as we are experiencing at the moment however it is not a bad way of thinking about our own value to our organisation at any given point in time. If someone was to wave the Human Capital scanner over us today, what would it say we are worth and what decision would they make relative to continuing to invest in us?

The term “Human Capital” is being increasingly used with varying levels of understanding of what it actually means. The definition we use at Sork HC is “The intangible assets held by individual employees (and the collective workforce) including relationships, knowledge and skills that hold value for the organisation and can be increased through investment.”

This definition assumes that the assets we hold are being used to a standard or common level of effort - assumed to me maximum effort. Of course this is not the case. The value is impacted at any point in time by the willingness of the individual to use their intangible assets to positively impact the performance of the organisation. This willingness or emotional commitment is commonly referred to as Engagement and for new employees as Attachment.

This value is very difficult to quantify. Organisations have crudely attempted to do this over time by assigning values to our workforce such as Average Operating Cost Per Employee, Average Profit Contribution, Salary:Profit and others. None of these though provide an accurate value of your Human Capital and fail to factor the fluctuations that relate to levels of Attachment & Engagement.

So how do you ascribe a true Human Capital value on which to base your decisions? You need to look beyond the current dollar contribution and look at the value of the asset.

I recommend you look at 2 key factors when considering this;

1. Human Capital – cost of loss & replacement
2. Engagement Contribution Range

The Human Capital value associated with the loss and replacement cost of the intangible assets held by any one individual. “Relationship Capital” is a good example. Someone who has worked within the organisation for 5 years who has developed a comprehensive internal and external network. What is the value of this to the organisation? If it is lost then what value has gone? What would it cost to replace this? As an asset it would take 5 years to replace. So the replacement cost would be at least 5 years operating cost of a new employee.

In a previous article I have outlined the direct and indirect costs associated with getting a new employee to minimum competency and performance levels which is a minimum investment of $100,000 in direct and indirect costs. This is without factoring the lost value associated with the intangible assets that have been lost.

These are significant amounts associated with the value of our current Human Capital assets. If a person leaves, those assets leave with them.

Engagement contribution range relates to the variance in value associate with an individual of high engagement vs low engagement. For many organisations this is what provides a false sense of comfort in loosing someone.

Usually an individual becomes progressively less engaged resulting in ever decreasing levels of discretionary effort and diminishing performance. At the point that the individual decides to transition (leave), the organisation associates a lower value to them than they actually should if they were still engaged. The organisation is therefore not evaluating the true human capital value that is being lost.

I am not advocating a “retain people at all costs” approach. But rather to build a greater appreciation of the real value associated with loosing human capital from your organisation and the merits associated with continuing an investment in engagement initiatives rather than reducing or ending them.

To make the decision to reduce or end engagement initiatives will result in less engaged people. Less engaged people will leverage lower levels of discretionary effort and therefore appear to be less valuable to the organisation. When the market turns, less engaged people will be less committed and will leave, or worse they will be less committed and stay.

It is not an easy decision, but it is a self fulfilling one. Continue to invest in engagement or accept the true loss and replacement costs of your human capital that will inevitably follow.

Knowing what your Attachment & Engagement levels are within your business is critical to making well informed decisions about your engagement investment. The 3 key measures that will help you to do this more effectively as an organisation are:

1. New Employee Attachment
2. Existing Employee Alignment & Engagement
3. Transitioning Employee Detachment

By measuring these within your organisation you are able to develop an effective Human Capital Strategy for your organisation.

Engagement Investment Debate Part 1

Making the decision to invest in your people initiatives seems to be more difficult in a tougher market. To make the decision not to invest or to cut investment is likely the wrong one for your business in the medium to long term. The perceived short term gain is a real temptation in an economic climate that demands cost control. Before you take the axe to your people initiatives though, you should consider the following.

Firstly are you reducing your investment because of comfort?

There are managers and leaders that are very much task focussed who have had to work hard to give attention to their people orientation. They have understood rationally that they have had to do this because of the need for retention of talent. These managers tend to be somewhat relieved that people are less certain about their personal security and are therefore less likely to leave at present.

The sense that they are able to get people to “just do their job”, without having to fuss over their happiness, is a more comfortable place for them. A reduction of people initiatives coupled with motivating performance through leveraging the fear over position security is a typical response to this.

This is very short sighted and their people will feel taken advantage of and even threatened. As the market shifts (and it will), the response from employees will be to get away from the person (and organisation) that took advantage their insecurity.

What many of these managers are not considering is the difficulty and expense associated with attracting and retaining talent when the market turns. If there is a mass exodus of disgruntled employees coupled with a skill shortage environment, the employer brand damage that is done will make it very difficult for the organisation. They should remember that Employer Brand is associated with both organisations and individual managers.

Conversely, those organisations that maintain their people investment during tough times will achieve praise and loyalty from their people. Discretionary effort will remain high (though performance rates will seem lower because of macro-environmental conditions). When the market turns, these people will be highly engaged, motivated and be the key competitive advantage in a growing market.