Managing People Effectively Improves Organizational Success
Share
Research by a number of organizations over the past decade clearly demonstrates that organizations which practice effective human resource management are significantly more likely to have higher productivity and stronger market performance. Here are some of the more recent studies:

Watson Wyatt 2002 Survey

Five key human capital practices led to average 30% greater shareholder value.

The five are:
  • excellence in recruiting
  • clear accountability and rewards
  • collegial, flexible workplace
  • effective communications based on integrity
  • prudent use of people resources

PricewaterhouseCoopers Global Human Capital Survey 2003

These practices significantly help the bottom line:
  • HR strategy is documented and integrated in business strategy
  • HRM practices and policies reinforce and deliver the strategy
  • HR function is respected part of leadership team

Zell Lurie Entrepreneurship Center (University of Michigan) 2003 Report

An evaluation of 300 firms with 1996 IPOs vs their 2001 success level demonstrated significant differences between the high performers and lower performers.

    High performing companies focused on:
    • employee energy (involvement levels)
    • culture and rewards
    • organizational structure

    Lower performing companies focused on:
    • product
    • technology
    • venture capital firms' expectations

Best Practices Ltd (a consulting firm) 2003 Report

Business practices of the top US firms that keep them on top:
  • emphasize people, service, and profitability
  • place employees first among stakeholders
  • ensure excellent communications with all employees
  • link Human Resources functions with strategy
  • measure performance to Human Resources metrics

Employee Involvement and Organizational Success

One of the critical issues in human resource management (HRM) is employee involvement. Studies show that employees who are actively engaged perform at higher levels by factors of anywhere from 50 to 500%!

Towers Perrin recently reported on its study of 35,000 workers in the US that most still want to help their organizations succeed despite downsizing and pay slumps. But only about 20% are actively engaged in their work while almost an equal number are actively disengaged. The 'good news' for nonprofits that nearly 40% of those who work in nonprofits are actively engaged. The Gallup Poll's 2002 research on employee engagement shows similar results for businesses to the Tower Perrin survey.

You can make a significant difference in your organization if you increase the number of actively engaged employees.

This recent research and other studies going back for twenty plus years indicates what work factors employees want and need to succeed is fairly consistent. What helps employees perform better and be more involved includes:
  • active leadership by senior managers
  • clear knowledge of what is expected of them
  • frequent feedback on performance
  • opportunities for growth and development
  • ideas and suggestions are encouraged
  • accountability
  • autonomy

Surprised that pay is not a significant factor? It is not. It can be a demotivator where employees feel that there is significant unfairness in pay practices or where a person feels that their pay is not equitable in relation to their peers. But increasing pay does not increase employee engagement or discretionary effort.

The toughest part of this "prescription"? It is not an easy change in most organizations. It takes effort, time, and commitment.

Action Steps

  1. Audit your current HRM policies and actual practices.
    1. Do they support your strategic plans?
    2. Do they communicate the culture and expectations clearly?

  2. Evaluate your communications.
    1. Do you have an effective internal communications plan?
    2. Does it support and communicate your strategy and business clearly?

    Strengthen your recruiting and retention efforts.
    1. Are you hiring the most effective performers who will fit into your organization?
    2. Do you specifically define what behaviors and skills are needed for each opening as well as what values you are seeking?
    3. Once you hire a person, do you have an effective orientation program?
    4. Are managers trained and assessed on their retention roles?
    5. Do you offer career development opportunities to all?

  3. Develop your performance management practices.
    1. Do you have a mechanism to ensure each employee understands how their work fits into the overall strategy and business goals?
    2. Do you have an iterative process to support day to day operations?
    3. Are managers held accountable for ongoing performance management?
    4. Do you expect and ensure that there is regular, frequent feedback to each employee on their performance?
    5. Are performance problems addressed in a timely manner?
    6. Do you remove poor performers quickly if they do not improve?

  4. Involve your employees in creating a productive, successful organization.
    1. Solicit their ideas and be sure you act on them.
    2. Use task forces, employee surveys, and focus groups to help address critical issues.
    3. Involve larger groups in business and strategic planning.
    4. Provide 'soft' skills training and development opportunities.

Managing People Effectively Improves Organizational Success is a part of the handouts from the September 2003 annual SSP Top Management Roundtable.