If you like to manage by the numbers, here are some numbers to think about:
- When companies systematically pick the right managers, they can achieve 27 per cent higher revenue per employee than the norm.
- When they select the right individual contributors for a specific role that adds another 6 per cent revenue increase per employee, taking you to 33 per cent.
- Engaging employees properly will add a further 18 per cent in revenue per employee, now lifting the benefit to 51 per cent.
- Focusing on employee strengths can add another 8 per cent – so the final total of getting those four steps right will be 59 per cent higher revenue growth potential.
Those numbers come from extensive research by Gallup. They aren't automatic and implementing them comes with significant complications. But they outline a pathway to greater success that many firms are oblivious to.
"If only 10 per cent of the organization's teams are maximizing all four human capital strategies you still get a six-per-cent boost, which most organizations would love to have," says Gallup's chief scientist, Jim Harter, who is based in Omaha, Neb.
"As you expand on the teams using all four strategies the returns will increase. If half of the teams are maximizing all four strategies you get a 30-per-cent boost."
Gallup has been gathering information on corporations and studying various management approaches for many years. It knows the power of effective engagement, for example, and of focusing on employee strengths. But recently it decided to look at the additive effects when certain strategies are combined – how much is redundant (since focusing on strengths will make employees more engaged) and therefore how much is ultimately enhanced by different combinations.
The barometer of effectiveness varies in their research, but this time the focus was on revenue per employee. "By studying these strategies in various combinations across thousands of workgroups and organizations from a wide range of industries and countries, we've found that using them together leads to gains that more than double the effect of using any single strategy on its own," Mr. Harter and colleague Randall Beck write in the Gallup Business Journal.
Here's the approach:
Strategy 1 – Select managers with natural talent:
The most critical of the four strategies is selecting and deploying the right managers at all levels in the organization. Their research suggests that only 10 per cent of people have the natural talent to be great managers – exceptional motivators, solid decision-makers, strong relationship builders, and able to hold people accountable as well as make tough calls that others will support. Another 20 per cent have some characteristics of basic managerial talent and can function at a high level if their organization invests in coaching and developmental plans for them.
But instead, most companies focus on individual achievement in the past, picking the best saleswoman to lead the sales team and the best designer to lead the design team, whether they have the natural managerial talent or not, and then throw them in without any training to underperform or fail. "You might argue management is the most important job in the world given how many people managers touch and the economic implications of their work," Mr. Harter says.
So pay attention to managerial ability in people you promote and revenue per employee can soar by a startling 27 per cent.
Strategy 2 – Select the right individual contributors:
Companies tend to concentrate on candidates' education, skills, and work experience while overlooking whether each individual has the right natural talent to excel in the role they are being selected for. Instead, Gallup says you need to develop talent profiles for each job, finding out how successful people differ from unsuccessful people in each post. That adds 6 per cent to the equation.
Strategy 3 – Engage employees:
By picking the right managers you will inevitably gain engagement from their subordinates. But an active organizational engagement process will add an additional 18 per cent to revenues – the second biggest driver of the four strategies. That involves developing metrics to evaluate engagement, such as Gallup's famed Q12, which asks 12 questions. "But creating a culture of employee engagement requires more than a survey. It demands a strategy, accountability, great communication, and manager and employee development plans that are aligned with scientifically-tested metrics and performance outcomes," the duo writes.
Strategy 4 – Focus on strengths:
The final additive is to study the talents of each of your employees and then focus on enhancing their strengths rather than fixating on weaknesses. "We're not saying you should ignore weaknesses. But the managers who lead with strengths and leverage the strengths of their employees get greater performance," Mr. Harter stresses. A Gallup study of U.S. employees found that when managers focus on employees' strengths, 61 per cent of workers are engaged and only 1 per cent are actively disengaged – dramatically different from the norm. In the four-strategy formula, the contribution is an additional 8 per cent.
So there you have it: By the numbers, how to potentially gain – over time as you progressively implement the four strategies – 59 per cent more revenue per employee.
Special to The Globe and Mail
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter